In today’s briefing:
- Korea – A Look at Ecopro, Kumyang & JYP Entertainment
- Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping
- NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
- JAPAN PASSIVE: Who Owns What 2023?
- OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
- STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
- OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co
- End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023
- Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won
Korea – A Look at Ecopro, Kumyang & JYP Entertainment
- We take a look at Ecopro Co Ltd (086520 KS), Kum Yang (001570 KS) and Jyp Entertainment (035900 KS) since they appear to be on investor radars.
- Foreign investors have been buyers while retail have been sellers in Ecopro Co and Kum Yang over the last month, while foreign investors have continued to buy Jyp Entertainment.
- Short interest on all stocks has dropped over the last month, though there has been a recent tick up in shorts on Jyp Entertainment (035900 KS).
Yuanta ETFs Rebalance Preview: Soaring Stocks, Rising Shorts; AI Beats Shipping
- Using data from the close on 19 July, there could be 5 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 2 deletions for the Yuanta/P-Shares Taiwan Dividend Plus ETF.
- Stocks that are expected to benefit from the AI revolution could gain ETF inclusion while shipping stocks are the ones expected to be deleted from the ETF.
- There has been a huge increase in shorts on some of the potential inclusions and on most of the potential deletions. That will affect how stocks trade near term.
NIFTY/NEXT50 Index Rebalance Preview: Loads of Changes if Proposed Methodology Is Implemented
- Using the current index methodology throws up 5 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be BIG.
- Using the proposed index methodology throws up 11 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) in September. Turnover will be HUGE.
- The market consultation being put on hold could indicate pushback from index users or the possibility of F&O contracts being introduced on some of the non-F&O index constituents.
JAPAN PASSIVE: Who Owns What 2023?
- The 2023 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each.
- Even if you do not “play” index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
- Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan.
OCI Swap Arbitrage: A Bit More Complex Structure, Still Juicy Spread in Play
- This is a classic swap arbitrage of shorting the acquirer and using the tendered shares to repay it. However, executing now would be meaningless as the swap ratio isn’t finalized.
- Nevertheless, we should consider securing a long position in OCI Holdings in advance. The target (45%) is quite substantial, indicating that the practical allocation rate won’t plummet dangerously below 1.
- Additionally, the likelihood of OCI Holdings’ swap price plummeting to completely nullify the 5.6% spread immediately after its determination appears to be low based on the current context.
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
- The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
- The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
- One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.
Nikkei 225 Index Rebalance Preview (Sep 2023): Final Look as Review Period Ends
- The review period for the Nikkei 225 (NKY) September rebalance ended yesterday. There should be three index changes, potential stepwise inclusion, no Fast Retailing capping and a big funding trade.
- There appears to be decent positioning on the potential adds, while it is the close adds that are spiking along with a big increase in traded volumes.
- If the three changes are on expected lines, estimated one-way turnover at the rebalance is 2.01% resulting in a one-way trade of JPY 461bn (US$3.24bn).
OCI Holdings Announces a Tender Offer to Buy 45% Stake in OCI Co
- On 28 July, OCI Holdings (010060 KS) announced that it plans to conduct a tender offer to purchase up to 45% stake in OCI Co (456040 KS).
- The tender offer price of OCI Co is 139,000 won. The method of this tender offer is to issue new common shares of OCI Holdings.
- In the short term (one month), we expect OCI Co’s shares to outperform OCI Holdings shares. This deal is structured to mainly benefit the OCI Group’s insiders.
End of Mandatory Lock-Up Periods for 40 Companies in Korea in August 2023
- We discuss the end of the mandatory lock-up periods for 40 stocks in Korea in August 2023, among which 2 are in KOSPI and 38 are in KOSDAQ.
- These 40 stocks on average could be subject to further selling pressures in August and could underperform relative to the market.
- Among these 40 stocks, the top five market cap stocks include HK inno.N, PhilEnergy, CJ CGV Co Ltd, Sure Soft Tech, and CanariaBio.
Macquarie Korea Infra Fund Announces A Rights Offering Worth 361 Billion Won
- On 28 July, Macquarie Korea Infra Fund (088980 KS) announced that it will conduct a rights offering worth 361 billion won, representing 7.4% of its current market cap.
- The major uses of funds from the rights offering include acquisition of a city gas supplier (128 billion won) and investment in Incheon-Gimpo Expressway private investment project (128 billion won).
- We have a positive view of this rights offering. We believe the acquisition of CN City Energy and the investment in Incheon-Gimpo Expressway will add additional value on the company.
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