In today’s briefing:
- SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
- Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Korea – A Look at Ecopro, Kumyang & JYP Entertainment
- Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity
- Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket
- IMAX China (1970 HK): IMAX Corp’s Privatisation Offer
- KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents
- A Deep Dive on China Macro – The RMB
- ALT Co IPO Bookbuilding Results Analysis
SSE50 Index Rebalance Preview: Potential Adds Powering Higher
- Two thirds of the way through the review period, we see 10 potential adds/8 potential deletes in December. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 5.8% at the December rebalance leading to a one-way trade of CNY 4.67bn. Index arb balances could increase the impact on the stocks.
- The potential adds have outperformed the potential deletes over the last six months and there has been renewed outperformance over the last month.
Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
- Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
- The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
- There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.
Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
- Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
- The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
- It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.
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).
Fast Retailing UPs Forecasts, Which Creates A Sell/Short Opportunity
- Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.
- It also raised its H2 dividend by 20+% so the full-year div will be more than 20% higher than previously forecast and up 35+% since last year. All good.
- Except for the selling. Potentially lots of selling. And more outperformance begets more selling. Then even more selling in 2024. And 2025? What about 2025? More outperformance begets more selling.
Canon (7751) Buyback Almost Done, TPX Selldown to Come = Trade Vs Ricoh or Basket
- Canon Inc (7751 JP) announced a second buyback this fiscal year on 15 June. As discussed here previously, Canon buybacks are short, sharp, and sweet.
- The recent one should be done imminently (15 May start ended 13 July). 16 June start? (Note: Canon reports buyback results at 3pm local time, and did not report today).
- This time we have a double-setup with buyback ending and a large TOPIX sell on Canon on 28 July.
IMAX China (1970 HK): IMAX Corp’s Privatisation Offer
- IMAX China Holding (1970 HK) disclosed a scheme privatisation offer from IMAX Corp (IMAX US) at HK$10.00 per share, a 39.5% premium to the undisturbed price (HK$7.17 on 10 July).
- The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
- The offer price is final. While the offer price is light compared to peer multiples and historical share prices, the deal will likely succeed.
KRX’s Revised CFD Oversight Guidelines & Ongoing Suspicious Incidents
- The important point is that the regulations also incorporate a provision mandating the disclosure of the actual end traders’ identities when brokerages engage in CFD transactions disguised as proprietary trading.
- Recent suspicious incidents raise concerns because they are carried out through brokerages’ proprietary trading practices, making them relatively more difficult for local regulatory authorities to detect and monitor.
- We need to closely monitor the market’s abnormal volatility following the strengthened new rules on CFDs and carefully consider the setup for responding to these changes.
A Deep Dive on China Macro – The RMB
- The RMB has undergone significant changes in its history, evolving into a currency with increasing influence on global financial markets
- RMB has significant impact on China’s economy, mainly through the trade balance (export/import) and its impact on outbound tourism
- China has made key steps regarding internationalization of the currency, however, full internationalization is dependent on further financial market liberalization and opening up of the capital account.
ALT Co IPO Bookbuilding Results Analysis
- ALT’s IPO price has been determined a 25,000 won, which is 22% higher than the high end of the IPO price range.
- A total of 1,937 institutional investors participated in the IPO offering with a competition demand ratio of 1,836 to 1.
- Our base case valuation of ALT is market cap of 299 billion won or 33,365 won per share, which represents 33% higher than the IPO price range of 25,000 won.
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