In today’s briefing:
- S&P Global Water Index: Market Consultation Driven Potential Changes
- Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September
- MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- SGX FTSE Taiwan Index Futures – The Most Liquid Taiwan Offshore Contract
- GQG Partners IPO Lock-Up – Tightly Held by Founders, PAC Could Exit
- Shinoken (8909) MBO – Decent Premium, Still Light, Will Someone Push?
- Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints
S&P Global Water Index: Market Consultation Driven Potential Changes
- S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
- We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
- There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.
Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
- Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
- The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
- This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September
- We do not expect any deletions from the FTSE TWSE Taiwan Dividend+ Index in September, but there will be a lot of passive flow due to capping changes.
- Based on the closing prices from 9 August, we estimate one-way turnover of 11.2% at the September rebalance resulting in a one-way trade of TWD 15,754m (US$525m).
- Most stocks with expected passive inflows are trading near their recent lows (leading to higher dividend yield), while most stocks with expected passive outflows have rallied recently (lower dividend yields).
MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
- We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals.
- The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom.
- The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom).
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
- Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
- We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
- But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically
Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
- Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
- MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
- And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings? This is not OK. And it smacks of something unsavoury.
SGX FTSE Taiwan Index Futures – The Most Liquid Taiwan Offshore Contract
- The SGX FTSE Taiwan Index Futures are CFTC certified and started trading on 20 July 2020 and use the FTSE Taiwan RIC Capped Index as the underlying.
- Volumes on the SGX FTSE Taiwan Index Futures have increased significantly since launch and the ADTV for July was US$3.34bn versus US$509m for the MSCI Taiwan Index Futures.
- At US$4.86bn, open interest for the SGX FTSE Taiwan Index Futures is also substantially higher than the open interest on the MSCI Taiwan futures at US$797m.
GQG Partners IPO Lock-Up – Tightly Held by Founders, PAC Could Exit
- GQG Partners (GQG) raised US$868m in its Australia IPO in Oct 2021. Its IPO linked lockup is set to expire soon.
- GQG is a global investment boutique with a focus on managing active equity portfolios.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Shinoken (8909) MBO – Decent Premium, Still Light, Will Someone Push?
- Today Shinoken Group (8909 JP) announced it was the subject of an MBO where the CEO-founder invited Integral – a local PE fund – to help him restructure and grow.
- It is at a 45% premium to last, and management negotiated the price from a relatively insulting initial bid of ¥1,300 to ¥1,600 in the end, but it’s still light.
- It is not hugely light, but it is not a full price. It could definitely be a bit higher. The question is whether active foreigners will push.
Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints
- Canon Inc (7751 JP) has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn.
- The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies.
- There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade.
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