In today’s briefing:
- How Has the Index Rebalance Strategy Performed in 2024?
- TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact
- Sony To Buy 7+% Stake in Kadokawa (9468 JP) For ¥50bn, Ending Near-Term Hopes of Takeover
- SET50 Index Rebalance: Four Changes; Cal Comp🚀
- Henlius (2696 HK): This Should Trade Tighter. Get Involved
- Shimano: An Opportunity for Activist Investors
- MPHB Capital (MPHB MK)’s Offer: Almost There As ISM Exhausts Options
- LY Corp (4689) Announces Takeover of Beenos (3328) – Lightish at ¥4,000 But A Done Deal
- Quiddity Leaderboard CSI 300/500 Jun 25: ~US$5.9bn Collective One-Way Flows
- Korea FSC’s Stabilization Fund: Breaking Down the Buzz and Flow Impact
How Has the Index Rebalance Strategy Performed in 2024?
- It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
- Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
- As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.
TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact
- There are 8 changes a side for the TIP Customized Taiwan Select High Dividend Index in December. The TIP Taiwan Select High Dividend ETF (00919TW) has an AUM of US$9.3bn.
- Estimated one-way turnover is 17.2% and that will result in a round-trip trade of US$3.2bn. All adds and deletes have over 5x ADV to trade from passive trackers.
- The rebalance will be implemented over 8 trading days and the ETF started trading some stocks late last week and the rest from 17 December.
Sony To Buy 7+% Stake in Kadokawa (9468 JP) For ¥50bn, Ending Near-Term Hopes of Takeover
- Today, Kadokawa (9468 JP) announced it would sell ¥50bn of shares to Sony (6758 JP) in a 3rd Party Allotment to cement a Strategic/Capital Alliance. Sony will own 10% at ¥4,146/share.
- 40% of proceeds is to “create and develop new IP”, 60% is to “enhance global IP distribution”; both over 5yrs. Given ¥108bn of net cash/securities, this is a garbage reason.
- Kadokawa shares have gained 44% in a month since Reuters carried an “Exclusive” article saying Sony was in talks to acquire Kadokawa. This is defensive entrenchment. The result will disappoint.
SET50 Index Rebalance: Four Changes; Cal Comp🚀
- There will be 4 changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 30 December.
- All changes are in line with our forecasts and there appears to be positioning in all the stocks.
- Cal Comp Electronics Thailand (CCET TB) will have the largest passive buying a percentage of free float and could be the stock to watch.
Henlius (2696 HK): This Should Trade Tighter. Get Involved
- After the China Traditional Chinese Medicine (570 HK) fiasco back in October, Hong Kong M&As have received some welcome Xmas cheer of late.
- Small-Cap CM Hi-Tech (2115 HK) secured reg approvals in record time. Then CPMC (906 HK)‘s pre-cons were satisfied on 13th December. Now Shanghai Henlius (2696 HK)‘s pre-cons are also fulfilled.
- Henlius’ spread narrowed after securing NDRC approval on the 22nd Nov; and again after fulfilling pre-cons this week. A 3.1% gross spread is okay. This is done. Get involved.
Shimano: An Opportunity for Activist Investors
- Shimano, the Japanese maker of bicycle components and fishing equipment, is in need of a strategic gear change
- A significant -25% decline in FY23 net sales highlights Shimano’s struggles. Revenues dropped a further -11% in the first nine months of 2024
- For investors seeking opportunity at the bottom of the cycle, Shimano presents a compelling case. The stock is trading at 2.3x book value
MPHB Capital (MPHB MK)’s Offer: Almost There As ISM Exhausts Options
- MPHB Capital (MPHB MK)‘s delisting Offer via a selective capital reduction (SCR) from controlling shareholder and chairman Tan Sri Surin Upatkoon appears to be in the home straight.
- The completion of the Offer has been delayed as ISM Sdn Bhd, MPHB’s minority partner in six JVs, invokes various legal options in an ongoing dispute.
- The High Court has now fixed 6 January 2025 as the hearing date for the SCR petition. Assuming that is granted, payment is likely mid-Feb.
LY Corp (4689) Announces Takeover of Beenos (3328) – Lightish at ¥4,000 But A Done Deal
- Early today, the Nikkei had an article saying LY (4689 JP) would launch a takeover of Beenos Inc (3328 JP). The stock went limit up. Shorts are many times ADV.
- Post-Close, we get a deal much as implied by the Nikkei article. It seems light to me but the top three holders have agreed to the deal.
- Regulatory will take a couple of months. This will likely fall tomorrow. If you are a long-only fund holder, think about the alternatives (read the conclusions here).
Quiddity Leaderboard CSI 300/500 Jun 25: ~US$5.9bn Collective One-Way Flows
- CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
- In this insight, we take a look at the potential ADDs and DELs leading the race for the semiannual index rebal event in June 2025.
- Currently, we see 6 ADDs/DELs for the CSI 300 index and 50 ADDs/DELs for the CSI 500 index.
Korea FSC’s Stabilization Fund: Breaking Down the Buzz and Flow Impact
- With the Fed shock pushing the won past 1,450 and the KOSPI down, it’s time to dig into the stabilization fund—its size, timing, and which stocks will catch the flow.
- With ₩10T in play, even spread over 10 stages, it could drive significant price impact. NPS’s ₩1.5T injection in December shows how even smaller flows move the market.
- The FSC plans to focus on KOSPI 200 and broad market ETFs, with new ETFs like the Value-Up Index likely getting more flow—target stocks in both for bigger impact.
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