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
- 7&I (3382 JP) – Share Price Dipping Deeper Means Dipping Toes Deeper
- SET50 Index Rebalance: Four Changes; Cal Comp🚀
- Shimano: An Opportunity for Activist Investors
- CPMC (906 HK): Tendering Now Open
- GAPack (468 HK): XJF Satisfies Pre-Cons. Management Should Back Terms
- CPMC Holdings (906.HK) Update – The Critical Moment Has Arrived
- UBTech Robotics US$1.9bn Lockup Expiry – Needs Some Selling to Improve Its Liquidity
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.
7&I (3382 JP) – Share Price Dipping Deeper Means Dipping Toes Deeper
- Seven & I Holdings (3382 JP) shares are in a lull here. Winter doldrums without news as the Ito consortium gets its ducks in a row and 7&i sells York.
- Alimentation Couche-Tard (ATD CN) is waiting patiently. They have the ability to wait, and to fund, and pay up.
- An article/show is causing a dip today on top of last week’s weakness. This is a dip to buy.
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.
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
CPMC (906 HK): Tendering Now Open
- At a 1.5% gross spread to terms, CPMC Holdings (906 HK) is trading with completion is mind after the last pre-condition – SAFE – was satisfied on the 13th December.
- The Offer Doc is now out and the transaction is open for acceptances. The First Close is the 10th January.
- I’d expect this deal to turn unconditional on or before the First Close, with payment around the 20th January.
GAPack (468 HK): XJF Satisfies Pre-Cons. Management Should Back Terms
- During the lunch break, Greatview Aseptic Packaging (468 HK) announced that Shandong Xinjufeng Technology Packaging (301296 CH) (XJF) had satisfied all pre-conditions – the final approvals concerned outbound direct investments.
- The Offer Document, including the IFA opinion, is expected to be dispatched in seven days – or 27th December, at which time, the Offer will be open to acceptances.
- Evidently the Jeff Bi/Gong Hong MGO isn’t materialising any time soon. Provided the IFA is supportive – and that should now be known – management should unanimously back XJF’s Offer.
CPMC Holdings (906.HK) Update – The Critical Moment Has Arrived
- The First Huarui Offer Closing Date is Jan.10 2025. The latest time/date by which the Huarui Offer can become or be declared unconditional as to acceptances is 18 February 2025.
- China Foods once chose to side with Baosteel – They are both SOEs.Although regulatory agencies have given the green light, it’s still unclear if China Foods will accept Huarui Offer.
- The “key variable” is Zhang Wei’s attitude. Investors can choose bet on it.It would be wise for arbitrageurs to wait until Zhang Wei makes his move before making a decision.
UBTech Robotics US$1.9bn Lockup Expiry – Needs Some Selling to Improve Its Liquidity
- UBTech Robotics (9880 HK) was listed in Hong Kong on 29th Dec 2023 after it raised US$130m. Its one-year lockup will expire on 28th Dec 2024.
- UBTech Robotics is engaged in artificial intelligence (AI)-empowered robotics in China, dedicated to the innovation of humanoid robots and development and sales of smart service robotic solutions.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
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