In today’s briefing:
- FRTIB Switches Benchmarks: +EM/-DM; US$56bn Trade as Asia EM Benefits & HK Loses Out
- Pasona: The Wrong Price
- New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban
- EOFlow Craters. Medtronic Stays Mum
- Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns
- Alibaba (9988 HK): 2Q24, Higher Margin Means Smooth Reorganization, Buy
- Steadfast Group Placement – While Accretion Here Is Limited, Past Deals Have Done Well
- Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Key Points We Should Know Regarding the Current Status of EOFlow
FRTIB Switches Benchmarks: +EM/-DM; US$56bn Trade as Asia EM Benefits & HK Loses Out
- The FRTIB has decided to switch its benchmark for the International Stock Index Investment Fund from the EAFE Index to the ACWI IMI ex-USA ex-China ex-Hong Kong Index.
- With around US$68bn invested in the I Fund, this will set off churn among the constituent stocks in 2024. One-way trade is around US$28bn with DM outflows and EM inflows.
- The benchmark shift could be done over a 4 month period with higher trading during periods where liquidity opportunities arise.
Pasona: The Wrong Price
- As discussed here in a piece about the Partial Tender Offer, Pasona Group (2168) has agreed to sell its controlling stake in Benefit One (2412) to M3 (2413).
- That will leave Pasona Group with a fair chunk of cash and possibly a residual stake in Benefit One, depending on the results.
- Though we don’t know what the future holds, Pasona now is the wrong price for its future.
New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban
- There is a prevailing sentiment in the local market that short selling by market makers (MM) and liquidity providers (LP) will effectively be prohibited very shortly.
- The widening of the futures basis extends the influence of futures on the spot market prices. This is precisely where trading opportunities that we should be keenly observing may arise.
- It also leads to a significant widening of ETF tracking errors due to the direct sell-off of underlying shares. We must capitalize on extreme spreads in ETFs.
EOFlow Craters. Medtronic Stays Mum
- Five weeks after shares were suspended, EOFlow (294090 KS) shares resumed trading this morning, the 16 November. Wording is sparse on the resumption.
- One small consolation was that EOFlow may benefit from the temporary ban on short selling. Irrespective, shares have declined ~27% at the open, as I type.
- Elsewhere, Medtronic Plc (MDT US) provides no guidance. The only other news of note are the various court filings in the District Court of Massachusetts.
Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group Holdings (2502 JP) today announced a collection of 10 shareholders (mostly financial institutions) would sell a total of 33.48mm shares (6.6% of shares out) in Asahi Group.
- This will become more of a thing going forward. Cross-holders “want” to unwind. And in many cases, the cross-held want to buy back stock (reduce E, raise ROE).
- This deal is “good” in that it clears out a lot of the bank cross-holders in one fell swoop. But there are more crossholders behind.
Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns
- A group of shareholders are looking to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
- The deal would represent 23 days of Asahi’s three month ADV. Its latest extended large primary deal has done very well.
- While the deal isn’t particularly well flagged, it is an extended one allowing the market to price in the impact of the share sale.
Alibaba (9988 HK): 2Q24, Higher Margin Means Smooth Reorganization, Buy
- Alibaba’s operating margin rose to 15% in 2Q24 versus 12% in 2Q23.
- Every expense as percentage of total revenue decreased and EBITDA of every business line increased.
- We believe the reorganization is going smoothly and the stock has an upside of 82%. Buy.
Steadfast Group Placement – While Accretion Here Is Limited, Past Deals Have Done Well
- Steadfast (SDF AU) is looking to raise around A$280m (US$180m) to fund the acquisition of Sure Insurance, and provide headroom for potentially additional acquisitions over the year.
- SDF has undertaken a number of capital raises in the past to similarly fund its active acquisition strategy. Overall, the firm’s past deal record has been strong.
- In this note, we will talk about the acquisition and run the deal through our ECM framework.
Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Nine shareholders are looking to sell 33.48m shares of Asahi Group Holdings (2502 JP). That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.
- Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.
- There will be buying from global trackers but nothing from TOPIX trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.
Key Points We Should Know Regarding the Current Status of EOFlow
- It can be considered that the suspension of EOFlow’s trading and, furthermore, the risk of delisting have been completely eliminated at this point.
- EOFlow emphasizes the possibility of circumventing sales of EOPatch by supplying EOPump to a JV in China. The key factors that initially sparked Medtronic’s interest in EOFlow are still valid.
- If CEO Kim fails to repay a stock collateral loan of ₩20B or secure additional loans, approximately 4% of the total issued shares could be sold in the market.
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