In today’s briefing:
- JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
- Yuanta/P-Shares Taiwan Dividend+ ETF Preview: Two Weeks to Cutoff
- AAG Energy (2686 HK): New Scheme Vote Date, Different Result?
- Kum Yang: Shorting Entry Timing on the Inevitable Block Deals
- Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- A Long Short Trading Event Likely to Have a High Hit Rate: HPSP & TCK
- Quiddity Leaderboard TWSE Div+ Jun 23: New Potential Index Changes and Flow Expectations Update
- ECM Weekly (7th May 2023) – Mankind, Nexus REIT, Pertamina Hulu, Growatt, DXN, Giant Biogene, Ventia
- JAPAN FLOW: Foreign Investor Inflows May Increase
JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
- Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.
- The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.
- In this insight I look at several possible rankings for potential large buyback targets.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
- There is only one new listing as a potential inclusion to the HSCI in June. If added to the HSCI, it will also be added to Southbound Stock Connect.
- There are 18 potential inclusions and 19 potential deletions for the HSCI in September. There are a few close adds and there could be another 5 deletions on Prolonged Suspension.
- A lot of the potential deletions have large Southbound holdings. With all the stocks becoming sell-only, there could be unwinding of some positions over the next couple of months.
Yuanta/P-Shares Taiwan Dividend+ ETF Preview: Two Weeks to Cutoff
- With two weeks left to the cutoff, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
- Apart from the adds/deletes, there will also be capping and funding flows that will lead to an estimated one-way turnover of 13.5% and a one-way trade of US$886m.
- There are 9 stocks with at least 5 days ADV to trade from passive trackers and another 12 stocks that have at least 1 day ADV to trade.
AAG Energy (2686 HK): New Scheme Vote Date, Different Result?
- Aag Energy Holdings (2686 HK)’s disclosed a revised timetable to vote on Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer. The new scheme meeting is set for 2 June.
- Our analysis suggests that in the best case, Xinjiang Xintai would need to further swing NO votes representing 6.52%-8.34% of outstanding shares to YES to get the scheme approved.
- AAG’s case is unprecedented. The risk-reward remains unattractive as the upside to a scheme pass (13.5% upside) is equal to the downside to a scheme fail (average 13.5% downside).
Kum Yang: Shorting Entry Timing on the Inevitable Block Deals
- Kum Yang IR director Park once mentioned that the block deals to sell the 2M treasury shares would likely occur in late May or early June.
- There has been speculation in the market that the timing of the block deal may be postponed until after its inclusion in the KOSPI 200, allowing for short selling.
- Considering the immediate funding needs faced by the company, setting an aggressive approach to shorting from shortly after its inclusion in the KOSPI 200 would be reasonable regarding entry timing.
Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads 111 Inc (YI US), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK),Origin Energy (ORG AU), Metro Pacific Investments Co (MPI PM).
- Lowest spreads Liontown Resources (LTR AU), Healius (HLS AU), Penguin International (PBS SP), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Blackmores Ltd (BKL AU), Arcland Service (3085 JP).
A Long Short Trading Event Likely to Have a High Hit Rate: HPSP & TCK
- The Korean local sector ETF with the fastest growing AUM is TIGER Fn Semiconductor Top 10 ETF, whose AUM has increased more than twice over the past two months.
- HPSP (403870 KS) will replace Tokai Carbon Korea (064760 KS) by a comfortable margin in the upcoming review in October.
- From a day trading perspective, this presents a significant Long-Short opportunity. Considering the relatively sizeable passive impact size, setting an entry point more aggressively may not be a bad idea.
Quiddity Leaderboard TWSE Div+ Jun 23: New Potential Index Changes and Flow Expectations Update
- There have been some changes to my expectations for the TWSE Div+ index June 2023 index changes and capping flows.
- I currently see 5 ADDs/DELs. Some of these names are different from the ones I specified in my previous insight.
- In this insight, we take a look at my latest flow expectations.
ECM Weekly (7th May 2023) – Mankind, Nexus REIT, Pertamina Hulu, Growatt, DXN, Giant Biogene, Ventia
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- Nexus Select Trust will open books for India’s first Retail REIT, just as the first major India IPO for the year, Mankind Pharma seeks to list.
- There was only Ventia (VNT AU) placement during the week, along with Giant Biogene Holding (2367 HK) lockup expiry.
JAPAN FLOW: Foreign Investor Inflows May Increase
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to one relatively simple indicator.
- The policy backdrop points to greater corporate buying, greater foreign flow, greater selling by individuals and trust banks. The current timing probably matches.
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