In today’s briefing:
- October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
- Kokusai Electric (6525 JP) IPO – Index Demand On The Follow
- Celltrion Merger: Index Implications
- Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
- Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture
- Kokusai Electric IPO: Trading Debut
- Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
- Kokusai Electric IPO Trading – Decent Demand, Now for the Real Test
- KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection
October 2023 TOPIX Free Float Review – $22.6bn to Trade and JPB (7182) The Biggie
- The TOPIX October Free Float Weight Review details are out. This is the biggest FFW review of the year. This year, it’s $11.3bn a side.
- As discussed in Japan Post Bank (7182) – The October TOPIX FFW Adjustment, JPB is the big buy. $2bn/23d of ADV. There is $2bn to buy of trading cos too.
- There are lots of large names to trade in both directions. If you have interests to sell the buys and vice versa, it is good to know the flows.
Kokusai Electric (6525 JP) IPO – Index Demand On The Follow
- Niche Japanese Semiconductor Production Equipment specialist Kokusai Electric (6525 JP) last Thursday announced the TSE approved its late October IPO (with indicative pricing, shares to be sold, and initial prospectus).
- This insight looks at initial shareholder structure, selling group, post-IPO shareholder structure with index inclusion timing, and follow-on flow possibilities.
- At ¥435bn indicative market cap, it will be the largest IPO in Japan since pre-covid, despite coming in a cycle trough. I expect it will be hot.
Celltrion Merger: Index Implications
- Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
- For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
- There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.
Newcrest/Newmont Conclusion Nearing – Flowfront & Gold Price
- Newcrest Mining (NCM AU) saw its shareholder meeting vote through the Scheme, then on teh 18th, the Special Div went ex-.
- Since then, as gold has rebounded sharply, Newmont Mining (NEM US) has underperformed peers and juniors (VanEck Gold Miners ETF/USA (GDX US)) since gold has spiked.
- Thursday is the last day of trading and there is a LOT of NEM to trade.
Merger Arb Mondays (23 Oct) – Eoflow, Celltrion Healthcare, JSR, Origin, Lithium Power, Poly Culture
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Haitong International Securities Group (665 HK), Lithium Power International (LPI AU).
- Lowest spreads – Healius (HLS AU), Pact Group Holdings (PGH AU), Origin Energy (ORG AU), T&K Toka Co Ltd (4636 JP), Kenedix Retail REIT (3453 JP), Chindata Group (CD US).
Kokusai Electric IPO: Trading Debut
- Kokusai Electric (6525 JP) priced its IPO at JPY1,840 per share to raise secondary proceeds of US$723 million. The shares will start trading on 25 October.
- We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Lower Price Range Is Reasonable.
- The peers have modestly derated since the lowered IPO price range was announced on 10 October. However, the IPO price remains attractive. Our DCF valuation is JPY2,058.
Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
- Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
- Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
- The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.
KOSDAQ150 Index Rebalance Preview: Big Sell Off Among Potential Inclusions as Momentum Fades
- With the review period nearly complete, we see 15 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
- There could be index changes even before the December rebalance if there are prolonged trading suspensions and stocks migrate from the KOSDAQ Market to the KOSPI Market.
- The potential adds have sold off hard over the last six weeks, similar to the performance at the June rebalance.
Kokusai Electric IPO Trading – Decent Demand, Now for the Real Test
- KKR raised around US$730m via selling a stake in Kokusai Electric’s (6525 JP) (KE) Japan IPO.
- KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
- In our previous notes we have looked at the company’s past performance, undertaken a peer comparison and looked at valuations. In this note, we talk about the trading dynamics.
KOSPI200/KOSDAQ150 Index Rebalances: KRX Increases Opacity on Stock Selection
- KRX has amended the stock selection methodology for the KOSPI2 INDEX and KOSDQ150 INDEX and added ‘Expert Judgement’ as a criteria.
- The qualitative and quantitative criteria and the detailed filtering standards will be described in the manual but will NOT be publicly disclosed.
- There is no change from using full market cap to free float market cap in stock selection, so the stocks that could be added/deleted will be broadly same as forecasts.
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