In today’s briefing:
- TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
- A Comparison of Korea Zinc’s M&A in 2024 Vs SM Entertainment’s M&A in 2023 in the 9th Inning
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- Fuji Soft (9749 JP) – Bain Bumps UnBigly, and FSI Responds
- Kioxia IPO Trading – Decent Demand for Decent Upside
- PCOMP Index Rebalance Preview: Two Changes Likely in February
- Activist Buys 7+% of Takeover Target Macromill (3978 JP)
- A Passive Flow Trading Event that Sparked Wild Price Action in Korea Is Happening Again
- TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact
- Shin-Etsu Chemical (4063) – Small/Large Below-Market Tender Offer Buyback, Followed by Overhang
TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
- We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
- An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.
A Comparison of Korea Zinc’s M&A in 2024 Vs SM Entertainment’s M&A in 2023 in the 9th Inning
- The EGM for Korea Zinc (010130 KS) is expected to be held on 23 January 2025. Accordingly, the shareholder registry is expected to be closed around 19 – 23 December.
- By better analyzing the timeline of the M&A of SM Entertainment, we may be able to get better clues to Korea Zinc’s price movement in the next several weeks.
- Notice the double top share price formation of SM Entertainment in 2023 versus the potential double top formation of Korea Zinc in 2024. These trading formations look eerily similar.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- We see 32 potential and close adds and 44 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
- We expect 29 stocks to be added to Southbound Stock Connect following the rebalance while 31 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
Fuji Soft (9749 JP) – Bain Bumps UnBigly, and FSI Responds
- ~4 weeks ago, Fuji Soft Inc (9749 JP) responded to Bain’s Proposal to take over the company but got KKR to bid ¥1 more, then said that covered it.
- The Special Committee then asked the FSI Board to halt further negotiations with Bain, and to ask Bain to destroy all confidential documentation.
- Bain rejected saying it contravened METI Guidelines on Corporate Takeovers and reappeared 2 days ago with a ¥9,600 bid. The structure/details of Bain’s bid was probably a strategy mistake.
Kioxia IPO Trading – Decent Demand for Decent Upside
- Kioxia Holdings (285A JP) raised around US$800m (including over-allocation) in its Japan IPO, after pricing its IPO in the middle of its range.
- It was the world’s largest pure-play NAND flash memory supplier, in terms of both revenue and unit shipments in 2023, according to TechInsights.
- We have looked at the company’s past performance and valuations in our previous notes. In this note, we will talk about the trading dynamics.
PCOMP Index Rebalance Preview: Two Changes Likely in February
- The review period for the February rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) ends in two weeks.
- There could be two changes for the index with passive trackers needing to trade between 23-64x ADV in the stocks.
- The passive buying is a lot larger than the passive selling, there will be funding outflows for the other index constituents; some stocks will have over 1x ADV to trade.
Activist Buys 7+% of Takeover Target Macromill (3978 JP)
- Today post-close, activist/engagement investor Oasis Management filed a new LSR on Macromill, Inc (3978 JP) owning 7.12% of shares as of 13-Dec-2024. Reason: Defend shareholder value, propose measures to management.
- That is 7.56-7.65% of effective voting/tender rights. It’s big enough to matter. Of course, the stock has not traded below terms once since full trading started post-announcement.
- And this was warned in CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid. Shareholder structure REALLY matters.
A Passive Flow Trading Event that Sparked Wild Price Action in Korea Is Happening Again
- This event drew significant attention, causing unusual price action. From Sept 20 to Nov 29, corrections in the deletions far outpaced the KOSPI, with the trend holding across key checkpoints.
- We’re watching 4 stocks: Kumho Petro, Lotte Chemical, Posco DX, and EcoPro Materials. SK Bioscience and Enchem are close, with small price moves likely pushing them out.
- Based on past rebalancing patterns, proactive positions on these names could trigger strong price action. All except Enchem have listed futures and solid volume, making trading conditions favorable.
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.
Shin-Etsu Chemical (4063) – Small/Large Below-Market Tender Offer Buyback, Followed by Overhang
- Today, Shin Etsu Chemical (4063 JP) announced a second buyback this year (first ¥100bn was announced in May, buying back 16.695mm shs (0.83%). This time, ~¥94bn via Own-Share Tender Offer.
- Three non-life insurers and two banks who together hold 6+% will sell a total of ~1.01% at ~10% below last. They will then sell the rest of their shares later.
- Cute, but not enough. Shin-Etsu is cash-rich, securities-rich, receivables and inventory-rich. And nearly ¥1trln of EBITDA. They are a key part of the tech infrastructure. They can borrow.
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