In today’s briefing:
- Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
- Japan – Increase in Shorts on Some Interesting Stocks
- JIP Tender Offer for Toshiba (6502) Finally Here
- Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- Bank of Kyoto (8369) – Too Far Too Fast
- Toshiba – The Tender Arrives
- Samsung Electronics: Prefs Need to Catch Up
- Estia & Bain Enter Into Scheme Agreement
- TOPIX Inclusions: Who Is Ready (Aug 2023)
Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
- Ecopro Co Ltd, Kum Yang, Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX have all rallied recently and could find their way into global passive portfolios.
- There could be liquidity events in some of the stocks as early as the end of the month and there is pre-positioning on a lot of the stocks.
- Retail investors have been big buyers in Ecopro Co and Kum Yang while foreign investors have been buyers in Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX.
Japan – Increase in Shorts on Some Interesting Stocks
- Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
- The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
- Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.
JIP Tender Offer for Toshiba (6502) Finally Here
- The JIP TOB for Toshiba is here. Finally. It is still too low. Since the announcement, when it was too low, peers are up a lot, and memory looks healthier.
- But it is not clear that activists who pushed this for years want to push any more. There appears to be Toshiba Fatigue, as I warned in March.
- That makes this deal look “safe” but there are technical aspects which make it less “comfortable” than normal large and long-awaited deals.
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
- Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
- There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.
JPX Nikkei 400 Index Rebalance: Some Big Impact Names
- There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
- Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
- There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.
Bank of Kyoto (8369) – Too Far Too Fast
- Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising. On a static equity-portfolio discount measure, it has outperformed regional banks.
- On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
- Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.
Toshiba – The Tender Arrives
- At long last the end to the Toshiba saga appears at hand with JIP’s belated tender offer being formally announced today at the previously quoted price of ¥4,620.
- With a minimum target of 66.7% this does not seem guaranteed to pass but we nevertheless believe that odds are good.
- The question is whether there is any room for a small hike in the price as alluded to by the Chairman.
Samsung Electronics: Prefs Need to Catch Up
- Over the last year, the discount of Samsung Electronics Pref Shares (005935 KS) to Samsung Electronics (005930 KS) has increased from 5% to 17%.
- The preferred shares have adequate liquidity, a large issue market cap, and now trade at a much higher dividend yield. A special dividend will further increase the dividend yield differential.
- Breaking from history, the preferred shares discount has continued to increase as the stock has moved higher. With the preferred shares trading near its widest discount, that could change.
Estia & Bain Enter Into Scheme Agreement
- After its initial bid of $3.00/share was rejected by Estia Health (EHE AU), Bain returned on the 7 June with a $3.20/share non-binding proposal and was granted exclusive due diligence.
- Estia and Bain Capital have now entered into a Scheme Implementation Agreement at A$3.20/share, a 50% premium to undisturbed.
- A shareholder meeting is expected to be held in November with implementation expected prior to the end of 2023.
TOPIX Inclusions: Who Is Ready (Aug 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- Plus Alpha Consulting (4071 JP) will be included in TOPIX at the end of August 2023 and so far the stock has performed negatively as expected (see link).
- Our long-term TOPIX pre-event name CELSYS (3663 JP) has seen its share price decline sharply in the last few weeks which raises some important questions.
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