In today’s briefing:
- Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
- ASX200 Index Rebalance: PEXA to Replace Pendal
- Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
- Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
- Bilibili Follow-On Offering – Seems Opportunistic
- China Education Group Placement – Recent Momentum Has Been Strong but past Deals Were Mixed
- Essential Metals (ESS AU): Scheme With Tianqi/IGO
- Lotte Chemical Offering: Schedule Clarifications & Trading Considerations
- Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact
- How Should We Play with Kakao Pay’s MSCI Inclusion Event?
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
- End December was the end of the review cutoff for a lot of indices that will rebalance within the next couple of months.
- PEXA Group (PXA AU) replaces Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 12 January.
- There were big outflows from Hong Kong and China focused ETFs led by Hang Seng H Share Index ETF (2828 HK) and Tracker Fund of Hong Kong Ltd (2800 HK).
ASX200 Index Rebalance: PEXA to Replace Pendal
- PEXA Group (PXA AU) will replace Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 12 January.
- Passive S&P/ASX 200 (AS51 INDEX) trackers will receive PEXA Group (PXA AU) shares from their Link Administration (LNK AU) holdings and will have to buy the rest from the market.
- There will be selling in Pendal Group (PDL AU) from S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index trackers as well as from global trackers.
Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
- In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
- This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
- This is therefore a TOPIX inclusion event at end-January 2023.
Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
- Yamada Denki (9831 JP) has bought back nearly 16% of shares out ex-Treasury in the 7.5 months since last fiscal year earnings were announced. It went limit up on Day1.
- Then it stopped – despite the buyback being 15% of expected volume every day for a year and a HUGE piece of Real World Float.
- There is 8% left to buy at current prices – 16-18% of volume the next 4.5mos. And it is still a dirt cheap capital structure and somewhat sticky shareholder structure.
Bilibili Follow-On Offering – Seems Opportunistic
- Bilibili Inc (BILI US) aims to raise around US$400m via a follow-on ADS offering.
- The company plans to use most of the proceeds to redeem its 2026 notes.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
China Education Group Placement – Recent Momentum Has Been Strong but past Deals Were Mixed
- China Education Group (839 HK) is looking to raise up to US$209m in its top-up placement.
- This will be the fourth placement by the group since its listing in 2017, we have earlier looked at the past three placements as well.
- In this note, we will look at the deal dynamics and run the deal through our ECM framework.
Essential Metals (ESS AU): Scheme With Tianqi/IGO
- Small lithium player Essential Metals (ESS AU) has entered into a Scheme with the Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%).
- The Scheme Consideration of A$0.50/share is a 45% premium to last close, and a 36.3% premium to the 30-day VWAP.
- Standard Scheme conditions apply. FIRB required. The Scheme Booklet is due out in March, with a shareholder meeting expected in April 2023. Possible implementation in May 2023.
Lotte Chemical Offering: Schedule Clarifications & Trading Considerations
- The subscription starts on January 19, so the pricing is January 16, three trading days earlier. The shorting restriction runs until January 16, which means the 16th is inclusive.
- There was no arb spread opening during the last four trading days of the subscription rights trade period. Nonetheless, this event had some impact on Lotte Chemical’s futures trading.
- Considering this, the trade that can be considered at this point would be unhedged shorting. We target potential inflow to adjust the second issuing price downwardly and post-listing overhangs.
Quiddity Leaderboard-S&P/ASX Mar 23: Multiple Names with Decent Impact
- In this insight, we take a look at the potential index changes for S&P ASX 20, 50, 100, 200, 300 in the run up to the March 2023 Rebalance.
- I expect there to be one, two, and four changes, respectively, for the ASX 20, ASX 100, and ASX 200 indices in the March 2023 Rebalance.
- For ASX 300, there could be 14 ADDs and 12 DELs in the March 2023 Rebalance including some high impact names based on days-to-trade.
How Should We Play with Kakao Pay’s MSCI Inclusion Event?
- Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
- It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
- More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.
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