In today’s briefing:
- Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
- Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- ASX100/ASX200 Index: Replacement Candidates for Virgin Money (VUK AU)
- Auckland Airport (AIA NZ) Placement: Index Impact
- Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower
- Details of MBK’s Four Major Concerns on Management of Korea Zinc
- Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF
- Japan Weekly | Rate Cuts Ignite Rally
- EQD | HSI September Rally: What’s Next?
Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
- Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
- Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
- The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
- The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
- Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
- Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
- There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
- We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
- Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.
ASX100/ASX200 Index: Replacement Candidates for Virgin Money (VUK AU)
- Following its acquisition by Nationwide, Virgin Money UK Plc (VUK AU) is scheduled to stop trading on the ASX Ltd (ASX AU) after market close on 25 September.
- Virgin Money UK Plc (VUK AU) is a member of the S&P/ASX100 Index and S&P/ASX 200 (AS51 INDEX) and there will be adhoc inclusions at the close on 25 September.
- There are a couple of stocks vying for inclusion in each index and the next couple of days will determine which ones make it.
Auckland Airport (AIA NZ) Placement: Index Impact
- Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
- The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
- We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.
Fuji Soft (9749) – As Bain Prepares to Go Higher, KKR Goes Lower
- Yesterday, KKR amended its plans to take over Fuji Soft Inc (9749 JP) by creating a Two-Tender Scheme, effectively lowering the threshold for eventual success through clearly coercive tactics.
- 3D (23.46%) and Farallon (9.22%) had already tendered. Contractual terms make it difficult (not impossible) to withdraw. Assuming it goes through, KKR has 32.68%, quasi-negative control.
- This revised structure is clearly abusive of minorities and NOT the deal Fuji Soft signed. This should cause Fuji Soft to Change their Opinion. Shareholder (and Bain) Pressure would help.
Details of MBK’s Four Major Concerns on Management of Korea Zinc
- In this insight, we discuss in detail MBK’s four major concerns on the management of Korea Zinc.
- We believe that MBK has legitimate concerns on especially the three factors including poor investments, deteriorating profitability, and increase in equity capital/disposal of treasury shares.
- If and when the 2 trillion won+ is raised, then it could lead to another tender offer and the four concerns highlighted in this insight become much more important.
Unique Rebalancing Pattern & Unique Trading Angle of the KODEX Samsung Group ETF
- This KODEX Samsung Group ETF sees 30% AUM outflows pre-rebalancing, with the same chunk flowing back in after, especially noticeable during December.
- Over three years, local brokers sold stock baskets before rebalancing, causing notable price impacts. During this time, Samsung affiliates in the ETF delivered 3-4% returns.
- ChatGPT said:ChatGPTThis isn’t typical NAV arbitrage; it’s likely an unhedged play. Nonetheless, given the consistent price impact and accessible stock futures, it’s worth considering.
Japan Weekly | Rate Cuts Ignite Rally
- The Federal Reserve made a pivotal move last week, cutting its policy rate by 0.5%—the first rate cut in four years and larger than the typical reduction
- Japanese stocks rallied strongly this week, with the Nikkei gaining 3.1% and the Topix rising 2.8%, as the yen weakened by more than 2 yen to 143 per dollar.
- Rotation into economically sensitive areas like machinery and chemicals – KHI, Resonac, and Fujikura all out performed
EQD | HSI September Rally: What’s Next?
- We continue our coverage of the Hang Seng Index : in our previous insight we theorized a continuation of the rally in September.
- So far the index is following the path outlined (pullback, then rally). What is going to happen in the next few weeks, if September closes up?
- Broadly speaking we see a potential continuation of the rally in October, but there may be some resistance in the short-term.
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