In today’s briefing:
- LQ45 Index Rebalance: Two Changes in a Few Days
- KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
- Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- Nomura Real Estate To Buy Nomura RE Master Fund Units
- A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- EOFLOW/Medtronic Tender: Assessing the Wide Spread
- NVIDIA: Global Funds Hit New Highs
- Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way
- LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?
- Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?
LQ45 Index Rebalance: Two Changes in a Few Days
- Gudang Garam (GGRM IJ) and Mitra Adiperkasa (MAPI IJ) will replace Timah Persero (TINS IJ) and Japfa Comfeed Indonesia (JPFA IJ) in the LQ45 Index next week.
- There are some large changes to free float plus capping changes for Bank Central Asia (BBCA IJ) and Bank Rakyat Indonesia (BBRI IJ).
- There could be jumps in the stocks of the adds/deletes today, though there should be pre-positioning and a potential reversal later in the week.
KRX New Deal Index Rebalance Preview: Review Period Nearly Complete
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There is one change currently for each of the Secondary Battery, Bio and Game indices. Then there are a couple of changes for the Internet and BBIG indices.
- There are four stocks that will have over 2 days of ADV to trade from passive trackers and these stocks could move around announcement of the changes.
Toshiba (6502) Tender – Certainly Cheaper. Maybe Delayed, But Toshiba Fatigue Is Strong
- It has been four months since JIP officially announced their intention to launch a Tender Offer for Toshiba Corp (6502 JP) by end-July. 7 weeks since Toshiba’s Board supported it.
- There’s been no material public griping. Peers are sharply higher. There have been news stories suggesting a Western Digital/Kioxia deal is close. That’s now extended. The Toshiba deal possibly too.
- But huge outperformance by peers, and possible clarity from Kioxia deal terms are unlikely to move the Toshiba Board to demand more.
Nomura Real Estate To Buy Nomura RE Master Fund Units
- Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
- They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP).
- Understanding the reason is how you understand the trade to do.
A Long Short Arb Event on SKT & LG U+ Targeting SKT’s Index Inclusion in November with Buyback
- The chances of SKT’s inclusion in the August MSCI Review seem slim. SKT narrowly missed meeting the 15% threshold on both Day 1 and Day 2 during this review.
- SK Telecom’s buyback completion can be accelerated to align with the MSCI November Review period, just like the previous case of KT Corp back in April.
- The estimated size of passive funds flowing into SKT is approximately ₩160 billion, which is expected to be around 5.5 times the average daily trading volume (ADTV).
EOFLOW/Medtronic Tender: Assessing the Wide Spread
- Medtronic Plc (MDT US) aims to acquire Eoflow (294090 KS) through share purchase agreements (SPA), a share subscription agreement (SSA) and a public tender offer at KRW30,000.
- Since the deal announcement on 26 May, the spread has widened, reflecting deal risk around patent litigation risk, regulatory approvals and the minimum acceptance condition.
- Our assessment of these risks suggests a low probability of a deal break. At the last close, the gross spread is an attractive 8.5%.
NVIDIA: Global Funds Hit New Highs
- Global Fund exposure in NVIDIA Corp (NVDA US) has moved to record levels after a doubling of the share price this year.
- New positions from UniNachhaltig Global, JP Morgan Global Focus and BNY Mellon Global Equity (3.36%) were among a total of 14 funds who opened exposure to NVIDIA Corp in 2023.
- Growth and Aggressive Growth funds are at maximum levels of ownership, whilst Value managers are showing some hesitancy here.
Quiddity Leaderboard CSI 300/500 Dec 22: Massive Baskets, US$2.5bn One-Way
- CSI 300 represents the 300 largest stocks by market capitalization and liquidity from the entire universe of Shanghai and Shenzhen Stock Exchanges. CSI 500 represents the next largest 500 names.
- In this insight, we take a look at the potential ADDs/DELs for the CSI 300 and CSI 500 rebalance in December 2023.
- I currently expect 13 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
LGES: Slowing Sales in Europe & A Turning Point in Momentum for Korean Rechargeable Battery Sector?
- LGES provided a lower sales guidance in 3Q 2023 due to slower sales in Europe. LGES expects its sales in 3Q 2023 to decline in a QoQ basis.
- The share prices of the top 12 rechargeable battery names in Korea are down on average 13.9% in the past two trading days.
- We believe that the overall sentiment on the rechargeable battery sector in Korea has started to turn sour which could have a further negative impact on companies such as LGES.
Japan Watch: 1% with Added Flexibility – More or Less Printing from Here?
- The Bank of Japan moved the needle on the 10yr YCC from an effective cap 0.5% to a new effective cap at 1% but with a larger flexibility being introduced to the setup.
- This also means that JGBs are now effectively tradeable again and that two-way-traffic is introduced as the BoJ can decide to guide the 10yr point both higher and lower within the accepted range given incoming data on prices ahead.
- This is very different from just communicating a new clear cap and the 10yr yield is trading around +56 bps on the screens by the time of writing.
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