In today’s briefing:
- [Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
- HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
- HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
- HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
- Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues
- What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
- Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
[Japan Governance] FSA Urges Japan Non-Life Insurers to Eliminate Cross-Holdings – Sales Coming
- There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors.
- There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have
- 9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.
HSCI Index Rebalance: 25 Adds, 29 Deletes & Changes to Southbound Stock Connect
- There are 25 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents down to 514.
- We expect 21 of the 25 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
- Since the start of the year, shares held though Southbound Connect have increased on 22 of the 29 HSCI deletions and there could be some unwinding in the weeks ahead.
Snow Peak (7816) – Nikkei Says Bain to Launch ¥50bn MBO
- Apparently, MergerMarket had an article out Friday saying once-higher-flying outdoor/sporting goods retailer Snow Peak Inc (7816 JP) was considering going private. The company said(J) late they were considering multiple options.
- A Nikkei article (J) Saturday said it was Bain would launch an MBO/Tender Offer as early as this week paying ¥50bn.
- This will probably go limit up Monday. I’d expect an announcement post-close Monday. Long-suffering long-only investors who have already sold will be disappointed. Those who were late to sell? Happy.
HSCEI Index Rebalance: Third Time Unlucky for Zhongsheng (881 HK) As China Unicom (762 HK) In
- After narrowly avoiding deletion at the last two index reviews, Zhongsheng Group will be deleted from the HSCEI INDEX in March and replaced with China Unicom (762 HK).
- Zhongsheng Group (881 HK) is down 25% for the year while China Unicom Hong Kong (762 HK) is up 10%.
- There appears to be positioning on both stocks though the increase in shorts and jump in cumulative excess volume on Zhongsheng Group (881 HK) point to higher positioning.
HSTECH Index Rebalance: Tongcheng (780 HK) In; GDS (9698 HK) Out; Round Trip Trade US$1bn
- As expected, Tongcheng Travel Holdings (780 HK) will replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 March.
- Estimated one-way turnover is 3.9% leading to a round-trip trade of HK$7.74bn (US$988m). There is nearly 14x ADV to buy in Tongcheng Travel Holdings (780 HK).
- Positioning in Tongcheng Travel (780 HK) does not appear to be very high, while positioning in GDS Holdings (9698 HK) is very high with a couple of deletions coming up.
Index Rebalance & ETF Flow Recap: HSI, Screen Holdings, GMRI, SEA EM, MVIS, SET50, JP Positioning
- There were index review announcements for the HSI, HSCEI INDEX, HSTECH, HSCI, HSIII and some global indices last week.
- There are a bunch of review cutoffs early in the coming week followed by announcements for the STAR50 INDEX and STAR100 Index later in the week.
- Another week of outflows for Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share ETF (2828 HK) as inflows to iShares Emerging Markets ex-China (EMXC US) continue.
Snow Peak (7816 JP): Bain Contemplating Backing an MBO at JPY1,200
- The Nikkei reports that Snow Peak Inc (7816 JP) is set to disclose a Bain-sponsored MBO this week “in the range of 1,200 yen per share.”
- Mergermarket first disclosed a potential MBO on Friday. Snow Peak responded that while it is true that we are considering going private, no decision has been made at this time.
- The rumoured JPY1,200 offer price is light vs historical trading ranges but attractive vs peer and historical multiples. The probability of an offer materialising is high.
Last Week in Event SPACE: Outsourcing Ltd, MGM China, JSR Corp, Dissentient Blues
- Nobody “named” having >5.0% in Outsourcing (2427 JP); no public noise, the stock down; people won’t be fighting for a bump unless the delay and impairment are truly meaningless.
- Stay long MGM China Holdings (2282 HK) as its FY23 top line surpasses pre-Covid levels.
- Investors and risk arbitrageurs who are worried about the potential loss of the case to RF SUNY should simply avoid, or sell then avoid JSR Corp (4185 JP) shares.
What We’ve Gathered Thus Far Regarding KOREA PREMIUM INDEX: Schedule, Methodology, & NPS
- The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
- Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
- NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.
Hang Seng Internet & IT Index Rebalance: Three Changes & One Big Surprise
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the March rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 5.6% resulting in a round-trip trade of HK$3.26bn (US$416m). 6 stocks will have over 1x ADV to trade.
- There is huge short interest on East Buy Holding (1797 HK) and there could be some short covering ahead of the inclusion of the stock in the index.
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