In today’s briefing:
- SET50 Index Rebalance: KCE Replaces TIDLOR
- Japan – Increasing Shorts on Some Interesting Stocks
- KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX
- Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue
- Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150
- SBI To Buy Gumi (3903) Shares To Up Stake to Near 30% (And Try To Avoid Impairment)
- A/H Premium Tracker (To 22 Dec 23): Wide Premia Narrow; Narrow Premia Widen. Stay Long Hs Vs As
- Meldia DC (1739 JP) – Open House Group Cleans Up Sanei Architecture Sub in TOB.
- Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer
- IJTT (7315 JP): Risk/Reward as SPARX Bumps to JPY850
SET50 Index Rebalance: KCE Replaces TIDLOR
- KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
- Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
- Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB).
Japan – Increasing Shorts on Some Interesting Stocks
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios early next year.
- The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
- Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.
KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX
- Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
- In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
- Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.
Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue
- In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
- In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
- The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.
Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150
- The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
- The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
- There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US).
SBI To Buy Gumi (3903) Shares To Up Stake to Near 30% (And Try To Avoid Impairment)
- Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
- SBI already owns 8.8mm shares, and this would bring them close to 30.0%.
- SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment.
A/H Premium Tracker (To 22 Dec 23): Wide Premia Narrow; Narrow Premia Widen. Stay Long Hs Vs As
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
- STILL time to go long Hs vs As for the new year at 52wk wide discounts.
Meldia DC (1739 JP) – Open House Group Cleans Up Sanei Architecture Sub in TOB.
- Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
- Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
- This is too light for minorities, and even lighter for whole co, but it’s a done deal.
Hollysys (HOLI US): Dazheng Ups the Ante with a US$29.00 Competing Offer
- Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
- While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
- Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng’s offer.
IJTT (7315 JP): Risk/Reward as SPARX Bumps to JPY850
- IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s revised tender offer of JPY850, 4.7% premium to its previous JPY812 offer. The revised offer has been declared final.
- The Isuzu Motors (7202 JP) share repurchase price has risen 4.0% from JPY677 to JPY704. The tender closes on 15 January 2024. All other terms are unchanged.
- The shares are trading above the revised terms. A final offer and no competing bidder points to an unfavourable risk/reward profile – a 21% downside on a deal break.
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