In today’s briefing:
- Two Days Left Til Nikkei 225 Juggled Review Starts
- The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
- S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- Tencent Investee Selldown – The US$120bn Global Overhang
- Socionext IPO – Ample Upside Even After Discount
- Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
- SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- About A Gajillion Yen of Index Flows At the Close
- Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
- Jinke Smart’s VGO of HK$12.00 from Boyu Capital
Two Days Left Til Nikkei 225 Juggled Review Starts
- The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
- ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
- Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.
The October TOPIX FFW Review and Shinsei Bank (8303)’s Future Float
- This is a hybrid insight on the upcoming TOPIX FFW Review to be announced 7 October, and the situation around Shinsei Bank (8303 JP).
- Shinsei Bank is in “limbo” post control-acquisition by SBI Holdings (8473 JP) and an attempt to go over 50% should be in the works. When is not known.
- The TOPIX FFW Review should see ¥2.0-2.2trln of one-way flow, and amongst that flow, a large sell on Shinsei to increase Real World Float by 60+% and 25d of ADV.
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
- If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
- Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.
Tencent Investee Selldown – The US$120bn Global Overhang
- Multiple new agencies have been reporting that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year.
- The reports have been coming in since the second half of the year and the company has been duly denying these rumors.
- In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.
Socionext IPO – Ample Upside Even After Discount
- Socionext (6526 JP) is looking to raise up to US$463m in its Japan IPO.
- Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation.
- In this note, we will look at the updated deal dynamics, our earlier assumptions, and share our thoughts on valuation.
Jinke Smart (9666 HK)’s Low-Balled But Virtually Unconditional Offer
- PRC-Incorporated property management play Jinke Smart Services (9666 HK) has announced a voluntary cash offer at HK$12/share, a 33.04% premium to last close.
- The Offeror (Boyu) and concert parties collectively hold more than 50%. The Offer is contingent on regulatory approvals and 7.71% of shares out tendering. The tendering condition can be waived.
- The Offer appears geared to bring Boyu’s stake in line with Jinke Property Group (000656 CH)‘s.
SET50 Index: Market Consultation & DTAC/TRUE Merger Impact
- The SET has commenced a market consultation on lowering the turnover ratio level from 5% to 2% while selecting stocks to be added to and deleted from the SET50 INDEX.
- The change to the turnover ratio level could lead to three changes in December that result in one-way turnover of 7.44% and in a one-way trade of THB 6.79bn.
- Separately, the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger could result in an ad hoc inclusion prior to the regular rebalance in December.
About A Gajillion Yen of Index Flows At the Close
- Today is a day which happens twice a year in Japan.
- It is Day Before Divs Go Ex- Day. Which theoretically means a fair bit of buying.
- Nikkei 225 is pretty neutral. But there is a Nikkei 225 buy of Nidec Corp (6594 JP). TOPIX and other float market cap indices are a buy on the close.
Swire B Vs A – Surprising on Regs, Surprising on Risk; Short-Tm Displacement Now in 99th Percentile
- The Swire buyback has been impressive. In 27 trading days they have bought back 26.8% of teh HK$4bn promised. In that period, participation has been aggressive.
- Swire has bought back As at a pace of 52% of pre-buyback one-year ADV. For Bs, it has been 105%. But Bs have dramatically underperformed As on “HK Re-opening” trades.
- Historically, when B/A gets more than 6% from 3mo Avg VWAP Ratio, there is statistically significant reversion. We are now at 6.8%. I’d buy B vs A.
Jinke Smart’s VGO of HK$12.00 from Boyu Capital
- Jinke Smart Services (9666 HK) announced a voluntary conditional general offer from Boyu Capital at HK$12.00 per share, a 33.0% premium to the undisturbed price.
- The offer is conditional on 7.71% valid acceptances (such that Boyu represents 30.40% of outstanding shares) and anti-trust approval. The conditions can be waived.
- The offer is designed to flush out minorities unwilling to wait for the industry headwinds to dissipate. A low threshold suggests that the offer will be declared unconditional.
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