In today’s briefing:
- Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- S&P/ASX Index Rebalance (Mar 2025): SIG Is the BIG One; Changes Galore Across Indices
- 7&I (3382) – Artisan Writes (Again) And 7&I Updates (Again) – More Positive Outlook Now
- S&P500/400/600 Index Rebalance: DASH In as Stability Trumps Volatility
- Got the BBIG Rebalancing Results: SK Innovation Is the Trade This Week
- Select Sector Indices and S&P Equal Weight Rebalance: US$16.3bn Trade; Big Impact for EXE, TKO
- Seven & I Holdings (3382 JP): Reading Between the Lines of the Public Letter
- ECM Weekly (10th Mar 2025) – BYD, Japan Post, Mixue, Sanhua, Chifeng, Nanshan, Goertek, Travel Food
- Makino Milling Machine (6135 JP): A White Knight Bidder Is Emerging
Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.
- India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.
- A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.
Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- The Offering of Japan Post Bank (7182 JP) is not taking place the way “the right pattern” would suggest, but last time was kind of special. This time is different.
- Last time was a “second IPO” and coincided with a US regional bank crisis. This time the offering is smaller outright, and much smaller as a portion of float.
- Pricing is Monday. It hasn’t moved much vs JPH. It needs to move more to be attractive. And there is still a bit of overhang to come.
S&P/ASX Index Rebalance (Mar 2025): SIG Is the BIG One; Changes Galore Across Indices
- There are 2 changes for the S&P/ASX50 Index, 2 changes for the S&P/ASX100 Index, 7 changes for the S&P/ASX200 Index and 11 adds/ 7 deletes for the S&P/ASX300 Index.
- There is a huge increase in the number of index shares for Sigma Healthcare (SIG AU), triggering passive buying of nearly A$1.4bn at the close on 21 March.
- The adds have outperformed the deletes across all indices. Positioning varies across stocks and there could be some big movers over the next few days.
7&I (3382) – Artisan Writes (Again) And 7&I Updates (Again) – More Positive Outlook Now
- On Thursday 6 March we got a Nikkei article then a company announcement for Seven & I Holdings (3382 JP)‘s proposed management measures and update on ACT Bid Process.
- It involved Isaka-san stepping down, Stephen Dacus stepping up, selling York to Bain for ¥814.7bn, IPOing 7-Eleven US, a ¥2trln share buyback over 5yrs, and ACT process update.
- It was OK. Good, bad, and ugly. But Artisan wrote a letter over the weekend and 7&i responded and suddenly, their concerns are mostly addressed and the outlook is different.
S&P500/400/600 Index Rebalance: DASH In as Stability Trumps Volatility
- There are 4 changes for the S&P 500 INDEX, 6 changes for the S&P Midcap400 Index and 14 changes for the S&P SmallCap600 Index at the March rebalance.
- DoorDash (DASH US) was newly eligible after meeting the profitability criterion, while AppLovin (APP US), Coinbase Global (COIN US) and Interactive Brokers Group, Inc (IBKR US) were overlooked again.
- There will be more same-way flow for the S&P 500 INDEX (SPX INDEX) adds and deletes from the Select Sector index trackers.
Got the BBIG Rebalancing Results: SK Innovation Is the Trade This Week
- Real alpha? Tight basket means outsized passive flows. The play? SK Innovation, no contest.
- Samsung SDI faces -0.54x ADTV outflows. Other movers: Netmarble 0.68x, Wemade Max 0.54x, NHN -0.46x ADTV.
- Net-Net? SK Innovation is the trade. Long here, hedge short on Samsung SDI or the broader Battery space.
Select Sector Indices and S&P Equal Weight Rebalance: US$16.3bn Trade; Big Impact for EXE, TKO
- Constituent changes to the S&P500 INDEX and capping changes will result in a round-trip trade of US$16.3bn across the Select Sector indices and the S&P500 Equal Weight Index.
- The Select Sector index trackers and S&P500 Equal Weight trackers will need to buy the adds to the S&P500 INDEX and sell the deletes, further increasing flow for the stocks.
- The flows will change over the next week as stock prices move around, and final capping is done after the close on 14 March.
Seven & I Holdings (3382 JP): Reading Between the Lines of the Public Letter
- The Seven & I Holdings (3382 JP) Board has released a public letter to address Artisan Partners’ letter and provide more details on the Alimentation Couche-Tard (ATD CN) constructive engagement.
- The letter effectively addresses most of Artisan’s concerns. The Board is engaging with Couche-Tard, particularly by agreeing on a strategy to find a solution to secure antitrust approvals.
- However, the statement suggests that the Board retains deep scepticism that the Couche-Tard is viable and is manoeuvring to shift the blame on a failed bid on a flawed proposal.
ECM Weekly (10th Mar 2025) – BYD, Japan Post, Mixue, Sanhua, Chifeng, Nanshan, Goertek, Travel Food
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, Mixue Group (2097 HK) provided some much needed relief to the HK tea chains, Seoul Guarantee Insurance (031210 KS) might not do the same this week.
- On the placements front, BYD (1211 HK)‘s jumbo offering has been doing well, while Japan Post Bank (7182 JP) hasn’t been correcting much.
Makino Milling Machine (6135 JP): A White Knight Bidder Is Emerging
- Makino Milling Machine Co (6135 JP) has disclosed that it has received initial letters of intent from multiple third parties, reportedly private equity funds, to launch a competing tender offer.
- My analysis suggests that a white knight bid could be as high as JPY13,284, 20.8% higher than Nidec’s JPY11,000 offer and 10.2% higher than the last close price of JPY12,050.
- Nidec Corp (6594 JP) will take a wait-and-see approach. However, regardless of whether a white knight bidder emerges, Nidec will eventually have to bump.
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