In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
- Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo
- TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
- A Pair Trade Between KT & LG Uplus
- Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?
- Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
- Pinduoduo (PDD) Short Review: Third-Party Retailers “Bombarded” Direct Sales
- Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
- ECM Weekly (10th Apr 2023) – Rakuten Bank, Merdeka Battery, ZJLD, Socionext, Trial Holdings
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
- There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.
Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
- There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
- If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
- This implies an essential premise for us to set up a more aggressive preemptive position on KT.
Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
- Lowest spreads – Healius (HLS AU), Golden Energy & Resources (GER SP), Liontown Resources (LTR AU), Norwest Energy NL (NWE AU), Mincor Resources NL (MCR AU), GK Goh.
TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
- The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
- According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month.
- Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.
A Pair Trade Between KT & LG Uplus
- In this insight, we discuss a pair trade between KT Corp (030200 KS) (go long) and LG Uplus Corp (032640 KS) (go short).
- The three major reasons for going long on KT Corp include a) the potential inclusion in MSCI Korea Standard index, b) attractive valuations, and c) a new CEO.
- KT Corp is a potential inclusion candidate for MSCI Korea Standard index in May 2023. With foreign room at 17%, it is comfortably above the 15% level threshold requirement.
Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?
- OVERSEAS. Good Friday holidays. US Economy proving to be pretty resilient. Non-farm payrolls showed hiring continued to be strong in March. NFP was 236k vs Cons 230k. Telsa cuts prices(again)
- JAPAN. NKY Futs +0.5% vs Cash as US Equity(Cash) markets closed. USDJPY 132.2. Likely see some beta led reversals of losses seen in the latter half of last week.
- NUGGET. Kuroda bids Farewell after 10 years as BOJ Governor. He created a new playbook on monetary policy that will be studied for years. Net-net, positive outcome.
Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
- Kotak Mahindra Bank (KMB IN) was added to the MSCI India Index at the November 2020 SAIR. However, a LIF of 0.5 was applied due to the low foreign room.
- The latest shareholding pattern as of end-March shows a foreign room higher than 25%. That should result in a removal of the LIF at the May QCIR.
- The increase in foreign room is a result of FPIs selling the stock despite the inclusion of Kotak Mahindra Bank (KMB IN) in a global index in March.
Pinduoduo (PDD) Short Review: Third-Party Retailers “Bombarded” Direct Sales
- PDD’s small retailers bought out products of direct sales and claimed full refund.
- The story happened to Alibaba more than ten years ago.
- It can be hard for PDD to enter the high quality market.
Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
- Through the regular rebalancing, Kum Yang and Cosmo Chemical will be included in KOSPI 200, and Youlchon Chemical will be included as an ad-hoc change due to Dongkuk Steel’s deletion.
- We should prepare for an aggressive long position on Youlchon Chemical from a day trading perspective, targeting May 15th, the day after Dongkuk Steel’s general meeting.
- If the meeting is scheduled for the morning, we should consider entering the position in the afternoon of the 12th.
ECM Weekly (10th Apr 2023) – Rakuten Bank, Merdeka Battery, ZJLD, Socionext, Trial Holdings
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- While sentiment took a hit as Trial Holdings (5882 JP)‘s pulled its IPO, Rakuten Bank (5838 JP) cutting its price range leaves more upside on the table for investors.
- Merdeka Battery Materials (2012725D IJ) concluded its US$586m IPO bookbuild in Indonesia, with decent upside waiting for the longer-term investor.
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