In today’s briefing:
- Nikkei 225 Sep 2022 Review Update
- Index Rebalance & ETF Flow Recap: S&P/ASX, CH50/A50, TW50/Div+, NIFTY50/100, STI, EPRA, Sensex
- Nikkei 225 Index Rebalance: Mostly on Expected Lines
- FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
- Nikkei 225 Review Results: Nidec, SMC, Hoya IN
- Yamada Denki (9831) Buyback Progress Strong But Big Impact To Come
- SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP
- New Regulations on Split-Off Listing in Korea: Complete Details & Trading Implications
- Giordano’s Acceptances Just Short of the 50% Voting Threshold; Offer Period Extended
- KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation
Nikkei 225 Sep 2022 Review Update
- The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
- Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
- Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this.
Index Rebalance & ETF Flow Recap: S&P/ASX, CH50/A50, TW50/Div+, NIFTY50/100, STI, EPRA, Sensex
- There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
- The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
- There were large inflows to China and Hong Kong focused ETFs during the week.
Nikkei 225 Index Rebalance: Mostly on Expected Lines
- The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
- Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP).
- Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.
FTSE TWSE Taiwan 50/ Div+ Index Rebalance: Sinopac Holdings and Elan Micro To Watch For
- As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
- Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
- Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.
Nikkei 225 Review Results: Nidec, SMC, Hoya IN
- The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
- Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
- The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company.
Yamada Denki (9831) Buyback Progress Strong But Big Impact To Come
- In early May 2022, Yamada Denki (9831 JP) launched a GINORMOUS buyback program. I wrote about it suggesting the company meant business. The stock popped outright and vs Peers.
- Then it fell back, and has only recently started moving back up. Surprising given buyback dynamics but it may have been overhang. If so, that overhang should be gone now.
- And the stock is cheap, a chunk of the register is sticky, so this could get squeezier now.
SK Discovery Launches Opportunistic Partial Tender on SK Chemicals To Buy SK Bio CHEAP
- On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
- The stated purpose in the Tender Offer Announcement is “Stability of Management Rights.” This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.
- The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).
New Regulations on Split-Off Listing in Korea: Complete Details & Trading Implications
- The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
- The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
- We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.
Giordano’s Acceptances Just Short of the 50% Voting Threshold; Offer Period Extended
- The offeror and acceptances reached 44.98%, just short of the 50% minimum acceptance condition. The closing date has been extended to 13 September.
- If the offer is declared unconditional on or before 8 September, Giordano International (709 HK) shareholders who accept the offer will get HK$1.88 but not the dividend of HK$0.085.
- The offeror likely remains confident that it will hit the 50% threshold. At the last close, the gross and annualised spread for 17 Sep payment is 1.1% and 37.2%, respectively.
KOSPI Size Index Migration: Official Results & Trading Approach Towards Implementation
- The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
- Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
- I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.
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