In today’s briefing:
- Pasona: The Wrong Price
- STAR50 Index Rebalance Preview: Big Impact Expected on the Changes
- Hina/IBC’s Non-Binding Proposal For VNET
- New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban
- Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Key Points We Should Know Regarding the Current Status of EOFlow
- US Fed. Rtir’mt Thrift Board Changes Intl Benchmark, Excludes HK, US$1.6bn HK to Sell, $20bn 1-Way
- Alibaba: Our Take on 2QFY24
- Asahi Group (2502 JP): US$1.3bn Secondary Placement
Pasona: The Wrong Price
- As discussed here in a piece about the Partial Tender Offer, Pasona Group (2168) has agreed to sell its controlling stake in Benefit One (2412) to M3 (2413).
- That will leave Pasona Group with a fair chunk of cash and possibly a residual stake in Benefit One, depending on the results.
- Though we don’t know what the future holds, Pasona now is the wrong price for its future.
STAR50 Index Rebalance Preview: Big Impact Expected on the Changes
- With the review period complete, we expect one change for the STAR50 INDEX in December if the index committee continues to use a 6-month minimum listing history.
- With net inflows to mainland China ETFs over the last few months, passive trackers will need to trade between 9-25 days of ADV on the potential add and delete.
- SMIC (688981 CH) will be capped and there will be reverse funding flows on the index constituents. One-way turnover is estimated at 1.8% resulting in a one-way trade of CNY2,580m.
Hina/IBC’s Non-Binding Proposal For VNET
- Chinese Internet data center services provider 21Vianet Group (VNET US) has recently received a non-binding proposal letter from the Hina Group and Shanghai’s Industrial Bank Co.
- The indicative Offer price is US$8.00/ADS, or ~US$1.3333 per ordinary share.
- The Offer Price is utterly underwhelming. A successful outcome will more than likely find its way to the Cayman Court.
New Phase in Korean Short Selling: Immediate Impact of MM and LP Short Selling Ban
- There is a prevailing sentiment in the local market that short selling by market makers (MM) and liquidity providers (LP) will effectively be prohibited very shortly.
- The widening of the futures basis extends the influence of futures on the spot market prices. This is precisely where trading opportunities that we should be keenly observing may arise.
- It also leads to a significant widening of ETF tracking errors due to the direct sell-off of underlying shares. We must capitalize on extreme spreads in ETFs.
Asahi Group Holdings (2502) Offering – Some Index Demand But Needs Lots of Active Long-Onlies
- Asahi Group Holdings (2502 JP) today announced a collection of 10 shareholders (mostly financial institutions) would sell a total of 33.48mm shares (6.6% of shares out) in Asahi Group.
- This will become more of a thing going forward. Cross-holders “want” to unwind. And in many cases, the cross-held want to buy back stock (reduce E, raise ROE).
- This deal is “good” in that it clears out a lot of the bank cross-holders in one fell swoop. But there are more crossholders behind.
Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key
- Nine shareholders are looking to sell 33.48m shares of Asahi Group Holdings (2502 JP). That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.
- Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.
- There will be buying from global trackers but nothing from TOPIX trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.
Key Points We Should Know Regarding the Current Status of EOFlow
- It can be considered that the suspension of EOFlow’s trading and, furthermore, the risk of delisting have been completely eliminated at this point.
- EOFlow emphasizes the possibility of circumventing sales of EOPatch by supplying EOPump to a JV in China. The key factors that initially sparked Medtronic’s interest in EOFlow are still valid.
- If CEO Kim fails to repay a stock collateral loan of ₩20B or secure additional loans, approximately 4% of the total issued shares could be sold in the market.
US Fed. Rtir’mt Thrift Board Changes Intl Benchmark, Excludes HK, US$1.6bn HK to Sell, $20bn 1-Way
- The Federal Retirement Thrift Investment Board which manages the four major funds in the Thrift Savings Plan for US federal government employees will change benchmark for its International Fund
- This was announced on 14 November. The transition will take place “in 2024.” It entails moving from MSCI EAFE to MSCI All Country World ex-USA ex-China ex-HongKong Investable Market Index.
- The explanation: double the countries, lots more stocks, BUT CHINA! This means selling ~US$1.6bn of HK stocks but US$20bn of one-way flow in total (lots of Japan/UK/Europe to sell)
Alibaba: Our Take on 2QFY24
- While Alibaba (ADR) (BABA US)‘s 2Q24 revenue and OP closely matched consensus expectations, the company experienced a significant sell-off, resulting in shares plummeting by over 9% yesterday.
- Yesterday’s weak performance may be linked to a 10% pre-earnings price surge, anticipating robust results. The postponement of the Cloud Spin-off could also have contributed to the decline.
- We maintain a bearish stance on Alibaba Group Holding (9988 HK) as we identify other fundamental and structural downside catalysts might become increasingly important and price-sensitive as time progresses.
Asahi Group (2502 JP): US$1.3bn Secondary Placement
- Asahi Group Holdings (2502 JP) announced a pure secondary offering of 33.5 million or 6.61% of outstanding shares. At the last close, the placement was worth JPY194 billion (US$1.3 billion).
- Notwithstanding Asahi’s explanation, the selling shareholders’ motivation for exiting their shareholding is likely to capitalise on the strong share price performance – Asahi shares are up 45% YTD.
- Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 28 November and 1 December (likely 28 November).
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