In today’s briefing:
- Index Rebalance & ETF Flow Recap: FTSE AW/AC, CH 50/A50, STI, KLCI, TW 50/Div+, STAR50, EPRA Nareit
- CSRC and PCAOB “Agree” On Audit Terms – Now PCAOB Will Try To Prove a Negative
- STAR50 Index Rebalance: Adds Continue to Outperform as Changes Are Announced
- China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA
- Hanmi Science Merger: Proxy Battle-Triggered Momentum Trading
- Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue
- MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
- SENSEX Index Rebalance Preview: Adani Green Could Replace Dr. Reddy
- MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
Index Rebalance & ETF Flow Recap: FTSE AW/AC, CH 50/A50, STI, KLCI, TW 50/Div+, STAR50, EPRA Nareit
- It was a busy week with a lot of review cutoffs for the FTSE country indices and the announcement of the STAR50 INDEX changes for September.
- The coming week has the implementation of the JPXNK400, MSCI, HSI, HSCEI and HSTECH rebalances. Plus announcements of the changes to the FTSE, NIFTY and S&P/ASX indices.
- There were outflows from iShares MSCI All Country Asia ex-Japan ETF (AAXJ US), IShares Core MSCI Asia Ex Japan ETF (3010 HK) and KraneShares CSI China Internet ETF (KWEB US).
CSRC and PCAOB “Agree” On Audit Terms – Now PCAOB Will Try To Prove a Negative
- Friday in US time, the China Securities Regulatory Commission (CSRC), China’s MOF, and the US Public Company Accounting Oversight Board (PCAOB) “agreed” on a Statement of Protocol.
- This SoP sets the outlines for PCAOB access to inspect/investigate audit papers and accounting firms in China and HK for companies listed in the US.
- The releases’ difference in language is to be expected – different constituencies – but as PCAOB Chair Williams said, “Now we will find out whether those promises hold up.”
STAR50 Index Rebalance: Adds Continue to Outperform as Changes Are Announced
- The index committee has continued to use a 6 month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in September.
- One-Way turnover is estimated at 4.07% and will result in a one-way trade of CNY 2,265m. Passive trackers will need to trade between 1-5 days ADV on the adds/deletes.
- The adds have outperformed the deletes and the CSI500 Index since the end of the review period. We’d look to buy the adds and hedge with CSI500 Index futures.
China ADRs Delisting – Tide Is Turning – Non-HK Listed ADRs Are Already Outperforming
- On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
- On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
- In this note, we’ll talk about the latest developments and its implications.
Merger Arb Mondays (29 Aug) – Ramsay, DTAC/True, Pendal, Link Admin, Ramsay, Infomedia, ResApp, MACA
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), True Corp Pcl (TRUE TB).
- Lowest spreads MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), MyDeal.com.au Ltd (MYD AU), China Vast Industrial Urban Development (6166 HK)
Hanmi Science Merger: Proxy Battle-Triggered Momentum Trading
- This event provides three trading angles. 1. merger swap arbitrage, 2. passive flow trading, and 3. proxy battle-triggered momentum trading. But a proxy battle would be the only actionable one.
- The market will likely see the dissolution of Hanmi Healthcare, owning a 6.43% stake in the holding company as a prelude to a full-fledged proxy battle.
- Predicting the triggering timing is difficult, but we should note that the mother is 72 years old. How long she will remain in the current managerial position is highly doubtful.
Meituan (3690 HK): 2Q22, Reduced Loss, But Unnecessarily Reclassifies Revenue
- The revenue growth rate decelerated, but operating loss shrank in 2Q22.
- We believe the the revenue reclassification is unnecessary and suspicious.
- We set a downside of 19% and a price target of HK$148.
MACA: Thiess’ Unsurprising Bump. NRW’s Move, If Any
- Back on the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the undisturbed price.
- The Bidder’s Statement was dispatched on the 9 August. After rejecting NRW Holdings (NWH AU)‘s non-binding proposal (implied consideration of $1.085/share), MACA dispatched the Target Statement on the 25 August.
- Thiess has now lifted its all-cash Offer to A$1.075/share – a 34.4% to undisturbed. MACA is trading marginally through the revised terms. The first closing date is the 12 September.
SENSEX Index Rebalance Preview: Adani Green Could Replace Dr. Reddy
- We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.
- We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
- Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.
MACA’s Revised Thiess Offer Makes an NRW Rival Offer Increasingly Unlikely
- Theiss has improved its MACA Ltd (MLD AU) offer from A$1.025 to A$1.075 per share. The offer is conditional on 90% minimum acceptances, FIRB approval and no prescribed occurrences.
- Theiss increased its shareholding to 15.90% of outstanding shares due to acceptances from MACA founders and directors. This is a stumbling block to a potential NRW Holdings (NWH AU) scheme.
- While the value of NRW’s default option remains higher than Thiess’ revised offer, it is increasingly unlikely that NRW will start a bidding war.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
