In today’s briefing:
- Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- Yuexiu Rights – The Trading Pattern Fits
- Checking on Dongwon Industries’ KS200 Deletion Situation After Last Friday’s Share Cancellation Plan
- S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
- KOSPI200 Index Rebalance: Two Sets of Changes
- Five Star IPO Lock-Up – Over US$1.3bn Lockup Release with Less than US$1m ADV
- Skyworth (751 HK): Thoughts On Proration
- KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- Preemptive Flow Trading Opportunities with the Fastest-Growing Sector ETFs in Korea
Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- Yesterday (15 May 2023) just before EOD, an article ran suggesting a ¥300bn capital raise by Rakuten (4755 JP). The stock fell 10% in 10mins. Rakuten hemmed/hawed but didn’t deny.
- One day later, we have a deal. It is up to 546mm shares including greenshoe, which at the close was ¥333bn. 468mm shares to the public, 79mm to 3rd parties.
- This increases Real World Float by 95%. In that respect this is vaguely IPO-ish. Investors have to re-underwrite. Then Passive re-shrinks the float. Details matter.
Yuexiu Rights – The Trading Pattern Fits
- The Yuexiu Property (123 HK) Rights start trading today. Last day is next Monday. There is a general pattern to the flows and it behooves investors to be aware.
- There is a pattern to these trades which is worth understanding.
- In this case, I expect it is worth going long Yuexiu Rights vs Short peer basket equity earlier in the cycle.
Checking on Dongwon Industries’ KS200 Deletion Situation After Last Friday’s Share Cancellation Plan
- It is highly likely that Dongwon Industries will be removed from the KOSPI 200 index in this June review.
- Additionally, based on the confirmed cancellation timeline, the possibility of reinstatement during the December review seems unlikely.
- As a result, it would be wise to maintain shorting position strategies that factor in this information.
S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
- The review period for the June rebalance of the S&P/ASX family of indices ends tomorrow and we expect two changes for the S&P/ASX 200 (AS51 INDEX).
- Impact of passive trading on the stocks varies between 4.3-11 days of ADV. Short interest on the potential adds is small while there are significant shorts on the potential deletes.
- We expect there is pre-positioning on at least three of the four stocks. In some cases that is small, while it could be a lot larger in other stocks.
KOSPI200 Index Rebalance: Two Sets of Changes
- There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
- Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
- Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.
Five Star IPO Lock-Up – Over US$1.3bn Lockup Release with Less than US$1m ADV
- Five Star Business Finance (FIVESTAR IN) raised around US$190m in its India IPO in Nov 2022.
- Five-Star Business is a non-banking financial company (NBFC-ND-SI) that provides secured business loans to micro-entrepreneurs and self-employed individuals.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Skyworth (751 HK): Thoughts On Proration
- Back on the 23 December, Skyworth Group (751 HK) announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.
- On the 28 March, terms were bumped to $5.00/share. Independent shareholders approved the whitewash waiver on the 5 May.
- The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the final proration to be higher.
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
- There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
- There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
- Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.
Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
- Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
- There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
- Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.
Preemptive Flow Trading Opportunities with the Fastest-Growing Sector ETFs in Korea
- Two SOL sector ETFs are unique in that they only include companies positioned upstream. This results in a group of smaller-sized constituents, which can have a greater flow impact.
- Once the universe is established, constituent selection and weight adjustment are determined exclusively using full/float market capitalization. As a result, flow trading can be highly predictable.
- Although they have lower AUM, the five Semiconductor constituents could still face a significant flow impact during this one-day flow event due to their much lower DTV.
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