In today’s briefing:
- SF Holding (002352 CH): H-Share Listing & Index Implications
- Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
- Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
- Japan – Increase in Shorts on Some Interesting Stocks
- Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
- Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI
- Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
- Ohayo Japan| SPX -2.3%WoW; Buffett Buying UST; NUGGET:Motorcycle Electrification – Honda Roars Ahead
- Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer
SF Holding (002352 CH): H-Share Listing & Index Implications
- S.F. Holding (002352 CH) could raise between HK$26-33bn (US$3.4-4.2bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
- The H-shares could get Fast Entry to certain indices and regular entry to others depending on the number of shares that are allotted to cornerstone and/or strategic investors.
- The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.
Finally, a Risk-Free Dividend Arbitrage Trading Opportunity Is Presented in Korea: Feat. SK Inc
- In a surprising move, SK Inc confirmed the interim dividend amount (₩1,500) on July 26, and the ex-dividend date is set for August 10.
- As a result, this enables risk-free dividend arb trading in Korea as SK Inc carries single-stock futures, whose liquidity level is around 70% of the spot since July 26.
- The backwardation level has not yet pushed this arbitrage to a profitable level. Nevertheless, it’s still possible to observe the basis spread moving to a meaningful extent before the ex-date.
Korea – Positioning in Ecopro, Kumyang, JYP Entertainment, Hanwha Ocean, Hanmi Semi, Posco DX
- Ecopro Co Ltd, Kum Yang, Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX have all rallied recently and could find their way into global passive portfolios.
- There could be liquidity events in some of the stocks as early as the end of the month and there is pre-positioning on a lot of the stocks.
- Retail investors have been big buyers in Ecopro Co and Kum Yang while foreign investors have been buyers in Jyp Entertainment, Hanwha Ocean, Hanmi Semiconductor and Posco DX.
Japan – Increase in Shorts on Some Interesting Stocks
- Nisshin Seifun Group, Oji Holdings, Nippon Shinyaku, CyberAgent Inc, NGK Insulators, Lixil Group and Sharp Corp have all underperformed the Nikkei 225 (NKY INDEX) over the last 3-4 months.
- The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
- Short interest has started to increase and there could be more pre-positioning yet to come over the next few weeks.
Index Rebalance & ETF Flow Recap: NKY, STAR50, NIFTY NEXT50, SF Holding
- The review period for a bunch of indices ended early last week and the announcement of the changes will be made in the next few weeks.
- Hydro Lithium (101670 KS) will replace Nice Information Service Co (030190 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX EQUITY) at the close on Monday.
- There have been big net inflows into China focused ETFs and outflows from Taiwan focused ETFs during the week.
Last Week in Event SPACE: Nippon Yusen, Takara, Kawasaki Kisen Kaisha, PCCW/HKT, ANZ
- This may get squeezy after Nippon Yusen Kk (9101 JP) announced a ¥200bn over 9mos. Do not be short. Be long.
- On an implied stub and simple ratio, Takara Holdings (2531 JP) is trading rich to 60.9%-held Takara Bio Inc (4974 JP).
- Remain bullish Kawasaki Kisen Kaisha (9107 JP) vs TOPIX, especially near-term. But this is a much less exciting and squeeze-able opportunity than before,
Merger Arb Mondays (07 Aug) – JSR, ITOCHU, Allkem, Origin, Symbio, Pacific Current, United Malt, MPI
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Chindata Group (CD US), Estia Health (EHE AU), Invocare Ltd (IVC AU), ENM Holdings (128 HK), Eoflow (294090 KS), JSR Corp (4185 JP).
- Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Penguin International (PBS SP), Itochu Techno Solutions (4739 JP), Oishi Group PCL (OISHI TB), Kenedix Retail REIT (3453 JP).
Weekly Deals Digest (06 Aug) – Toshiba, E-Guardian, ITOCHU, Allkem, Symbio, Pacific Current, MPI
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Rakuten Securities (RAKUSEC JP), EbixCash (EBIXC IN), Lalatech Holdings Co Ltd (LALA HK) and Lianlian DigiTech (2104619D CH) IPOs.
- Event-Driven developments – E Guardian Inc (6050 JP), Itochu Techno Solutions (4739 JP), Toshiba Corp (6502 JP), Symbio Holdings (SYM AU), Metro Pacific Investments Co (MPI PM).
Ohayo Japan| SPX -2.3%WoW; Buffett Buying UST; NUGGET:Motorcycle Electrification – Honda Roars Ahead
- OVERSEAS. SPX500 fell on Friday, and closed -2.3%WoW; July jobs report showed cooling in the labor market; Apple -4.8% weighed on market sentiment; Reports that Buffet buying short dated UST.
- JAPAN. NKY Futures -0.8% vs Cash; USDJPY 141.8; Strong JP earning season so far- NP +20%YoY; Investors favor Japan> China; Oasis’s Fischer says still more to be done with Governance.
- NUGGET. Honda is ahead of their motorcycle electrification strategy vs Japanese competitors. With the #1 global share and 2.7 trillion yen in sales, they CANNOT afford to be left behind.
Yaizu Suisankagaku Industry (2812 JP): J-STAR’s JPY1,137 Tender Offer
- Yaizu Suisankagaku Industry (2812 JP)/YSK has recommended J-STAR’s tender offer of JPY1,137 per share, a 35.0% premium to the undisturbed price (4 August).
- The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
- YSK is cash rich, and the offer is below book value. The tender offer is a reasonable alternative in challenging trading conditions that have slashed operating margin targets.
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