In today’s briefing:
- HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record
- Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
- Semiconductor Events Deserving Your Attention @ 9/7/23
- Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects
- Ohayo Japan | Weak Payrolls=Lower Rates; Weaker USD; NUGGET:Heat Pumps-The Future of Cooling/Heating
- Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway
- ECM Weekly (9th July 2023) – Socionext, Yongtai, Tryt, Redox, S.F. Holding, Lalatech, Fadu, Amman
- Japan Screen | Nikkei Dividend Stocks
HSI Market Consultation: Foreign Companies, Industry Groups, HK Companies
- Hang Seng Indexes has started a consultation on the eligibility of Foreign Companies in the Hang Seng Index, a review of the seven Industry Groups and number of HK constituents.
- We agree that foreign companies should be added to the index, no change needed to the Industry Groups, and the cap on the number of HK constituents should be removed.
- There are a few potential adds due to the removal of the cap on HK companies, while there are potential foreign company additions later this year or in 2024.
Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
- We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
- The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
- We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.
Socionext Placement – Valuation More Reasonable but past Secondary Offerings Have a Mixed Record
- Three shareholders of Socionext (6526 JP) aim to raise around US$1.4bn via selling all of their shares in Socionext.
- We have covered the background of the deal in our earlier note, Socionext Placement – A US$1.8bn Cleanup, Will Have to Give up Some of Its 6x Listing Gains.
- In this note, we talk about the updates and look at the performance of some of the past Japan deals.
Index Rebalance & ETF Flow Recap: HSCI, HSCEI, HSI, CSI300, CSI500, SSE50, HDFC Bank, Sensex
- Hang Seng has announced the conclusions of the market consultation. Primary-listed foreign stocks will be eligible for inclusion in the HSI INDEX and HSTECH INDEX from the December rebalance.
- The coming week has the rebalances for the NIFTY Index, Nifty Next 50 Index, Nifty Bank Index and SENSEX Index as a result of the HDFC Limited/ HDFC Bank merger.
- There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and outflows from Hang Seng H Share Index ETF (2828 HK) during the week.
Semiconductor Events Deserving Your Attention @ 9/7/23
- Global semiconductor sales amounted to $40.7 billion in May’23. This represented an increase of 1.7% MoM and a 21.1% decline on a year-ago basis
- Samsung pre-announces Q2’23 sales and operating profit slightly down sequentially
- HMB3 standard launched. SK Hynix wins a critical HMB3 design win at NVIDIA
Ant Group’s $6.0bn Buyback Move Casts Doubt on IPO Prospects
- China’s regulators on Friday imposed Ant Financial Services Group (6688 HK) with a fine of RMB 7.12bn. A day later, Ant Group unveiled a share buyback program worth $6bn.
- The last time media created a positive narrative around Ant Group was in January 2023 when Jack Ma relinquished control of the company.
- However, the media excitement was short-lived as Alibaba Group Holding (9988 HK)‘s share price quickly resumed a downward trend after rising by around 22%.
Ohayo Japan | Weak Payrolls=Lower Rates; Weaker USD; NUGGET:Heat Pumps-The Future of Cooling/Heating
- OVERSEAS. SPX -0.3% and down WoW; Weak Payrolls numbers lead to fall in US 2Yr to 4.95%, USD weakness; This week – packed schedule with CPI; Watch Bank earnings
- JAPAN. NKY Futs flat vs Cash; USDJPY 142.2, on weaker US payrolls; JP companies struggle to lift ROE due to expanding Equity Base (=more buybacks?); Kishida to reshuffle cabinet
- NUGGET. Heat Pumps – A Big Deal for Daikin(6367)/Melco(6503). A large addressable, and growing market, and great for the environment. Yes, you should get excited!
Merger Arb Mondays (10 Jul) – JSR, Yachiyo, InvoCare, Costa, Musgrave, Metro Pacific, Healthway
- 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), ENM Holdings (128 HK), Chindata Group (CD US), Estia Health (EHE AU), Poly Culture Group Corp H (3636 HK), Costa Group Holdings (CGC AU).
- Lowest spreads – Healius (HLS AU), Hailan Holdings (2278 HK), Liontown Resources (LTR AU), Toyo Construction (1890 JP), Oishi Group PCL (OISHI TB), Yachiyo Industry (7298 JP), Penguin.
ECM Weekly (9th July 2023) – Socionext, Yongtai, Tryt, Redox, S.F. Holding, Lalatech, Fadu, Amman
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- In the IPO space, Tryt Inc (9164 JP) announced a somewhat reasonable pricing range, while Fadu (440110 KS) looks to open up the Korean market for larger IPOs again.
- On the placement front, Socionext (6526 JP) found itself in the eye of a storm after its stupendous 6x increase since listing.
Japan Screen | Nikkei Dividend Stocks
- The Nikkei has recently launched two new equity indices for investors that are focused on dividends.
- We highlight some similarities and differences with the well-known US S&P 500 Dividend Aristocrats Index
- We carry out a quick and simple screen of the Nikkei constituents to find the best dividend stocks to buy
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