In today’s briefing:
- HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- 2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
- HSI Index Rebalance Preview: Better Late Than Never?
- HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- TOPIX Inclusions: Who Is Ready (Jan 2023)
- Ping An A/H Premium: Buy the A’s, Sell the H’s
- Halcyon Agri: MGO One Step Closer As SASAC Approves SPA
- Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
- Korea M&A Outlook in 2023: What’s for Sale?
HSTECH Index Rebalance Preview (March): Handling Treatment Changes Lead to High Turnover
- We expect at least one change to the Hang Seng Tech Index (HSTECH INDEX) in March – though there could be another change as well.
- Changes to the index handling for Dual Primary Listings should result in an increase in free float and passive inflows to Li Auto (2015 HK) and XPeng (9868 HK).
- Estimated one-way turnover is 5.83% resulting in a one-way trade of HK$4.87bn and this is mainly driven by float and capping changes.
2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
- SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.
- I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation.
- What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff.
HSI Index Rebalance Preview: Better Late Than Never?
- There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
- We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
- All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.
HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
- We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
- We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
- We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.
TOPIX Inclusions: Who Is Ready (Jan 2023)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Dec 2022).
- Our latest top pick for TOPIX Inclusion pre-events is Artspark Holdings (3663 JP).
Ping An A/H Premium: Buy the A’s, Sell the H’s
- Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
- We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
- Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.
Halcyon Agri: MGO One Step Closer As SASAC Approves SPA
- Back on the 16 November, Halcyon Agri (HACL SP) announced Sinochem, holding 65.2% of shares out, had entered into an SPA to sell 36% to China Hainan Rubber (601118 CH).
- Upon completion of the SPA, Hainan Rubber will make an MGO, conditional on a 50% tendering acceptance. Sinochem has provided an undertaking not to tender its remaining 29.2% stake.
- Halcyon has now announced SASAC has given the green light for the SPA. Outstanding conditions include MoC and NDRC. Those approvals should fall into place shortly.
Weimob Placement – Share Price Momentum over the past Few Months Have Been Strong
- Weimob Inc. (2013 HK) is looking to raise about US$205m in its primary placement to fund R&D, upgrade marketing systems, and for general working capital purposes.
- On an ADV basis, the deal is a relatively small one at just 3.6 days of the firm’s three month ADV.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
Korea M&A Outlook in 2023: What’s for Sale?
- More than 20 trillion won (US$16 billion) worth of deals are up for M&As in 2023.
- However, due to high interest rates and differences on valuations among buyers and sellers, the M&A market in Korea is likely to continue to be weak in 2023.
- In this insight, we discuss 24 companies that are up for M&As this year in Korea, including Hanon Systems, SK Shieldus, and K Car.
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