In today’s briefing:
- 7&I (3382) Possibility of YUUUUUGE Buyback?
- 7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Nikkei 225 Index Rebalance: Baycurrent (6532) Replaces Mitsubishi Logistics (9301); Kokusai Elec
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- Sunevision (1686 HK): Data Center Rally Brings Passive Flows
- Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
- Nikkei 225 Mar25 Rebal: BayCurrent (6532) IN, Mitsubishi Logi (9301) OUT (Re-IPO). Kokusai MIA
- Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before
7&I (3382) Possibility of YUUUUUGE Buyback?
- Last Thurs the MBO died. Tuesday an article said the ACT deal had died. Then 7&i denied that. Yesterday an article said Bain’s York Holdings deal would be approved today.
- That meant a Board meeting which would approve receipt of ~¥700bn of cash. What to do with it?
- Just now, Bloomberg says Seven & I Holdings (3382 JP)‘s board will consider a massive buyback. THAT is the capital allocation news my last piece suggested necessary. It’s HUGE.
7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
- “Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
- Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).
Nikkei 225 Index Rebalance: Baycurrent (6532) Replaces Mitsubishi Logistics (9301); Kokusai Elec
- In a big surprise, there is only one change for the Nikkei 225 (NKY INDEX) in March with BayCurrent Consulting (6532 JP) replacing Mitsubishi Logistics (9301 JP).
- The non-inclusion of Kokusai Electric (6525 JP) is a big surprise given that the stock was ranked among the top 75 stocks by liquidity. There could be selling near-term.
- BayCurrent Consulting (6532 JP) has been added at a 0.5 PAF and that will increase to 1 in September. Fast Retailing (9983 JP) could be capped yet again in September.
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- The March rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
- The gross round-trip trade across all stocks across the four indices is estimated at HK$41.1bn (US$5.3bn). The net round-trip trade is HK$37.3bn (US$4.8bn).
- Meituan , JD.com, Baidu, Horizon Robotics, ICBC, BeiGene, Kuaishou Technology and China Construction Bank are the largest buys. Alibaba, Xiaomi, HSBC, ZhongAn Online and Tencent are the largest sells.
Sunevision (1686 HK): Data Center Rally Brings Passive Flows
- The huge rally in SUNeVision Holdings (1686 HK) will bring passive inflows to the stock after being added to a global sector index.
- Estimated passive buying is 19.4m shares (US$22m; 0.55x ADV) with implementation scheduled for the close of trading on 21 March.
- Shorts have risen sharply in the last couple of weeks and cumulative excess volume has jumped too. But we see a similar pattern in a close peer.
Seven & I Holdings (3382 JP): Board’s Plan to Unlock Value Is a Stop-Gap Measure
- The Seven & I Holdings (3382 JP) Board announced a plan to unlock and distribute significant value to shareholders.
- The initial excitement focused on the positives of leadership changes, US Assets IPO, a higher-than-expected valuation for the Superstore Business and a considerable buyback.
- The negatives of a long-dated buyback, inevitable rejection of the Couche-Tard offer, an uncertain US Assets IPO and ongoing HoldCo discount suggest the initial excitement will fizzle out.
Nikkei 225 Mar25 Rebal: BayCurrent (6532) IN, Mitsubishi Logi (9301) OUT (Re-IPO). Kokusai MIA
- The March 2025 Nikkei 225 Average Review was announced last night. Something of a disaster for Team Quiddity. I had expected 2-3 ADDs and 2-3 DELETEs.
- We got only one change, and that was my second choice ADD and second choice DELETE. Top 75 name Kokusai Electric (6525 JP) was missing in action. BIG Disappointment.
- BayCurrent Consulting (6532 JP) is in at a PAF of 0.5, with an upweight end-Sep. Mitsubishi Logistics (9301 JP) is OUT. Fast Retailing (9983 JP) will see US$2.3bn of sells.
Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- Constituent changes to the S&P 500 INDEX (SPX INDEX), S&P Midcap400 Index and S&P SmallCap600 Index for the March rebalance will be announced after market close on Friday.
- There will also be capping changes for the Select Sector indices that will result in a round-trip trade of US$13.1bn. Constituent changes will add to that flow.
- The largest inflows will be in Amazon.com, Tesla, Microsoft, NVIDIA, Alphabet (GOOGL US) and Electronic Arts. Largest outflows are from Broadcom, Meta Platforms, Linde, Mcdonald’s Corp and Take Two Interactive.
Japan Post Bank US$4bn Deal Updates – Needs to Correct More. Discount Vs Deal Performance Analysis
- Japan Post Holdings (6178 JP) (JPH) aims to sell around US$4bn worth of Japan Post Bank (7182 JP) (JPB), trimming its stake to below 50%.
- JPH had last sold around US$9bn worth of JPB shares in Mar 2023. That deal had a similar structure and it didn’t end up performing well.
- We have looked at the deal dynamics in our previous notes. In this note, we talk about updates and look at discounts vs performance for past secondary deals.
Nikkei 225 Sep25 Rebal: One ADD, One DELETE Probable – Less Interesting Than Before
- The March 2025 Nikkei 225 review came out with a sparse set of changes. That gives us hints for the September 2025 review.
- I see one ADD and one DELETE. Fast Retailing capping is right on the border. BayCurrent will see an upweight.
- The lack of effort to address sector imbalances within the rules suggests the rules are not as hard as people thought. Intra-review changes could be more interesting in years ahead.
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