In today’s briefing:
- Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy
- CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid
- TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
- Henlius (2696 HK): NDRC Approval Should Calm Nerves
- KRX Value-Up Index Rebalance Results and Estimated Passive Impact
- Fosun Tourism (1992.HK) Privatization – The Cancellation Price Is Not Good Enough
- MV Global Junior Gold Miners Index Rebalance: Big Flow in Some Stocks
- Select Sector Indices and S&P Equal Weight Rebalance: US$17.7bn Round-Trip Trade Post Capping Cutoff
- HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- PCOMP Index Rebalance Preview: Two Changes Likely in February
Shinko Electric (6967 JP) Takeover – THIS Is a Dip to Buy
- Over the last few days, Shinko Electric Industries (6967 JP) shares have dipped lower than the previous standard trading range.
- I expect this weakness is related to investors in other deals deciding to sell this deal too. I believe it is not related to Shinko specifically.
- For that, while gap risk remains somewhat high, I still see break risk as low and see this as a great opportunity to buy the dip.
CVC Offers ¥1150 for Macromill (3978) – Wrong Price, Wrong Register – Expect Activism or An Overbid
- Today, CVC announced a deal to buy out Macromill, Inc (3978 JP). It is agreed and supported by management and the Board.
- The shareholder register on this stock is wide open. It is not burdened by crossholders. It IS burdened by 7 large active holders who have 55%.
- Those holders may complain about the process, the transparency, and the low price. This could be a target for an activist or a strategic overbidder.
TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
- We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
- An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.
Henlius (2696 HK): NDRC Approval Should Calm Nerves
- Due to several factors, the gross spread of Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) has widened to 21.5%.
- The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote.
- NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.
KRX Value-Up Index Rebalance Results and Estimated Passive Impact
- KRX updated the Value-Up Index with five new names: KB Financial, Hana Financial, KT Corp, SK Telecom, and Hyundai Mobis, with Mobis replacing JB Financial, surprising the market.
- This is the first rebalancing, packed into one day, so expect notable price action. Reverse moves could also follow Thursday as pre-positioned trades unwind, so monitor price action closely.
- Even after Thursday’s rebalancing, half of the funds, especially from the National Pension Service, will flow into high-yield stocks, likely driving significant price moves through early next year.
Fosun Tourism (1992.HK) Privatization – The Cancellation Price Is Not Good Enough
- Fosun Tourism has emerged from its difficulties and started an upward trend.If it remains listed, it’s only a matter of time before its share price returns to the IPO price.
- Temasek was once in talks to buy a minority stake in Club Med from Fosun International for €500 million, based on which reasonable valuation for Fosun Tourism is RMB12.6 billion.
- Fosun has continued its style- When performance recovery hasn’t been reflected in stock price, it’s the right time to privatize valuable assets at cheap price. A share alternative is expected.
MV Global Junior Gold Miners Index Rebalance: Big Flow in Some Stocks
- No constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December. But there are a lot of float and capping changes.
- Estimated one-way turnover is 2.6% resulting in a round-trip trade of US$269m. There are 8 stocks with over 1x ADV to trade from passive trackers.
- Stocks with the largest flows are Evolution Mining, Pan American Silver, Westgold Resources, B2Gold, Alamos Gold, Harmony Gold Mining, Eldorado Gold, K92 Mining, IAMGOLD, Endeavour Silver and Emerald Resources.
Select Sector Indices and S&P Equal Weight Rebalance: US$17.7bn Round-Trip Trade Post Capping Cutoff
- Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$17.7bn across the Select Sector indices and the S&P500 Equal Weight Index.
- There is over US$500m to trade in Broadcom (AVGO US), Tesla (TSLA US), Apollo Global Management (APO US), Amazon.com Inc (AMZN US) and Workday Inc Class A (WDAY US).
- Broadcom (AVGO US) swings from a small net buy to a large net sell following the rally in the stock last week.
HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025
- We see 32 potential and close adds and 44 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
- We expect 29 stocks to be added to Southbound Stock Connect following the rebalance while 31 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.
PCOMP Index Rebalance Preview: Two Changes Likely in February
- The review period for the February rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) ends in two weeks.
- There could be two changes for the index with passive trackers needing to trade between 23-64x ADV in the stocks.
- The passive buying is a lot larger than the passive selling, there will be funding outflows for the other index constituents; some stocks will have over 1x ADV to trade.
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