In today’s briefing:
- Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK
- Alibaba (BABA US): No Where to Go but Up
- A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide, High Div SOEs Moving
- Aoki Super (9977 JP): MBO Tender Offer at JPY3,800
- FXI Rebalance Preview: Two Potential Changes in March
- Inabata & Co (8098) – LARGE Equity Secondary Offering by Sumitomo Chemical
- Last Week in Event SPACE: HS Holdings, Celltrion Pharm, NISA, PICC/PICC P&C
- LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
- Weekly Deals Digest (07 Jan) – Ola Electric, Mixue, Aoki Super, Hollysys, Weiqiao Textile, Vinda
- Merger Arb Mondays (08 Jan) – Weiqiao Textile, IRC, Aoki Super, Hollysys, OreCorp, Tietto, Pact
Index Rebalance & ETF Flow Recap: HSCEI, HSCI, KRX New Deal, NIFTY50, NEXT50, CNXBANK
- Posco DX (022100 KS) continues to drop following its section transfer from the KOSDAQ market to the KOSPI market. Short interest in the stock nearly halved in December.
- There were big net inflows to China ETFs with creations in CSI 300 Index ETFs and redemptions in ETFs tracking the CSI 500 Index and CSI 1000 Index.
- Creations continued in the iShares Emerging Markets ex China (EMXC US) ETF with units outstanding reaching a new high.
Alibaba (BABA US): No Where to Go but Up
- Alibaba is transforming into a leaner, more efficient and more profitable technology company with sharpened focus on core business and shareholder return.
- While we don’t expect growth to define the company in the near future, high single-digit P/E more than compensates for the lack of it.
- This worst-performing and cheapest technology stock among global peers stands a big chance of staging a comeback in 2024 in our view.
A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide, High Div SOEs Moving
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
- STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.
Aoki Super (9977 JP): MBO Tender Offer at JPY3,800
- Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January).
- 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 13.35% ownership ratio.
- Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high.
FXI Rebalance Preview: Two Potential Changes in March
- With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
- China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
- There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.
Inabata & Co (8098) – LARGE Equity Secondary Offering by Sumitomo Chemical
- On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering.
- Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain.
- This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.
Last Week in Event SPACE: HS Holdings, Celltrion Pharm, NISA, PICC/PICC P&C
- Stay long in HS Holdings (8699 JP).But beware. It is possible that there is a slightly uncomfortable outcome.
- Celltrion Pharm (068760 KS) is up 37% since the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger completed; and Inc is up 22%. That’s A LOT of expectation baked in.
- NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.
LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
- The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.
Weekly Deals Digest (07 Jan) – Ola Electric, Mixue, Aoki Super, Hollysys, Weiqiao Textile, Vinda
- 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 – Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
- Event-Driven developments – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), Weiqiao Textile Co (2698 HK), Vinda International (3331 HK).
Merger Arb Mondays (08 Jan) – Weiqiao Textile, IRC, Aoki Super, Hollysys, OreCorp, Tietto, Pact
- 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 – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Adbri (ABC AU).
- Lowest spreads – Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), A2B Australia (A2B AU), Tietto Minerals Ltd (TIE AU), IJTT Co., Ltd. (7315 JP).
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