In today’s briefing:
- Japan – Another Big Round of Passive Selling
- Baidu: Priced to Fail
- S&P/ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June
- Asia Cement (743 HK): Parent’s Ready-Mixed Offer?
- TIP Customized Taiwan Select High Dividend Index Rebalance Preview: AUM Jump & HUGE Trade
- Asia Cement China (743 HK): Privatisation by Asia Cement?
- JAPAN ACTIVISM: Murakami-Père Ran Up Mitsui Matsushima (1518 JP), Now Murakami-Fille Selling Down
- Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns
- Block Deal Prospects Arising from SK Group’s Corporate Reshuffle
- NIFTY200 Momentum30 Index Rebalance Preview: 49% Turnover; US$850m Trade; Election Results Coming
Japan – Another Big Round of Passive Selling
- There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
- Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
- Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.
Baidu: Priced to Fail
- Since late 2020, Search’s share of digital advertising revenue has stabilised at around 8-10%, seemingly retaining its core advertising customers and industries.
- Baidu management expects AI Cloud to maintain strong revenue growth momentum in the upcoming quarters.
- Baidu trades on a 3.6x NTM EV/EBITDA multiple, well below one standard deviation lower than its 5-year historical average trading range and the lowest it has ever been.
S&P/ASX Index Rebalance Preview: Regular & Ad Hoc Changes in June
- With the review period complete, we take a look at the potential index changes at the June rebalance as well as potential index inclusions due to M&A.
- Timing is key for the ad hoc inclusions to the S&P/ASX 200 (AS51 INDEX) with an ad hoc inclusion being announced prior to the regular announcement.
- Passive trackers will need to buy 1.3-27x ADV on the expected adds and have 0.8-4.7x ADV to sell on the expected deletes. Shorts have built up on the potential deletes.
Asia Cement (743 HK): Parent’s Ready-Mixed Offer?
- Chinese cement play Asia Cement China (743 HK) (ACC) is currently suspended pursuant to the Takeovers Code.
- Asia Cement (1102 TT) has been ACC’s majority shareholder since its 2008 IPO. Asia Cement currently holds 73.07%.
- Shares gained ~50% this week. On serious volume. With net cash of US$1.03bn vs. a market cap of US$66mn, a privatisation should command a punchy premium to the last close.
TIP Customized Taiwan Select High Dividend Index Rebalance Preview: AUM Jump & HUGE Trade
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 209bn (US$6.5bn).
- There could be 14 changes for the ETF in June with an estimated one-way turnover of around 40% and a round-trip trade of around US$5bn.
- The potential adds have outperformed the potential deletes over the last couple of months and there could be more to go heading into announcement and implementation.
Asia Cement China (743 HK): Privatisation by Asia Cement?
- Asia Cement China (743 HK) entered a trading halt based on the Hong Kong Code on Takeovers and Mergers. Bloomberg reports that Asia Cement (1102 TT) is considering a buyout.
- Privatisation interest is unsurprising, as ACC’s EV has been negative since 6 July 2022 due to headwinds from the weak Chinese property sector and uncertainty about cash use.
- An offer price of HK$5.18 would imply a zero EV. However, due to the difficult trading conditions, we think an offer would be around HK$4.00 per share.
JAPAN ACTIVISM: Murakami-Père Ran Up Mitsui Matsushima (1518 JP), Now Murakami-Fille Selling Down
- Colour me perplexed. Murakami Group ran up Mitsui Matsushima (1518 JP)‘s share price in acquiring 29%. The pattern was clear, but one assumes everyone in-group was on the same page.
- The earliest buyer was NOMURA Aya. She bought early, slowly, then aggressively, then onshore buyers bought aggressively at higher prices. But she has now sold 6 days straight.
- The pattern is confusing but it will become clearer in coming days.
Latest Info on Value-Up Index Involving KRX & NPS: Potential Flow Trading Patterns
- The value-up index aims to align closely with the KOSPI 200’s composition, adjusting stock weights based on factors from KRX Governance Leaders 100 and KRX ESG Dividend Opportunities Index.
- Insiders confirm NPS will create new funds to track the value-up index, needing SAA adjustments and Fund Management Committee approval. Despite hurdles, government backing suggests smooth NPS involvement.
- Buybacks could cause passive outflows in KOSPI 200 rebalancing and inflows in value-up index rebalancing. This timing discrepancy could create a consistent passive flow pattern for these stocks.
Block Deal Prospects Arising from SK Group’s Corporate Reshuffle
- The declining appeal of the separator business prompts SK to seek buyers for SKIET through block deals amid financial pressures. The first deal is anticipated despite recent stock price drops.
- SK Ecoplant looks to sell its 37.6% stake in SK Oceanplant. Negotiations stall over the former major shareholder’s 20% stake, prompting consideration of a block deal.
- SK Bioscience, under SK Discovery, faces possible sale amid SK’s bio company reshuffle. SK Chemicals may bring SK Biopharm under its wing to help SK Inc focus on semiconductors/batteries.
NIFTY200 Momentum30 Index Rebalance Preview: 49% Turnover; US$850m Trade; Election Results Coming
- There could be 13 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 27 June.
- If all changes are on expected lines, one-way turnover is estimated at 48.8% and that will result in a one-way trade of INR 35.5bn (US$426m).
- Since January, the potential adds to the index have outperformed the potential deletes by a big margin. Watch out for the general election results on 4 June for momentum change.
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