In today’s briefing:
- Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
- Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
- S&P500 Index Rebalance: Calling an UBER
- March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
- Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
- S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
- FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
- Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
- Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
Japan Activism: Japan Catalyst Fund Calls Out Taisho Pharma Committee on MBO Price
- Japan Catalyst Fund is a relatively young effort in the Japan “engagement activism” space, having been founded by Monex Group in September 2019. Total assets remain apparently small.
- Championed by Monex Group founder Oki Matsumoto, despite small AUM, the fund has decent access. As of end-October, Taisho Pharmaceutical Holdings (4581 JP) was #5 and 5.26%. Now it’s #2.
- Friday, they released a statement about the MBO. It isn’t a barn-burner, but the stock has traded through terms since announcement at a too-low price. And nobody else has commented.
Mischief Managed! Iwatani Corp (8088) Buys Out Murakami-San’s Cosmo Energy Stake
- The question of how Murakami-san would get out of his stake in Cosmo Energy Holdings (5021 JP) was always a biggie. He likes to sell stock in tender offer buybacks.
- Cosmo wasn’t going to do that for him. They promised dividends and a high payout ratio, but that left the question was how he was going to get out.
- A semi-obvious solution was to find a corporate partner to buy his stake and today, Iwatani Corp (8088 JP) announced that it had bought 19.86% of Murakami-san’s 20.01% holding.
S&P500 Index Rebalance: Calling an UBER
- Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
- There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
- We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.
March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
- Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
- The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
- There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.
Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
- Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
- The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
- While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
- There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
- There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
- Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
- There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
- The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
- There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
- The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
- We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
- There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
- Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
- Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
- The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.
Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX
- The announcement of the inclusion of Uber Technologies (UBER US) in the S&P 500 INDEX was a big one last week. There were announcements for some other indices too.
- There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
- Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.
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