In today’s briefing:
- FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- Two Days Left Til Nikkei 225 Juggled Review Starts
- Bain Launches Hitachi Metals (5486) Tender Offer
- CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
- Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo
- New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
- StubWorld: Swire/Cathay And Hong Kong’s “Opening”
- S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
- Late-Stage Capitulation in Asia
FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
- The FTSE Taiwan Dividend+ Index is a fascinating index. The rebalance works the opposite way from most float market cap-weighted indices, but maintains a grounding in positive fundamentals.
- It has issues, shown in the recent non-constituent review which nonetheless saw ~10% one-way flow. And more flows has meant more impact to changes.
- FTSE Russell has commenced a consultation closing shortly, with the goal of increasing members from 30 to 50. This provides for some interesting potential changes.
Two Days Left Til Nikkei 225 Juggled Review Starts
- The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix.
- ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
- Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.
Bain Launches Hitachi Metals (5486) Tender Offer
- We had the heads up days (or a week plus) ago, and now it is official. Bain launches its Tender Offer for Hitachi Metals (5486 JP) tomorrow at ¥2,181/share.
- The company’s trade name will be changed to PROTERIALS (i.e. losing “Hitachi”) which should be fine. It was non-core anyway.
- This is still a large-ish deal – up to ¥434bn. MktCap is ¥930bn. But minimum is only 56.8mm shares because they get the parent vote anyway. Done deal.
CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
- CALB (3931 HK) is looking to raise between US$1.29bn-US$1.73bn by selling 265.85m shares at a price range of HK$38-51/share.
- CALB (3931 HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in March and to the FTSE All-World in June.
- Peer performance has been fairly mixed in the recent past. Stock trading weak post listing could provide buying opportunities ahead of the passive inflows.
Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo
- We visited a store of Freshippo Outlets in Shanghai in workhour.
- We believe the store is popular and accumulating more customers.
- However, the digitalized services bring some difficulties to old customers.
New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
- A South Korean lawmaker introduced legislation that would mandate that appraisal right exercise prices in split-off listings (equity carve-out) be based on asset/earnings value rather than market price (stock price).
- We may find an arb opening in DB Hitek. The appraisal price based on the asset/earnings value is at an 11.31% premium to the last close.
- If DB HiTek postpones the split-off listing to next year, FY22 earnings should be reflected. In this case, the appraisal price will be at a 90% premium.
StubWorld: Swire/Cathay And Hong Kong’s “Opening”
- After Hong Kong announced abandoning hotel quarantine for inbound travellers, Cathay Pacific (293 HK) gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.
- Preceding my comments on Cathay and Swire Pacific (19 HK) are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
S&P/ASX Index Rebalance Preview: A Few High Impact Adds
- At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
- If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
- Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.
Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
- Onewo (2602 HK) is looking to raise between US$700m-US$784m by selling 116.714m shares at a price range of HK$47.1-52.7/share. Indications are that the IPO will be priced close to mid-point.
- Given the domestic shares and unlisted foreign shares will not be converted to H-shares, there is no chance of MSCI inclusion and a small chance of FTSE inclusion.
- Onewo (2602 HK) is also unlikely to be added to the HSCI and consequently will not be added to Stock Connect.
Late-Stage Capitulation in Asia
- Call for markets that held up in Asia to buckle in late September (NKY, ASX, Nifty) is unfolding. Following our core short group – HSI, Taiwan and Korea.
- DJI new low a lead signal for the SPX and RTY to test sub-June lows in late September/early October on capitulation that sets up a tactical long strike.
- NKY and ASX are the first two markets in Asia to buy back into at lower range levels with undershoot risk.
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