In today’s briefing:
- TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
- HSCI Index Rebalance and Stock Connect: Changes at the Margins
- Olympus Placement – Had Been Doing Well, till Recently
- Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
- Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
- Chindata: China Merchants Potentially In The Mix
- I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation
- Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
- S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
- Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
- That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
- The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).
HSCI Index Rebalance and Stock Connect: Changes at the Margins
- We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
- Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
- Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.
Olympus Placement – Had Been Doing Well, till Recently
- MUFG aims to raise around US$255m via selling around 1% of Olympus Corp (7733 JP).
- The stock has been doing well recently and MUFG has sold before. Although, the recent earnings updates didn’t go down too well.
- In this note, we will run the deal through our ECM framework and comment on other deal dynamics.
Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
- This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
- We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
- This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.
Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
- In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
- It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
- Now they are letting go of the other half. Sale structure means ongoing pressure.
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
- Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
- If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
- If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.
Chindata: China Merchants Potentially In The Mix
- Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
- This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
- Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.
I-Tail Corporation IPO – Blowout 3Q22, Revised Earnings, Updated Thoughts on Valuation
- I-Tail, an OEM in the wet pet food category, aims to raise around US$600m in its Thailand IPO. It is a subsidiary of Thai Union Group (TU TB) .
- As per ITC, it was the number two pet food company in Asia and in the top ten pet food companies globally. ITC expertise lies in fish-based wet pet food.
- In our previous notes, we have looked at various aspects of the deal. In this note, we talk about its 3Q22 updates and run the deal through our ECM framework.
Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
- Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
- At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
- Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
- Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
- Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
- Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.
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