In today’s briefing:
- Share Buybacks In Japan – A 2023 Primer
- Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
- Joyful Honda (3191) – Repeats Its ASR In Double the Size
- HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
- Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
- HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
- Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
- HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
- Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
Share Buybacks In Japan – A 2023 Primer
- The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
- Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
- So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.
Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
- Sinopharm Group Co Ltd H (1099 HK) will be added to the Hang Seng Index (HSI INDEX) on 1 September while Country Garden Holdings Co (2007 HK) will be deleted.
- Both changes are a surprise, but the impact on Sinopharm Group Co Ltd H (1099 HK) will be much larger. Given the recent increase in shorts, there could be covering.
- Estimated one-way turnover is 1.9% leading to a one-way trade of HK$3.65bn. Capping will result in selling on Alibaba Group Holding (9988 HK), Tencent (700 HK) and HSBC (5 HK).
Joyful Honda (3191) – Repeats Its ASR In Double the Size
- Last year, I wrote about Joyful Honda (3191 JP)‘s implementation of a ¥2.5bn ToSTNeT-3 into Accelerated Share Repurchase. It was the first such transaction I knew of in Japan.
- This year, they have just announced another for nearly twice the size. It is worth looking at the details and comparing the stock vs Peers.
- It is also worth understanding exactly what the incentives are for whom and how that impacts the path. And who might respond to it.
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
- As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
- BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
- Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).
Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
- Eoflow (294090 KS)’s shares rose 2.7% to 27,000 won on 18 August with 1.4 million shares traded, which was 5.7x higher than the previous three days of trading.
- The main reason for this was due to the local news flow on Eoflow’s US subsidiary’s (Nephria Bio) technology on the advanced material MXene.
- This news flow on MXene is likely to put further positive boost to Eoflow’s share price closer to the tender offer price (or at least limit further downside risk).
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
- As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
- Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
- Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.
Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
- Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
- The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
- For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US).
Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
- Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
- The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk.
- The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote.
HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
- On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
- Sinopharm Group Co Ltd H (1099 HK) is ADDED, Country Garden Holdings Co (2007 HK) – in no surprise, is deleted.
- I see HK$4bn a side to trade, and the only “compelling” trade by ADV here is Sinopharm, but correlations with a Peer Basket are low.
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
- The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
- East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
- AAC is a significant flow event, and worth looking at. There are a few odds and ends too.
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