In today’s briefing:
- Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
- Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
- Yuexiu Property (123 HK) Rights Offering
- Another Reason To Like China Mobile (941 HK)
- Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
- Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain
- Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction
- Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo
- Nvidia, TSMC, ASML Trading Monitor – TSMC & ASML Results Indicate Cycle Bottom 2Q23E for Leaders
- Las Vegas Sands: Starting a Run as Macau Recovery Gains Speed. Up 23% YTD.
Index Rebalance & ETF Flow Recap: MSCI STD, Yuanta Div+, ZJLD, Anta
- The review period for the MSCI May QCIR started last week and there were ad hoc changes to the S&P/ASX family and the KOSDAQ 150 Index (KOSDQ150 INDEX).
- The end of the coming week will mark the end of the review period for the upcoming rebalances for a bunch of indices with implementation scheduled in May and June.
- There was inflow to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF for another week.
Yuexiu Property (123 HK): US$1.1bn Dilutive and Unnecessary Rights Issue
- Yuexiu Property (123 HK) will raise US$1.1bn through a rights offering – 30 rights shares for every 100 existing shares. The subscription price is HK$9.00, a 23.3% discount to TERP.
- As Yuexiu is in no danger of breaching the three red lines, the rights issue is an opportunistic play on capitalising on the strong share price run.
- Rights shares will be entitled to the final and special dividend announced on 15 March. Shares go ex-rights on 2 May and the rights start trading on 15 May.
Yuexiu Property (123 HK) Rights Offering
- On Thursday morning, Yuexiu Property (123 HK) halted trading in its shares and then later in the day announced a rights offering. Shares fell hard but gained back a little.
- The rights offering lowers BVPS by about 11.3% so the current price is “about right” for the fundamentals if the price the day before the news was right.
- There are, however, flow dynamics which are of interest. There almost always are.
Another Reason To Like China Mobile (941 HK)
- In March, the HK Secretary for Financial Services announced a waiver of stamp duty on dual counter trading market making. In November, the Govt of HK gazetted a bill.
- HKEX launched plans in December. 9 large HK names announced in March they’d apply (Tencent, Kuaishou, Geely, BOC, Anta, AIA, China Resources Beer, Bidu, HKEX). Six more in April.
- All the announcements are similar. But one on 21 April caught my eye because it is a big H/A with strong southbound support. That’s China Mobile (941 HK).
Overlooked Trading Angle in K-New Deal Rebalancing Event: Two LONG SHORT Pairs to Watch
- Two pairs of constituent changes marked in squares in INTERNET and GAME may offer meaningful trading opportunities: Seojin System IN / Ahnlab OUT and Com2us IN / Doubleugames OUT.
- Along with TIGER ETF, stealth index funds follow these indices. So, constituent changes in INTERNET and GAME create a flow impact of 0.3~0.6x DTV, even not in the Top 3.
- Also, INTERNET and GAME have less passive flow impact degradation risk due to momentum trading flows compared to BATTERY and BIO.
Nationalization of Lithium Industry in Chile – Impact on Korean Rechargeable Batteries Value Chain
- On 20 April, Chile’s government announced that it will be nationalizing the country’s lithium industry. Chile is the second largest producer of lithium in the world.
- The nationalization of the lithium industry in Chile will likely have a long-term negative impact on the rechargeable batteries related companies in Korea.
- This is mainly due to greater challenges of getting access to lithium at more affordable prices.
Last Week in Event SPACE: Yamada Denki, Genting, HKBN, Toyo Construction
- Yamada Denki (9831 JP) lowering the March 2023 div to ¥12/share vs ¥18/share last year was just weird. And bodes badly. We need a lightbulb moment for a lightbulb dilemma.
- Genting Bhd (GENT MK)‘s implied stub and simple ratio (GENT/ Genting Singapore (GENS SP)) are currently at muti-year trough levels.
- Buy Toyo Construction (1890 JP) <¥970. The proposed dividend could be in danger should YFO spill the board; but spilling the board to get better governance is a good thing.
Merger Arb Mondays (24 Apr) – AAG Energy, Jiangnan, HKBN, Healius, Lian Beng, Toyo
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), United Malt Group Ltd (UMG AU), Origin Energy (ORG AU), Toshiba Corp (6502 JP).
- Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), Golden Energy & Resources (GER SP), HKBN Ltd (1310 HK), Mincor Resources NL (MCR AU).
Nvidia, TSMC, ASML Trading Monitor – TSMC & ASML Results Indicate Cycle Bottom 2Q23E for Leaders
- TSMC and ASML reported results last week, with both companies beating consensus earnings expectations.
- TSMC and ASML both expect their historically high margins to persist and have both shown a major decline in inventory levels.
- TSMC expects utilization to bottom in 2Q23E and improve thereafter; which we believe is strong indication of the cycle bottoming for leaders. TSMC however sees the overall industry taking longer.
Las Vegas Sands: Starting a Run as Macau Recovery Gains Speed. Up 23% YTD.
- LVS just reported 1Q23 results showing a surging recovery of GGR and daily arrivals in Macau driving gains in revenue and profit profile.
- Labor shortages that have limited availability of LVS’ 12,000 rooms are beginning to subside. Golden Week just ahead expected to reach +90% room occupancy.
- Stock has moved over 20% since our buy call at $53. Our PT is raised to $80.
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