In today’s briefing:
- MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day
- Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion
- SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
- Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs
MSCI Japan Index Rebalance: Short Build Up Continues as We Near Implementation Day
- There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there was large short buildup prior to announcement of the changes.
- Shorts have continued to increase to increase over the last week and there could be a reversal over the next few days as shorts start to cover.
- Buying the deletions in the next few days and hedging with Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) futures could provide superior risk adjusted returns.
Appen (APX AU): Telus’ 48% Premium; 10% Short Interest; Potential ASX200 Deletion
- Telus International (TIXT US) has made an unsolicited, conditional and non-binding indicative proposal to acquire 100% of Appen Ltd (APX AU) at A$9.5/share, valuing the company at A$1.17bn.
- The offer is a 48% premium to the last close but a discount to longer-term VWAPs. It should require a bump for the Appen Board to unanimously recommend to shareholders.
- Appen Ltd (APX AU) is a potential deletion from the S&P/ASX 200 (AS51 INDEX) at the June rebalance. Short interest is 10% of shares out. There will be covering.
SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- The debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn’t entirely burned.
- The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.
- This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.
Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
- The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
- It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
- More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.
Yancoal (YAL AU, 3668 HK): Potential Offer From Parent In H-Share CBs
- Yankuang Energy Group Company (1171 HK) is considering an Offer for dual-listed coal-miner Yancoal Australia (YAL AU / 3668 HK) via the issuance of H-share convertible bonds.
- The potential consideration of US$3.60 (~A$5.07/~HK$28.26) per Yancoal share, in the form of H-Share CBs, compares to the last close A$6.08 and HK$33.05. Perhaps an attractive yield will be dangled.
- Yankuang Energy has 62.26%. Cinda, Glencore, and China Shandong collectively hold 27.7%. You need all three to support the Offer terms, and then some, to force compulsory acquisition.
Before it’s here, it’s on Smartkarma
