In today’s briefing:
- S&P/ASX Index Rebalance Preview (Sep): Plenty of High Impact Changes
- HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- HDFC/HDFC Bank Mega Merger: Foreign Selling Leads to Higher Foreign Room
- Punters Take A Gamble on Genting Singapore
- Sungeel HiTech IPO – The Highest Ever Bookbuilding Demand Ratio for a Korean IPO
- MergerTalk: Healthcare Realty/ HealthCare Trust – Short-Term Risk-Arb Opportunity
- WCP IPO – The Negatives – Patent, Going Concern, Customer Concentration
- WISE Theme Indexes Rebalancing: Conformity of Passive Flow to Price Return
- Genting Singapore in the Crosshairs of Potential Suitors
- Shanghai/Shenzhen Northbound Connect: Weekly Moves (15 July 2022)
S&P/ASX Index Rebalance Preview (Sep): Plenty of High Impact Changes
- There could be one change to the S&P/ASX 200 (AS51 INDEX) in July following the privatisation of Uniti Group Ltd (UWL AU).
- Then there will be a whole bunch of changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index in September as part of the regular rebalance.
- There is large short interest on a couple of the potential adds and a lot of the potential deletes. That will drive stock price moves closer to implementation.
HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
- The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
- FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
- Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.
HDFC/HDFC Bank Mega Merger: Foreign Selling Leads to Higher Foreign Room
- Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
- Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
- If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.
Punters Take A Gamble on Genting Singapore
- Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
- With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base.
- But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.
Sungeel HiTech IPO – The Highest Ever Bookbuilding Demand Ratio for a Korean IPO
- Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
- The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
- Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.
MergerTalk: Healthcare Realty/ HealthCare Trust – Short-Term Risk-Arb Opportunity
- The Healthcare Realty Trust (HR US) / Healthcare Trust Of America (HTA US) transaction is heading towards climax with the critical HR and HTA shareholder votes set for July 15
- The odds are that activist investor and HR shareholder will not succeed in derailing the deal which it opposes from closing on July 20
- Notwithstanding the significant spread compression seen in recent weeks, there remains an attractive short-term opportunity for the arbs
WCP IPO – The Negatives – Patent, Going Concern, Customer Concentration
- WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO.
- WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries
- In this note, we will talk about the not-so-positive aspects of the deal.
WISE Theme Indexes Rebalancing: Conformity of Passive Flow to Price Return
- The ETF operator (TIGER)’s index tracking conformity was high enough to create trading opportunities aimed at the rebalancing flow.
- Flow/Price directions were mostly synched with only a few exceptions. Of particular importance is that the price impact was substantial compared to the passive flow size.
- The yield of the tradable names suitable for a basket based on the projected passive impact size was 4.51%.
Genting Singapore in the Crosshairs of Potential Suitors
- Bloomberg reported MGM Resorts International (MGM US) recently approached Genting Singapore (GENS SP)’s controlling shareholder, Genting Bhd (GENT MK), to express an interest in a deal.
- While the discussions with MGM Resorts have fizzled out, other potential suitors are reportedly interested. Shares are in a trading halt pending a response to an SGX query.
- Genting Singapore trades at a discount to peers. Precedent transactions suggest a potential privatisation price of at least S$1.00 per share, a 33% premium to the last close.
Shanghai/Shenzhen Northbound Connect: Weekly Moves (15 July 2022)
- Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
- Overall, net outflow over the past week was ~US$1.28bn, split between Shanghai (-US$0.85bn) and Shenzhen (-US$0.43bn)
- The largest inflows were into Aier Eye Hospital (300015 CH) and Shenzhen Mindray (300760 CH). The largest outflows were in China Merchants Bank (600036 CH) and Sungrow Power (300274 CH).
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