In today’s briefing:
- STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises
- Aeon (8267) And Aeon Mall (8905) To Be a Guess The Ratio Trade
- STAR Chip Index Rebalance: Shenzhen Bluetrum (688332) Replaces JoulWatt (688141)
- A/H Premium Tracker (To 28 Feb 2025): AH Premia Continue to Fall; Expect Widening
- JX Advanced Metals IPO Preview
- Aeon Tender Offer for Aeon Delight (9787) At ¥5,400/Share
- HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Sparx Launches Another Offensively Underpriced Takeover at a Fat Premium – SNT (6319) +94%
- Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Weekly Deals Digest (02 Mar) – Japan Post Bank, 7&I, Aeon Delight, Tonami, Mixue, JXAM
STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises
- There are 3 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the March rebalance that will be implemented at the close on 14 March.
- The last-minute methodology change could lead to under/over positioning on some names and those stocks could move the most over the next few days.
- Performance has been mixed in the changes to the STAR50 INDEX but the outright adds have continued to outperform the outright deletes for the STAR100 Index.
Aeon (8267) And Aeon Mall (8905) To Be a Guess The Ratio Trade
- On 28-Feb-25, the last day of their fiscal year, Aeon Co Ltd (8267 JP) signed a deal to acquire Aeon Delight via Tender Offer and Aeon Mall via scrip exchange.
- For Aeon Mall, that means negotiation on the share exchange ratio over the next 5-6 weeks.
- While I have an opinion on the fair ratio (explained below), I find “Guess The Ratio” trades fraught with bad governance outcomes. The 3-month average is often used.
STAR Chip Index Rebalance: Shenzhen Bluetrum (688332) Replaces JoulWatt (688141)
- CSI announced the changes for the March rebalance after market close on 28 February and the changes will be effective after the close of trading on 14 March.
- As expected, Shenzhen Bluetrum Technology (688332 CH) will be added to the index while JoulWatt Technology Co (688141 CH) will be deleted.
- Shenzhen Bluetrum Technology (688332 CH) outperformed JoulWatt Technology Co (688141 CH) in the last quarter of 2024 and there has been a reversal of fortunes this calendar year.
A/H Premium Tracker (To 28 Feb 2025): AH Premia Continue to Fall; Expect Widening
- AH Premia continue to fall. Spread curve torsion reverses again with narrow premia trades seeing Hs perform the best.
- Warning signs are starting to flash on spreads. This week I have the biggest week of changes recommended that I have ever had. By a long ways.
- This week threatens to be a very strange week geopolitically. Being smaller in crowded trades is probably a good thing.
JX Advanced Metals IPO Preview
- JX Advanced Metals (5016 JP) is seeking to raise about ¥460 billion in the upcoming IPO on the Tokyo Stock Exchange. The indicative IPO price is ¥862 per share.
- The final IPO pricing will be on 10 March. JX Advanced Metals will be listed on 19 March. Eneos is selling as many as 534.9 million shares in the IPO.
- The company has a strong customer base. It is a key supplier to TSMC, Samsung, Intel, SK Hynix, and Micron for sputtering targets and high-purity metals.
Aeon Tender Offer for Aeon Delight (9787) At ¥5,400/Share
- Bowing before bureaucratic, governmental, societal, and perhaps finally shareholder pressure, Aeon Co Ltd (8267 JP) Friday announced it is rolling up two big subsidiaries.
- Aeon Mall will be merged with Aeon in a share exchange and Aeon Delight (9787 JP) will be taken over via slightly long-dated Tender Offer which starts Monday.
- This is probably the wrong price, but it isn’t egregiously wrong I expect. And it would be difficult to block. I expect it gets done easily.
HK Connect SOUTHBOUND Flows (To 28 Feb 2025); Big Volumes, HUGE Net Buys on Blue Chips, Tech-Y Names
- Gross SOUTHBOUND volumes cleared HK$800bn for the second week in a row. NET buying by SOUTHBOUND was HK$75bn which was perhaps a new record.
- Notable again is the HUGE back-and-forth. If HK$865bn traded and SOUTHBOUND “only” bought HK$75bn, HK$395bn was round-tripped for short-term purposes.
- Last week I flipped to short Alibaba Group Holding (9988 HK). Sentiment may worsen and there’s lots to sell later this week. Staying short Alibaba for now.
Sparx Launches Another Offensively Underpriced Takeover at a Fat Premium – SNT (6319) +94%
- Sparx on Friday announced a Tender Offer at 0.55x book and an EV of less than inventory (<20% of revenue) for Snt Corp (6319 JP) – another metal monozukuri company.
- Last year they did it on IJTT Co., Ltd. (7315 JP). That one got bumped. This one could too, but cross-holders own nearly 60%.
- This kind of company has skill-sets which may be portable but the product line is tied to old Japan. The takeover
Box Trades Explained: How Traders Execute Near Risk-Free Arbitrage in Hong Kong’s Options Market
- Box trades are gaining popularity on the Hong Kong Stock Exchange. These arbitrage strategies exploit price discrepancies in options markets for near risk-free profits.
- Long box trades involve simultaneously buying bull call spreads and bear put spreads with identical strikes and expiration dates, creating a fixed payoff regardless of the underlying asset’s price movement.
- Box trades require careful execution consideration of spreads, commissions, margins, and fees, with risks primarily in execution and operations rather than market exposure.
Weekly Deals Digest (02 Mar) – Japan Post Bank, 7&I, Aeon Delight, Tonami, Mixue, JXAM
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Mixue Group (2097 HK) andJX Advanced Metals (5016 JP) IPOs. Japan Post Bank (7182 JP) placement.
- Event-Driven developments: Seven & I Holdings (3382 JP), Aeon Delight (9787 JP), Tonami Holdings (9070 JP), Sg Fleet (SGF AU).
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