In today’s briefing:
- 7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- STAR50/STAR100 Index Rebalance: Methodology Changes & Some Surprises
- BYD (1211 HK) Placement: Continuing to Power Up
- HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- Sunevision (1686 HK): Data Center Rally Brings Passive Flows
- Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- S&P/NZX 10 Index Rebalance: A2 Milk (ATM NZ) Replaces Ryman Healthcare (RYM NZ)
- Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- M&A For Korea Zinc: Seoul Central District Court Makes Important Rulings
- Seven & I Holdings: Mega Share Buyback Plan and IPO of North American CVS Unit to Boost Share Price
7&I (3382) – A Starting Point for the Standalone Plan – The Good, The Bad, The Ugly
- Today, partway through the day, we got a Bloomberg article suggesting a large-scale buyback was to come. Post-close, we got the full details.
- “Seven & i Holdings Announces Plan to Unlock Shareholder Value Through Leadership Changes and Transformational Capital and Business Initiatives”.
- Sale of York. Management change. Update on Special Committee work with ACT. Commitment to return ¥2trln to shareholders via buybacks by FY2030. Higher divs. IPO of 7-Eleven Inc (US).
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.
BYD (1211 HK) Placement: Continuing to Power Up
- Overnight, BYD (1211 HK) has announced a placement of 118m shares at a price range of HK$333-345/share that could raise up to HK$40.7bn (US$5.2bn).
- The Pink Sheets listing for BYD (BYDDY.PK) closed at US$87.1/share and traded US$155m for the day. That close implies an open of HK$338.7/share for BYD, middle of the placement range.
- There will be passive buying from global index trackers later this week while buying from Hang Seng Index and Hang Seng China Enterprises Index trackers will come in April.
HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$5.3bn of Flows Post Capping (Mar 2025)
- The March rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This leads to large flows.
- The gross round-trip trade across all stocks across the four indices is estimated at HK$41.1bn (US$5.3bn). The net round-trip trade is HK$37.3bn (US$4.8bn).
- Meituan , JD.com, Baidu, Horizon Robotics, ICBC, BeiGene, Kuaishou Technology and China Construction Bank are the largest buys. Alibaba, Xiaomi, HSBC, ZhongAn Online and Tencent are the largest sells.
Sunevision (1686 HK): Data Center Rally Brings Passive Flows
- The huge rally in SUNeVision Holdings (1686 HK) will bring passive inflows to the stock after being added to a global sector index.
- Estimated passive buying is 19.4m shares (US$22m; 0.55x ADV) with implementation scheduled for the close of trading on 21 March.
- Shorts have risen sharply in the last couple of weeks and cumulative excess volume has jumped too. But we see a similar pattern in a close peer.
Select Sector Indices and S&P Equal Weight Rebalance Preview: Capping Changes & US$13bn Trade
- Constituent changes to the S&P 500 INDEX (SPX INDEX), S&P Midcap400 Index and S&P SmallCap600 Index for the March rebalance will be announced after market close on Friday.
- There will also be capping changes for the Select Sector indices that will result in a round-trip trade of US$13.1bn. Constituent changes will add to that flow.
- The largest inflows will be in Amazon.com, Tesla, Microsoft, NVIDIA, Alphabet (GOOGL US) and Electronic Arts. Largest outflows are from Broadcom, Meta Platforms, Linde, Mcdonald’s Corp and Take Two Interactive.
S&P/NZX 10 Index Rebalance: A2 Milk (ATM NZ) Replaces Ryman Healthcare (RYM NZ)
- A2 Milk Co Ltd (ATM NZ) will replace Ryman Healthcare (RYM NZ) in the S&P/NZX 10 Index at the close of trading on 21 March.
- Passive trackers will need to buy 0.8x ADV in A2 Milk Co Ltd (ATM NZ) and will need to sell 1.2x ADV in Ryman Healthcare (RYM NZ).
- Importantly, A2 Milk Co Ltd (ATM NZ) is a deletion from a global index at the close on 21 March and the selling from those passive trackers is far larger.
Japan Post Bank (7182 JP) – Not Cheap Enough Vs Others, or Holdings
- The Offering of Japan Post Bank (7182 JP) is not taking place the way “the right pattern” would suggest, but last time was kind of special. This time is different.
- Last time was a “second IPO” and coincided with a US regional bank crisis. This time the offering is smaller outright, and much smaller as a portion of float.
- Pricing is Monday. It hasn’t moved much vs JPH. It needs to move more to be attractive. And there is still a bit of overhang to come.
M&A For Korea Zinc: Seoul Central District Court Makes Important Rulings
- On 7 March, the Seoul Central District Court ruled that it is reasonable for Korea Zinc to maintain the concentrated voting system, which should favor Chairman Choi and his allies.
- On the other hand, the court also ruled that Korea Zinc was wrong to restrict Young Poong’s voting rights which should be favorable to MBK/Young Poong alliance.
- The fact that the court has allowed concentrated voting system would mean the M&A of Korea Zinc will continue.
Seven & I Holdings: Mega Share Buyback Plan and IPO of North American CVS Unit to Boost Share Price
- If indeed the company proceeds with 2 trillion yen buyback over five years, this would represent buyback of about 7.3% of its shares per year (37% of market cap).
- Seven & I Holdings’ plans to massively buyback shares and IPO its North American CVS business are major catalysts that should have positive impact both near and long term.
- Certainly, the company’s action plan to sell its non-core assets (including supermarket, restaurant, and specialty stores) to Bain Capital for $5.5 billion is a step in the right direction.
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