In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes
- Nikkei 225 Sep 2023 Review – The Mercari Conundrum
- KRX New Deal Index Rebalance Preview: Interesting Changes Emerging
- Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics
- SK Square’s Special Dividend Momentum Trading: Entry Timing at Month End.
- Vivendi Acquires A Stake In PCCW’s Viu
- Alibaba’s Cloud Intelligence Group Spin-Off: The First Look
- SK Square: Share Cancellation and More Share Buyback Likely from Sale of SK Shieldus in 2H 2023
- Almac IPO: Change in IPO Regulation & Trading Strategy in First Day of Trading
- EM Growth Funds Raise Out-Of-Benchmark Exposure to Japan
Nikkei 225 Index Rebalance Preview (Sep 2023): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We take another stab at identifying potential inclusions and exclusions.
- There will be a big impact on the potential index changes. Fast Retailing (9983 JP)‘s index weight could be capped and there will be a big funding trade.
- There are many things to watch out for that could affect the impact on the inclusions, including stock splits among potential adds and stepwise inclusion of stocks in the index.
Nikkei 225 Sep 2023 Review – The Mercari Conundrum
- Mercari Inc (4385 JP) is potentially a leading candidate for inclusion in the Nikkei 225 in September.
- There are other technical reasons to think it is not.
- This insight looks at the issue of why it might be a leading candidate and why it might not be.
KRX New Deal Index Rebalance Preview: Interesting Changes Emerging
- The review period for the September rebalance ends on 31 July, the changes will be announced towards end August and implemented at the close of trading on 7 September.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. Plus there are a couple of changes for the BBIG indices.
- SK Biopharmaceuticals Co Ltd (326030 KS) has overtaken SK Bioscience (302440 KS) on average market cap and there will be large flows on both stocks at the rebalance.
Celltrion Merger Announcement in July: Trading Angles Utilizing Appraisal Rights Exercise Dynamics
- According to Invest Chosun, Celltrion plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.
- Given that the approximate timing of the merger registration statement submission has already been exposed to the market, we can track the difference between the spot and exercise prices.
- Celltrion Inc will likely attempt to minimize the appraisal rights price. We can consider capitalizing on this possibility by shorting Celltrion Inc while going long on the other two companies.
SK Square’s Special Dividend Momentum Trading: Entry Timing at Month End.
- The market’s attention has shifted to the second part, which is the additional utilization of a portion of the harvest result for shareholder returns.
- There is a significant possibility that the timing to allocate the ₩200B for shareholder returns will be advanced to late July or early August.
- We should set up a position aiming for the potential for a special dividend, which may lead to momentum trading flow just before the quarterly ex-div date later this month.
Vivendi Acquires A Stake In PCCW’s Viu
- PCCW Ltd (8 HK) is selling an initial 26.1% equity stake in its streaming platform Viu, to Vivendi SA (VIV FP)‘s Canal+, for US$200mn.
- Via a staggered investment, Canal+ can increase its equity to US$300mn. In addition, a further investment, at Canal+’s option, could result in increasing its stake in Viu to 51%.
- Elsewhere, PCCW’s 18% discount to NAV is the narrowest in over two years.
Alibaba’s Cloud Intelligence Group Spin-Off: The First Look
- Alibaba (ADR) (BABA US) aims to complete a spin-off of the Cloud Intelligence Group via a stock dividend distribution, with it becoming publicly listed in the next 12 months.
- The Cloud business is pursuing a land-grab strategy to reignite growth. While it is the only profitable Chinese cloud platform, the profitability gap to Amazon AWS highlights the opportunity.
- The aim to bring in external strategic investors before the spin-off will provide a valuation benchmark. Our analysis points to a Cloud business valuation range of US$45-58 billion.
SK Square: Share Cancellation and More Share Buyback Likely from Sale of SK Shieldus in 2H 2023
- SK Square announced that it will cancel treasury shares worth 2.5 million shares on 4 October 2023, which represents 1.8% of its current outstanding shares.
- Our NAV analysis of SK Square suggests NAV of 9.4 trillion won or NAV per share of 66,421 won, representing a 45% upside from current levels.
- SK Square’s positive shareholder return policies including higher share buybacks, cancellations, and dividends are result in further outperformance of SK Square relative to KOSPI this year.
Almac IPO: Change in IPO Regulation & Trading Strategy in First Day of Trading
- Almac IPO is likely to benefit from the change in IPO regulations in Korea, which could result in a spike in its share price in the first day of trading.
- Starting next week, the Korean IPO rules are changed so that the price limit on the newly listed companies will be expanded to 60-400% of the IPO price.
- We believe Almac’s shares could OVERSHOOT by more than 200-250% versus the IPO price on the first day of trading, which would be 150,000 won to 175,000 won per share.
EM Growth Funds Raise Out-Of-Benchmark Exposure to Japan
- Active Emerging Market funds in the Aggressive Growth style group raise out-of-benchmark exposure in Japanese stocks to record levels.
- Nearly a fifth of funds are now invested, with Unicharm Corp (8113 JP) and Hoya Corp (7741 JP) the key stock holdings.
- Japan is the 9th largest country overweight among Aggressive Growth EM funds, underscoring the commitment of active managers in identifying Emerging Market opportunities beyond conventional indices.
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