Weekly Top Ten Event-Driven and Index Rebalance - Dec 3, 2023

1. KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
Toyota is the company’s largest shareholder and its largest customer.
In this note, we will talk about the deal dynamics.

There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.