Weekly Top Ten Event-Driven and Index Rebalance – Dec 8, 2024

1. 7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal

By Travis Lundy, Quiddity Advisors

• A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
• The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
• But more directly, this leads us back to 7&I (3382) – What If…  A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.

2. Goodman Group (GMG AU) Placement: Limited Index Flows

By Brian Freitas, Periscope Analytics

• China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
• Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
• There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

3. Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

By Brian Freitas, Periscope Analytics

• Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
• At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
• TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

4. Sanrio (8136 JP) – Kitty Behaving Badly

By Travis Lundy, Quiddity Advisors

• Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon.  Next day it fell sharply. 
• There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
• There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

5. TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform

By Brian Freitas, Periscope Analytics

• The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
• We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
• An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

6. Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

By Sanghyun Park, Clepsydra Capital

• Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
• The Martial Law Command’s first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
• Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.

7. HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

By Brian Freitas, Periscope Analytics

• The December rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
• The round-trip trade across all stocks across the four indices is estimated at HK$26.14bn (US$3.4bn).
• Alibaba, Tencent, Midea Group, Kuaishou Technology, NIO, HSBC Holdings and New Oriental Education & Techn are the largest buys. Meituan, Xiaomi, JD.com, AIA Group and NetEase are the largest sells.

8. NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade

By Brian Freitas, Periscope Analytics

• There could be 19 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December. There are some stocks from the new F&O inclusions.
• If all changes are on expected lines, one-way turnover is estimated at 65.2% and that will result in a one-way trade of INR 71bn (US$837m).
• The potential inclusions have outperformed the potential deletions since the start of July. The pace picked up over the last month as we neared the end of the review period.

9. Auckland Airport (AIA NZ) Placement: Potential Index Flows

By Brian Freitas, Periscope Analytics

• Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
• The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
• There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

10. 7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

By Travis Lundy, Quiddity Advisors

• The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
• I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
• This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness