Weekly Top Ten Event-Driven and Index Rebalance – Oct 20, 2024

1. Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿

By Travis Lundy, Quiddity Advisors

• As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.  
• There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up. 
• There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got 🍿🍿🍿.

2. MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out

By Sanghyun Park, Clepsydra Capital

• MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
• MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
• Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.

3. China ETF Inflows & Implications: YTD Inflows Nearing US$150bn

By Brian Freitas, Periscope Analytics

• Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
• 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
• The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.

4. S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

By Brian Freitas, Periscope Analytics

• With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December. 
• There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
• Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.

5. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade

By Brian Freitas, Periscope Analytics

• Using data from the close on 11 October, there could be 6 adds and 5 deletes for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
• There will also be capping and funding flows that will lead to a one-way turnover of 15% and a one-way trade of TWD 49bn (US$1.52bn)
• Shorts have been building up in some of the forecast deletes and in a couple of the forecast adds as well.

6. China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025

By Brian Freitas, Periscope Analytics

• China Resources Beverage (CRB HK) is offering 347.8m shares in its IPO at a price range of HK$13.5-14.5/share. With the overallotment option, the IPO could raise up to HK$5.8bn (US$474m).
• Cornerstone investors will take up nearly half the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
• Index inclusions will commence with the HSCI in March 2025 – that will also result in Stock Connect inclusion. The next index inclusion will take place in June.

7. Korea Value-Up ETFs: Latest Market Info on Initial AUM Setup & Resulting Passive Impacts

By Sanghyun Park, Clepsydra Capital

• KRX will launch 12 ETFs tracking the Korea Value-Up Index on November 4—9 passive and 3 active—aiming for an initial AUM exceeding 1 trillion KRW.
• KRX is pressuring ETF operators to reveal initial capital by November 4, with expectations to exceed 1 trillion KRW due to government pressure.
• Early signs of position buildup are emerging, so it’s essential to monitor stocks with significant passive impact closely moving forward.

8. Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer

By Arun George, Global Equity Research Ltd

• Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
• The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation. 
• KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.

9. Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium

By Arun George, Global Equity Research Ltd

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

10. Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun

By Janaghan Jeyakumar, CFA, Quiddity Advisors

• The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
• The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
• In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.