Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

China Merchants Bank Co., Ltd. operates as a commercial bank. The Company provides deposits, loans, wealth management, asset custody, finance leasing, investment banking, and other banking services. China Merchants Bank conducts businesses domestically and internationally.

<ul>
<li>AH Premia bounce higher. Spread curve torsion was as expected. Narrow spreads saw Hs suffer more. Wide spreads saw H outperformance. </li>
<li>The last few weeks I said warning signs were flashing and spreads could widen. This week they widened despite big SOUTHBOUND buying.</li>
<li>I expect the right thing to do is hunker down and be flat H/A risk.</li>
</ul>


AH Premia bounce higher. Spread curve torsion was as expected. Narrow spreads saw Hs suffer more. Wide spreads saw H outperformance. 
The last few weeks I said warning signs were flashing and spreads could widen. This week they widened despite big SOUTHBOUND buying.
I expect the right thing to do is hunker down and be flat H/A risk.


A/H Premium Tracker (To 28 Mar 2025):  AH Premia Still Falling; Expect Curve Torsion or AH Widening

Weichai Power Co., Ltd. specializes in the research and development, manufacturing and sales of diesel engines. The company's products are applicable to markets such as, heavy-duty vehicles, coaches, construction machines, vessels and power generator.

<ul>
<li>Q1 saw record quarterly inflows by SOUTHBOUND investors at HK$435bn, beating the previous record of Q1 2021 by more than HK$100bn. This week was +HK$37bn.</li>
<li>That's decent net buying still. Keeping that pace would mean a new record. It IS possible this excess flow is state-managed (or state-insisted as insurers up equity investment ratios).</li>
<li>Included is a summary of important China Stocks-relevant news as I saw it this week, but tariffs, retaliation, US growth prospects, etc will all matter more. </li>
</ul>


Q1 saw record quarterly inflows by SOUTHBOUND investors at HK$435bn, beating the previous record of Q1 2021 by more than HK$100bn. This week was +HK$37bn.
That's decent net buying still. Keeping that pace would mean a new record. It IS possible this excess flow is state-managed (or state-insisted as insurers up equity investment ratios).
Included is a summary of important China Stocks-relevant news as I saw it this week, but tariffs, retaliation, US growth prospects, etc will all matter more. 


HK Connect SOUTHBOUND Flows (To 28 Mar 2025); Banks and Divs Bought Again

Index Rebalance

Baycurrent Consulting , Inc. offers comprehensive consulting services in a wide variety of industries. The company's main focus areas are business strategy consulting, IT consulting, and IT integration.

<ul>
<li>The Nikkei 225 March 2025 rebalance is today. The ADD is  big, with more to buy later. The SELL is a really big sell in terms of float. </li>
<li>The Sell, <a href="https://www.smartkarma.com/entities/mitsubishi-logistics-corp" target="_blank" data-smartkarma-citation="entities:11909:1" rel="noopener">Mitsubishi Logistics (9301 JP)</a>, means Max Real World Float <em>doubles</em>. It's like a huge offering, with warning.</li>
<li>There's a big cap trade on <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> where timing is not on its side, leaving US$2bn to buy in funding. 25 names at 0.4x ADV to buy.</li>
</ul>


The Nikkei 225 March 2025 rebalance is today. The ADD is  big, with more to buy later. The SELL is a really big sell in terms of float. 
The Sell, Mitsubishi Logistics (9301 JP), means Max Real World Float doubles. It's like a huge offering, with warning.
There's a big cap trade on Fast Retailing (9983 JP) where timing is not on its side, leaving US$2bn to buy in funding. 25 names at 0.4x ADV to buy.


Nikkei 225 Mar25 Rebal - A Big Buy With Buying Shadow, A Bigger Sell, And $2bn of Funding Flows

Topcorn Corporation manufactures and sells measuring equipment and medical equipment primarily for ophthalmologist use. The Company also manufactures industrial products including projectors and optical devices.

<ul>
<li>The difference between an LBO (Leveraged Buy Out) and an MBO (Management Buy Out) is that an MBO is usually just an LBO where the buyers don't replace the CEO.</li>
<li>After 4+mos  of speculation/noise since a Bloomberg article said Topcon was weighing takeover bids, we have a deal. KKR and JIC will buy out Topcon in an "MBO" at ¥3,300/share.</li>
<li>Unusually, the lower limit is 50.1%. This is an OK exit for the "<a href="https://www.smartkarma.com/insights/thinking-about-topcon-7732-and-the-new-meti-enabled-bad-cop-good-cop-routine" target="_blank" rel="noopener">Bad Cops</a>" but not a great one. It should be higher. Start delayed for 4 months.</li>
</ul>


The difference between an LBO (Leveraged Buy Out) and an MBO (Management Buy Out) is that an MBO is usually just an LBO where the buyers don't replace the CEO.
After 4+mos  of speculation/noise since a Bloomberg article said Topcon was weighing takeover bids, we have a deal. KKR and JIC will buy out Topcon in an "MBO" at ¥3,300/share.
Unusually, the lower limit is 50.1%. This is an OK exit for the "Bad Cops" but not a great one. It should be higher. Start delayed for 4 months.


[Japan Activism] - KKR and JIC Buy Out Topcon (7732 JP) At ¥3,300/Share

Equity Bottom-Up

Daihatsu Diesel Manufacturing Co., Ltd. manufactures marine-use propulsion and auxiliary diesel engines, stationary diesel engines, and industrial products such as aluminum wheels and automatic door closers for train cars. The Company also manages real estate leasing with properties ranging from office buildings to parking garages.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/daihatsu-diesel-mfg-co-ltd" target="_blank" data-smartkarma-citation="entities:12455:1" rel="noopener">Daihatsu Diesel Mfg (6023 JP)</a> is down sharply today - much more than indices - as autos/tech fall on US auto tariffs. There may be some GPIF unwinds as well. </li>
<li>A reminder: Despite the name, Daihatsu Diesel is not an auto name, is growing, has a big order book, and minimal direct exposure to the US. </li>
<li>The Tender settles today. The 8% overhang from Tendered-But-Unsold Shares is an opportunity, not a burden, at 7.2x ex-cash PER.</li>
</ul>



Daihatsu Diesel Mfg (6023 JP) is down sharply today - much more than indices - as autos/tech fall on US auto tariffs. There may be some GPIF unwinds as well. 
A reminder: Despite the name, Daihatsu Diesel is not an auto name, is growing, has a big order book, and minimal direct exposure to the US. 
The Tender settles today. The 8% overhang from Tendered-But-Unsold Shares is an opportunity, not a burden, at 7.2x ex-cash PER.


Daihatsu Diesel (6023) - Is Not Directly Auto-Tariff-Related

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Travis Lundy
Pan-Asia Catalysts/Events
• Quiddity Advisors

A/H Premium Tracker (To 28 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening

AH Premia were up for the week despite net SB buying. Finally, H/A reflects local market benchmarks. A long trend may now be ending (I'm not clear...

Travis Lundy

HK Connect SOUTHBOUND Flows (To 28 Mar 2025); Banks and Divs Bought Again

Chinese banks get their expected capital injection and the world awaits tariffs but SOUTHBOUND investors continue to buy, making for a record...

Travis Lundy

Nikkei 225 Mar25 Rebal - A Big Buy With Buying Shadow, A Bigger Sell, And $2bn of Funding Flows

The Nikkei 225 rebalance - all the data for all the flows. There will be buying overhang on Baycurrent as it gets upweighted in 6mos, post-delete...

Travis Lundy

A/H Premium Tracker (To 28 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening

AH Premia were up for the week despite net SB buying. Finally, H/A reflects local market benchmarks. A long trend may now be ending (I'm not clear...

Travis Lundy

HK Connect SOUTHBOUND Flows (To 28 Mar 2025); Banks and Divs Bought Again

Chinese banks get their expected capital injection and the world awaits tariffs but SOUTHBOUND investors continue to buy, making for a record...

Travis Lundy

Nikkei 225 Mar25 Rebal - A Big Buy With Buying Shadow, A Bigger Sell, And $2bn of Funding Flows

The Nikkei 225 rebalance - all the data for all the flows. There will be buying overhang on Baycurrent as it gets upweighted in 6mos, post-delete...

Travis Lundy

[Japan Activism] - KKR and JIC Buy Out Topcon (7732 JP) At ¥3,300/Share

The Topcon Deal is out. ¥3,300/share. This may or may not please activists. It is light given extreme confidence in the eyecare biz. But if...

Travis Lundy

Daihatsu Diesel (6023) - Is Not Directly Auto-Tariff-Related

Daihatsu Diesel is cheap. Tariffs, GPIF selling, and name association may be making it cheaper. This stock is worth sitting on, buying more, etc....

Travis Lundy