Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Index Rebalance

Shin Kong Financial Holding / Index Rebalance

<ul>
<li>A new factoid about the merger between the <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> and <a href="https://www.smartkarma.com/entities/taishin-financial-holding" target="_blank" data-smartkarma-citation="entities:715:1" rel="noopener">Taishin Financial Holding (2887 TT)</a> merger of FHCs came to my notice last week.</li>
<li>There is withholding tax on a portion of the Taishin shares to be received. The last day of trading will be 11 July 2025. Expect repercussions.</li>
<li>This week will see multiple index events, combined with the risk arb events, and the WHT may affect how passive investors trade the events.</li>
</ul>


A new factoid about the merger between the Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) merger of FHCs came to my notice last week.
There is withholding tax on a portion of the Taishin shares to be received. The last day of trading will be 11 July 2025. Expect repercussions.
This week will see multiple index events, combined with the risk arb events, and the WHT may affect how passive investors trade the events.


Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems

Event-Driven

Shin Kong Financial Holding / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> and <a href="https://www.smartkarma.com/entities/taishin-financial-holding" target="_blank" data-smartkarma-citation="entities:715:1" rel="noopener">Taishin Financial Holding (2887 TT)</a> are scheduled to merge in less than 6 weeks. </li>
<li>The recent TWD strength has meant sharp losses for Shin Kong Life, but the merger agreement the FSC agreed has Taishin explicitly supporting Shin Kong Life. </li>
<li>There are near-term flows and technical limitations which make this situation interesting again. Grab your shorts! It could be a bumpy ride!</li>
</ul>



Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) are scheduled to merge in less than 6 weeks. 
The recent TWD strength has meant sharp losses for Shin Kong Life, but the merger agreement the FSC agreed has Taishin explicitly supporting Shin Kong Life. 
There are near-term flows and technical limitations which make this situation interesting again. Grab your shorts! It could be a bumpy ride!


Shin Kong (2888 TT)/Taishin (2887 TT) - Short Timer, FX Risk, Index Flows - Time To Buy Vs Peers

<ul>
<li>After rumours were rekindled a week earlier, on 22 August 2024, <a href="https://www.smartkarma.com/entities/taishin-financial-holding" target="_blank" data-smartkarma-citation="entities:715:1" rel="noopener">Taishin Financial Holding (2887 TT)</a> and <a href="https://www.smartkarma.com/entities/shin-kong-financial-holding" target="_blank" data-smartkarma-citation="entities:15351:1" rel="noopener">Shin Kong Financial Holding (2888 TT)</a> announced they would merge.</li>
<li>The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That's bad.</li>
<li>There's history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.</li>
</ul>


After rumours were rekindled a week earlier, on 22 August 2024, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced they would merge.
The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That's bad.
There's history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.


Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn't Clean, And It's A Bad Price

Founder of Antler Capital

Stanley Tsai, CFA

Thematic (Sector/Industry)

<ul>
<li>The unfolding crisis is unlikely to have far-reaching impacts on Asia financial names, given their more robust deposit franchises and sector diversification.</li>
<li>That said, the Taiwanese financial holdcos do seem to be substantially more exposed than their peers in other markets owing to the USD fixed-income exposures at their life insurance units.</li>
<li>In a flight-to-quality scenario, we expect Fubon FHC to outperform the more geared Shin Kong FHC.</li>
</ul>


The unfolding crisis is unlikely to have far-reaching impacts on Asia financial names, given their more robust deposit franchises and sector diversification.
That said, the Taiwanese financial holdcos do seem to be substantially more exposed than their peers in other markets owing to the USD fixed-income exposures at their life insurance units.
In a flight-to-quality scenario, we expect Fubon FHC to outperform the more geared Shin Kong FHC.


Asia Financials: The Fallout from SVB and Silvergate | Where's the Biggest Asset/Liability Mismatch?

<ul>
<li>The last couple of days have seen the TWD increase value against the USD extremely sharply. This has caused the Shin Kong/Taishin risk arb spread to widen. </li>
<li>There is no expectation that the merger will be delayed, but the change in USDTWD rate introduces a new dynamic into the ShinKong-as-Taishin-vs Peers trade.</li>
<li>Careful consideration of this trade going forward is worthwhile. What may have been the better trade may no longer be the better trade.</li>
</ul>


The last couple of days have seen the TWD increase value against the USD extremely sharply. This has caused the Shin Kong/Taishin risk arb spread to widen. 
There is no expectation that the merger will be delayed, but the change in USDTWD rate introduces a new dynamic into the ShinKong-as-Taishin-vs Peers trade.
Careful consideration of this trade going forward is worthwhile. What may have been the better trade may no longer be the better trade.


ShinKong (2888 TT)/Taishin (2887 TT) - Time To Deal Is Shorter, But Risk To Peers Is Higher

Taiwan

Shin Kong Financial Holding Co., Ltd. is a holding company.  Through its subsidiaries, the Company provides traditional life, health, group and accident insurance products and services, as well as acts as a broker, dealer and underwriter for financial securities.

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Shin Kong Financial Holding (2888 TT)

Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems

The last week of trading of the Shin Kong/Taishin merger. This past week seems to have highlighted a heretofore minimally understood withholding...

Travis Lundy

Shin Kong (2888 TT)/Taishin (2887 TT) - Short Timer, FX Risk, Index Flows - Time To Buy Vs Peers

One month to go for the Shin Kong Taishin Merger Arb and the spread is still elevated at 5.5%. There is some tightness on Taishin borrow but more...

Travis Lundy

Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn't Clean, And It's A Bad Price

Shin Kong Financial and Taishin Financial have agreed to merge, but the Board decision and price aren't pretty. Looks a bit like a coup. And CTBC...

Travis Lundy

Asia Financials: The Fallout from SVB and Silvergate | Where's the Biggest Asset/Liability Mismatch?

For the most part, we expect Asia financial names to be able to withstand the SVB / Silvergate fallout. But risks in ALM are reminiscent of what...

Stanley Tsai, CFA

ShinKong (2888 TT)/Taishin (2887 TT) - Time To Deal Is Shorter, But Risk To Peers Is Higher

For months, Shin Kong and Taishin gained ground vs Peers after underperforming to a 10-year relative low. Now, USDTWD FX volatility and strength...

Travis Lundy

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