Smartkarma Daily Briefs

Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP)
This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great.

Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited

By Aki Matsumoto

Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.

Keiyo (8168 JP): DCM’s JPY1,300 Tender Offer

By Arun George

Keiyo Co Ltd (8168 JP) has recommended DCM Holdings (3050 JP)’s tender offer of JPY1,300 per share, a 58.3% premium to the undisturbed price (29 September).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 35.68% ownership ratio.
Irrevocables represent a 0.88% ownership ratio. The minimum acceptance condition (lower limit) requires a 50.4% minority acceptance rate, which is achievable as the offer price represents a ten-year high.

Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys

By Joe Jasper

Key support levels on global equity indexes (EURO STOXX 50, $ACWX, $EFA) are beginning to break as the U.S. dollar (DXY) and 10-year Treasury yield break above $105.70 and 4.35%.
This significantly increases the odds of a break below major $92-$93 support on $ACWI, and we would shift to a more cautious outlook only on a break below $92.
We shifted to overweight value within non-U.S. equities last week, and we are now also shifting to overweight small-caps within non-U.S. equities as well. Buys in Transportation, Communications, and HealthCare

EQD | Nikkei 225 (NKY) Forecast for October: Not So Good…

By Nico Rosti

The Nikkei 225 INDEX closed September down at 31857.62, CC=-3 (3 months down). Did not double-bottom at August’s lows (31674), but is starting to be OVERSOLD MONTHLY (time perspective).
A new Market Reversal Matrix Seasonality model is hinting that October 2023 probably will not see a rally/reversal, but just below-average gains (if any).
One possible scenario (due to concomitant WEEKLY OVERSOLD conditions) is to see the Nikkei up early in October, then down again, closing the month with small gains or a loss.

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Sep 30

Daily Brief Energy/Materials: Vedanta Resources, China Petroleum & Chemical Cor, Texas Pacific Land , Celanese Corp Series A, Hunt Oil Company and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Weekly Wrap – 29 Sep 2023
China’s Sinopec Dives Deeper Into Geothermal Energy
TPL: The Unhedged
Celanese Corporation: 3 Predicted Uplifts Boosting 2024’s Profit Game! – Financial Forecasts
Hunt Oil – ESG Report – Lucror Analytics

Weekly Wrap – 29 Sep 2023

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

China’s Sinopec Dives Deeper Into Geothermal Energy

By Caixin Global

China Petroleum & Chemical Corp., the state-owned energy giant known as Sinopec, is making a bigger push into a renewable energy generated by heat within the earth as the country looks to diversify its sources of green energy.
Sinopec’s push could serve as a catalyst for fast-tracking the exploration and use of geothermal energy, and spur the development of related technologies in the country, experts said.
The company said on social media on Sept. 14 that it was expecting a “major development” in its geothermal heating segment and that it was on track to expand its service to more than 60 cities in over 10 regions in China by the end of the year.

TPL: The Unhedged

By Hamed Khorsand

The return of higher crude oil prices could result in Texas Pacific Land (TPL) reporting higher than expected revenue in the third and fourth quarters of 2023
TPL does not hedge its exposure to energy prices, which would have an outsize benefit when prices move higher like they have in the third quarter
Crude oil production has been rising even though total rig count has also declined from levels reached earlier in the year

Celanese Corporation: 3 Predicted Uplifts Boosting 2024’s Profit Game! – Financial Forecasts

Celanese Corporation’s results were a major disappointment as it failed to meet the revenue expectations as well as earnings expectations of Wall Street.
Additionally, $150 million in M&M synergies, aided by the first-quarter SAP integration, are anticipated to enhance cost savings.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Hunt Oil – ESG Report – Lucror Analytics

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Hunt Oil’s ESG as “Adequate”, in line with its Social and Governance scores. However, the Environmental pillar is “Weak”. Controversies are “Immaterial” but Disclosure is “Weak”.
Hunt Oil Company of Peru LLC, Sucursal del Peru (HOCP) is a wholly owned, indirect subsidiary of Hunt Oil Company, one of the largest privately owned hydrocarbon companies in the US.

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Sep 30

Daily Brief Industrials: EURO STOXX 50 Price EUR, Ecoeye and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys
Ecoeye IPO Preview

Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys

By Joe Jasper

Key support levels on global equity indexes (EURO STOXX 50, $ACWX, $EFA) are beginning to break as the U.S. dollar (DXY) and 10-year Treasury yield break above $105.70 and 4.35%.
This significantly increases the odds of a break below major $92-$93 support on $ACWI, and we would shift to a more cautious outlook only on a break below $92.
We shifted to overweight value within non-U.S. equities last week, and we are now also shifting to overweight small-caps within non-U.S. equities as well. Buys in Transportation, Communications, and HealthCare

Ecoeye IPO Preview

By Douglas Kim

Ecoeye is getting ready to complete its IPO on the KOSDAQ exchange in November. Ecoeye specializes in carbon emission rights related businesses.
The IPO price range is from 28,500 won to 34,800 won per share. The IPO offering amount is from 59.3 billion won to 72.1 billion won.
Established in 2005, Ecoeye makes money through carbon emissions trading and brokerage, carbon reduction business, carbon emissions trading system, and operation consulting.

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Sep 30

Daily Brief TMT/Internet: Tencent, Semiconductor Manufacturing International Corp (SMIC), Baidu , 4Paradigm, Microchip Technology, Twilio , Fox , Hang Seng Index, Huawei Technology and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Tencent/Netease: Zeroed for Two Rounds of Game Approval
SMIC’s Semi Shocker
Baidu: Back in the Mix
4Paradigm: Fears About The Entity List Are Exaggerated, Bullish On AI and SageGPT, PT: HK$86
Microchip Technology: Navigating Through Market Sluggishness! – Major Drivers
Twilio Inc.: Surprising Signals of Growth and Stabilization You Need to Know! – Major Drivers
Fox Corporation: Discover the Strategy Behind Their Stellar Viewership Jump! – Major Drivers
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Shutdown or Meltdown?
Huawei Unveils New Products Boasting Self-Developed Chips

Tencent/Netease: Zeroed for Two Rounds of Game Approval

By Ke Yan, CFA, FRM

China just announced game approval for September batch. The number of games approved is in-line with the pace of approval in recent month.
Pace of China game approval stays flattish, at a much slower pace than pre-tightening.
Neither Tencent or Netease received approval for any game. Same thing happened for July batch.

SMIC’s Semi Shocker

By William Keating

The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
SMIC’s accomplishment is not reflected in its share price which lies midways between 52 week highs & lows

Baidu: Back in the Mix

By Steven Holden

After a heavy decline in ownership between 2016 and 2020, active Asia Ex-Japan managers are re-engaging with Baidu Inc.
Ownership levels are at 4-year highs, with Baidu one of the key beneficiaries of manager rotation this year.
Baidu is the 3rd largest holding in the Communication Services sector, but there a plenty of funds with a history of ownership who remain on the sidelines for now.

4Paradigm: Fears About The Entity List Are Exaggerated, Bullish On AI and SageGPT, PT: HK$86

By Andrei Zakharov

4Paradigm, a self-developed AI platform and scenario-specific AI applications provider, has completed an IPO and raised net proceeds of ~HK$836M, excluding the over-allotment option.
Founder-Led AI unicorn priced its IPO at the bottom end of the range at HK$55.60 per share. Cornerstone investors agreed to purchase ~13.6M H shares at the IPO price.
I like the company’s leadership position in China’s fastest-growing decision-making AI market, large TAM for their enterprise-grade generative AI offering SageGPT and top-tier VC investors.

Microchip Technology: Navigating Through Market Sluggishness! – Major Drivers

Despite a sluggish macro environment, Microchip Technology’s quarterly earnings were solid due to resilient end markets and broad client base.
The company’s net sales increased 2.5% sequentially and 16.6% annually to reach $2.29 billion.
From a product line standpoint, their mixed-signal microcontroller net sales hit another all-time high, increasing 0.8% sequentially and 22.5% annually in the quarter.

Twilio Inc.: Surprising Signals of Growth and Stabilization You Need to Know! – Major Drivers

Twilio Inc. delivered a positive result and managed an all-around beat in the last quarter, exceeding its revenue and profit targets and producing a significant quarterly non-GAAP revenue from operations of $120 million.
Twilio had a successful quarter in communications and continues to see encouraging signs of stabilization across its client base.
Their management believes that bookings will recover toward the end of the year and that revenue growth will resume throughout 2024.

Fox Corporation: Discover the Strategy Behind Their Stellar Viewership Jump! – Major Drivers

Fox delivered decent results in the quarter, with revenue growth of 7%, including 12% growth in advertising, supported by significant tentpole events like the midterm elections, Super Bowl LVII, and the FIFA Men’s World Cup, as well as outstanding growth of Tubi and 3% affiliate growth driven by the first third of its distribution renewal cycle.
These results show that Fox’s distinctive strategy continues to produce engaged audiences at scale for its distribution and advertising partners across its sports and news verticals while also propelling remarkable growth throughout its digital businesses.
For the ninth consecutive quarter, the FOX News Channel concluded the fourth quarter as the most-watched cable network overall.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades-Shutdown or Meltdown?

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

Huawei Unveils New Products Boasting Self-Developed Chips

By Caixin Global

Huawei Technologies Co. Ltd. launched a line of new products this week, including a tablet and smart TV, powered by self-developed chips, in its latest show of semiconductor self-sufficiency in the face of U.S. sanctions.
The fall season launch event on Monday came a month after the tech giant made headlines with the rollout of its new flagship smartphone the Mate 60 Pro — a handset using Huawei’s own Kirin 9000s chip that reviewers claimed can rival 5G speeds.
During the launch event, the head of Huawei’s consumer division, Richard Yu, spent much of his time on stage measuring the company’s new MatePad Pro tablet against Apple’s iPad Pro.

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Sep 30

Daily Brief Industrials: EURO STOXX 50 Price EUR, Ecoeye and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys
Ecoeye IPO Preview

Supports Starting to Break; Upgrading Non-U.S. Small-Caps to Overweight; Transports/Comm/HC Buys

By Joe Jasper

Key support levels on global equity indexes (EURO STOXX 50, $ACWX, $EFA) are beginning to break as the U.S. dollar (DXY) and 10-year Treasury yield break above $105.70 and 4.35%.
This significantly increases the odds of a break below major $92-$93 support on $ACWI, and we would shift to a more cautious outlook only on a break below $92.
We shifted to overweight value within non-U.S. equities last week, and we are now also shifting to overweight small-caps within non-U.S. equities as well. Buys in Transportation, Communications, and HealthCare

Ecoeye IPO Preview

By Douglas Kim

Ecoeye is getting ready to complete its IPO on the KOSDAQ exchange in November. Ecoeye specializes in carbon emission rights related businesses.
The IPO price range is from 28,500 won to 34,800 won per share. The IPO offering amount is from 59.3 billion won to 72.1 billion won.
Established in 2005, Ecoeye makes money through carbon emissions trading and brokerage, carbon reduction business, carbon emissions trading system, and operation consulting.

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Sep 30

Daily Brief Consumer: Keiyo Co Ltd, Shenzhou Intl Group Holdings, Matahari Department Store, RPSG Ventures Limited, Tokyo Stock Exchange Tokyo Price Index Topix, Shiyue Daotian, Victoria PLC and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

DCM Takeover for Keiyo (8168) – Pretty Easy Deal
Shenzhou Intl (2313 HK): Nike’s Inventories Declined By 10% Yoy in 1Q24
Matahari Department Store (LPPF IJ) – Transforming and Trendy
RPSG Ventures: Strong Profitability from IPL
Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited
Keiyo (8168 JP): DCM’s JPY1,300 Tender Offer
Shiyue Daotian IPO – PHIP Updates & Quick Thoughts on Valuation
Victoria – ESG Report – Lucror Analytics

DCM Takeover for Keiyo (8168) – Pretty Easy Deal

Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP)
This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great.

Shenzhou Intl (2313 HK): Nike’s Inventories Declined By 10% Yoy in 1Q24

By Steve Zhou, CFA

Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading.
Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade.

Matahari Department Store (LPPF IJ) – Transforming and Trendy

By Angus Mackintosh

Matahari Department Store (LPPF IJ) is the key player in the department store space in Indonesia with a significant transformation well underway to drive future growth and profitability.
The company had a slightly disappointing Lebaran performance given some seasonal disparities but continues to make significant progress in revamping its merchandise mix, with a strong omnichannel yielding results.
Matahari Department Store (LPPF IJ) looks exceptionally cheap on 4.0x FY2024E PER, and with a dividend yield of 20.0% and with earnings expected to rebound in 2024E.

RPSG Ventures: Strong Profitability from IPL

By Ankit Agrawal, CFA

Helped by the share in the incremental IPL media rights value, RPSG Venture’s (RPSGV) revenue from the sports business revenue jumped to INR 590cr+ in Q1FY24 vs INR 300cr+ YoY.
Losses in the FMCG business narrowed to INR 63cr vs INR 90cr YoY and INR 70cr QoQ. FMCG revenues continue to be at around INR 400cr+ annualized run-rate.
RPSGV’s BPO business, Firstsource Solutions (FSOL IN) saw stabilization in de-growth and margins. Margins expanded by 375bp during Q1FY24.

Disclosure of Management Strategies with Cost of Capital and Stock Price in Mind Is Still Limited

By Aki Matsumoto

Regardless of “TSE request,” only 31% of prime market listed companies disclosed “measures to realize management with awareness of cost of capital and stock price” in their corporate governance reports.
The lack of ready disclosure measures on companies’ side seems to be the reason why few companies disclosed information, but many of those that did are also poor in content.
For companies with large shareholders and low P/B, the parent company has not yet TOB or sold the company, which may be the reason for the delay in disclosure.

Keiyo (8168 JP): DCM’s JPY1,300 Tender Offer

By Arun George

Keiyo Co Ltd (8168 JP) has recommended DCM Holdings (3050 JP)’s tender offer of JPY1,300 per share, a 58.3% premium to the undisturbed price (29 September).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 35.68% ownership ratio.
Irrevocables represent a 0.88% ownership ratio. The minimum acceptance condition (lower limit) requires a 50.4% minority acceptance rate, which is achievable as the offer price represents a ten-year high.

Shiyue Daotian IPO – PHIP Updates & Quick Thoughts on Valuation

By Ethan Aw

Shiyue Daotian (1892269D CH) is looking to raise up to US$108m in its Hong Kong IPO, after downsizing from an earlier reported float of US$200m.
Shiyue Daotian is a pantry staple food company in China, providing consumers with pre-packaged premium rice, whole grain, bean, and dried food products.
In our previous notes, we covered the company’s performance. In this note, we will cover the firm’s PHIP updates and share our thoughts on valuation.

Victoria – ESG Report – Lucror Analytics

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Victoria’s ESG as “Weak”, in line with its Environmental, Social and Governance scores. Controversies are “Material” and Disclosure is “Weak”.
Victoria PLC designs, manufactures and distributes flooring products across the UK, Continental Europe and Australia.

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Sep 30

Daily Brief Financials: Skylark Co Ltd, iShares MSCI Thailand, Bank Of Baroda, Nikkei 225, Intercontinental Exchange, M & T Bank Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

kopi-C with Thakral’s CEO: “We’ve re-invented ourselves from VCRs to Drones”
Bond Market Monitor: Prime Time Continues
Indian Banks Screener: Bank of Baroda (BOB IN) Remains Stand Out Value
EQD | Nikkei 225 (NKY) Forecast for October: Not So Good…
Intercontinental Exchange Inc.: Launch of CORSIA Carbon Credit Futures Market & Other Major Developments
M&T Bank Corporation: Inside the Strategy Fueling a Consistent Rise in Service Fees & Other Revenues! – Major Drivers

kopi-C with Thakral’s CEO: “We’ve re-invented ourselves from VCRs to Drones”

By Geoff Howie

kopi-C with Thakral’s CEO: “We’ve re-invented ourselves from VCRs to Drones” With the faster pace of development in sectors nowadays, adaptability and willingness to learn from others are crucial in business, says Thakral’s CEO Inderbethal Singh Thakral Building on the momentum, Thakral has invested in Skylark Drones, a start-up specialising in integrating drones in workflows in different industries.

Bond Market Monitor: Prime Time Continues

By Warut Promboon

Our thesis has not changed even though the Federal Reserve (the Fed) appears to be more hawkish than many investors thought.
We expect countries with lagging rate cycles, such as China and Thailand, to suffer capital outflows and rising yields.
In Asia, the spotlights remain on Indonesia and India where macroeconomic fundamentals continue to improve.

Indian Banks Screener: Bank of Baroda (BOB IN) Remains Stand Out Value

By Victor Galliano

We maintain that Bank of Baroda is the stand-out value in this peer group of Indian banks, for its modest valuations, healthy ROE and improving pre- and post-provision returns
We retain HDFC Bank as our higher quality bank pick, with its strong balance sheet, especially on NPA coverage, and potential for improved return from the HDFC merger
Axis bank remains a name to watch, although valuations are not compelling; we remain negative on State Bank of India, and we are also cautious on ICICI Bank

EQD | Nikkei 225 (NKY) Forecast for October: Not So Good…

By Nico Rosti

The Nikkei 225 INDEX closed September down at 31857.62, CC=-3 (3 months down). Did not double-bottom at August’s lows (31674), but is starting to be OVERSOLD MONTHLY (time perspective).
A new Market Reversal Matrix Seasonality model is hinting that October 2023 probably will not see a rally/reversal, but just below-average gains (if any).
One possible scenario (due to concomitant WEEKLY OVERSOLD conditions) is to see the Nikkei up early in October, then down again, closing the month with small gains or a loss.

Intercontinental Exchange Inc.: Launch of CORSIA Carbon Credit Futures Market & Other Major Developments

Intercontinental Exchange, Inc. had a strong quarter, with adjusted earnings per share of $1.43, an increase of 8% over the prior year.
In the Exchange segment, net revenues totaled $1.1 billion, up 9% over the prior year.
Also, because of these improvements, they have seen a roughly 60% increase in energy volume performed through their ICE Chat platform over the first half of this year.

M&T Bank Corporation: Inside the Strategy Fueling a Consistent Rise in Service Fees & Other Revenues! – Major Drivers

M&T Bank Corporation delivered an all-around beat in the previous quarter.
The quarter’s net income was $867 million, a 24% increase over the previous quarter.
Trust income dropped from $194 million in the first quarter to $172 million in the most recent quarter.

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Sep 30

Daily Brief Health Care: EC Healthcare, Cigna Group/, Shield Therapeutics and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

EC Healthcare (2138 HK): Surging Revenue; Poised for Profitability Improvement; Future Looks Bright
The Cigna Group: How Innovation & Affordability Are Driving Impressive Growth! – Major Drivers
Shield Therapeutics – Ramped up and heading into a stronger H223

EC Healthcare (2138 HK): Surging Revenue; Poised for Profitability Improvement; Future Looks Bright

By Tina Banerjee

EC Healthcare (2138 HK) reported record high revenue of HK$3.9B in FY23 and started FY24 on a strong note, with Q1FY24 revenue increasing 23% YoY, driven by medical services segment.
Cost pressure is negatively impacting the bottom line. The company is reporting decelerating EBITDA and net profit margins since FY20. ROE deteriorated to 4.5% in FY23 from 33% in FY19.
The company is well-positioned to see turnaround in profitability with the resumption of Mainland China visitors in Hong Kong providing impetus to high margin earning aesthetic business and cost optimization.

The Cigna Group: How Innovation & Affordability Are Driving Impressive Growth! – Major Drivers

The Cigna Group exceeded analyst expectations in revenue and earnings, fueled by ongoing growth across its varied portfolio of companies.
Cigna produced total revenues of $48.6 billion, adjusted earnings per share of $6.13, and cash flow from operations of $2.5 billion in the quarter.
Another strong quarter was experienced by the company’s market-leading pharmacy, care, and benefits portfolio at Evernorth Health Services.

Shield Therapeutics – Ramped up and heading into a stronger H223

By Edison Investment Research

Shield Therapeutics’ H123 results were largely as expected. Despite the minor operational adjustments with the commercialisation ramp-up, our long-term expectations remain unchanged. H123 revenue of $4.3m grew 65.8% y o y and was largely driven by US Accrufer sales. Total prescriptions grew 59% (vs H222) to 26,200 and are anticipated to accelerate in H223 with the completed build out of its sales platform. For the medium term, we anticipate additional launches in the EU and regulatory approvals in China and our longer-term assumptions remain unchanged. Our valuation remains largely unchanged at £390.4m (£388.9m previously), reflecting updates to net cash (including the recent $6.1m equity raise) and our near-term estimate adjustments for volume and operating expenses in line with latest management guidance.

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Sep 30

Most Read: Lasertec Corp, I-TAIL , Nickel Asia, Toshiba Corp, Posco International Corporation, Hengan International Group, Cainiao Smart Logistics, Vedanta Resources, Keiyo Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Rebal – Beating a Dead Horse
SET50 Index Rebalance Preview: Two Potential Changes in December
PCOMP Adhoc Index Rebalance: NIKL to Replace UBP in a BIG Move
Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month
Warren Buffett’s Investments in Japanese Trading Firms: Impact on Korean Trading Companies
Hengan/Vinda: Pulp Friction
Cainiao Pre-IPO – The Negatives – Growth Still Driven by China Ops, Pricing Pressure Persists
Morning Views Asia: Vedanta Resources
DCM Takeover for Keiyo (8168) – Pretty Easy Deal
EM by EM #23 Playing the Least Dirty Laundry Vs the Dirtiest

Nikkei 225 Rebal – Beating a Dead Horse

The September 2023 Nikkei 225 Rebalance is tomorrow at the close. This will engender a lot of buying of three names, and a lot of selling of 3 names.
It will also engender a funding trade of nearly ¥460bn.
I am going to beat the dead horse and warn about certain issues with this rebalance.

SET50 Index Rebalance Preview: Two Potential Changes in December

By Brian Freitas

There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB).
With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

PCOMP Adhoc Index Rebalance: NIKL to Replace UBP in a BIG Move

By Brian Freitas

In a surprise development, UnionBank of the Philippines (UBP PM) will be deleted from the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and replaced with Nickel Asia (NIKL PM).
There will be a BIG impact on both stocks as a result of the change with passive trackers need to trade in excess of 30 days ADV.
Expect both stocks to move today and then continue that move for the next few days till the changes are implemented.

Updated TOPIX Selldown and Index Flows This Week – Initial TOPIX Selldown of Toshiba NEXT Month

Last week on 20 Sep I published Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule and Sunday, The Biggish Sep 2023 “Wednesday-Thursday Trade” With Added Monday/Friday Flavour.
They were based on an expectation the TSE would announce the initial selldown for Sep-end as they normally would. Unbeknownst to me, on 22 Sep they announced end-Oct.
The initial TOPIX selldown is 30 Oct, not 28 Sep. This affects expected reverse funding today.

Warren Buffett’s Investments in Japanese Trading Firms: Impact on Korean Trading Companies

By Douglas Kim

We believe that Warren Buffett’s investments in Japanese trading companies have also positively impacted several Korean trading companies in the past three years.
We highlighted seven Korean trading companies three years ago including Posco International and their share prices are up more than 76% on average in this period.
Despite their outstanding share price performance in the past three years, there could be some significant headwinds ahead, as evidenced by the steep inverted yield curve.

Hengan/Vinda: Pulp Friction

By David Blennerhassett

Hengan International Group (1044 HK) and Vinda International (3331 HK) are both market leaders in China’s personal care industry.
Hengan’s operations have greater exposure to sanitary napkins and diapers; whereas tissues account for 83% of Vinda’s revenue. Both companies have been impacted by an increase in wood pulp prices.
Hengan is trading cheap; but Vinda’s bottom line is forecast to return to its glory days. Plus rumours of a possible takeover of Vinda continue to do the rounds.

Cainiao Pre-IPO – The Negatives – Growth Still Driven by China Ops, Pricing Pressure Persists

By Sumeet Singh

Cainiao Smart Logistics, Alibaba Group Holding (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
In this note, we talk about the not-so-positive aspects of the deal.

Morning Views Asia: Vedanta Resources

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Vedanta Resources

DCM Takeover for Keiyo (8168) – Pretty Easy Deal