In today’s briefing:
- Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?
- Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD
- Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- SK Telecom (017670 KS): Foreign Room & Passive Inflows
- Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture
- SET50 Index Rebalance Preview: Two Potential Changes in December
- Costa Mulls Paine Schwartz’s Lower Bid
- EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)
- EQD | VIX Index WEEKLY Suggests Upcoming Increase in Volatility
Itochu Buying Descente (8114) – ANTA Selldown Offset Or Creeping Takeover?
- Four years after Itochu got to 40.0% of votes in Descente (8114) in a hostile Tender Offer, Descente partner ANTA, which supported Itochu at the time started selling its stake.
- A few months later, Itochu started buying shares of Descente in the market. As of 7 Sep, Itochu had bought Descente shares 81 days straight (9.7% of ADV).
- This begs the question: Is Itochu ensuring they maintain voting control as ANTA sells? Or are they buying to lift their stake prior to another bid?
Quiddity A/H Premium Weekly (15-Sep): Utilities, Insurance, China Mobile, BYD
- The Brand-Spanking New (6 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
- We used to do it and decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 41 Trade Recommendations.
- The last five weeks (since the instantiation of the new Monitor and Portfolio 6 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%.
Wharf Holdings (4 HK): Improved Liquidity & Passive Buying
- Improved liquidity and a higher stock price could see passive trackers buying Wharf Holdings (4 HK) within the next couple of months.
- Wharf Holdings (4 HK) trades cheaper than the average and median of its peers on EV/Sales, EV/EBITDA and price to book value.
- Wharf Holdings (4 HK) has already started to move higher and there could be a bigger move in the stock over the next month.
SK Telecom (017670 KS): Foreign Room & Passive Inflows
- Foreign room in SK Telecom (017670 KS) increased above 15% in July and is currently just above 16%. Foreign investors have resumed buying again and foreign room is moving lower.
- Foreign room staying above 15% for another month could result in passive buying at the end of November. SK Telecom (017670 KS) has outperformed peers over the last few weeks.
- Foreign buying over the next month could lead to foreign room dropping below 15% in which case there will be no passive inflows. But the stock could be higher.
Merger Arb Mondays (18 Sep) – Eoflow, Costa, Liontown, Pact, T&K Toka, IMAX, Poly Culture
- 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 – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Costa Group Holdings (CGC AU), Orecorp Ltd (ORR AU), Mason Group Holdings (273 HK), JSR.
- Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Pacific Current (PAC AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP).
SET50 Index Rebalance Preview: Two Potential Changes in December
- 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.
Costa Mulls Paine Schwartz’s Lower Bid
- Back on the 4 July, Paine Schwartz Partners (PSP) made an A$3.50/share NBIO for Costa Group (CGC AU) by way of a Scheme. PSP held 14.84% at the time.
- The due diligence period came and went, or so it appeared, but Costa said it remained ongoing. Rumours circulated that PSP had gone cold. 1H23 results were also delayed.
- Costa has now announced this morning that PSP has returned with a $3.20/share Offer – best and final – reduced for any permitted dividend of up to A$0.04, if declared.
EQD | KOSPI 200 Index WEEKLY OVERBOUGHT (Or Break-Out Rally?)
- The KOSPI 200 INDEX WEEKLY did rise last week and is approaching OVERBOUGHT territory based on the current short-term trend pattern (Q3 resistance is at 346).
- The current pattern is bearish, but if the market gains momentum and rallies for 2 more weeks, it could reach 357 during the 3rd week up (not earlier).
- The alternative scenario, a better fit for this bearish pattern, is that the index starts to pull back this week, or remains weak this week and falls the next.
EQD | VIX Index WEEKLY Suggests Upcoming Increase in Volatility
- The VIX INDEX is currently OVERSOLD from a time perspective, but not yet from a price perspective: if it falls <13, there is a high probability it will reverse up.
- A spike in the VIX will correspond to a drawdown in equities, globally. The MRM model indicates a 1-2 weeks duration for the event, price targets between 16 and 18.
- After the spike, the VIX could start to fall again, so this upcoming volatility spike should be a brief, short-lived event.
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