Smartkarma Daily Briefs

The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.

JAPAN BUYBACKS: A Very Big Week

This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts).
The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%.
My prediction that this will be a record year for stock buybacks still stands.

SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer

By Arun George

SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.

A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again

By Douglas Kim

In this insight, we discuss two stocks in Korea, Dong Yang P&F and Shindaeyang Paper, whose share prices declined sharply on 12 May.
It appears that the main culprit behind their collapse in share price appears to be unwinding of the excessive leverage (especially CFD derivatives trading).
Post the sharp decline in their share price for DYPNF and Shindeyang Paper on 12 May, further downside is likely on these stocks in the coming weeks.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?

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

Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔

The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.

HSCEI Index Rebalance: China Shenhua (1088 HK) Replaces Country Garden (2007 HK); Div Impact

As expected, China Shenhua Energy Co H (1088 HK) replaces Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close 2 June.
Using prices from the close on 12 May, estimated one-way turnover is 2.1% leading to a one-way trade of HK$1.3bn (US$170m).
The change will lead to an increase in the fair value of the HSCEI 2023 Dividend Futures. We’d be sellers on a move higher towards 240 DIPS.

Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows

Mitsubishi Corp (8058 JP)‘s ¥300bn buyback means 8+% of ADV every day from here to end-Dec 2023. Buy MitCorp vs trading houses with less of a buyback impact.
Rumours abound of an MSCI up weight for Jardine Matheson Holdings (JM SP). It wasn’t a clear-cut situation. And nothing came of it.
There are concerns about the stability of funding for JIP’s offer for Toshiba Corp (6502 JP) in the event that Kioxia (6600 JP)’s results collapse further.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Allkem/Livent, Yitai Coal, ARTERIA, St Barbara, AAG Energy

There are 39 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals were discussed on Smartkarma this past week: the Allkem (AKE AU)/Livent (LTHM US)‘s merger; Yitai Coal (3948 HK)‘s H-share buyback; Networks Corp (4423 JP)‘s tender offer.
Key updates took place forSt Barbara Ltd (SBM AU), AAG Energy Holdings (2686 HK), and Toshiba Corp (6502 JP).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Macro: Range Bound – Portfolio Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Range Bound – Portfolio Changes, China’s Low Pulse, Why Earnings Will Go Down, and More

Range Bound – Portfolio Changes, China’s Low Pulse, Why Earnings Will Go Down, and More

By Jeroen Blokland

China’s trade, credit growth, and inflation numbers were all uninspiring. Not offering the counterweight to slowing growth in the rest of the world that many investors are hoping for.
NASDAQ: the percentage of stocks trading above their 200-day moving average is a meager 30%.
Global earnings numbers will drop. China’s producer price deflation intensified in April, with the PPI falling 3.6% from a year ago. Historically, there is a close relationship between global earnings-per-share.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Equity Bottom-Up: China Healthcare Weekly (May.12) – Three Globalization Strategies and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

China Healthcare Weekly (May.12) – Three Globalization Strategies, GLP-1/Weight Loss Drug, Bio-Heart

China Healthcare Weekly (May.12) – Three Globalization Strategies, GLP-1/Weight Loss Drug, Bio-Heart

By Xinyao (Criss) Wang

There are three main ways for Chinese pharmaceutical companies to enter global markets, but the results are completely different. Investors are advised to make cautious judgments based on different cases.
Speed is a crucial factor in the competition for drug development, but there’re precedents in history that late-comers are still able to turn things around, such as GLP-1/weight loss drugs.
We remain conservative about the future commercialization performance of Bio-Heart’s BRS and Iberis 2nd. However, the product launch is a catalyst for share price, which provides a good short-term trade opportunity.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief TMT/Internet: Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- China Cooling?

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

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Consumer: JD Health, Nitori Holdings, Alibaba Group, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

HSI Index Rebalance: Yippee! Finally at 80!
Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔
ECM Weekly (14th May 2023) – Mankind, Nexus REIT, SCG Chemicals, Guoquan, Shiyue, Medanta, Bikaji
Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation

HSI Index Rebalance: Yippee! Finally at 80!

The Hang Seng index committee has added four stocks to take the number of Hong Kong Hang Seng Index (HSI INDEX) constituents to 80. A year late, but we’re there!
The next leg of the increase in the number of index constituents will take us up to 100. There is no timeline, so this should take a couple of years.
Estimated one-way turnover is 2.93% leading to a one-way trade of HK$5.7bn (US$730m). All adds will have over 2x ADV to buy from passive trackers.

Nikkei 225 Index Consultation Makes Things Weirder, but Still a 0️⃣🍔

The Nikkei Index team has been quite conscious of market impact since the April 2000 debacle. For a few years after, things were quieter. In 2005, Fast Retailing spurred introspection.
Float was low and became lower. Selection behaviour changed. Now there is a new consultation where “technical listings” would stay in, and phased “stepwise” inclusion would reduce inclusion impact.
The proposal increases subjectivity, reduces the attractiveness of bets, but otherwise increases the likelihood they will follow the other selection rules. It STILL does not solve the high weight problem.

ECM Weekly (14th May 2023) – Mankind, Nexus REIT, SCG Chemicals, Guoquan, Shiyue, Medanta, Bikaji

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
Mankind Pharma delivered some joy to the Indian equity markets over the past week.
There were no major placements over the past week but there were some lockup expiries.

Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation

By Aki Matsumoto

Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.
Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.
TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Financials: SBI Shinsei Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer

SBI Shinsei Bank (8303 JP): SBI’s Contentious JPY2,800 Tender Offer

By Arun George

SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Industrials: Mitsubishi Corp, Dong Yang P&F and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

JAPAN BUYBACKS: A Very Big Week
A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again
Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows

JAPAN BUYBACKS: A Very Big Week

This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts).
The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%.
My prediction that this will be a record year for stock buybacks still stands.

A Crash in 2 More Korean Stocks Related to CFD Derivatives: Margin Calls Again

By Douglas Kim

In this insight, we discuss two stocks in Korea, Dong Yang P&F and Shindaeyang Paper, whose share prices declined sharply on 12 May.
It appears that the main culprit behind their collapse in share price appears to be unwinding of the excessive leverage (especially CFD derivatives trading).
Post the sharp decline in their share price for DYPNF and Shindeyang Paper on 12 May, further downside is likely on these stocks in the coming weeks.

Last Week in Event SPACE: MitCorp, Jardine Matheson, Toshiba, Japanese Foreign Inflows

Mitsubishi Corp (8058 JP)‘s ¥300bn buyback means 8+% of ADV every day from here to end-Dec 2023. Buy MitCorp vs trading houses with less of a buyback impact.
Rumours abound of an MSCI up weight for Jardine Matheson Holdings (JM SP). It wasn’t a clear-cut situation. And nothing came of it.
There are concerns about the stability of funding for JIP’s offer for Toshiba Corp (6502 JP) in the event that Kioxia (6600 JP)’s results collapse further.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 14

Daily Brief Energy/Materials: China Shenhua Energy Co H, Allkem Ltd and more

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

In today’s briefing:

HSCEI Index Rebalance: China Shenhua (1088 HK) Replaces Country Garden (2007 HK); Div Impact
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Allkem/Livent, Yitai Coal, ARTERIA, St Barbara, AAG Energy

HSCEI Index Rebalance: China Shenhua (1088 HK) Replaces Country Garden (2007 HK); Div Impact

As expected, China Shenhua Energy Co H (1088 HK) replaces Country Garden Holdings Co (2007 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close 2 June.
Using prices from the close on 12 May, estimated one-way turnover is 2.1% leading to a one-way trade of HK$1.3bn (US$170m).
The change will lead to an increase in the fair value of the HSCEI 2023 Dividend Futures. We’d be sellers on a move higher towards 240 DIPS.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Allkem/Livent, Yitai Coal, ARTERIA, St Barbara, AAG Energy