Smartkarma Daily Briefs

On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.
Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration.

What Is NPS Buying & Selling?

In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.

Futu Holdings: Cross-Border Broking In Crosshairs

Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction.
According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.

Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.

Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution

Agri-Food play Japfa Ltd (JAP SP) recently distributed in-specie its 62.5% stake in AustAsia Group (2425 HK).
Japfa continues to hold a 55.4% stake in Japfa Comfeed Indonesia (JPFA IJ), together with unlisted ops focused on animal proteins in Vietnam, India, Bangladesh, and Myanmar.
Japfa is estimated to be trading at around a 41% discount to NAV and ~4x EV/EBITDA.

HSI Index Rebalance Preview: Better Late Than Never?

There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

Warrego (WGO AU): Has MinRes Gatecrashed the Party?

The AFR reports that Mineral Resources (MIN AU) was the buyer of 15% of outstanding shares at A$0.35, 25.0% above Hancock and 4.5% above Strike Energy (STX AU)’s offer.
MinRes’ move is motivated by the desire to have a say in the recent Perth Basin consolidation. It recently lobbed an all-scrip takeover offer for Norwest Energy NL (NWE AU).
Warrego Energy (WGO AU)‘s three largest shareholders are now the three suitors. The emergence of MinRes (if confirmed) suggests that the takeover battle is far from done.

Appreciate Group/Paypoint: There May Be Higher Rewards in Vouchers

By Jesus Rodriguez Aguilar

PayPoint has launched an agreed cash and shares offer for closest rival Appreciate. On completion, PayPoint shareholders will hold c. 95% and Appreciate shareholders c. 5% of the merged firm.
The offer price doesn’t seem generous (my fair value estimate is 53p vs. 43.45p package value). Event-driven investor Samson Rock is the top shareholder with a 19.7% stake.
Gross spread is 5.9% (including dividend). I believe there are grounds for an offer sweetening, and although both stocks are illiquid, the risk/reward looks appealing, in my view.

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Jan 05

Daily Brief Energy/Materials: Warrego Energy, S&P 500, Air Products & Chemicals, Inc, Sibanye-Stillwater and more

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

In today’s briefing:

Warrego (WGO AU): Has MinRes Gatecrashed the Party?
More Downside to Lead to Buying Opportunity?; Buy Ideas in Consumer Staples, EU Banks, Gold Miners
Air Products and Chemicals Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
Air Products and Chemicals Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Sibanye: Production To Ramp Up, Valuation Remains A Concern

Warrego (WGO AU): Has MinRes Gatecrashed the Party?

The AFR reports that Mineral Resources (MIN AU) was the buyer of 15% of outstanding shares at A$0.35, 25.0% above Hancock and 4.5% above Strike Energy (STX AU)’s offer.
MinRes’ move is motivated by the desire to have a say in the recent Perth Basin consolidation. It recently lobbed an all-scrip takeover offer for Norwest Energy NL (NWE AU).
Warrego Energy (WGO AU)‘s three largest shareholders are now the three suitors. The emergence of MinRes (if confirmed) suggests that the takeover battle is far from done.

More Downside to Lead to Buying Opportunity?; Buy Ideas in Consumer Staples, EU Banks, Gold Miners

By Joe Jasper

Market dynamics remain largely bearish/unchanged, and we are sticking with our call that breaks of supports on SPX, IWM,QQQ are likely to result in a test of the 2022 lows.
The Nasdaq 100 (QQQ) is already testing its 2022 lows, but the S&P 500 and Russell 2000 (IWM) are still 6-9% above their 2022 lows.
Depending on how the market responds to its 2022 lows, that could be a better area to increase risk.

Air Products and Chemicals Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Air Products and Chemicals is a behemoth in the industrial gases domain and is the third-largest industrial gas supplier in the world.
The company has had a decent financial performance off-late as all its regions have seen a gradual improvement in price and volume.
These initiatives support the company’s energy transition plan and will continue to be a significant source of revenue for it in the future.

Air Products and Chemicals Inc.: Initiation of Coverage – Business Strategy & Key Drivers

By Pearl Gray Equity and Research

This is our first report on industrial gases major, Air Products and Chemicals.
The company delivered an impressive result in the last quarter, surpassing Wall Street expectations in terms of revenues as well as earnings per share.
We initiate coverage on the stock of Air Products and Chemicals, Inc. with a ‘Hold’ rating.

Sibanye: Production To Ramp Up, Valuation Remains A Concern

The firm’s 7.75% dividend yield could escalate should production ramp up.
However, a monthly Var5% of 24.73% could overshadow any income-based prospects.
Sibanye’s operations to recover sharply in 2023 with its U.S. PGM back online and South African wage deals being settled.

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Jan 05

Daily Brief Industrials: Hyundai Mipo Dockyard, Halcyon Agri and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

What Is NPS Buying & Selling?
Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

What Is NPS Buying & Selling?

In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.

Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.

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Jan 05

Daily Brief TMT/Internet: Pinduoduo and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Raise 2023 Forecasts Due to High Take Rate

Raise 2023 Forecasts Due to High Take Rate

By Shawn Yang

There has been debate: 1) why PDD’s take rate can be higher than BABA, 2) how to justify PDD’s long term margin, 3) will PDD be able to beat cons.
We suggest that the key driver of PDD’s outperformance in recent quarters has been the weak macro environment.
We raise our 2023 forecasts of total revenue and non-GAAP net income by 4% and 19%, more than consensus by 8% and 7% respectively.

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Jan 05

Daily Brief Utilities: China Power International and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

China Power International (2380 HK): Stepping up Transformation Strategy

China Power International (2380 HK): Stepping up Transformation Strategy

By Osbert Tang, CFA

The three recent transactions of China Power International (2380 HK) provide solid evidences that it is accelerating its progress in transformation into a giant green energy play.
Partial disposal of coal-fired assets will generate significant disposal gain and reduce exposure to loss-making business. Introduction of CCB Investment as green power shareholder will improve cash flow.
Acquisition of 579MW of wind power capacity will raise proportion of clean energy in its total installed capacity by 0.9pp. This also showcases strong support from its parent SPIC.

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Jan 05

Daily Brief Consumer: Oriental Watch, China MeiDong Auto, Japfa Ltd, Li Auto, Minor International, Tokyo Stock Exchange Tokyo Price Index Topix, Hisense Home Appliances Group Co., Ltd. H, Shinsegae and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield
China MeiDong Auto Placement – Strong Track Record and Past Deals Have Held Up
Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution
HSI Index Rebalance Preview: Better Late Than Never?
Minor International (MINT TB) – More Than Just Revenge Tourism
How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section
Hisense Announced the Long-Awaited Equity Incentive Scheme
Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Oriental Watch: Ex-Dividend, 7x PE + 50% of Mkt Cap in Cash + >15% Dividend Yield

By Sameer Taneja

Oriental Watch (398 HK) went ex-dividend on the 30th of December, post which there was a slight correction, and now the stock is 7x PE FY23 (~15% dividend yield).
There is a substantial margin of safety with assets worth 4+ HKD/share ( 2 HKD/share of net cash + 1 HKD/share of inventory and >1 HKD of real estate).
Trends point to a year of decent profitability as SSSG continues remain stable in China in November/December 2022. HK sales trended lower due to outbound travel.

China MeiDong Auto Placement – Strong Track Record and Past Deals Have Held Up

By Clarence Chu

China MeiDong Auto (1268 HK) is looking to raise US$100m via a top-up placement.
Proceeds from the offering will be geared towards potential M&A and general working capital purposes.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

Japfa Ltd: Trading Cheap After AustAsia In-Specie Distribution

Agri-Food play Japfa Ltd (JAP SP) recently distributed in-specie its 62.5% stake in AustAsia Group (2425 HK).
Japfa continues to hold a 55.4% stake in Japfa Comfeed Indonesia (JPFA IJ), together with unlisted ops focused on animal proteins in Vietnam, India, Bangladesh, and Myanmar.
Japfa is estimated to be trading at around a 41% discount to NAV and ~4x EV/EBITDA.

HSI Index Rebalance Preview: Better Late Than Never?

There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

Minor International (MINT TB) – More Than Just Revenge Tourism

By Angus Mackintosh

Minor International (MINT TB) represents a unique combination of exposure to a diverse set of hotel and restaurant brands both in Thailand and globally making it a true recovery proxy.
The company’s hotel portfolio is well-diversified geographically and across different segments giving it exposure to both tourism in Thailand and globally and to the recovery in business travel.
Minor Food has also seen a strong recovery as revenge dining draws consumers to dine out. Overall valuations look attractive given expected growth rates over the next two years.

How Far Has Corporate Governance Progressed in 2021? (1) ~ Key Actions Section

By Aki Matsumoto

Shareholder returns, including dividend policy and treasury stock retirement/buyback and growth policies improved slightly. Still, cash allocations are weak in both shareholder returns and growth, so cash is piling up.
The policy shareholdings is decreasing year by year, but the holdings is so large that they still account for a large % of total assets, so cash is piling up.
Companies with ROEs above 12% achieved even higher returns, and Tobin’s Q1.2-1.4 companies (with higher valuations than average) increased slightly. Investors may have valued companies that exhibit higher returns.

Hisense Announced the Long-Awaited Equity Incentive Scheme

By Xin Yu, CFA

Hisense announced the long-awaited equity incentive scheme on Jan 2.
For 100% vetting, Hisense net profit needs to grow by 62%/86%/109% from 2023 to 2025, compared with its 2021 net profit level.
We have seen Hisense Home Appliance (Hisense HA) transforming itself into a more market-oriented company.

Korea Loan Guarantees: A Pair Trade Between Shinsegae & Hyundai Dept Store

Amid sharply rising interest rates and greater economic uncertainty, the subject of loan guarantees to affiliates among Korean companies has become more important.
In this insight, we discuss a pair trade between Shinsegae (long) and Hyundai Dept Store Co (short).
Four major reasons why we prefer Shinsegae vs Hyundai Dept Store include negative impact from equity spin-off, increasing leverage (including loan guarantees), valuations, and economies of scale.

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Jan 05

Daily Brief Financials: SBI Shinsei Bank, Futu Holdings Ltd, PICC Property & Casualty H, Appreciate Group, Banco Santander Brasil SA, Times China, Sprott Focus Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
Futu Holdings: Cross-Border Broking In Crosshairs
APAC Insurers Series (#1): A Hidden Gem in This Bear Market?
Appreciate Group/Paypoint: There May Be Higher Rewards in Vouchers
November Brazil Bank Data in Charts – Household and Corporate NPL Metrics Broadly Worsening
Morning Views Asia: Times China
Sprott Focus Trust: An Incredibly Well-Managed Cyclical Fund

2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines

By Travis Lundy

SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.
I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation.
What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff.

Futu Holdings: Cross-Border Broking In Crosshairs

By Pearl Gray Equity and Research

Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction.
According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.

APAC Insurers Series (#1): A Hidden Gem in This Bear Market?

By Alec Tseung

The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds.
Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

Appreciate Group/Paypoint: There May Be Higher Rewards in Vouchers

By Jesus Rodriguez Aguilar

PayPoint has launched an agreed cash and shares offer for closest rival Appreciate. On completion, PayPoint shareholders will hold c. 95% and Appreciate shareholders c. 5% of the merged firm.
The offer price doesn’t seem generous (my fair value estimate is 53p vs. 43.45p package value). Event-driven investor Samson Rock is the top shareholder with a 19.7% stake.
Gross spread is 5.9% (including dividend). I believe there are grounds for an offer sweetening, and although both stocks are illiquid, the risk/reward looks appealing, in my view.

November Brazil Bank Data in Charts – Household and Corporate NPL Metrics Broadly Worsening

By Victor Galliano

In November most consumer NPL ratio categories, except credit cards, worsened with corporate delinquencies, especially in micro and SME, also deteriorating; the system NPL ratio is approaching its pre-pandemic high
System loan growth continues to decelerate; +14.7% for the twelve months to November is a further reduction from the October rate (+15.7%), due to slower corporate and consumer loan growth
New system credit spreads rose further MoM, and we expect average loan spreads to remain elevated into 2023; we favour Banco do Brasil, and are cautious on Santander Brasil

Morning Views Asia: Times China

By Charles Macgregor

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.

Times China

Sprott Focus Trust: An Incredibly Well-Managed Cyclical Fund

The Sprott Focus Trust exhibits outstanding risk attribution metrics.
The fund’s constituents typically host high earnings yields, and ROIC ratios, suggesting that a value trap is unlikely.
This is a high-conviction closed-end fund with little emphasis on sector rotation. Thus, beware of recession risk.

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Jan 05

Daily Brief Industrials: Hyundai Mipo Dockyard, Halcyon Agri and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

What Is NPS Buying & Selling?
Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

What Is NPS Buying & Selling?

In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.

Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.

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

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

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

Jan 05

Daily Brief Health Care: Acotec Scientific Holdings, Jinxin Fertility Co Ltd, Zoetis Inc, Dexcom Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering
Jinxin Fertility Group Placement – Weak Track Record And Recent Deals Have Performed Poorly
Zoetis Inc.: Initiation of Coverage – The Jurox Acquisition & Key Drivers
DexCom Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Zoetis Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering

On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.
Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration.

Jinxin Fertility Group Placement – Weak Track Record And Recent Deals Have Performed Poorly

By Ethan Aw

Jinxin Fertility Co Ltd (1951 HK) is looking to raise US$122m via a top-up placement.
Proceeds from the offering will be used to repay its outstanding convertible bond and general corporate purposes.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

Zoetis Inc.: Initiation of Coverage – The Jurox Acquisition & Key Drivers

This is our first report on animal health pharma major, Zoetis.
Despite the world’s volatile external environment and economic unpredictability, Zoetis has performed well from a financial standpoint given to its varied durable portfolio and global reach.
It delivered a 5% operating revenue increase in Q3, which reflected a decent yet below-par performance across its range of innovation-driven companion animal products, particularly in its overseas markets.

DexCom Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on medical device major, DexCom.
Although DexCom anticipates that these primary care connections will be crucial to its long-term consumer goals, they also enable the company to serve the nation’s extensive insulin users.
In addition, DexCom carried out its previously disclosed accelerated share repurchase program, buying roughly 550 million outstanding shares.

Zoetis Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Zoetis Inc is a well-known animal health pharma company.
Besides, their pet care products are increasingly helping to fuel growth in some of their biggest markets, like China and Australia.
The management also expects a high global demand for novel goods, particularly in companion animal parasiticides, dermatology, vaccines, diagnostics, and monoclonal antibodies for pain.

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Jan 05

Most Read: Brilliance China Automotive, SBI Shinsei Bank, Jinko Solar, Adani Enterprises, Acotec Scientific Holdings, Hyundai Mipo Dockyard, Futu Holdings Ltd, Halcyon Agri, Li Auto, Warrego Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines
CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering
What Is NPS Buying & Selling?
Futu Holdings: Cross-Border Broking In Crosshairs
Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent
HSI Index Rebalance Preview: Better Late Than Never?
Warrego (WGO AU): Has MinRes Gatecrashed the Party?

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only.
There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

2023 High Conviction – SBI Shinsei Bank (8303 JP) – Still Reading Between the Lines

By Travis Lundy

SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.
I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation.
What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff.

CSI300 Index Rebalance Preview: Early Look at Potential Changes in June

Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.

SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro

A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN).
Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.

Acotec (6669 HK): Boston Scientific’s Partial Offer Open For Tendering

On the 12 December, Acotec Scientific (6669 HK) announced a HK$20/share partial Offer from Boston Scientific, a 31.6% premium to last close, but below August 2021’s IPO price of HK$23.80/share.
Boston Scientific will acquire at least 156.7mn shares (50.01%), up to 203.7mn (65%). Irrevocables total 60.14%, comprising shares held by CA Medtech/CPE Investment, Jing Li (chairman, CEO), and Bliss Way.
The Composite Doc is now out and the Offer is open for acceptances. This Offer is done. The key question is the final proration.

What Is NPS Buying & Selling?

In this insight, we discuss a list of 60 stocks in Korea where NPS recently added or reduced 1% or more stake (27 adds and 33 reduce).
Among the stocks NPS increased its stake, many of them are clear beneficiaries of the end of zero COVID policies in China including Hotel Shilla, Amorepacific Corp, and GKL.
Among the top market cap stocks where the NPS decreased its stake by 1% or more, they include Lg Innotek, Hyundai E&C, Hyundai Mipo, and Posco International.

Futu Holdings: Cross-Border Broking In Crosshairs

Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction.
According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.

Halcyon Agri (HACL SP) MGO: SPA Effective, Next Is Satisfaction of Conditions Precedent

The SPA for China Hainan Rubber Industry (601118 CH) to acquire 36.00% of Halcyon Agri (HACL SP)’s outstanding shares from Sinochem International Corporation A (600500 CH) at US$0.315 is effective.
Conditions precedent which relate to Chinese regulatory approvals should be satisfied shortly. Completion will trigger an MGO at US$0.315 or S$0.423 (US$/S$ rate fixed on the closing date).
The MGO has a 50%+ minimum acceptance condition which requires around 40% of minorities acceptance rate. We think that this is achievable as the offer is attractive.

HSI Index Rebalance Preview: Better Late Than Never?

There are currently 76 index constituents and we can (maybe? finally! hopefully 🤞) get to 80 members in March before commencing the next leg up to 100 index constituents.
We list 10 potential inclusions to the index in March. Adding all 10 stocks will lead to over 6% one-way turnover, so there will be fewer inclusions.
All stocks will have over 1 day of ADV to buy from passive trackers. Some stocks have short interest of over 7% of float.

Warrego (WGO AU): Has MinRes Gatecrashed the Party?