Smartkarma Daily Briefs

There are 51 – 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: Beach Energy’s tilt for Warrego (WGO AU), Sumitomo’s offer for Sumitomo Precision (6355 JP), and Hainan Rubber’s offer for Halcyon (HACL SP).
Key updates took place for: Perpetual Ltd (PPT AU) / Pendal Group (PDL AU), Nitro Software Ltd (NTO AU), and OZ Minerals Ltd (OZL AU).

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Nov 20

Daily Brief United States: Bitcoin, Home Depot Inc, NVIDIA Corp, Cisco Systems, Lowe’s Companies Inc, Target Corp and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

An Arbitrage Opportunity? Evaluating the GBTC Convergence Trade
Home Depot Inc: Managing Labor Shortages & Other Developments
NVIDIA Corp: New Product Launches & Other Drivers
Cisco Systems Inc: Major Drivers
Lowe’s Companies: Divestment Of Canadian Retail Operations & Other Drivers
Target Corporation: Partnership With Apple & Other Drivers

An Arbitrage Opportunity? Evaluating the GBTC Convergence Trade

By Rose Choy

Recent concerns on Genesis’ solvency arose after the broker/dealer halted redemptions on its lending unit and was reportedly looking to raise $1 billion of loans from investors.
Contagion fears have extended to Genesis’ parent company, DCG, and its wholly owned Grayscale subsidiary, which has a steady fee generating business via its Bitcoin and ETH trust products.
We analyze the potential arbitrage opportunity for the controversial GBTC convergence trade with its 42.7% discount to NAV.

Home Depot Inc: Managing Labor Shortages & Other Developments

Home Depot delivered another good result and surpassed Wall Street expectations in terms of revenues as well as earnings.
The company continued to observe high demand for home renovation projects throughout the third quarter.
Sales growth for both Pro and DIY was good, with Pro surpassing DIY.

NVIDIA Corp: New Product Launches & Other Drivers

NVIDIA Corp delivered a mixed performance as the company’s revenues exceeded the analyst consensus estimate.
However, its earnings were below par given the persistent supply chain interruptions, increased export bans, and macroeconomic challenges.
Leading U.S. cloud providers and a growing number of consumer Internet companies were the main drivers of year-over-year increases for workloads like big language models, recommendation systems, and generative AI.

Cisco Systems Inc: Major Drivers

Cisco had a good start to fiscal 2023 and managed to deliver an all-around beat.
The management continued their shift to greater software and subscription-based recurring revenue, even as they proactively manage through a developing and complicated market environment.
Web-scale orders increased by double digits or more on a trailing 12-month basis for the ninth consecutive quarter.

Lowe’s Companies: Divestment Of Canadian Retail Operations & Other Drivers

Lowe’s delivered an impressive set of results this quarter and managed to surpass Wall Street expectations in terms of revenues as well as earnings.
The company’s Pro business maintained its momentum, resulting from the success of its Pro efforts and the tenacity of the demand for home renovation.
Their ongoing focus on productivity and solid sales growth contributed to improved operating performance which ensured the earnings beat.

Target Corporation: Partnership With Apple & Other Drivers

Target’s third quarter results were a mixed bag as the company’s revenues surpassed Wall Street expectations but it missed out on meeting earnings expectations.
Their top-line continues to profit from increases in guest visitation and unit share gains across all of their main categories.
While their performance in the third quarter compared favorably with the previous one, the period’s tendencies were very different.

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Nov 20

Daily Brief Japan: Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

By Aki Matsumoto

72.9% of companies in prime market complied with the principles of Corporate Governance Code, which defines the concept of ensuring diversity, but no specific targets were set in their disclosures.
If % female directors were raised to 30%, they should be recruited from within the company to executive directors, but very few companies have % female managers exceeding 30%.
Gender discrimination in hiring, gender disparity in access to higher education, issues of leaving/returning to work due to childbirth and child rearing, and gender discrimination in workplace must be resolved.

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Nov 20

Daily Brief China: Haier Smart Home Co Ltd, Zhongsheng Group, Oriental Watch, Meituan, Ganglong China Property Group, Travelsky Technology Ltd H, Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm
Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag
Travelsky (696): Beneficiary from Potential Reopening in China
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home

The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

By Sameer Taneja

Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash. In slightly better market conditions, this could be a 6 HKD stock.

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals

The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation.
China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks.

ECM Weekly (20th Nov 2022) – I-Tail, Growatt, Lygend, SinoHytech, Meituan/Tencent, Olympus, Paytm

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.
On the IPO front, Indian IPOs delivered some decent performance while HK IPOs are likely to pick up as well.
There were a number of placement and blocks this week, after the expiry of lockups in a few Indian names.

Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
These insights may flag those companies where shares have been pledged. Stocks mentioned include Cross Harbour (32 HK), Grand Ming (1271 HK), and Ganglong China Property (6968 HK)

Travelsky (696): Beneficiary from Potential Reopening in China

By Henry Soediarko

Travelsky Technology Ltd H (696 HK) is a system provider for airports in China that benefit from the reopening plan.
The company is not sensitive to the oil price and it has low debt which makes it attractive compared to the airlines.
The stock is trading at a 40% PBR discount to Shanghai International Airport. Historically, the company is trading at a 50% discount to its 5-year high on PBR.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

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

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Nov 20

Daily Brief India: Tata Motors Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)

SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)

As forecast, Tata Motors Ltd (TTMT IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX) in December to replace Dr. Reddy’s Laboratories (DRRD IN).
We estimate passive trackers will need to buy 2.3x ADV (7.2x delivery volume) on Tata Motors Ltd (TTMT) while selling 5x ADV (10.5x delivery volume) on Dr. Reddy’s Laboratories (DRRD).
The HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger should see Adani Enterprises (ADE IN) added to the S&P BSE SENSEX Index (SENSEX INDEX) prior to the June rebalance.

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Nov 20

Most Read: Brilliance China Automotive, Devsisters, OZ Minerals Ltd, FTX Token, Haier Smart Home Co Ltd, Zhongsheng Group, Oriental Watch, Fairfax India Holdings, Meituan and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCI Index Rebalance and Stock Connect: Changes at the Margins
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
FTX Fallout – A Quick Update
HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
Has The US Fed Already Paused Its QT and ‘Pivoted’?
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally
Fairfax India Holdings: Major Value Unlock Via BIAL IPO
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

HSCI Index Rebalance and Stock Connect: Changes at the Margins

We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises

There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.

OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done

BHP Group has made a revised conditional, non-binding and indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$28.25/share, 13% higher than its earlier offer.
The OZ Minerals Board has agreed to give BHP Group Ltd (BHP AU) exclusive due diligence access for 4 weeks and intends to unanimously recommend the revised proposal.
Barring a competing proposal, this is BHP Group‘s best and final price – expect the stock to trade close to A$28/share today.

FTX Fallout – A Quick Update

By Rose Choy

FTX filed for bankruptcy on 11/11 after halting client withdrawals in the previous week, despite SBF (the ex-CEO) tweeting 2 days prior that it had $1 bn of excess cash.
With over 130 affiliates included in the filing and no first day documents in the Delaware Court, the bankruptcy filing seems disorderly. The fallout is far-reaching in the industry.
As we await the top 50 creditor list and more details, we have compiled a hit list of some of the major affected players in the industry.

HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home

The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.

Has The US Fed Already Paused Its QT and ‘Pivoted’?

By Michael J. Howell

US Fed has injected a positive US$167bn into markets so far in Q4, 2022. This partly reverses the US$1.1 trillion they withdrew in year up to September
Based on US Fed projections of a further US$1.5-2 trillion of QT liquidity withdrawals, the S&P500 could skid lower to 3200 (i.e. minus 20% from here)
QT has stalled, showing the operational difficulty of withdrawing cash. This may also reflect underlying concerns about US Treasury market liquidity. A pause/ pivot is coming, but its not now

HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls

There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

By Sameer Taneja

Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash. In slightly better market conditions, this could be a 6 HKD stock.

Fairfax India Holdings: Major Value Unlock Via BIAL IPO

Fairfax India Holdings (FIH/U CN), a holdco with investment activities exclusively in India, is edging closer to IPOing 49%-held Bangalore International Airport (BIAL).
Reportedly FIH is seeking a value upward of C$3.7bn for BIAL, a 45% premium over the current fair value holding.
Currently trading at a P/B of 0.6x compared to its five-year average of 0.8x, and the two-year average pre-Covid of 1.06x.

Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan

Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.

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Nov 20

Daily Brief Thematic (Sector/Industry): GEM Weekly (18 Nov 2022): Chinese Macro and House Prices; Alibaba and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

GEM Weekly (18 Nov 2022): Chinese Macro and House Prices; Alibaba, TSMC, Tencent, Meituan, NetEase
China Healthcare Weekly (Nov.18) – Central Investment Budget, Anesthetic Drugs, Insomniacs Demand

GEM Weekly (18 Nov 2022): Chinese Macro and House Prices; Alibaba, TSMC, Tencent, Meituan, NetEase

By Wium Malan, CFA

The Global Emerging Markets weekly provides a summary of the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
Macro data points:Chinese industrial production, retail sales, and new home prices.
Companies mentioned:Alibaba Group (9988 HK), Taiwan Semiconductor (TSMC) (2330 TT), Tencent (700 HK), Meituan (3690 HK), NetEase (9999 HK), Activision Blizzard (ATVI US)

China Healthcare Weekly (Nov.18) – Central Investment Budget, Anesthetic Drugs, Insomniacs Demand

By Xinyao (Criss) Wang

The government issued a central infrastructure investment budget of RMB26.52 billion in healthcare sector for 2022. Related leading domestic manufacturers would maintain relatively stable growth in the next 2-3 years.
Behind the wave of import substitution of endoscopes, the demand for anesthetic drugs would also increase, which are not affected by VBP. We think this market deserves investors’ attention.
Considering the large number of insomniacs, the resulting demand for treatment makes the insomniacs market show a good growth prospect.

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Nov 20

Daily Brief ESG: Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

Raising % of Female Board Directors Requires Solving a Variety of Challenges in Reality

By Aki Matsumoto

72.9% of companies in prime market complied with the principles of Corporate Governance Code, which defines the concept of ensuring diversity, but no specific targets were set in their disclosures.
If % female directors were raised to 30%, they should be recruited from within the company to executive directors, but very few companies have % female managers exceeding 30%.
Gender discrimination in hiring, gender disparity in access to higher education, issues of leaving/returning to work due to childbirth and child rearing, and gender discrimination in workplace must be resolved.

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Nov 20

Daily Brief Industrials: Halcyon Agri, Monadelphous and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Warrego, Sumitomo Precision, Halcyon Agri, Nitro Software
S&P/ASX Quiddity Final Expectations Dec 22: Mostly Mining Companies, Avoid Short Buildup!

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Warrego, Sumitomo Precision, Halcyon Agri, Nitro Software