In today’s briefing:
- Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin
- MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes
- MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes
- 111’s Opportunistic US$3.66 Bid from the Co-Founders
- Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro
- Korea ETF Market Size Breakdown from a Flow Trading Perspective
- Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport
- Nikon (7731) | Snapping up a 3D Printing World Leader
- Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin
- The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
- The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
- There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes
- Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
- Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
- We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.
MVIS Global Junior Gold Miners Index Rebalance: One Delete & Plenty of Float Changes
- Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
- One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
- Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.
111’s Opportunistic US$3.66 Bid from the Co-Founders
- 111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price.
- For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
- The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively.
Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro
- Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
- In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
- Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.
Korea ETF Market Size Breakdown from a Flow Trading Perspective
- There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
- The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
- Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.
Backtesting Implications: Korea Sector ETFs Rebalancing on the 8th
- Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
- The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
- So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport
- There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
- Key updates took place for Link Administration (LNK AU), Giordano International (709 HK), and Hitachi Transport System (9086 JP).
Nikon (7731) | Snapping up a 3D Printing World Leader
- We believe the market may have missed the important acquisition of 3D printing firm, SLM Solutions
- The 3D printing market is expected to grow rapidly driven by industrial applications that require accurate products and rapid time to market
- We believe the acquisition is a good fit for Nikon and that the realization of synergies could see SLM making a meaningful profit contribution
Merger Arb Mondays (12 Sep) – DTAC/True, Link Admin, Ramsay, Genex, Tyro, EVOC, Giordano, 111
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
- Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).
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