In today’s briefing:
- Taishin (2887 TT)/Shin Kong (2888 TT) Merger: Index Flows in July
- Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- HSTECH Index Rebalance Preview: Universe Expansion Could Lead to One Change
- FWD IPO Trading – Tepid Demand
- Merger Arb Mondays (07 Jul) – Seven & I, Shibaura, Insignia, New World, ENN Energy, HKBN, Fengxiang
- Korea’s Next Policy Trade: Locals’ Screens for Dividend Tax Reform Plays
- NTT DC REIT IPO: Valuation Insights
- HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace J&T Global (1519 HK)
- Last Week In Event SPACE: Shibaura, HKBN, NWD, Yichang HEC
- A/H Premium Tracker (To 4 July 2025): “Beautiful Skew” Continues as SB Buys Wide Spread Hs
Taishin (2887 TT)/Shin Kong (2888 TT) Merger: Index Flows in July
- Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced a Merger of Equals in August 2024 and completion is expected on 24 July.
- Taishin Financial Holding (2887 TT) has underperformed its peers over the last 18 months while Shin Kong Financial Holding (2888 TT) has underperformed its peers following the merger announcement.
- There will be passive flows in the merged entity following the completion of the merger and could help reverse some of Taishin Financial Holding (2887 TT)‘s underperformance.
Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- A new factoid about the merger between the Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) merger of FHCs came to my notice last week.
- There is withholding tax on a portion of the Taishin shares to be received. The last day of trading will be 11 July 2025. Expect repercussions.
- This week will see multiple index events, combined with the risk arb events, and the WHT may affect how passive investors trade the events.
HSTECH Index Rebalance Preview: Universe Expansion Could Lead to One Change
- The review period for the September rebalance of the Hang Seng TECH Index ended on 30 June, the changes will be announced on 22 August and implemented on 5 September.
- No constituent changes will result in a one-way turnover of 4.1% and that will mean a round-trip trade of HK$15.2bn (US$1.94bn).
- An expansion of the index universe could lead to one constituent change and that increases the one-way turnover to 6.2% and the round-trip trade to HK$23.1bn (US$2.94bn).
FWD IPO Trading – Tepid Demand
- FWD Group Holdings (1828 HK), a pan-Asian life insurer founded by Richard Li, raised around US$442m in its HK IPO.
- FWD is a pan-Asia life insurer operating in ten markets including Hong Kong (and Macau), Thailand (and Cambodia), Japan, the Philippines, Indonesia, Singapore, Vietnam and Malaysia.
- We looked at the company’s past performance and valuations in our previous notes. In this note we talk about the trading dynamics.
Merger Arb Mondays (07 Jul) – Seven & I, Shibaura, Insignia, New World, ENN Energy, HKBN, Fengxiang
- I 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:Mayne Pharma (MYX AU), Yichang HEC Changjiang Pharma (1558 HK), Insignia Financial (IFL AU), ENN Energy (2688 HK), Seven & I Holdings (3382 JP), Santos Ltd (STO AU).
- Lowest spreads: Bright Smart Securities And (1428 HK), Hainan Meilan International Airport (357 HK), New World Resources (NWC AU), Humm Group (HUM AU), Avjennings Ltd (AVJ AU).
Korea’s Next Policy Trade: Locals’ Screens for Dividend Tax Reform Plays
- With the governance trade fading, local desks are rotating into dividend tax reform—bipartisan tailwinds and rising political chatter are driving early positioning ahead of potential rerating.
- Local desks are screening for names with 35%+ payout and 30%+ individual ownership, key thresholds tied to the ruling party’s dividend tax reform bill gaining traction in policy circles.
- The real trade is in names with individual top holders—direct beneficiaries of the tax reform—most exposed to theme flows and likely to lead on dividend hikes if the bill passes.
NTT DC REIT IPO: Valuation Insights
- NTT DC REIT (NTTDCR SP) is the exclusive S-REIT vehicle sponsored by NTT Group. It has launched an SGX IPO to raise proceeds up to US$864 million.
- I previously discussed the listing in NTT DC REIT IPO: The Investment Case.
- In this note, I discuss valuation. The valuation analysis suggests that the IPO price is attractive in comparison to peers’ multiples and yields.
HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace J&T Global (1519 HK)
- The review period for the September rebalance of the HSCEI INDEX ended on 30 June, the results will be announced on 22 August and will be implemented on 5 September.
- Pop Mart International Group L (9992 HK) could be added to the index while J&T Global Express (1519 HK) could be deleted from the index.
- There is a possibility of Pop Mart International Group L (9992 HK) being added to the Hang Seng Index (HSI INDEX) as well.
Last Week In Event SPACE: Shibaura, HKBN, NWD, Yichang HEC
- Given the METI extension on FEFTA review on Shibaura (6957 JP), risks are slightly higher. <¥5,900 was a good buy on an incremental basis. ¥5,970 is OK but not spectacular.
- As expected (at least by me) – I Squared has withdrawn its Offer for HKBN Ltd (1310 HK).
- Re: New World Development (17 HK), this “rescue package” announcement – ~HK$88.2bn – should come as no surprise, as the alternative situation (liquidation/bankruptcy) and the ensuing optics were not great.
A/H Premium Tracker (To 4 July 2025): “Beautiful Skew” Continues as SB Buys Wide Spread Hs
- AH premia flat among liquid names but “beautiful skew” of wide premia converging more than narrow premia continues bigly. It has paid well to be long wide H discounts.
- Last week I said, “It has paid to be long the H on those H/A pairs with the biggest H discounts. I would continue to ride that trend.” Ride on.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers. Technical issue delayed this week’s Monitor.
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