Smartkarma Daily Briefs

• As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.  
• There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up. 
• There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got .

For our next Corporate Webinar, we are glad to welcome Kina Bank’s executive management to Smartkarma. In the upcoming webinar, they will share a short company presentation after which, they will engage in a fireside chat with Smartkarma Insight Provider, Daniel Tabbush. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 15 October 2024, 17:00 SGT.

About Kina Bank

Kina Securities Limited (Kina Bank) was established in 1985 and is Papua New Guinea’s
second largest bank and financial services company. Kina Bank offers customers end-to-end financial solutions – from savings accounts to business loans, investments to mortgages, financial advice and investment management. It is also the largest wealth management business in PNG, with more than PGK11 billion of funds under management. As the country’s largest fund administrator, they administer accounts on behalf of more than 938,000 beneficiaries whose funds total almost PGK19 billion. Kina Bank is also the leading stockbroking company in PNG and is listed on the Australian Securities Exchange (ASX:KSL) and the PNG’s Stock Exchange (PNGX:KSL). 

• If NPS and passive funds each tender half, it could hit 24%, pushing investors to consider both sides. The market’s eyeing a ratio of about MBK 3 to Choi 7.
• This tight vote could drag out the event longer than expected, and MBK might scoop up more shares if they miss their minimum target.
• MBK will likely go for open market buys against Korea Zinc’s buyback. Consider tendering to MBK Monday and spread trading futures, or push Korea Zinc to raise their buyback offer.

• With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December. 
• There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
• Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.

• Korea Zinc raised the share buyback and tender offer price from 830,000 won to 890,000 won. Korea Zinc’s share price closed up by only 0.6% today to 794,000 won. 
• As a result, the amount of capital involved in this share buyback and tender offer would increase from 2.7 trillion won to 3.2 trillion won.
• Despite higher share buyback/tender offer of Korea Zinc by Choi family, we believe that this fight for the control of Korea Zinc is increasingly in favor of MBK/Jang family.

• Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
• 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
• The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.

• We 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 Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

• Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
• The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation. 
• KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.

• China is not in a 2015 boom/bust period with households under-invested in the stock market.
• It is now time for China to begin fiscal stimulus as discussed at the MOF meeting over the weekend.  Central government will relieve local governments’ hidden debt through debt swaps.
• PBOC and MOF will closely watch interest rates and government yields as they roll out fiscal measures.  CNY levels will also be considered in future policy decisions.

• The HS HK-Listed Biotech Index (“Hang Seng Biotech Index”) represents the 50 largest biotech companies listed in Hong Kong (HKEX).
• In this insight, we take a look at the final rankings of potential ADDs/DELs and our capping flow expectations for the December 2024 index rebal event.
• We expect two changes for the HSHKBIO index in December 2024.