Smartkarma Daily Briefs

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index and we estimate passive buying of 0.3-0.65x ADV in the adds and selling of between 0.4-0.6x ADV in the deletes.
On average, the adds to the index have outperformed the deletes over the last 5 weeks with the adds moving higher and the deletes trending lows.

Merger Arb Mondays (02 Dec) – Shinko, WealthNavi, AVJennings, SG Fleet, Latin Res, Get Nice, GA Pack

By Arun George

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: WealthNavi (7342 JP), Shanghai Henlius Biotech (2696 HK), Shinko Electric Industries (6967 JP), Get Nice Financial Group Ltd (1469 HK), Arcadium Lithium (LTM AU), Canvest.
Lowest spreads: Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Elematec Corp (2715 JP), I-PEX (6640 JP).

CES China Semiconductor Chips Index Rebalance: Multiple Index Inclusions for the Adds

CSI announced the changes for the December rebalance after market close on 29 November and the changes will be effective after the close of trading on 13 December.
There are 3 changes for the index, and we estimate one-way turnover of 1.7% resulting in a round-trip trade of CNY 570m (US$79m).
Nexchip Semiconductor (688249 CH) and United Nova Technology (688469 CH) are adds to other indices as well and the impact on the stocks will be a lot higher.

Quiddity STAR 50/100 Dec 24 Results: US$793mn Capping Outflow for SMIC; 4 Changes for STAR 100

By Janaghan Jeyakumar, CFA

The December 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 29th November 2024.
There will be zero changes for the STAR 50 index and four changes for the STAR 100 index.
We expect one-way flows of approximately US$793mn and US$136mn for the STAR 50 and STAR 100 index rebal events respectively.

CSI All Share Semiconductor Index Rebalance: Methodology Change Leads to 7 Adds, 29 Deletes

Following a methodology change in mid-November for the CSI All Share Semiconductor Index, there are 7 adds and 29 deletes for the index in December.
Estimated one-way turnover at the rebalance is 6% leading to a round-trip trade of CNY 3.15bn (US$435m).
The adds outperformed the deletes bigly in the first 2 weeks of November. Some of those gains have been given back but a new uptrend seems to be taking shape.

(Mostly) Asia M&A, Nov 2024: Net One System, Amcor/Berry, I D & E Holdings, SG Fleet, Macromill

By David Blennerhassett

For the month of November 2024, 14 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$15bn.
The average premium for the new transactions announced (or first discussed) in November was ~44%. The average premium YTD is ~43%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

HONG KONG ALPHA PORTFOLIO (November 2024)

By David Mudd

Hong Kong Alpha portfolio lost 2.9% in November, but has outperformed its benchmark by 4.9% since inception on October 1st. It has outperformed HSI, HSCI and HSCEI by 9%.
Hong Kong Alpha has generated idiosyncratic returns during the market correction. The portfolio has no exposure to energy, healthcare and property sectors.
We exit 4 positions at the end of the month and add positions in software, tech components, travel and restaurant sectors.

ECM Weekly (2nd Dec 2024) – Kioxia, FineToday, MNC Solutions, JST, Pateo, Carraro, Hulic, Sanrio

By Sumeet Singh

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPOs front, listing in the past week didn’t do much, while a number of comapnies are still looking to beat the year end deadline.
On the placements front, there were a number of secondary selldowns in Japan.

Tech News This Week: Samsung Re-Org, QCOM Gives up on Intel, TSMC Increase CoWoS, Apple Delays 2nm

By Nicolas Baratte

Samsung Semiconductor re-org, new reporting lines, top management promotions and demotions, but the same people. That’s going to solve problems? Qualcomm gives up on buying Intel – good idea.
Xiaomi to launch its smartphone chip, but what for? Intel launching a PC GPU again . Apple delays or abandons 2nm for M5 chip (too expensive). TSMC increasing CoWoS again.
China – US worsening relations, side effect is over buying, over stocking of semiconductors? is there a bunch of inventories in China that we can’t see?

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Dec 02

Daily Brief Industrials: Jacobs Solutions , Deere & Co and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Jacobs Solutions Unveils Bold Fiscal ’25 Outlook: Profit Growth That’s Hard to Ignore! – Major Drivers
Deere & Company: Precision Agriculture Expansion As A Pivotal Growth Lever! – Major Drivers

Jacobs Solutions Unveils Bold Fiscal ’25 Outlook: Profit Growth That’s Hard to Ignore! – Major Drivers

Jacobs Solutions recently concluded its fourth quarter and fiscal year 2024 with a focus on a strategic shift towards a more streamlined operation centered on higher value and higher-margin portfolios.
The company completed the separation transaction of its Critical Mission Solutions (CMS) and Cyber & Intelligence businesses.
This resulted in a cash inflow of $911 million, which was used to repay existing debt, alongside acquiring a 7.5% equity stake in Amentum, which could increase to 8%.

Deere & Company: Precision Agriculture Expansion As A Pivotal Growth Lever! – Major Drivers

Deere & Company delivered a fourth quarter and full-year performance for fiscal 2024 in a context of declining sales and tough market conditions.
The company reported net sales and revenues down 16% for the year to $51.7 billion, with equipment operations showing a sharper decline of 19%.
Net income attributable to Deere stood at $7.1 billion, reflecting a challenging market impacted by lower agricultural demand globally.

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Dec 02

Daily Brief Consumer: Shanxi Xinghuacun Fen Wine Factory Co, Seven & I Holdings, Meituan, PT Daya Intiguna Yasa Tbk (Mr DIY Indonesia), Seres Group , SHEIN, TSE Tokyo Price Index TOPIX, Bosideng International Holdings, S&P 500 INDEX and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows
7 & I (3382) – York Holdings Sale Process, Timeline, Nuances
Meituan (3690 HK): Embracing the Slowdown
Mr DIY Indonesia IPO – Has Aggressively Expanded Its Network
MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside
Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come
SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform
P/B Reform: Effective Disclosure to Include that “going Private” Is an Option
Bosideng (3998 HK): Good Results, yet There Are Concerns
EQD | Asia December Vol Roadmap – The Big Exhale

CSI Liquor/ Alcoholic Drink Index Rebalance: Capping to Drive Larger Flows

There is 1 add/ 2 deletions for the CSI Alcoholic Drink Index and no constituent changes for the CSI Liquor Index.
The largest flows arise as a result of capping of constituents to 15% of the index weight. Impact on the stocks varies from 0.2-0.6 days of ADV.
WeiLong Grape Wine outperformed the deletes in early October, but the deletes moved higher and closed the gap. The gap has started to open up again in the last week.

7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness

Meituan (3690 HK): Embracing the Slowdown

By Eric Chen

Meituan reported strong 3Q results last Friday which were largely expected by the market. Yet downbeat guidance seemed to have disappointed investors and dragged the stock during US trading session.
We believe the stock’s significant re-rating since early 2024 has come to end as earnings growth starts normalizing after being boosted by less competition and narrowing losses from new initiatives.
While the company has strengthened its moat and we expect steady growth ahead, we see near-term price volatility as markets digest the notable slowdown.

Mr DIY Indonesia IPO – Has Aggressively Expanded Its Network

By Clarence Chu

PT Daya Intiguna Yasa Tbk (Mr DIY Indonesia) (2517930D IJ) is looking to raise US$296m from its Indonesia IPO.
Mr DIY Indonesia (MRDIYI) is a home improvement retailer. The firm is the largest home improvement retailer in Indonesia with a 25.2% market share as per 2023 sales
In this note, we look at the firm’s past performance.

MT/ Meituan (3690): 3Q24, Excellent Results, Still 46% Upside

By Ming Lu

Revenue grew by 22% YoY and operating margin improved 8 percentage points YoY in 3Q24.
All Business lines grew strongly and all expense percentages of total revenue declined YoY in 3Q24.
We believe the stock has an upside of 46% for the next twelve months.

Quiddity SSE50/180 Dec 24 Results: All SSE 50 ADDs in the LONGs Basket; Positive Start; More to Come

By Janaghan Jeyakumar, CFA

The December 2024 index review results for the SSE 50 and SSE 180 indices were announced after market close on Friday 29th November 2024.
There will be 4 changes for SSE 50 and 18 changes for SSE 180 during the December 2024 index rebal event.
SSE 50 ADDs and DELs will see large index flows while the SSE 180 flow names have fairly insignificant flow expectations.

SHEIN and Temu: Higher Tariffs Under 2nd Trump Admin an Additional Threat Beyond “De Minimis” Reform

By Daniel Hellberg

US President-elect Trump has proposed new tariffs on China (and others) by January
Higher tariffs on Chinese goods could make Chinese imports more expensive in the US
For SHEIN & Temu, larger threat still comes from potential reform of de minimis rules

P/B Reform: Effective Disclosure to Include that “going Private” Is an Option

By Aki Matsumoto

Since there’s little confidence that merely disclosed share buybacks and medium-term management plans will increase corporate value in future, it’s natural that institutional investors’ evaluation of these plans is low.
For companies that develop budgets and plans each January, the key is to incorporate into their budgets the use of cash that will ensure future growth in corporate value.
For companies that lack the time to translate “mid-term management plan” into strategy to increase corporate value within two months, including “going private is an option” is an effective disclosure.

Bosideng (3998 HK): Good Results, yet There Are Concerns

By Osbert Tang, CFA

Bosideng International Holdings (3998 HK) has another solid 1H, with net profit surging 23% and DPS rose 20%. At 11.3x PER for FY25F, the valuation is not stretched.
The gross margin for branded down apparel has hit the lowest 1H level since 1H FY22, however. Similarly, its OEM management gross margin has come down.
Operating cash outflow rose to Rmb3.5bn, compared with Rmb585m a year ago, and inventory days leaped 29 days. Revenue and profit for ladieswear have plunged.

EQD | Asia December Vol Roadmap – The Big Exhale

By John Ley

We introduce a new section this month showing implied vol vs average absolute December price movement. A good way to screen for straddle candidates for the month ahead.
Implied vols came in hard in November with the US election and the FOMC in the rear-view mirror.
Price performance across markets especially strong in the final week of the month with SP500, Nifty and SPASX200 postive on the month ~ 70% of the time.

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Dec 01

Daily Brief Quantitative Analysis: HK Short Interest Weekly: Kuaishou and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

HK Short Interest Weekly: Kuaishou, Jd, Xpeng, CMB

HK Short Interest Weekly: Kuaishou, Jd, Xpeng, CMB

By Ke Yan, CFA, FRM

We analyzed the latest HK SFC report for aggregate short position as of Nov 22nd.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short changes in Kuaishou Technology, Jd.com, Xpeng, CMB.

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Dec 01

Daily Brief ESG: The Issue of Tenure Is Also Similar to the Issue of Concurrent Directorships and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

The Issue of Tenure Is Also Similar to the Issue of Concurrent Directorships

The Issue of Tenure Is Also Similar to the Issue of Concurrent Directorships

By Aki Matsumoto

While female directors and nominating/compensation committee, for which TSE has specified specific goals, have made progress, foreign directors, for whom no specific goals have been set, have lagged behind.
Even now, with over 40% of companies with P/Bs below 1x and ROE not exceeding the cost of capital, not many companies moved to value-creating management with functioning corporate governance.
Nominating committee should make its selection, including whether to replace the incumbent director with another candidate. If it fails to do so, it’s not fulfilling its responsibilities as nominating committee.

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Dec 01

Daily Brief Thematic (Sector/Industry): Anime-Related Stocks Become Hot Ticket Among Chinese Investors and more

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

In today’s briefing:

Anime-Related Stocks Become Hot Ticket Among Chinese Investors
APAC Healthcare Weekly (Dec 1)- Celltrion, Eoflow, Lunit, Hansoh, Kelun Biotech, Eisai, Dr. Reddy’s
Japan Weekly | T&D Soars on Higher Shareholder Returns

Anime-Related Stocks Become Hot Ticket Among Chinese Investors

By Caixin Global

China’s booming demand for physical products based on media intellectual property (IP) is increasingly reflected in the stock market, where related stocks have become a hot topic among investors.
These products, known in Chinese as “guzi” (谷子) — a transliteration of the English word “goods” — are based on IP from comics, anime, TV dramas and computer games.
Their prices vary widely.

APAC Healthcare Weekly (Dec 1)- Celltrion, Eoflow, Lunit, Hansoh, Kelun Biotech, Eisai, Dr. Reddy’s

By Tina Banerjee

Celltrion outlined mid- to long-term business outlook. European Patent Court has dismissed injunction against Eoflow. Lunit partnered with Salud Digna, one of Mexico’s largest healthcare chains.
China has accepted Hansoh Pharma’s fifth indication approval application for Ameile. Sichuan Kelun-Biotech received marketing authorization in China for the first domestically developed TROP2-directed ADC sacituzumab tirumotecan.
Eisai launched Leqembi in South Korea. Dr. Reddy’s launched new biologic drug, toripalimab in India, for the treatment of nasopharyngeal carcinoma. Aster DM is merging with Quality Care India Limited.

Japan Weekly | T&D Soars on Higher Shareholder Returns

By Mark Chadwick

The Japanese stock market posted a muted performance this week, with the Nikkei 225 slipping 0.2% and the Topix declining 0.6%
The yen strengthened by 4.5 yen against the dollar, closing at its highest level in over two weeks
Sector-Wise, Textiles (+5%) led the market this week, with Wacoal (+8%), Goldwin (+4%) and Asics (+5%) all performing well.

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Dec 01

Daily Brief Equity Bottom-Up: Astra Otoparts (AUTO IJ) – EVs and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment
Shopify Inc.: How Is The Management Executing Integration with Emerging Sales Channels! – Major Drivers
BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 29)
Taiwan Semiconductor Industry Aggregate Analysis: Margins Challenged; Inventory Data Positive
[Kanzhun Ltd. (BZ US, BUY, TP US$17) Target Price Change]: Mark Down C4Q24 and 2025 on Weak Demand
Bank Rakyat Indonesia (BBRI IJ) – Ultra Attractive
Memory Monitor: Decoupling Trade Long SK Hynix Vs. Short Nanya Tech
Taiwan Dual-Listings Monitor: TSMC Spread Approaching Short Level; UMC Short Interest Soars Higher
Inter Parfums Inc.: Expanding Brand Portfolio with New Launches To Change The Game! – Major Drivers
Bajaj Finance (BAF): Mixed Q2 But Growth Remains Robust

Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment

Astra Otoparts (AUTO IJ) looks set to see increasing contributions from its modern retail push, which will boost its trading business and should see margins improving over time.
AUTO is pushing into both the EV component space and manufacturing public and residential EV charging equipment. It is also venturing into medical devices as local content becomes a requirement.
AUTO has outperformed the auto market since the pandemic and looks set to continue to do so through new growth segments. Valuations attractive on 5.5x forward PER and 8% yield.

Shopify Inc.: How Is The Management Executing Integration with Emerging Sales Channels! – Major Drivers

Shopify Inc. has reported a strong performance for the third quarter of 2024, showcasing significant growth and expansion across several facets of its business.
The company’s gross merchandise volume (GMV) grew 24% for the quarter, marking the fifth consecutive quarter of GMV growth over 20%.
This growth was attributed to increased same-store sales among existing merchants, growth in new merchants, and international expansion, particularly in Europe.

BUY/SELL/HOLD: Hong Kong Stock Updates (NOVEMBER 29)

By David Mudd

As Hong Kong market continues to consolidate, the consumer discretionary sector is leading in momentum and strength while the energy and materials sectors lag.
Trip.com Group (9961 HK) , Trip.com (TCOM US) received BUY ratings after a strong 3Q24 announcement on revenue and earnings. China’s tourist numbers are projected to reach Pre-COVID levels soon.
Yum China Holdings (9987 HK) , Yum China Holdings (YUMC US) received BUY ratings after initial success from its small store/franchising strategy. The company is actively returning capital to shareholders.

Taiwan Semiconductor Industry Aggregate Analysis: Margins Challenged; Inventory Data Positive

By Vincent Fernando, CFA

Gross Margins Aggregate Data – Shows Taiwan Semiconductor Companies Under Pressure
How TSMC and GlobalWafers show two very different margin environments; However everyone needs to manage rising energy costs into 2025E
Aggregate Inventory Levels — Inventory Days Declining Trend is a Positive Sign

[Kanzhun Ltd. (BZ US, BUY, TP US$17) Target Price Change]: Mark Down C4Q24 and 2025 on Weak Demand

By Eric Wen

Kanzhun, along with Kuaishou, Beike and PDD, are we call the “Macro Mauled Champions” (MMC). We suggest long term investors to accumulate;
Weak industrial sector earnings in October bodes ill for manufacturing hiring into C4Q24 and we think may further extend to early 2025 recruiting season;
We expect BZ to grow profit faster than revenues on cost savings, particularly on marketing and gain shares. We cut the TP from US$19 to US$17.

Bank Rakyat Indonesia (BBRI IJ) – Ultra Attractive

Bank Rakyat Indonesia should have a stronger finish to the year with stable credit costs and continuing growth in micro recoveries driving fee income growth, with NIMs remaining stable
Loan growth will increase in 4Q2024 but may see a slowdown in 2025 but the bank should see stable credit costs and a rebound in earnings with lower provisions.
Foreign ownership and vaulations are back to 2015 lows apart from the pandemic at 2.1x PBV is also a 10-year ex-pandemic low of 1.8x, and trades on 9.6x PER.

Memory Monitor: Decoupling Trade Long SK Hynix Vs. Short Nanya Tech

By Vincent Fernando, CFA

Memory Market Diverges: AI Demand Continues to Surges While Legacy Segments Struggle in November
Diverging Demand Trends Highlight Market Decoupling — AI Driving HBM, Server DRAM, QLC NAND Demand
Outlook for the Memory Market — Decoupling Trade: Long SK Hynix vs. Short Nanya Tech Trade

Taiwan Dual-Listings Monitor: TSMC Spread Approaching Short Level; UMC Short Interest Soars Higher

By Vincent Fernando, CFA

TSMC: +20.4% Premium; ADR Premium is Approaching a Short Level
UMC: +0.7% Premium; Short Interest Soars to New Two-Year Highs
ASE: +4.2% Premium; ADR Headroom Falls to 100% Maxed Out

Inter Parfums Inc.: Expanding Brand Portfolio with New Launches To Change The Game! – Major Drivers

Interparfums Inc.’s third quarter financial results for 2024 highlight several key aspects of their performance, including strengths and challenges in a fluctuating global market.
On the positive side, the company reported its best third quarter in history, driven by robust sales across all major markets.
North America, Western Europe, and Asia Pacific all saw double-digit sales growth, with North America up 12%, Western Europe 25%, and Asia Pacific 15%.

Bajaj Finance (BAF): Mixed Q2 But Growth Remains Robust

By Ankit Agrawal, CFA

Q2FY25 performance was mixed with good growth in AUM and volumes, however, loan losses were elevated. AUM growth came in at 29% YoY and 5.5%+ QoQ in Q2.
Asset quality deteriorated led by retail and SME segments. GNPA worsened to 1.06% in Q2FY25 vs 0.86% QoQ. Credit cost has been around 2.1% vs 1.75%-1.85% guided.
BAF successfully listed its housing finance subsidiary, BHFL, on Sep 16 2024. Its shareholding in BHFL is down to 88.75% from 100%.

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Dec 01

Daily Brief Event-Driven: STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100
Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal
KWEB Index Rebalance: 1 Add & 4 Deletes in December
Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade
WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer
HK Connect SOUTHBOUND Flows (To 29 Nov 2024); SB Trading Volumes Lower, Still Strong Net Buying Tech
CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade
SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade
MUFG Launches a TOB to Take Out Robo-Advisor WealthNavi (7342) – The 81.4% Premium Is Light
Aster DM and Quality Care India: A Deep Dive into the Merger

STAR50/STAR100 Index Rebalance: No Changes for STAR50; 4 Changes for STAR100

As forecast, there are no changes for the SSE STAR50 (STAR50 INDEX) in December while there are 4 changes for the STAR100 Index.
There will be big outflows for Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) due to SSE STAR50 (STAR50 INDEX) capping. There will be selling from other index trackers too.
Hainan Jinpan Smart Technology (688676 CH) had been ignored by the index committee at the September rebalance, so this inclusion in the STAR100 Index could come as a surprise.

Six Hang Seng Index Family Indices: Flows for Dec 6 Rebal

In this insight, we present the flows to buy and sell for each of the top 6 Hang Seng Index Family indices based on estimated tracking AUM.
The indices: Hang Seng Index (HSI), HS Tech Index (HSTECH), HS China Enterprise Index (HSCEI), HS HK Biotech (HSHKBIO), HS Internet & Infotech (HSIII), and HS Healthcare Index (HSHCI).
By Quiddity calculations based on prices of 29 November’s close, there is one-way flow across these six indices of HK$15,894,690,433.49 to trade on 6 December. Roughly speaking.

KWEB Index Rebalance: 1 Add & 4 Deletes in December

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 December.
Cloud Village (9899 HK) is an add while Lufax Holding (LU US), Ping An Healthcare and Technology (1833 HK), ZX (9890 HK) and YSB (9885 HK) are deletes.
The deletions of Ping An Healthcare (1833 HK), ZX (9890 HK) and YSB (9885 HK) were forecast and there will be positioning in the stocks. Lufax was a close delete.

Quiddity CSI 300/500 Dec 24 Results: ~90% Hit Rate; Positive Start for the Trade

By Janaghan Jeyakumar, CFA

The December 2024 index review results for China’s CSI 300 and CSI 500 indices were announced after market close on Friday 29th November 2024.
There will be 16 ADDs/DELs for CSI 300 and 50 ADDs/DELs for CSI 500.
The CSI 300 and CSI 500 index rebal events could trigger US$4.5bn and US$3.8bn in one-way flows respectively.

WealthNavi (7342 JP): MUFG (8306 JP)’s Opportunistic Tender Offer

By Arun George

In response to a Nikkei article, WealthNavi (7342 JP) disclosed Mitsubishi UFJ Financial (MUFG) (8306 JP)’s tender offer at JPY1,950 per share, an 84.3% premium to the undisturbed price.
The high premium reflects WealthNavi’s steep 46% YTD share price decline, i.e., the timing is opportunistic. The offer is below the Board’s requested price.
While the irrevocable has a competing offer clause, a competing proposal is unlikely due to MUFG’s stake. However, a bump is possible if activist(s) take around a 15% stake.

HK Connect SOUTHBOUND Flows (To 29 Nov 2024); SB Trading Volumes Lower, Still Strong Net Buying Tech

SOUTHBOUND gross trading activity dropped sharply again to the lowest in a few months but net SOUTHBOUND buying remains very strong, with big flows on tech.
Most of the top names were tech names – both in gross and net buys. Only 1 tech name in top five net sells.
Last week I said I expect HK-listed tech to continue getting bought. Alibaba, Tencent, Xiaomi, etc are safe havens against Trump tariffs as they don’t compete in the US. Continue.

CSI300/CSI500/CSI1000 Index Rebalance: US$9bn Round-Trip Trade

There are 16 changes for the CSI 300 Index, 50 changes for the CSI 500 Index and 100 changes for the CSI1000 Index that will be implemented on 13 December.
There are 257 unique names that are adds or deletes and the round-trip trade across all 3 indices is close to US$9bn.
Stocks with the largest inflows and impact have outperformed stocks with the largest outflows and impact over the last few weeks. That could continue for the next couple of weeks.

SSE50/SSE180 Index Rebalance: Couple of Surprises; Seres Group’s Multiple Inclusions; US$3.2bn Trade

There are 5 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 December.
Seres Group (601127 CH) is an add to both indices, plus the CSI 300 Index, and passive trackers will need to buy over US$900m of the stock.
The adds have outperformed the deletes with a lot of the outperformance coming in the last couple of months. Trim positions in the expected adds/deletes and build positions in surprises.

MUFG Launches a TOB to Take Out Robo-Advisor WealthNavi (7342) – The 81.4% Premium Is Light

MUFG (8306) bought 15.5% of WealthNavi (7342 JP) in February at ¥1,718/share – zero premium. The shares fell. Now they are bidding for the rest 13.5% higher.
WealthNavi forecasts fantastic growth. Dec29 OP is specifically estimated at ¥13.822bn. Everyone agrees there are synergies, but they’re not “valued” because they “cannot be specifically estimated at this moment.”
I believe investors should start demanding Synergy CVRs of acquirors when synergies are not included in the fair value calculations.

Aster DM and Quality Care India: A Deep Dive into the Merger

By Nimish Maheshwari

Aster DM Healthcare Ltd (ASTERDM IN) and Quality Care India are merging to form India’s third-largest hospital chain with over 10,150 beds.
This merger combines two major players, generating significant scale, diversification, and financial strength. The merged entity will benefit from synergies and plans to expand to over 13,000 beds by FY27.
The merged entity is expected to be EPS accretive and expected to increase EBITDA by 10-15% through synergies

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

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

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

Dec 01

Daily Brief Macro: Japan Funds: Extreme Stocks and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Japan Funds: Extreme Stocks
Why Trump’s Rise Sounded Like a Sure Bet For China’s Small-Cap Stock Investors
Overview #13 – The US Dollar Peaks, Japan Struggles While China Treads Water

Japan Funds: Extreme Stocks

By Steven Holden

We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway

Why Trump’s Rise Sounded Like a Sure Bet For China’s Small-Cap Stock Investors

By Caixin Global

Donald Trump’s victory in the U.S. presidential election ignited a wild frenzy in China’s stock market, propelling shares of certain companies to dizzying heights — not due to any tangible link with his policies, but solely because their names vaguely echoed his.
In the lead-up to Trump’s re-election, Shenzhen-listed Wise Soft Co. Ltd., a software maker, and Sichuan Development Lomon Group (SDLomon), a fertilizer producer, saw their stock prices soar, repeatedly hitting daily trading limits as investors piled in.
These were part of a wave of “Trump concept” stocks, heavily touted by influencers and livestreamers doling out online stock tips. The pitch was as peculiar as it was effective: the companies’ names, when spoken in Chinese, bore a resemblance to the phrase “Trump wins.”

Overview #13 – The US Dollar Peaks, Japan Struggles While China Treads Water

By Rikki Malik

A review of recent events/data impacting our investment themes or outlook
Revisiting some of our old favourites- China, Japan and Gold
Short-Term trades continue to work but investors only interested in US equities

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

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

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

Dec 01

Daily Brief Indonesia: Astra Otoparts, Bank Rakyat Indonesia and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment
Bank Rakyat Indonesia (BBRI IJ) – Ultra Attractive

Astra Otoparts (AUTO IJ) – EVs, Modern Retail, and Medical Equipment

Astra Otoparts (AUTO IJ) looks set to see increasing contributions from its modern retail push, which will boost its trading business and should see margins improving over time.
AUTO is pushing into both the EV component space and manufacturing public and residential EV charging equipment. It is also venturing into medical devices as local content becomes a requirement.
AUTO has outperformed the auto market since the pandemic and looks set to continue to do so through new growth segments. Valuations attractive on 5.5x forward PER and 8% yield.

Bank Rakyat Indonesia (BBRI IJ) – Ultra Attractive