Event-Driven

• Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
• The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
• Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.

• Discounts likely set for a re-rating as market continues to overreact to appointment of CEO amid good set of results.
• The discounts of both Naspers and Prosus have continued to widen since the appointment of Fabricio Bloisi to Group CEO was announced in May (effective 10 July).
• At the end of June, the group released its strongest set of results in years, delivering on consolidated ecommerce profitability ahead of target.

• ENEOS Holdings (5020 JP) announced its deal for affiliate Tatsuta Electric Wire & Cable (5809 JP) 18-plus months ago. China approvals held it up more than a year.
• Last month, they launched. The sector was up a lot. TOPIX was up a lot. The stock had recently been trading through terms. But ENEOS didn’t bump the price.
• A month later, and the tender was supposed to have closed Friday 19 July. It didn’t. ENEOS extended, for no reason, which suggests they don’t have the shares. 

• 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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Asia Cement China (743 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK).
• Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), Hollysys.

• Since announcing Shandong Xinjufeng Technology Packaging (301296 CH)’s pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65 per share, the gross spread has increased. 
• The Board’s strategy is to rally shareholders against a hostile offer. However, the recent AGM protest votes suggest that the Board cannot easily thwart the offer. 
• Shandong Xinjufeng’s renewed efforts to secure Board representation suggest that its offer is in trouble. Meanwhile, China Mengniu Dairy Co (2319 HK) seems disinclined to engage in a bidding war. 

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND inflow strong but SOEs not leading and Hang Seng down hard. Bank buying minimal. NORTHBOUND saw significant selling, but A-share indices generally strong on the week. Window-dressing?
• AH Premia rose 3.3% on average. Really bad week for H vs A as Liquid Hs underperformed their As by 4%. Stunning week really. Relative performance a sea of red.

• SOUTHBOUND was again a net buyer, for HK$19.2bn this week, on smallish two-way volumes. Tencent and ETFs stood out as large net buys.
• I’ve thought national team was buying banks for months. This week, no banks showed in the top five net buys, and only 1 in the top ten.
• It is somewhat perplexing that the flows just stopped. But that may be a sign of things to come. Confirmation may require a week or two.

• Weekly IVs marked significantly higher. Options demand returns post holiday-shortened week. Market focuses on 23.07.2024 Budget & Corporate Earnings announcements. 
• Put-Call Ratio compression + Rising IVs indicative of call-buying activity. Significant Open-Interest buildup seen in 25000 calls.
• Vol Term-structure: Entire curve in Backwardation. Much of which can be attributed to the India Budget event. Curve expected to flatten out post event.

• SoftwareONE is currently considered a special situation case by the market, with its new Board of Directors being more receptive to a potential transaction, possibly above CHF 20/share.
• Compelling stock narrative: strong balance sheet (10.3% of market cap in net cash&equivalents), low valuation (8.7x EV/NTM EBITDA, 17.5x Fwd P/E), shareholder return policy (buyback and dividend), and ongoing recovery.
• My fair value estimate is CHF 20.04/share, which implies an undemanding 9.8x EV/Fwd NTM EBITDA. SoftwareONE releases Q2 and H1 results on 21 August. Long.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net SELL RMB +19.3bn of A-shares. NORTHBOUND sold everything. Consumer, Finance, and Energy hit hardest.
• Net flows as a percentage of value traded are clearly “short gamma”, but the net buys this week were of stocks previously a net sell. 

• Zhihu Technology (ZH US) has launched a conditional share buyback offer to acquire a maximum of 46.9m Class A ordinary shares (15.93% of outstanding shares) at HK$9.11 (US$3.50 per ADS).
• The offer is conditional on shareholder approval by a majority of votes cast at the EGM. There is no minimum acceptance condition. The EGM vote is done due to irrevocables. 
• Zhihu’s share buyback returns 19% of cash not subject to government controls, below Douyu International Holdings (DOYU US)’s comparable 34%. The minimum pro-ration is expected to be around 34%. 

• I tally 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.
• Three new deals discussed this week on Smartkarma: Samson Holding (531 HK)‘s Scheme, and VTOs for Advanced Info Service (ADVANC TB) and Thaicom Pcl (THCOM TB).
• Key updates took place on Capitol Health (CAJ AU), Alumina (AWC AU), Ansarada (AND AU), TCM (570 HK), CPMC  (906 HK), Fancl (4921 JP),and Hollysys Automation Technologies (HOLI US).

• The Gulf Energy (GULF TB)/Intouch (INTUCH TB) merger is an opportunistic, bullying method designed to have GULF shareholders buy INTUCH and therefore AIS (ADVANC TB) at too low a price. 
• CK Infrastructure Holdings (1038 HK)‘s interest in a possible London listing coincides with the LSE undergoing a listing regime change.
• Management continue to creep their stake in Zhongsheng Group (881 HK), and now hold a shade under 50%. 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments: ASICS Corp (7936 JP) and Kokusai Electric (6525 JP) placements; Sanil Electric (062040 KS) and Timee Inc (215A JP) IPOs.
• Event-Driven developments China Traditional Chinese Medicine (570 HK), Huafa Property Services Group (982 HK), Samson Holding (531 HK), Zhihu Technology (ZH US), Intouch Holdings (INTUCH TB), Gulf Energy Development (GULF TB). 

• Maximizing Lee Jae-yong’s dividend income is crucial, making Samsung SDS’s ₩5.5T cash assets key, thus prompting the merger of Samsung C&T and Samsung SDS’s BPO division.
• With no legal risks for Lee Jae-yong, Samsung C&T needs the merger to increase assets and avoid forced holding company conversion, making the acquisition of Samsung SDS’s BPO division necessary.
• We should target a setup for likely appraisal rights for C&T. Monitor and capture the spread between the stock price and appraisal rights exercise price.

• Thai Beverage(THBEVSP)‘s  proposed swap deal involves acquiring a 41.3% stake in F&N from promoters, seemingly at book value than fair market value, expected in case of an arms length transaction.
• Fraser And Neave (FNN SP)  holds a 20.3% stake in Vietnam Dairy(VNM VN), Vietnam’s leading dairy player, which is now trading at nearly a 40% discount to the investment value.
• Understanding TCC Assets’ ownership history of F&N may help clarify the deal’s valuation rationale.

• The Nikkei 225 INDEX pulled back last week, and it may continue to fall for another 1-2 weeks.
• Make sure you read the Market Reversal Matrix – Charts Analysis section below: we are introducing a possibile new Premium Service using our trend prediction models in algorithmic trading format.
• The price support area to buy the Nikkei 225 would be between 39800 and 39300, this coming week (or the next).

• KT’s foreign room has been exhausted due to value-up trading inflows, NPS selling shares, and KT canceling treasury stocks.
• Hyundai Motor may sell 0.5% of its KT stake, likely to overseas investors. KT’s 700,000 share cancellation will lower foreign ownership to the low-4% range, possibly below 3.75% by November.
• Focus on the stock price surge from ETF recall requests around the effective date, and note that passive outflow corrections typically occur afterward.

• Huafa Property Services Group (982 HK)’s IFA opines that Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’s HK$0.29 privatisation offer is fair and reasonable. The vote is on 28 August. 
• Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and a headcount test. The offer price is final.
• No shareholder holding a blocking stake, low AGM minority participation rate and calm retail boards suggest low vote risk. At the last close, the gross/annualised spread is 9.4%/52.5%. 

• Thai Beverage(THBEV SP)  has proposed a share swap-deal with a promoter company to acquire additional stake in FraserAnd Neave(FNN SP)  in exchange for Frasers Property at negotiated valuations, not market prices.
• Post-Completion of the swap deal with the promoter-owned entity, which requires shareholder approval, Thai Bev will hold a 69.6% stake in F&N and no stake in Fraser Property (FPL).
• If the stake swap were valued at yesterday’s closing share prices, it would imply a drop in the total stake value for Thai Bev after the proposed deal.

• On 17 July, SK Innovation (096770 KS) officially announced a merger with SK E&S. The merger ratio between SK Innovation and SK E&S has been set at 1 to 1.1917417.
• We believe this is the wrong timing for this merger from SK Innovation’s point of view. SK Innovation is trading at near three year lows.
• This merger is likely to generate backlash from KKR which holds SK E&S redeemable convertible preferred stock (RCPS) worth 3.1 trillion won.

• STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
• Unlike the other popular Chinese indices (CSI, SSE, ChiNext, etc.) that rebalance semiannually, the STAR 50 index has a quarterly rebalance cycle and the next rebalance will be in September.
• With the reference period for the September 2024 STAR 50 index rebal event coming to an end, we have presented our final expectations for ADDs and DELs in this insight.

• Capitol Health (CAJ AU) has entered a binding merger proposal with Integral Diagnostics (IDX AU) at 0.12849 Integral shares per Capitol share.
• The transaction will require approval from the ACCC and Capitol shareholders. Due to the minimal geographic overlap, ACCC clearance should be forthcoming.
• The offer is attractive compared to historical exchange ratios, trading ranges and peer multiples. At the last close, the gross spread was 8.0%. 

• Back on the 17th June, diagnostic imaging provider Capitol Health (CAJ AU) announced it had entered into a process deed with Integral Diagnostics (IDX AU). Terms are now firmed.
• IDX will issue 0.12849 new IDX shares for each Capitol share. Scrip terms are unchanged from that announced previously. Upon completing the transaction, Integral would hold 63% in the NewCo. 
• Apart from ACCC signing off, this transaction looks priced to complete. 

• Since mid-June, share-price spreads have generally tightened across our European liquid universe of ordinary and preferred shares (13 have tightened, 5 widened, 1 remained at same level).
• Recommended trades long preferred / short ordinary shares: Atlas Copco, Grifols (see section on the company), Media-for-Europe, Sixt.
• Recommended trades long ordinary / short preferred shares: Henkel, SSAB Svenska Stal.

• Dell Technologies (DELL US) is the main candidate for addition-transition with uncertainty arising from the ‘Multiple Share Classes’ criterion. Forecasted demand is ~$7bn and ~4 ADV.
• Williams Sonoma (WSM US) is one of the top candidates for addition-migration with uncertainty due to the migrations’ inconsistent market cap selection pattern. Forecasted demand is $840m and ~2.6 ADV.
• American Airlines Group (AAL US) is one of the main candidates for deletion with uncertainty due to price hence ranking fluctuations until cut-off. Forecasted supply is $290m and ~0.8 ADV.

• There are a bunch of stocks listed in Hong Kong that have underperformed the HSCEI INDEX and their peers and could be deleted from global passive portfolios in August.
• The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
• There has been a big jump in cumulative excess volume in some stocks and the A/H premium on a lot of the names has jumped over the last few months.

• Last night, the Board of Intouch Holdings (INTUCH TB)  announced an amalgamation with Gulf Energy Development (GULF TB) and Tender Offers for Advanced Info Service (ADVANC TB) (at THB 216.30) 
• And Thaicom Pcl (THCOM TB) (THB 11.00) shares. This is really big news. It appears to try to cap years of re-arrangement of the capital structure. It’s complicated.
• But it is not fair. INTUCH shareholders lose 22% of earnings value per investment value in 2024. 20% in 2025. But, there may be a way to block it…

• Korea’s majority party plans to amend the Capital Markets Act to base listed companies’ merger ratios on intrinsic rather than market value, dubbed the “Doosan Bobcat Prevention Law.”
• Other conglomerates, like Hanwha and Hyundai Motor Group, may execute mergers just before this amendment.
• We should expect shareholder-favorable merger ratios. So, we should position in such companies before announcements, ideally just before the new amendment’s enforcement.

• The amalgamation will entail the ratios for allocations of shares in the NewCo to the shareholders of GULF and INTUCH as detailed below.
• The amalgamation process and the establishment of the NewCo are expected to be completed in 2Q25.
• The restructuring is aimed at reducing duplication in the shareholding structure and facilitating growth opportunities in the energy, infrastructure, and digital businesses.

• The merger ratio, not as unfavorable to SK Innovation as feared, shows SK Group acting cautiously amid political and regulatory scrutiny.
• SK Inc.’s stake will drop to mid-60s; the 1.2x merger ratio for SK E&S could positively affect SK Innovation’s stock price short-term.
• Persuading KKR is crucial. SK E&S won’t convert ₩3T in RCPS or grant appraisal rights, potentially leading KKR to consider litigation, a significant risk to the merger.

• An interview in the Nikkei of Koito Manufacturing (7276 JP) CFO Takahito OTAKE offered the comment that Koito Mfg expected a shareholder return of 130% a year through March 2029.
• The stock popped 19% after lunch on that comment, then fell back to end up 5.0%.
• This is the same pop as we saw end-March. Then it was +24.6% and it stayed up the next day. Same reason for the pop. This was an echo.

• Andrew Walker hosts the podcast and introduces John Haskell, CIO at Ulta Global Management
• Ulta Global focuses on international public real estate investing, particularly in emerging markets
• Despite negative perception and underperformance in emerging markets, there are opportunities for value investing in international real estate

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Intouch Holdings (INTUCH TB) and Gulf Energy Development (GULF TB) announced restructuring transactions to merge into NewCo and VTOs for Advanced Info Service (ADVANC TB) and Thaicom Pcl (THCOM TB). 
• Shareholders will receive 1.69335 NewCo shares per Intouch share (excluding shares held by Gulf) and 1.02974 NewCo shares per Gulf share.
• The key conditions are shareholder approvals, completion of VTOs and purchase of dissenting shares. The transaction is long-dated and expected to be completed in 2Q25.

• KKR and KSP Kokusai Investments are looking to raise approximately US$1.7bn through an extended secondary follow-on offering, via selling approximately 22.3% of Kokusai Electric (6525 JP). 
• We have looked at the lockup expiry and deal dynamics in our earlier notes.
• In this note, we talk about share price performance since then.

• Furniture trader Samson Holding (531 HK) has announced a Scheme from Shan Huei Kuo, Samson’s Chairman. 
• The Cancellation price is $0.48, a 50% to last close. The premium is more pronounced if going back a month. The price is final.
• This looks done. But Samson is an illiquid micro cap.

• The Doosan Group are planning to restructure Doosan Enerbility (034020 KS), Doosan Bobcat Inc (241560 KS) and Doosan Robotics (454910 KS) by reorganizing the business structure to find synergies.
• Doosan Enerbility will spin-off its stake in Doosan Bobcat and merge it with Doosan Robotics. Doosan Robotics will then look to acquire full control of Doosan Bobcat via a share swap.
• There could be an adhoc inclusion to the KOSPI200 INDEX at the end of October and global passives will buy Doosan Robotics (454910 KS) at the time of merger completion.

• Samson Holding (531 HK) disclosed a Cayman scheme privatisation offer from Mr Samuel Kuo (Chairman) at HK$0.48 per share, a 77.8% and 50.0% premium to undisturbed and last close price, respectively. 
• The key condition will be approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The offer price is final.
• The attractive takeover premium, lack of shareholders holding a blocking stake, and low AGM minority participation rate point to a done deal. However, this is a small cap illiquid stock.

• Back on the 18th June, personal computer parts and accessories play PC Partner (1263 HK)  announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
• This development was discussed in PC Partner (1263 HK) Muses SGX Listing & HKEx Withdrawal.  PC Partner subsequently announced a privatisation would not accompany any proposed withdrawal (should it happens).
• My recent discussions with SFC confirms this is possible. And there was a recent precedent. But there may be caveats.

• Medi Assist Healthcare Services (0886371D IN) was listed on 23rd Jan 2024 after raising US$140m. The IPO had been 100% secondary, with the promoters and pre-IPO investors trimming their stakes.
• Medi Assist Healthcare Services (Medi Assist) provides third party administration services to insurance companies via its subsidiaries.
• Coming up for six-month lockup expiry are the firm’s pre-IPO shareholders and a portion of the promoters’ stakes.

• With 70% of the review period complete, 4 non-constituents are in inclusion zone and 5 constituents are in deletion zone.
• We estimate one-way turnover of 6.5% at the December rebalance leading to a one-way trade of CNY 8.8bn (US$1.2bn). Index arb balances could increase the impact on the stocks.
• The potential adds have outperformed the potential deletes. With multiple days ADV to trade on the changes and the recent short selling clampdown, there could be further outperformance.

• With nearly 80% of the review period complete, there could be 28 adds/deletes across the S&P/ASX family of indices in September.
• There is a lot of stocks for passive trackers to trade on the index changes with the largest impacts on the potential changes to the S&P/ASX 200 (AS51 INDEX). 
• The potential adds have outperformed the potential deletions by a LOT over the last few months and continued positioning could lead to further gains.

• 15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of ASICS Corp (7936 JP) in a secondary offering that will likely be priced on 23 July.
• ASICS Corp (7936 JP) has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.
• Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.

• China Traditional Chinese Medicine (570 HK)’s monthly update provides ammunition to both the bulls and bears. Since falling on no news on 26 June, the spread has widened to 31.8%. 
• The bull view is that while the timelines are delayed, the privatisation remains on track as the update shows ongoing progress in satisfying the pre-condition. 
• The bear view is that progress remains glacial, as the consortium wants to withdraw from a binding offer by failing to satisfy the pre-condition before the long stop date.

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
• The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
• Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.

• Nine companies disclosed value-up plans, with four official and five pending disclosures. Initially, these announcements boosted stock prices, but long-term correlations were inconclusive. Yet, shareholder returns notably rose in H1.
• NPS increased stakes in three of the nine recently announced value-up companies. They share traits in value-up trading (large caps & low PBR), potentially guiding our strategy as NPS enters.
• BlackRock’s Hong Kong branch has recently engaged with six Korean asset management firms for potential entrustment of its Asian fund’s Korean investment portion, focusing on the value-up policy.

• Legend Biotech Corp (LEGN US) shares increased 12% on Friday as a Street Insider report claimed it received takeover interest and hired Centerview Partners to help review the offer.
• Genscript Biotech (1548 HK), the largest shareholder, shares rose 25%. Genscript responsded that it is not aware of any reasons for these share price movements and any inside information.
• The chances for an offer are low as the offeror would face several hurdles. Nevertheless, without an offer, the upcoming CARVYKTI commercial production in 2H24 will support the share price.   

• SK Innovation (096770 KS) and SK E&S plan to hold a board meeting on 17 July to discuss the potential merger between the two companies.
• If this merger is successful, it would create the eighth largest company in Korea with a combined assets of 106 trillion won (US$77 billion). 
• Although the merger ratio is not yet available, we believe that this potential merger could potentially benefit SK E&S and SK Inc but could be negative on SK Innovation.

• The UK government has more than halved its stake in NatWest Group (NWG LN) over the last two years reflecting an improving financial health for the lender.
• The UK government is a strategic shareholder and the selling is forecasted to cause a passive fund demand in the next two months across four indices.
• At close of 20 September 2024, the aggregate passive fund demand for NatWest Group (NWG LN) is currently estimated at 22.8m shares, $95.7m and 0.73 days of volume.

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• In this insight, we take a look at the names leading the race to become ADDs and DELs during the December 2024 index rebal event.
• There have been some changes to the SSE 180 expected ADDs/DELs lists since our last insight.

• 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. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight include: Zhongsheng Group (881 HK), Jardine Matheson Holdings (JM SP), FIT Hon Teng (6088 HK), and Hon Hai Precision Industry (2317 TT).

• With 70% of the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index at the close on 13 December.
• We estimate a one-way turnover of 11.3% at the rebalance resulting in a one-way trade of CNY12.08bn (US$1.7bn). The Information Technology and HealthCare sectors gain at the expense of Industrials.
• The potential adds have outperformed the potential deletes and the CSI Smallcap 500 Index (SH000905 INDEX) since the start of the year with the outperformance gradually picking up.

• 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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), A8 New Media (800 HK), Asia Cement China (743 HK).
• Lowest spreads: Fancl Corp (4921 JP), Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP). 

• Friday post-close, MMG (1208 HK) released the results of its Rights Offering. 3.4654bn Rights Shares at HK$2.62 saw 98.18% take-up. New Rights Shares officially start trading on 16 July.
• The other 1.82% (63.1mm Rights Shares) saw 6.383bn excess Rights Shares applications. EAFs were allocated evenly, so applicants got 0.99% of what they bid for, but hey, free money?
• The new Rights Shares are expected to commence trading on 16 July. Even better, there was good fundamental news out late Sunday which should add to the general wellbeing.

• POSCO Holdings (005490 KS) announced a major shareholder return policy to buyback and cancel nearly 2 trillion won worth of treasury shares from 2024 to 2026. 
• The company will cancel 5.25 million treasury shares representing 6.2% of outstanding shares (about 1.9 trillion won). It will also repurchase and cancel additional 100 billion won of shares.
• POSCO Holdings has taken a major initiative to provide greater returns to its shareholders and this should have a positive impact on its share price. 

• There could be 18 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 5 spots.
• We estimate one-way turnover of 3.3% at the rebalance leading to a one-way trade of CNY 22.07bn (US$3bn). There are a lot of stocks with multiple days ADV to trade.
• The potential adds have outperformed the potential deletes. There were ETF inflows last week amid a short selling crackdown as the Third Plenum kicks off.

• CK Infrastructure Holdings (1038 HK), 75.67%-held by CK Hutchison Holdings (1 HK), announced it is considering a second listing on an overseas stock exchange, such as London.
• A UK-listing makes perfect sense. In excess of 90% of CKI’s FY23 profit was sourced from businesses outside Asia, with ~50% from its UK ops.
• The wording in the announcement is unclear – a dual primary listing, or a secondary listing? The LSE is also undergoing a listing regime change, effective 29th July.

• The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND inflow continues, albeit smaller. SOE Banks/Energy/Telecoms remain a big net buy. Percentage of volume is large. NORTHBOUND saw finance buying. Possible short-covering ahead of new short-selling restrictions/access.
• AH Premia were up small on average, down small on the liquid pairs. But HSI/HSCEI vs CSI300/500 performance spreads were higher. Third Plenum this week may drive “sentiment.”

• Legend Biotech received takeover interest and hired Centerview Partners to review the offer. Due to the satisfactory clinical results/promising commercialization outlook of Carvykti, Legend Bio is an attractive M&A candidate.
• Peak sales of Carvykti could exceed US$5 billion. After Carvykti is approved by the FDA/EC for 2L treatment of MM, future valuation leap of legend Bio is becoming more certain.
• Legend Bio is clearly undervalued. We think reasonable market value range for Legend Bio is about US$12.5 – 15 billion, which means there is decent upward potential for share price.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB +15.9bn of A-shares. NORTHBOUND bought Financials, Industry, Infotech, etc. They sold Communications (which was a HUGE SOUTHBOUND buy) and Pharma/Healthcare.
• It is notable that net flows as a percentage of value traded are clearly “short gamma”, which is to say, sector underperformers are being sold, sector outperformers being bought.

• SOUTHBOUND was again a net buyer, for HK$7.3bn this week, on smallish two-way volumes. Major buying was mostly SOEs.
• The more I watch, the more I think the last few months have had serious national team buying of banks and energy, perhaps ahead of shareholder return policy changes.
• But valuations are acceptable. Flows are good. Policy changes are afoot. SOUTHBOUND may continue to see inflows – national team and otherwise.

• IVs for Monthly & Quarterly contracts rose as options market baked in additional risk premia for the Budget Announcement. 
• Vega bid & Gamma offered  – Monthly IVs higher by +2.3 vols & Weekly IVs lower by -0.5 vols.  Short-Dated IVs closed lower in spite of upcoming earnings events 
• Term structure is trading with a kinked shape, with Monthly IVs trading at a markup to rest of the curve

• The Toyota Group cross-holding ecosystem is in flux. They started with a small announcement by Aisin (7259 JP) but moves have come fast and furious.
• Apparently minorities are grumbling to the SFC about the low-balled Offer for Asia Cement China (743 HK). And for good reason. The best course of action? Vote against the Scheme.
• Hanwha Corporation (000880 KS) is trading at a steep NAV discount. And the controlling family is making  a partial Offer to gain majority control. 

• I tally 46 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Four new deals discussed this week on Smartkarma: Second Chance Properties (SCE SP)‘s VGO,Shinsung Tongsang (005390 KS)‘s Tender, Rex Minerals (RXM AU)‘s Scheme, and Canvest (1381 HK)‘s possible Offer.
• Key updates took place on Altium Ltd (ALU AU), Pacific Smiles (PSQ AU), Asia Cement China (743 HK), Shanghai Henlius Biotech (2696 HK), and Kfc Holdings Japan (9873 JP).

• Daidoh Ltd (3205 JP) saw an activist “win” at its AGM, another activist bought, the stock popped. I wrote about it. 2hrs later, the Board set a new Div Policy.
• ¥100/Yr for 3 years in a row. That was 11% of then-current price. Big activist win for Strategic Capital which owned 25% and Murakami-san who had gone substantial 1wk earlier.
• Today post-close, Strategic Capital reported it sold everything on 5 July, the next day. WOW. That was half of Maximum Real World Float. Oops. Murakami-san sold too. 

• On 11 July, the Doosan Group announced a major business structure reorganization, including the delisting of Doosan Bobcat Inc (241560 KS).
• In our view (over the next 3-6 months), these transactions appear to be value-destroying for Doosan Bobcat and Doosan Enerbility minority shareholders but positive for Doosan Robotics shareholders.
• Doosan Robotics plans to acquire the remaining 54% stake in Doosan Bobcat through a tender offer. Once Doosan Robotics fully owns Doosan Bobcat, its shares will be delisted.

• Interest in this merger is emerging from an unexpected angle, especially regarding the merger ratio’s fairness. There’s a risk it could unfavorably affect SK Innovation’s stock price.
• SK Innovation at ₩108,000/share; SK E&S at ₩290,000/share based on strong profits. SK plans ratios around 1.3x total value and 2.7x per share. SK Inc may reach mid-70% stake post-merger.
• SK Innovation’s stock may face short-term decline. Securing shareholder approval, with SK Inc at 36%, overseas investors 22%, local institutions 15%, local retail 20%, and NPS 7%, poses challenges.

• The KOSPI 200 INDEX started a modest pullback and is entering a BUY area, but it could fall further this coming week, caution is advised.
• The support levels to buy are between 383-371, this coming week.
• Alternatively buy the Close, if the WEEKLY Close is negative, next Friday.