Event-Driven

The SSE180, SSE380 and SZSE1000 indices rebalance at the close on Friday and that will lead to changes to the list of stocks eligible for Northbound Stock Connect.
Deletion from the Northbound Stock Connect Buy and Sell list will result in MSCI and FTSE deleting stocks from their indices. That selling will take place at the close Friday.
We expect 37 stocks to be deleted from the MSCI and FTSE indices at the close on 9 December – the announcements should be made later today or tomorrow.

PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes

From December 2022, the minimum free float requirement to be a part of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) increases from 15% to 20%.
We see a high probability of DMCI Holdings (DMC PM) replacing Emperador (EMP PM) in the index at the upcoming rebalance.
There are a few other potential changes to the index and the passive flow on the stocks will be material.

Toshiba (6502 JP): JIP’s Privatisation Bid Is Floundering

JIP, Toshiba Corp (6502 JP)‘s preferred bidder, is reported to be under pressure from co-investors to cut its offer price. Securing financing continues to be troublesome.
An offer valuing Toshiba less than JPY2.2 trillion would face pushback from the special committee, let alone shareholders. There are no signs of a JIC/Bain coming to the rescue.
While the Toshiba/peers price ratio remains undemanding compared to historical ratios, Toshiba looks expensive vs peers on multiples. With short-term newsflow likely to be incrementally negative, remain on the sidelines.

FTSE China A50 Index Rebalance: Stock Connect Deletion to Drive Change

Beijing-Shanghai High Speed Railway-A (601816 CH) will be deleted from the Northbound Stock Connect Buy and Sell list from the close on 9 December.
Beijing-Shanghai High Speed Railway will be deleted from the SSE180, MSCI and FTSE indices. Plus a deletion from the FTSE China A50 Index (XIN9I INDEX).
The replacement for Beijing-Shanghai High Speed Railway-A (601816 CH) will be determined at the close of trading today and the announcement will be made post market close.

Net Protections Holding IPO Lock-Up – PE Owner Is Free to Shed Its Remaining Stake

By Sumeet Singh

Net Protections (7383 JP), a buy now pay later service provider, raised around US$570m via selling a mix of primary and secondary shares in its Japan IPO in Dec 2021.
As per Yano Research, it had 40% market share in the domestic BNPL market for B2C transactions.
In this note, we will talk about the upcoming lock-up expiry on 9th Dec 2022.

EQD | SPX Index/NDX Index : Big Data Week Coming Up-We Look at What Is Priced In

Next week is the last big week of data releases for the year
With CPI data and also a FED meeting there is lots of potential volatility to come
We look at what is priced in to the derivatives market and suggest some trade ideas

DAX, MDAX, SDAX Dec 2022 Rebal: DAX Inclusion for Porsche Is Positive News

The December 2022 index changes for DAX, MDAX, and SDAX were announced late last night (5th December 2022).
Porsche AG (P911 GR)‘s addition to the DAX Index is the main talking point. There are more changes for the MDAX and the SDAX indices.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

STAR50 Index Rebalance Preview: Another Five Potential Changes in March

Nearly 85% of the way through the review period, we see 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
Given the significantly higher market cap of the inclusions using a 6-month minimum listing history, we expect the index committee will continue to use the shorter listing history requirement.
With 5 changes a side, one-way turnover is estimated at 5.15% and will result in a one-way trade of CNY 3,994m. Impact on some deletions is quite high.

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Dec 06

Daily Brief Event-Driven: Where Does Melco’s Discount To NAV Go From Here? and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Where Does Melco’s Discount To NAV Go From Here?
Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers
HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern
Star Health IPO Lockup – Owned by Financial Investors, US$3.0bn Worth Shares Are Well in the Money

Where Does Melco’s Discount To NAV Go From Here?

On the 26 November, Macau’s government renewed the concession periods of the city’s six incumbent gambling concessionaires for another 10 years.
Genting Malaysia (GENM MK), a last-minute interloper, failed in its bid to secure a license. It scored lowest under the government’s bidding review. MGM China (2282 HK) topped the scoresheets.
As with all incumbents, Melco International (200 HK) and Melco Resorts & Entertainment (MLCO US) eked out strong gains following the renewal. Melco’s current discount to NAV is currently 20%.

Nippon Prologis REIT (3283 JP): Offering Could Be a Catalyst for Outperformance Vs Peers

Japan’s largest logistics REIT Nippon Prologis Reit (3283 JP) (“NPR”) announced a US$170mn follow-on equity offering to fund their recent acquisition of three logistics facilities.
The primary offer quantity will be 76,570 units out of which 44,410 units and 32,160 units are expected to be allocated for domestic and international investors, respectively.
Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)

Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.

KOSPI 200 Passive Flow Breakdown, Feat. NPS Size & Trade Window Pattern

We should set the minimum level of the target size to estimate the flow impact on T-1 Effective at ₩15T from ETFs.
We then need to pay attention to the recent trend that an additional flow from NPS appears post-Effective, with a significant portion on T+1~3.
We should revise down our expected rate of return on our early-phase setup aiming at the preemptive trading (T-6W Effective) by NPS.

Star Health IPO Lockup – Owned by Financial Investors, US$3.0bn Worth Shares Are Well in the Money

By Sumeet Singh

In Dec 2021, Star Health (STARHEAL IN) (SHAI), the largest private health and retail health insurance company in India, raised around US$851m in its India IPO.
SHAI insured 20.5m people in FY21. SHAI primarily offers retail health insurance which accounted for 87.9% of its FY21 GWP. Individual agents accounted for 97% of its FY21 GWP.
In this note, we will talk about the upcoming lockup expiry.

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Dec 05

Daily Brief Event-Driven: FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive
FTSE EPRA Nareit Index Rebalance: Now One Add for Korea
Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL
Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here
Weekly Deals Digest (04 Dec) – Chip Eng Seng, Bigtincan, Genex, ReadyTech, Warrego, Sunshine,Growatt
Merger Arb Mondays (05 Dec) – Origin Energy, OZ Minerals, Genex, Bigtincan, Pendal, Golden Energy

FTSE TWSE Taiwan Dividend+ Index Rebalance: On Expected Lines; But the Flow Is Massive

There are 26 inclusions and 5 deletions for the index resulting in a one-way turnover of 46.3% and a one-way trade of TWD 79.52bn (US$2.6bn). That is HUGE!
There at 14 stocks that have over 5 days of ADV to buy from passive funds while there are 20 stocks with more that 5 days of ADV to sell.
Over the last 2 weeks and 4 weeks, short interest has decreased on most of the adds while increasing on all the deletes and most of the stocks with outflows.

FTSE EPRA Nareit Index Rebalance: Now One Add for Korea

SK REITs (395400 KS) will now be added to the FTSE EPRA Nareit Global Real Estate Index Series after market close on 16 December.
Based on the passive assets estimated to track the FTSE EPRA Nareit Index, there could be around 3.11m shares (US$11.3m; 19.2x ADV) to buy on SK REITs (395400 KS).
SK REITs (395400 KS) trades expensive as compared to ESR Kendall Square REIT (365550 KS) and we’d use an index inclusion driven rally to pare positions in the stock.

Taiwan Div+ Index Dec22 Rebal Trade – +7.1% Now; Amend and HODL

This trade is based on historical patterns described in the FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades AND additional considerations.
Those additional considerations were discussed in Taiwan Dividend+ Index Rebal Trades – Offsets Other Index Risk and subsequent insights. So far, the trade is +7.1% since 26 October.
The announcement of FTSE TWSE Dividend+ names described in FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations changes the basket slightly for the home stretch.

Monadelphous (MND AU) Is The S&P ASX 200 ADD – There’s a Trade Here

Monadelphous (MND AU) will be added to the S&P ASX 200 Index on 16 December 2022.
This is not a surprise. It has been the lead contender for a December ADD slot since the day after the September rebalance was completed (see here).
There is a fair bit of volume to buy, and there are pair trades to do.

Weekly Deals Digest (04 Dec) – Chip Eng Seng, Bigtincan, Genex, ReadyTech, Warrego, Sunshine,Growatt

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 – Sunshine Insurance (6963 HK) launches a US$950m IPO, Lygend Resources & Technology (2245 HK) debuts flat, Growatt Technology (1833969D CH) puts its US$1 billion IPO on hold.
Event-Driven developments – Chip Eng Seng Corp (CHIP SP), Bigtincan Holdings Ltd (BTH AU), Genex Power Ltd (GNX AU), ReadyTech Holdings Ltd (RDY AU), Warrego Energy (WGO AU).

Merger Arb Mondays (05 Dec) – Origin Energy, OZ Minerals, Genex, Bigtincan, Pendal, Golden Energy

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Golden Energy & Resources (GER SP), 111 Inc (YI US), Origin Energy (ORG AU).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Warrego Energy (WGO AU), Uzabase Inc (3966 JP), Lifestyle International Holdings (1212 HK), Nearmap Ltd (NEA AU).

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Dec 04

Daily Brief Event-Driven: Index Rebalance & ETF Flow Recap: STAR50 and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Index Rebalance & ETF Flow Recap: STAR50, CSI300/500, SSE50/180/380, ChiNext, SZSE1000, CH50, EPRA
Chip Eng Seng (CHIP SP)’s Revised S$0.75 VGO from the Tangs
Warrego (WGO AU)’s Rinehart V Stokes Takeover Tussle in Full Swing
FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations
KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective
TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective
S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End
FTSE TWSE 50 & 100 Dec 22 Rebal: Greatek Deletion Confirmed; One Surprise Change

Index Rebalance & ETF Flow Recap: STAR50, CSI300/500, SSE50/180/380, ChiNext, SZSE1000, CH50, EPRA

It was a busy week with the implementation of the MSCI Nov SAIR and the Hang Seng December rebalance, plus a lot of announcements for the FTSE indices.
The coming week has the implementation of the December rebalance for the KOSPI2 INDEX, KOSDAQ 150 Index and a range of indices in China.
Inflows to iShares MSCI Emerging Markets (EEM) and iShares MSCI ACWI ETF (ACWI US) during the week as markets move higher on expectations of slower rate hikes from the Fed.

Chip Eng Seng (CHIP SP)’s Revised S$0.75 VGO from the Tangs

Chip Eng Seng Corp (CHIP SP) disclosed a revised conditional VGO from the Tangs at S$0.75, a 4.2% premium to the previous offer of S$0.72. The offer is final.
The offeror (47.27% of outstanding shares) and immediate family represent 50.49% of outstanding shares or 48.63% of diluted shares, which is just shy of the 50%+ minimum acceptance condition.
The bump was to increase the chances of privatisation rather than hitting the 50%+ minimum acceptance condition. At the last close, the gross spread is 1.4%.

Warrego (WGO AU)’s Rinehart V Stokes Takeover Tussle in Full Swing

Beach Energy (BPT AU)’s revised offer of A$0.25 per share was quickly gazumped by Hancock’s revised off-market proposal of A$0.28 for Warrego Energy (WGO AU). All other terms remain unchanged.
Speculation that Strike Energy (STX AU) would also be a takeover target has resulted in its all-scrip offer rising to A$0.248 per share (at last close).
Expect another round of the takeover battle as the bidders are well capitalised and the strategic importance of Perth Basin as Australia’s premier onshore basin.

FTSE TWSE Dividend+ Dec 22: Confirmed Index Changes and Revised Capping Flow Expectations

The index changes for the FTSE TWSE Taiwan Dividend+ Index for the December 2022 index review were confirmed after market close on Friday 2nd December 2022.
There will be 26 ADDs and 5 DELs which are mostly in line with Quiddity’s expectations.
In this insight, we take a look at our revised expectations for capping flows taking into account the confirmed index changes for the December 2022 review

KOSPI 200 Up/Down Weights: Official Results & Passive Impacts on T-1 Effective

Names with a significant impact: KT (030200), Shinhan Financial (055550), Korean Air (003490), LG Energy (373220), Dongwon Industries (006040), Lotte Fine Chemical (004000), Meritz Fire (000060), & Mirae Asset (006800)
Limiting the target size of our flow trading to only the fund size that directly mirrors it (₩17.8T) on T-1 Effective will increase our winning rate.
Lately, local pensions have been seen as rather taking advantage of flow trading in index rebalancing events, so I also recommend keeping the trading window fairly tight.

TIGER Top 10 Rebalancing: Four Names to Trade on T-1 Effective

Kakao managed to stay out of the relegation zone. Instead, Kia was pushed to the borderline. But POSCO failed to up its float rate, so Kia stayed in.
Besides that, LG Energy Solution and Celltrion made it to the index, replacing KB Financial and Shinhan Financial.
These passive flows appears to be of sufficient magnitude to cause a substantial price impact on T-1 Effectiveness. But it should also be approached with a fairly short window.

S&P/ASX Index Rebalance (Dec 2022): Couple of Changes to Close Out the Year

Pilbara Minerals (PLS AU) will replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) will replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
The largest impact from passive trading will be on Monadelphous (MND AU) while the largest flow will be on Pilbara Minerals (PLS AU).
There appears to be significant short positioning on Lendlease Group (LLC AU) as cumulative excess volume and short interest continue to rise.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

EQD | Tencent (700 HK): We Identify Three Derivative Trades into Year-End

Stock has recovered from an October low but may be running out of steam
Realised vol has been high and implied vols have not fallen as much as other equity assets
We suggest three trade ideas into year-end to take advantage of the vol surface and spot level

FTSE TWSE 50 & 100 Dec 22 Rebal: Greatek Deletion Confirmed; One Surprise Change

The index changes for the FTSE TWSE Taiwan 50 and Taiwan Mid-Cap 100 indices for the December 2022 Rebalance were announced after the close on Friday.
There will be one change for the Taiwan 50 Index and three changes for the Taiwan Mid-Cap 100 Index.
In this insight, we take a closer look at the possible explanations for this surprise and our index flow expectations for this Rebalance event.

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Dec 03

Daily Brief Event-Driven: FTSE TWSE Taiwan 50 Index Rebalance: Far Eastern New Century IN; AUO OUT and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE TWSE Taiwan 50 Index Rebalance: Far Eastern New Century IN; AUO OUT
Toshiba Privatisation In Trouble
S&P ASX Dec 22 Rebalance: MND Is the Top Pick
STOXX Europe 600 Dec 22 Rebal: Final Changes and Historical Performance Analysis
When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

FTSE TWSE Taiwan 50 Index Rebalance: Far Eastern New Century IN; AUO OUT

Far Eastern New Century (1402 TT) will replace AU Optronics (2409 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 December.
Passive trackers will need to buy 4.8 days of ADV on Far Eastern New Century (1402 TT) and sell 1.9 days of ADV on AU Optronics (2409 TT).
There will be same way flow from FTSE TWSE Taiwan Dividend+ Index trackers on both stocks and that will significantly add to the passive flow.

Toshiba Privatisation In Trouble

After a few successive rounds of Management and Board Proposals were shot down, last March Toshiba Corp (6502 JP) embarked on a process to generate a privatisation proposal.
The result has ended up with one, maybe two privatisation proposals in the offing. The “leading” candidate’s proposal will not fly as proposed. The other is MIA for the moment.
That leaves a complicated situation. Activists+active holders are stuck with Toshiba and vice versa. They want change, and out, and financiers do too. Change happens. The question is how.

S&P ASX Dec 22 Rebalance: MND Is the Top Pick

The index changes for the S&P ASX Index family for the December 2022 Rebalance were announced after the close on Friday 2nd December 2022.
There will be one ADD/DEL for the ASX 50 index and one ADD/DEL for the ASX 200 index.
In this insight, we take a closer look at our expectations for index flows and potential trading ideas.

STOXX Europe 600 Dec 22 Rebal: Final Changes and Historical Performance Analysis

The December 2022 index changes for the STOXX Benchmark Indices were announced yesterday.
There will be 6 ADDs and 6 DELs for the STOXX Europe 600 Index and 3 ADDs and 1 DEL for the EURO STOXX Index in December 2022.
In this insight, we take a closer look at the index flow expectations and the historical performance of STOXX Europe 600 and EURO STOXX Rebalance events.

When Will Samsung Life Insurance Be Forced to Sell Its Stake in Samsung Electronics by the Govt?

The debate about whether or not Samsung Life Insurance should sell its stake in Samsung Electronics is being reviewed by the National Assembly once again.
The greater probability event is status quo. The Korean government is not likely to force Samsung Life Insurance to sell its stake in Samsung Electronics in the near term.
Korean government is likely to require Samsung Life Insurance to sell its stake in Samsung Electronics after the Lee family has paid off all their inheritance taxes in 3-4 years.

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Dec 02

Daily Brief Event-Driven: Itochu Keeps Buying Fuji Oil and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom
Hang Seng Indexes: Rebalances Today; Recent Trading Data
Carbon Revolution: SPACed & Smacked
Expect Bigtincan To Reject SQN’s Proposal

Itochu Keeps Buying Fuji Oil, Takeover Offer Could Be Possible With Shares Near The Cyclical Bottom

By Oshadhi Kumarasiri

Itochu Corp (8001 JP) has restarted accumulating Fuji Oil Holdings (2607 JP) shares, with an acquisition of 3.5m shares during the last-quarter to take its ownership percentage in Fuji-Oil to 44%.
With both earnings and valuations at a cyclical bottom, Itochu could be encouraged to accumulate more Fuji Oil shares in the short term, resulting in Fuji Oil outperforming its peers.
We think even a takeover offer could be possible while the share price is hovering near the cyclical bottom.

Hang Seng Indexes: Rebalances Today; Recent Trading Data

The December rebalance of the HSI INDEX, HSCEI INDEX and HSTECH INDEX takes place at the close today. One-way flow is estimated at HK$8.4bn.
There are 3 adds for the HSI INDEX and 4 adds/ 4 deletes for the HSCEI INDEX. There are float changes for a few stocks as well as capping changes.
There is excess volume on most adds/deletes post announcement and short interest has also picked up significantly.

Carbon Revolution: SPACed & Smacked

Following a one-month suspension, carbon-fibre wheel maker Carbon Revolution Ltd (CBR AU) announced it will merge (and delist from the ASX) with Twin Ridge Capital, a US-listed SPAC.
CBR said it also requires upward of A$30mn in bridging finance to fund near-term costs (through to June 2023). The share price promptly tanked 50% upon the resumption of trading.
It’s an intriguing situation with an implied notional share price of A$1.49/share under the merger, versus the current price of A$0.15. So I dig a little deeper.

Expect Bigtincan To Reject SQN’s Proposal

Software provider Bigtincan Holdings Ltd (BTH AU) has announced an indicative proposal, by way of Scheme, from PE outfit SQN Investors at A$0.80/share, a 17.6% premium to last close.
Due diligence has not yet been afforded. SQN currently holds a 13.6% stake.
BTH also highlighted it has had preliminary discussions with other interested parties. Expect BTH’s board not to engage with SQN at this price.

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Dec 01

Daily Brief Event-Driven: FTSE China 50 Index Rebalance: JD Health and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
CES China Semiconductor Chips Index Rebalance: Four Changes in December
Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe
FTSE EPRA Nareit Index Rebalance: One Deletion for Australia
Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?
End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022
CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations
FTSE UK Dec 22 Rebal: Quiddity Announcement Day Thoughts
Reinhart Edges Stokes In Tussle For Warrego Energy
EQD | FXI (FXI US): – Could Chinese Equities Lead the Way Higher? Use Options for Delta-Revisited

FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT

JD Health (6618 HK) and Yum China Holdings Inc (9987 HK) will replace Longfor Properties (960 HK) and XPeng (9868 HK) in the FTSE China 50 Index on 16 December.
The largest flow and impact of passive trading will be on Yum China Holdings Inc (9987 HK). There could be buying on Yum China Holdings, Inc (YUMC US) overnight.
Short interest on the deletes is over 7% of float and there could be short covering against the passive selling at the close on 16 December.

CES China Semiconductor Chips Index Rebalance: Four Changes in December

There are 4 changes for the CES China Semiconductor Chips Index that will be implemented at the close on 9 December.
Empyrean Technology, GalaxyCore, Shanghai Fudan Microelectronics and Shanghai Awinic Technology will replace Grinm Advanced Materials, Chengdu Corpro Technology, Shanghai Sinyang Smcndctr Mtls and Espressif Systems Shanghai in the index.
Shanghai Fudan Microelectronics Group (688385 CH) will be added to the MSCI China Index at the close today and will also be added to the CSI 500 Index in December.

Toyo Construction (1890) – Creeping Up On The Next “Tender Offer Start Date”….. Uh…. Maybe

In March 2022, Toyo Construction (1890 JP) agreed to be taken over by equity affiliate stake owner INFRONEER Holdings (5076 JP) at what was a low price.
Nintendo Founder Family Office “YFO” objected, and bought 25+% of the company, then offered to buy it out 30% higher. Toyo Construction objected.
Four months later they finally signed an NDA and then started negotiating. Early in November the target date for a Tender Offer start by YFO was pushed to early December.

FTSE EPRA Nareit Index Rebalance: One Deletion for Australia

There are no adds for the FTSE EPRA Nareit Developed Asia Index in December. The only deletion is Home Consortium Ltd (HMC AU).
Passive trackers are estimated to sell 12x ADV on Home Consortium Ltd at the close 16 December. Short interest is nearly the same and there could be some covering.
Home Consortium Ltd (HMC AU) has underperformed its peers over the last 12 months and still trades more expensive to its peer group.

Appier (4180) Nearing A TSE Prime (And TOPIX) Announcement?

On 17 Feb 2022, Janaghan Jeyakumar, CFA wrote about Appier Group (4180 JP) suggesting it was a TOPIX inclusion candidate in the not-distant future.
In mid-August 2022, he reiterated his opinion. Three days later, the company said they had applied for TSE Prime membership. We are coming up on the timing for an announcement.
It would mean buying, but the shareholder structure is interesting, and intentions are not easy to read. But if they announce imminently, the calendar makes the event even more interesting.

End of Mandatory Lock-Up Periods for 58 Companies in Korea in December 2022

We discuss end of the mandatory lock-up periods for 58 stocks in Korea in December 2022, among which 9 are in KOSPI and 49 are in KOSDAQ.
These 58 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
Among these 58 stocks, the top 5 market cap stocks include HYBE, Kakao Games, WCP, Sillajen, and Duksan Neolux.

CSI KRX China-Korea: Rebalancing Results from KRX & Flow Trading Considerations

KRX unveiled the rebalancing results of the CSI KRX China-Korea indices for Korean constituents yesterday.
There is still insufficient evidence data to estimate specific passive impact. The previous rebalancing in June showed no clear correlation between constituent changes and price impact.
Although it may be risky to trade on this rebalancing, monitoring the correlation of their passive impact at this point, one year after the release, seems worthwhile.

FTSE UK Dec 22 Rebal: Quiddity Announcement Day Thoughts

The December 2022 Rebalance of the FTSE UK Index series will be based on the closing prices of 29th November 2022.
The results will be announced after market close later today (30th November 2022).
Below are Quiddity’s final expectations for index changes and flow parameters for the December 2022 Rebalance event. You have the day to trade this.

Reinhart Edges Stokes In Tussle For Warrego Energy

Gina Rinehart’s Hancock Prospecting has joined the bidding war for Warrego Energy (WGO AU) with a A$0.23/share, all cash, off-market Offer versus Beach Energy (BPT AU)‘s management-backed A$0.20/share Scheme Offer.
Hancock has already lodged the Bidder’s Statement. There is no minimum acceptance condition attached to this offer.
Warrego currently recommends Beach’s Offer, subject to no superior proposal emerging. Beach has matching rights under the SID entered into on the 14 November.

EQD | FXI (FXI US): – Could Chinese Equities Lead the Way Higher? Use Options for Delta-Revisited

Chinese equities have been on a volatile path but are finally gaining some upside momentum
Dollar seems to have peaked and USDCNH is retreating with renewed optimism for the Chinese economy reopening.
We revisit the trade and look at potential restructuring options

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Nov 30

Daily Brief Event-Driven: HSI and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
JPX-Nikkei 400 Rebal 2023: End-Nov 2022
StubWorld: Iljin Holdings – Discounts On Discounts
Doosan Bobcat Block Deal Sale – Overhang Remains
Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline
Philip Morris/Swedish Match: Squeeze-Out

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)

The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
The largest inflows will be on Alibaba Group, Haier Smart Home, Kuaishou Technology, Li Auto, PetroChina, Tencent, JD.com, China Resources Mixc Lifestyle Services and Tingyi Holding.
The largest outflows will be on SMIC, NetEase, AIA Group, HSBC Holdings, China Construction Bank, Alibaba Health Information Technology, Innovent Biologics, China Mobile, Ping An Insurance and ICBC.

JPX-Nikkei 400 Rebal 2023: End-Nov 2022

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-November 2022.

StubWorld: Iljin Holdings – Discounts On Discounts

Iljin Holdings (015860 KS)‘s implied stub is around levels just prior to the onset of Covid, despite strong subsequent deconsolidated earnings. 50.1%-held Iljin Diamond (081000 KS) is itself heavily discounted.
Preceding my comments on Iljin are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Doosan Bobcat Block Deal Sale – Overhang Remains

Doosan Bobcat Inc (241560 KS) announced a block deal sale of 5 million shares. representing 5% of outstanding shares.
There are three major reasons why we have a negative view of the block deal sale and on Doosan Bobcat.
Two of these reasons include an overhang associated with remaining shares which could be sold as well as a potential downturn in construction markets in North America and Europe.

Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline

Sunshine Insurance (SUN HK) is looking to raise between US$859m-US$950m by selling 1.15bn shares in its IPO. At the top end, the company will be valued at HK$74bn.
All of the pre-IPO shares are Domestic Shares and there appear to be no immediate plans to convert them to H-shares. The only H-shares will be the IPO shares.
MSCI China inclusion requires a higher stock price or conversion of Domestic Shares to H-shares; FTSE inclusion is likely in June; HSCI and Stock Connect inclusion is expected in March.

Philip Morris/Swedish Match: Squeeze-Out

By Jesus Rodriguez Aguilar

At the end of the further extended acceptance period, PMHH owns 93.11% of the shares of Swedish Match (obtained both through shares tendered and market purchases).
PMHH intends to initiate compulsory redemption under the Swedish Companies Act to acquire all remaining shares in Swedish Match and request delisting from Nasdaq Stockholm. PMI wins again.
Although the shares are still liquid, gross spread is 2 bps, and therefore there is no trade worth considering, in my view.

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Nov 29

Daily Brief Event-Driven: Korea FSC: Major Changes in Foreign Investor Registration & IPO Pricing and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Korea FSC: Major Changes in Foreign Investor Registration & IPO Pricing
ChiNext/ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care
SZSE1000 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions
Hankook Tire & Chosun Refractories Enter M&A Fight for Korea Zinc: [Young Poong’s Cheap NAV]
Thailand SET50 Quiddity Dec 22 Final Expectations: DTAC-TRUE Delay Could Cause RATCH-IRPC Surprise
Samsung Electronics: Likely Focus on Inheritance Taxes Again in 1Q 2023
EQD | HSBA Vs ICBC (5 HK,1398 HK): Trade a Relative Value Vol Spread -Revisited
NewMed Energy/Capricorn: Positive Spread

Korea FSC: Major Changes in Foreign Investor Registration & IPO Pricing

FSC’s unveiled measures: 1. declare a dividend before determining which shareholder to receive, 2. scrap foreign investor ID, & 3. widen price limit on a listing day & allow “test-the-waters”
These are still drafts, but since they have already been coordinated with the Yoon administration, it is highly likely that they will be implemented in the not-too-distant future.
FSC will disclose detailed plans next month. We should rush to prepare for them, which significantly impacts the increase in foreign investors’ trading volume and the IPO pricing.

ChiNext/ChiNext 50 Index Rebalance: Materials & Industrials Take Spots from IT, Health Care

There will be 10 changes for the Chinext Price Index and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 December.
One surprise is the inclusion of Hunan Zhongke Electric Co,Ltd. (300035 CH) in both indices. Four stocks are adds to both indices while two stocks are deletes from both indices.
The adds have outperformed the deletes over the last 8 months but have given up some of the gains over the last month. There is a big sector skew.

SZSE1000 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions

There are 47 changes for the SZSE 1000 index that will be implemented at the close of trading on 9 December.
We see 51 stocks being added to Shenzhen Stock Connect (47 index adds + 4 existing constituents) and 83 deletions from Stock Connect (15 index adds + 68 existing constituents).
There could be 4 adds to the MSCI China in February and 11 adds to the FTSE All-World/All-Cap in March. Plus a bunch of deletes at the close 9 December.

Hankook Tire & Chosun Refractories Enter M&A Fight for Korea Zinc: [Young Poong’s Cheap NAV]

There are increasing evidence that suggests that the M&A fight Korea Zinc (010130 KS) between the Jang and Choi families is becoming more heightened.
The family of the owners of Hankook Tire and Chosun Refractories have a close relationship with Korea Zinc Vice Chairman Choi and they have become friendly shareholders to Choi.
Our NAV valuation of Young Poong (000670 KS) suggests NAV of 2.2 trillion won or NAV per share of 1,210,644, which represents a 61% upside from current levels.

Thailand SET50 Quiddity Dec 22 Final Expectations: DTAC-TRUE Delay Could Cause RATCH-IRPC Surprise

The reference period for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) December 2022 Rebalance is about to come to an end.
With the market consultation changes confirmed as expected and the DTAC-TRUE merger likely to get delayed to 1Q CY2023, I expect 4 ADDs/DELs in December 2022.
Ratch Group PCL (RATCH TB) is a potential surprise ADD and IRPC PCL (IRPC TB) is a potential surprise DEL out of the index changes predicted in this insight.

Samsung Electronics: Likely Focus on Inheritance Taxes Again in 1Q 2023

One of the key events for Samsung Electronics in 1Q 2023 could be additional selling by Lee Jae-Yong and his family members to pay for inheritance taxes.
Samsung Electronics underperformed significantly versus KOSPI in the first quarter in the past two years.
As the negative issue of inheritance taxes becomes highlighted once again, this could further negatively impact Samsung Electronics and other Samsung affiliate shares.

EQD | HSBA Vs ICBC (5 HK,1398 HK): Trade a Relative Value Vol Spread -Revisited

On October 6th we suggested selling HSBC vol vs buying ICBC vol
We look at the trade performance both in terms of realised and implied vols
We consider the trading options given the convergence in vols

NewMed Energy/Capricorn: Positive Spread

By Jesus Rodriguez Aguilar

The NewMed/Capricorn reverse takeover should be approved at an EGM. Investors opposing the deal (mainly event-driven funds) hold in aggregate at least c. 33.6% of cash-rich Capricorn.
The approval threshold is 50% (vs. 75% in Tullow’s merger), which should favour the approval. But the +6.9% spread (as of 28 November), reveals it’ll be challenging.
First Tullow sought CNE’s cash pile, now NewMed seeks CNE’s Middle East assets and a coveted London listing. Unless NewMed sweetens the terms, this deal may not happen either.

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Nov 28

Daily Brief Event-Driven: CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover
Sembcorp Marine Takeover of Keppel O&M – Almost There
SSE180/SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions
KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points
Merger Arb Mondays (28 Nov) – Yashili, Perpetual/Pendal, Nitro, Warrego, Chip Eng Seng

CSI 500 Index Rebalance: 50 Changes a Side Leads to 12%+ One-Way Turnover

There are 50 changes a side for the CSI 500 Index at the upcoming rebalance that will be implemented at the close of trading on 9 December.
One-Way turnover at the rebalance is estimated at 12.64% leading to a one-way trade of CNY 9.3bn. The Materials, Information Technology and Consumer Discretionary sectors are net gainers.
9 adds to the CSI 500 Index are deletes from the CSI 300 Index while 7 deletes from the CSI 500 Index are adds to the CSI 300 Index.

Sembcorp Marine Takeover of Keppel O&M – Almost There

Last Wednesday, Keppel Corp (KEP SP) announced 8 Dec as the EGM date for shareholders to approve the AssetCo Transfer, the Keppel O&M/SMM combo, and the distribution of SMM shares.
This should probably sail through. Investors who want to submit questions in advance can email [email protected] by 3pm 30 Nov.
I still like Keppel. I think investors will find it attractive post-spin.

SSE180/SSE380 Index Rebalance: Changes & Potential MSCI/FTSE Inclusions & Exclusions

There are 18 changes to the SSE180 Index and 38 changes to the SSE380 Index that will be implemented at the close of trading on 9 December.
There will be 10 deletions from the MSCI Standard Index and 26 deletions from the FTSE All-World/All-Cap indices at the close on 9 December.
Currently, 8 stocks meet the threshold/are close for inclusion in the MSCI China Index while there are 21 stocks that meet the threshold for inclusion in the FTSE All-World/All-Cap indices.

KOSPI 200 Sector/Size & KRX 300 Sector: Constituent Changes & Trading Points