Event-Driven

• The KKR deal for Hitachi Transport System (9086 JP) is here. 
• Some were worried KKR would walk. That was never a worry. Some worried Russia wouldn’t approve. There was always a way. 
• This deal should trade tight. New money might be better allocated elsewhere. Arbitrageurs and investors should be wary of the index effects of the TOPIX FFW adjustment tomorrow at close.

• Aruhi Corp (7198 JP) is under Tender Offer by SBI Holdings (8473 JP) which wants to buy back in and expand the offering through SBI and Shinsei Bank (8303 JP). 
• The Tender Offer was expected to close on Monday, and Aruhi earnings were expected on the 10th of November. Today Aruhi changed its forecasts, so SBI extended the tender. 
• This engenders a bit of 🧐👀 on my part, but we gotta go with the flow. Discussion ensues. And watch for trading opportunities.

• PCCW Ltd (8 HK) is coming up “cheap” on my monitor, both from a discount to NAV and implied stub angle. 
• Preceding my comments PCCW / HKT Ltd (6823 HK) and Bank of Kyoto (8369 JP) 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%.

• The 2nd screening only deals with those who have passed the 1st screening. The 2nd screening does NOT include the first company to cross the threshold.
• Lotte Confectionery will be the only addition to the KOSPI 200. Samyang Holdings or Hyundai Home Shopping Network will leave the index.
• There will be ten changes in the KOSDAQ 150: eight regular & two special entries. WCP’s special entry still seems uncertain due to the GICS classification issue.

• Sembcorp Marine (SMM SP) will now acquire Keppel O&M from Keppel Corp (KEP SP) at an 8% lower consideration at a revised exchange ratio of 46:54 vs 44:56 earlier.
• The simplified transaction structure is expected to reduce consent and approval requirements and could reduce completion time by up to 2 months. Expected completion now is December or Jan.
• At a proforma market cap of S$7bn, there could be selling in Sembcorp Marine from MSCI Singapore and FTSE Straits Times Index (STI) (STI INDEX) trackers at the time of implementation.

• Back on the 5 August, Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, tabled a Scheme at HK$5/share, a 62.3% premium to last close.  
• The Scheme Doc is now out with the Court Meeting on the 21st of November. The outcome of this transaction will pivot off the reassessed net asset value of HK$10.60/share.
• Trading at a gross spread of 9.6% using yesterday’s close, reflecting the perceived opportunistic nature of the Offer. Yet Hong Kong’s 2018 visitor glory days remain a long way off. 

• Today, Keppel Corp (KEP SP) and Sembcorp Marine (SMM SP) made an announcement of revised structure and revised terms.
• Under revised terms, Sembcorp will issue fewer shares to Keppel, and it will be a takeover rather than Scheme of Arrangement. Keppel will deliver more shares to shareholders, keeping less. 
• Just like the first announcement, there is a little here for everyone. Keppel doesn’t do a great job of selling it but it is still win-win. 

• The agreed equity value exchange ratio between Keppel O&M and Sembcorp Marine (SMM SP) was revised from 56%:44% to 54%:46%. 
• For Keppel Corp (KEP SP) shareholders, the revised terms will lower the overall value but in a shorter deal completion, higher EPS accretion and higher in-specie distribution of SMM shares.
• The deal is expected to close by the end of the year. Our revised Keppel SoTP valuation is S$8.17 per share, which is 23% above the last close.

• Hang Lung Group (10 HK) is currently trading at a miserly 0.15x P/B, its lowest level since records began.
• It has also been somewhat of a forgetful week for 59.5%-held Hang Lung Properties (101 HK), down 12%, following Wednesday’s 7% decline.
• HLG’s discount to NAV has retraced back to levels last seen during the 2020 Covid lows. 

• Borsa Italiana reported a take-up in bid for Tod’s of c. 48.91%. DeVa Finance and (concerted) LVMH would have controlled 86.95%, below the 90% minimum acceptance condition and pulled out.
• The offer price seemed cheap on any measure (the shares traded above it since the offer period kicked off). A 20% share price drop means it looks good value now.
• If the Della Valles merged Tod’s with Deva Finance, they would offer c. €37/share. Either way, it should pay off to set up a long position in the stock now.

• The FTSE Taiwan Dividend+ Index is a fabulously interesting index from an index prediction trading standpoint. Because it works off negative momentum, the bias risk is different from normal indices.
• And there is a turn. That turn is where what had been bad becomes good, becomes very good, then turns bad again. 
• This insight proposes a basket to buy, and a basket to short, and if the basket to buy ends up not going in, it is a high quality problem.

• Float and capping changes will require passive trackers to sell Bank Central Asia (BBCA IJ) and Emtek (EMTK IJ) while buying GoTo (GOTO IJ) and Telekomunikasi Indonesia (TLKM IJ). 
• There will be passive changes to other stocks too, though the impact is not material on most of the stocks.
• The passive buying on GoTo (GOTO IJ) on Monday offers an avenue to exit the stock ahead of the huge lock-up expiry on 30 November.

• On 26 October, a Singaporean private equity firm called Flashlight Capital Partners started to go activist on KT&G demanding that the company spin-off its ginseng business to improve shareholder value.
• While a spin-off of the ginseng business is not likely near term, the company could buyback more shares and sell more non-core assets which could soothe Flashlight Capital Partners.
• Back in June 2022, we wrote a prescient insight called KT&G Is a Prime Candidate for Corporate Activism in Korea. 

• The Lifestyle International Holdings (1212 HK) scheme document is out with the court meeting scheduled for 21 November. The IFA considers the HK$5.00 offer to be fair and reasonable. 
• Key conditions include approval by at least 75% of independent shareholders (<10% rejection). Headcount test not applicable. No shareholder holds a blocking stake.
• The offer is light but likely to succeed. At last close and for a 30 December payment, the gross and annualised spread to the offer is 9.6% and 65.7%, respectively.

• In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
• Based on current rankings, Commerzbank AG (CBK GR) could move from MDAX to DAX and Puma SE (PUM GR) could move from DAX to MDAX.
• I also expect multiple changes for the MDAX and SDAX indices including the impact of the recently-listed Porsche AG (P911 GR). 

• In this insight, we take a look at the potential ADDs/DELs for the NIFTY 50, 100, and 500 Indices in the run up to the March 2023 Rebalance.
• The completion of the HDFC Limited (HDFC IN) – HDFC Bank (HDFCB IN) merger is the most significant event that can trigger intra-review changes in the next few months.
• NIFTY Indices Limited also initiated a market consultation recently on the “treatment of merger/demerger in Nifty equity indices” and the outcome could have important index consequences for such intra-review changes.

• The review period nearly complete, we see 7 potential adds and 9 potential deletes at the December rebalance. However, there can be a maximum of 5 changes at a rebalance.
• We estimate a one-way turnover of 4.28% at the December rebalance leading to a one-way trade of CNY 3.42bn. Index arb activity could add to the impact on the stocks.
• The potential adds have dropped over the last month while the potential deletes have moved higher over the last couple of weeks.

• Elmo Software (ELO AU) entered a scheme implementation deed (SID) with K1 at A$4.85 per share, a 100.4% premium to the undisturbed price.
• The key conditions are a shareholder and regulatory (FIRB & US antitrust) approvals. The scheme meeting is likely in early 1Q23. 
• While not a knockout bid, it is attractive in the context of current conditions. Key shareholders will vote in favour. At the last close, the gross spread is 4.8%.

• Turbulent markets can  widen merger spreads arbitrarily creating attractive  arb opportunities with the potential for outsized IRRs
• Among the several live transactions indicating unusually high spreads, none looks more alluring than the prospective MaxLinear (MX US) acquisition of Silicon Motion (SIMO US) in the semiconductor sector
• The combination of an exceptionally wide spread driven by unsupported skepticism that the merger will not pass muster with China’s SAMR and historically low valuations make SIMO’s risk-reward profile  enticing

• The TOPIX October FFW rebalance is Friday at the close. 
• It is still ¥2trln+ to buy and ¥2trln+ to sell. And there are some big names. A spreadsheet is attached with all the flows. 
• Surprisingly, the top 40 Z-scores on each side have traded in a VERY tight range for the 6 weeks prior to the announcement and the two weeks post. Very weird.

• Near the end of the review period, we see 16 potential changes to the CSI 300 Index at the December rebalance. There are other stocks very close to the cutoffs.
• We estimate a one-way turnover of 3.04% at the December rebalance leading to a one-way trade of CNY 8.4bn.
• The potential adds have outperformed the potential deletes, though the gap has narrowed in the last few weeks. We’d position for outperformance post the end of the review period.

• The selloff in the broader market has led to the A/H premium on PingAn blowing out to levels not seen in the last few years and outpacing the HSASP Index.
• At a 24% premium, the risk/reward for a long Ping An Insurance (H) (2318 HK) / short Ping An Insurance Group (601318 CH) trade has never been better.
• The shift from A-shares to H-shares is already taking place – Southbound Stock Connect holdings have been increasing while the Northbound Stock Connect holdings have been decreasing.

• In this insight, we take a look at the potential index changes for the FTSE Straits Times Index (STI) (STI INDEX) between now and the March 2023 index review.
• Keppel DC REIT (KDCREIT SP) is currently the lowest ranked index constituent and could get kicked out when Sembcorp Marine (SMM SP) gets added.
• Olam Group (OLG SP) and SATS (SATS SP) are the next highest ranked potential ADD and DEL respectively and could be involved in index changes if their prices move sharply.

• Costa Group Holdings (CGC AU), one of Australia’s largest fresh fruit and vegetable producer, is understood to be in the cross-hairs of Paine Schwartz Partners.
• According to the AFR, Paine is using Citi to buy shares up to $2.60/share a 16.6% premium to last close, with a 15% stake in mind.
• There’s a whiff of opportunism here after Costa’s recent EBITDA downgrade. However, the return of its major shareholder suggests value has emerged.

• Sumitomo has increased its all-cash offer by c. 19% to $27/share, a 50% premium, 4.6x EV/Fwd Revenue and corresponds to an implied equity value of $1.7 billion and EV of $2.9 billion.
• The Board of Myovant recommends the offer, which should close in Q1 2023. The market has bought into the deal: USD turnover on 24 October has been $585 million.
• As a result of the improved offer, I increase my TP to $27 (vs $22.84 formerly). Gross spread is 0.78% and the estimated annual return is 1.83%.

• Elmo Software (ELO AU) has entered into a Scheme Implementation Deed (“SID”) with K1 Investment under which ELMO shareholders will be entitled to receive $4.85/share, in cash.
• The SID has the support of the independent board and ELMO’s three largest shareholders collectively holding ~33.4% of shares out. 
• The Scheme is expected to complete in the 1Q23. The proposal requires FIRB approval. This looks done.

• Despite the WATCH list’s confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.
• There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.
• There was confusion about LG Chem’s deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem’s LONG/SHORT.

In 1992, a TV series aired in Hong Kong on TVB called The Greed of Man. The series told the three-plus-decade story of Ting Hai, an “uneducated and pathologically self-righteous brute” (played by Canto pop singer and actor Adam Cheng (born 1947)) and Fong Chun-sun, “an honest, cultured and refined leader of the Asian Stock Exchange” (played by Damian Lau) who were childhood friends, split, and saw Ting kill Fong over a girl.

Ting Hai fled to Taiwan, was brutish again, spent a decade-plus in prison there. One of Ting Hai’s sons pursues a Fong daughter, is rebuffed, the son turns violent. Eventually the three Fong daughters are killed, and Fong’s only son (played by Sean Lau) flees to Taiwan and makes it rich through indirect gambling on stocks. In Hong Kong, the Tings have made it rich by being short in the 1987 crash. Ting has come back to Hong Kong, is charged with murder, then buys himself out of a sentence. Fong comes back to Hong Kong, and they duke it out in the stock market in true good guys vs bad guys epic knock-down drag-out drama. Ting and his sons are backed by the triads. Fong is backed by a few HK tycoons. Eventually, Ting is wiped out.

He responds by throwing his four sons off the top of the stock exchange building and following himself. Only Ting survives, now billions in debt, and spends the rest of his life in prison. 

The first episode of the show actually started with that final scene of Ting hurling his sons off the building. TVB got so many calls from disturbed viewers they altered the show, and moved its time slot. Apparently, the re-issues and re-airings of the show all show edited versions. The edited version was re-released on TV in 2015 and was well-received in HK by a younger generation. 

Most importantly to this insight however, is that when the series started in 1992, the Hang Seng Index fell 1200 points in one month – that was almost 20% at the time. It started falling part way through the series, then the index fell 1,000 points (16+%) in four days after the gruesome ending.

There were so many complaints about the ending that TVB revised the video release and subsequent re-releases.

Two years later, another TVB drama series starring Adam Cheng called ‘Instinct‘ was aired starting in November 1994. The index started falling a day or two before, after what had been an ugly year-to-date, and fell 20% in 7 weeks while the series aired.

1996 saw two series starring Adam Cheng air on TVB.

Cold Blood Warm Heart – a romantic crime thriller series of 65 episodes aired its first episode on 5 February and ended its run on 3 May. The market fell 700+ points or 6% in the period. 

In early September 1996, Adam Cheng starred in another TVB series called Once Upon A Time In Shanghai (a remake of a 1980s series called The Bund), which ran from 2 September through 25 October 1996. The Hang Seng Index fell sharply the next day, and this was blamed on the Ting Hai Effect, but the market did pretty well in the 7-week-long series.

In late 1997 he starred in a historical drama called Legend of Yung Ching for a Taiwanese production company, covering a period in the mid 18th century of the Kangxi Emperor, the Yongzheng Emperor (Adam Cheng’s role), and the Qianlong Emperor in the Qing Dynasty. Apparently, the market dropped the day it aired. 

In June 1999, he starred in a four-part series called Lord of Imprisonment (may have been a Taiwanese series) which started apparently late in the month. That apparently started a fall of 6+% in the Hang Seng Index.

In 2000, a series called Divine Retribution aired on ATV. It was a sequel to Greed of Man, and was originally called Greed of Man 2000 and actually took place in the near future, not the recent past as had been the case for the original series. It ran from 11 September through 3 November 2000. The Hang Seng Index fell 10% in 6 weeks before rallying in the last two days of the series.

In March 2004 – from 8 March through 24 April 2004 – a historical drama of 37 episodes (more for the international version) starring Adam Cheng called Blade Heart aired on TVB. The opening theme song was performed by Adam Cheng.

You guessed it. The Hang Seng was down more than 10% in 7 weeks.

Later that year, he was in The Conqueror’s Story from 25 October through 4 December – also on TVB. The market fell nearly 200 points the day the series started. 

Adam Cheng also starred in a period costume drama called The Prince’s Shadow from 14 March through 18 April 2005. The market fell on the first day, regained most of its loss, but that was the high price of the series. The market fell over the period of the series.

In 2007, Adam Cheng played a real estate CEO in a TV drama set in contemporary China. The series, named Return Home ran for 33 episodes starting 15 July 2007.

In 2009 he did a TVB series on Hong Kong TV, titled The King of Snooker. It was 20 episodes airing on TVB from 30 March 2009 through 24 April 2009. On the first day, the market fell 600+ points or 4.7% on the day. He had also filmed a series in 2008 called The Book and The Sword – a 40-episode period drama aired in China starting 20 March 2009. The HK market fell 2.3% that day.

On 21 May 2012, a 30-episode psychological thriller titled Master of Play starred Adam Cheng. It ran on TVB for 30 episodes through 29 June 2012. The market fell 10% in the 10 days running up to the launch of the new series.

A year later, the period drama movie Saving General Yang was released in Beijing on 4 April 2013 and the next day, the Hang Seng was down 610 points (-2.7%).

In April 2015, the original 1992 drama The Greed of Man which made the Ting Hai Effect was rerun. The first day of the re-run (20 April) the market fell 2% or 558 points. 

He was interviewed in the South China Morning Post 9 days later and the next morning the article came out (30 April). He said he wasn’t to blame for the stock market’s falls when his shows aired. 

The market fell five days straight. 

In classic fashion, there was a new series out in 2018 called Ever Night. It saw advertising the two weeks before and the Hang Seng fell about 1,000 points in the two weeks before the release. People joked days before that the market fall was due to the new show.

The show was popular in China, so the 60-episode Season 1 started in October 2018 was followed by a 43-episode Season 2 staring 13 January 2020 and running for 3 months and a week. The market fell 25% from the start of Season 2 before rebounding. 

Which brings us to the present day…

Earlier this month, the sequel to The Greed Of Man was released for streaming on Disney+. The market, which had rebounded that day, fell for the next 6 days. 

And today, 25 October, TVB starts re-runs of the 1988 series Behind Silk Curtains starring Adam Cheng, where he plays the role of the chairman of a bank, and drives a businessman’s company to bankruptcy so he can take it over.

Notes:

• This is a fun thing. But it appears to be taken somewhat seriously. It ALWAYS comes up. 
• Not EVERY movie or tv series appearance causes bad results. Bar Bender aired starting on 3 April 2006 on TVB Jade, and the market was up that day, fell back a little in the following days, but not seriously, and then rose 8% by 26 April. 
• However, enough do that it retains its name decades later. 

Sources:

• CLSA put out a Hong Kong Market Outlook piece in April 2004 about The Adam Cheng Effect. That is probably the first I heard of it. 
• The Ting Hai Effect wikipedia page is a place to start. 
• There was an article in Chinese on www.chinanews.com (original source: http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml) in April 2009 just after the King of Snooker series started which talked about the Tin Hai Effect. It is likely the source of some of the later articles in English because one of the dates is wrong and most later English sources copy that date.
• Wikipedia has a list of most of the TVB series by year of production. 
• IMDB has a list of most of his appearances. Wikipedia does too.

• Kingston Financial (1031 HK) announced a privatisation offer from Mrs Chu, the controlling shareholder, at HK$0.30 per share, a 47.8% premium to the undisturbed price. The offer price is final.
• Key conditions include approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
• The offer is light and the offeror is betting that the grim market conditions will sway the headcount test in its favour. Scheme document despatched by 21 December. 

• Jinke Smart Services (9666 HK)’s VGO from Boyu Capital is now open at HK$12.00 per share. The first closing date is 14 November. The IFA says it’s fair and reasonable. 
• The offer is conditional on 7.71% valid acceptances and anti-trust approval. The conditions can be waived. The offeror has not received irrevocables.
• The offer is unattractive, but the low threshold and peer multiple derating suggest a high probability of success. At the current price, the spread to the offer is 3.4%. 

• With the review period nearly complete, there could be 4 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• The market cap of potential adds using a 6-month minimum listing history is higher and there is a higher probability of a 6-month minimum listing history being used.
• The potential adds have outperformed the potential deletes and the index. Similar to the last few rebalances, we could see the adds outperform post the end of the review period.

• PMI increased the offer price by 9.4% to SEK 116/share to overcome the resistance of shareholders. PMI warns it is its final offer and keeps the 90% minimum acceptance condition.
• The revised offer represents an implied equity value of SEK 176.4 billion (USD15.8 billion, vs. USD16 billion last May) and 17.1x EV/NTM EBITDAe (vs. 17.5x in May).
• Swedish Match is trading at SEK 112.5, c. 3.1% discount to the revised offer (settlement estimated on 11 November). The market believes the sweetened offer is final. Long & tender.

• The sharp decline in the Korean stock market this year has led to more Korean companies conducting share buybacks. 
• As of 23 October, the number of companies in Korea seeking share buybacks in Korea increased by 41% YoY with 308 companies announcing share buyback programs.
• In the past month, some of the larger market cap companies including Ecopro BM and SKC that have announced share buybacks have significantly outperformed the market.

• Chu Yuet Wah is Offering to take Kingston Financial (1031 HK) private by way of a Scheme at HK$0.30/share.
• The Cancellation price is a 47.78% premium to last close. It will not be increased. 
• Disinterested shareholders  comprise 25.073% of shares out, therefore a blocking stake at the Scheme meeting is 2.5073%. The headcount test also applies. 

• GoTo (GOTO IJ) listed on 11 April and closed at its lowest point since listing yesterday. The lock-up on pre-IPO shareholders expires on 30 November.
• GoTo (GOTO IJ) has confirmed that it is working with pre-IPO shareholders to explore a coordinated secondary offering.
• The lock-up expiry will result in a lot of shares hitting the market in December. The increased float could result in MSCI/FTSE inclusion early next year.

• We see one potential change for the S&P/ASX 50 Index and two potential changes for the S&P/ASX 200 at the December rebalance, though some stocks are close to the cutoffs.
• The potential passive buying on the S&P/ASX 200 (AS51 INDEX) adds will exceed 11 days of ADV while the impact on the other stocks ranges from 1.5-4 days of ADV.
• Most stocks have been moving the right way and there will be pre-positions built up on some of the stocks. Shorts have been active on a few names too.

• System-On-Chip designer and IP purveyor Socionext (6526 JP) is a recent IPO in Japan, born from a spinout of Fujitsu and Panasonic system LSI operations 7+ years ago.
• Having listed on TSE Prime from the outset, that means it gets TOPIX inclusion at the close of trading 29 November. 
• Inclusion Float is a bit nebulous. There is a chance we get official company data prior to the TSE announcement, in which case we know more by cob 31 October.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Giant Biogene Holding (GBH HK) will launch a US$500 million HKEx IPO this week. Blibli (1437710D IJ) has launched an IDR8.2 trillion (US$530 million) Indonesian IPO.
• Event-Driven developments  Link Administration (LNK AU), Nearmap Ltd (NEA AU), Pushpay Holdings (PPH NZ), Tyro Payments (TYR AU), China Vast Industrial Urban Development (6166 HK), Singapore Medical (SMG SP), DTAC/True.

• Two other names aim at Special Entry: WCP and SillaJen. Their listing dates are September 30 and October 13. So, they are technically eligible. But they each have their issues.
• As for WCP, MSCI has not yet assigned a GICS sector. It is unlikely that KRX will put WCP into the KOSDAQ 150 without GICS confirmation.
• SillaJen is technically eligible as its ADMINISTRATIVE designation got terminated. But the rule allowing for KRX’s arbitrary judgment can act as an uncertainty factor.

• On the 27th of September, PRC-incorporated property management play Jinke Smart Services (9666 HK) announced a voluntary cash offer at HK$12/share, a 33.04% premium to last close.
• Boyu, the Offeror, together with concert parties, hold more than 60%. The Offer is contingent on regulatory approvals and 7.71% of shares out tendering. The tendering condition can be waived.
• The Composite Document has now been despatched. The first closing date is the 14 November.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), O2Micro International (OIIM US), Eagle Cement Corp (EAGLE PM).
• Lowest spreads – Tyro Payments (TYR AU),Nitro Software Ltd (NTO AU), OZ Minerals Ltd (OZL AU), Tassal (TGR AU), China Vast Industrial Urban Development (6166 HK), PTB. 

• Talk about timing… Friday before the close I wrote that I thought circumstances might merit a revised tilt at OZ Minerals Ltd (OZL AU) by BHP Group Ltd (BHP AU). 
• Earnings are Monday, copper is up in AUD terms, time is moving us forward into a supply squeeze. It all looks good to me.
• But an article this morning in the AFR says BHP CEO Mike Henry called OZ Minerals “nice to have” not a “must have” and talked “discipline.” Oops.

• Two months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
• Outperformance within Office REITs has been a minimum of 5.9%, and a maximum of ~17% vs the biggest peer, with an average and median outperformance of 10.8% and 9.2% respectively.
• There is no reason to think it won’t continue, but the Japan Excellent story is idiosyncratic.

• Toshiba (6502 JP) investors should look at process and understand the difference between this one and others. Some news is not news, other than telling you the dance has started.
• United Tractors (UNTR IJ) is cheap. It appears to be running at 6x 2022 earnings. This is not abnormal for a cyclical at the end of the cycle.
• Westpac Banking (WBC AU) confirms its interest in Tyro Payments (TYR AU), but still nothing firm.

• The review period for the MSCI November SAIR started during the week and will run till 31 October. The TPX INDEX October rebalance will be implemented close on 28 October.
• The HDFC/ HDFCB merger is progressing faster than expected. NSE Indices has started a market consultation on treatment of mergers and demergers in their indices.
• There have been big redemptions in iShares MSCI Emerging Markets (EEM US) and iShares Core MSCI Emerging Markets ETF (IEMG US) during the week. Tracker Fund had big inflows.

• The IE considers Thoma Bravo’s A$2.10 offer fair and reasonable as it is within its valuation range of A$1.94 to A$2.45 per share (but the below the midpoint of A$2.20). 
• The spread has risen due to suggestions that some investors aim to block the scheme. These investors aim for a bump but will likely settle for the offer if unsuccessful. 
• At Nearmap Ltd (NEA AU)‘s last close price and for the 15 December payment, the gross and annualised spread is 5.8% and 44.5%, respectively.

• In this insight, we take a look at the potential index changes for FTSE 100 and FTSE 250 in the run up to the December 2022 Rebalance.
• There are multiple FTSE 100 and FTSE 250 constituents involved in M&A situations and there could be around five intra-review changes during 4Q 2022.
• Most interestingly, some of the names leading the race to become intra-review replacement ADDs seem to have decent volume impact.

• There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• I see no new deals discussed on Smartkarma this week.
• Key updates took place for Tyro (TYR AU), Shandong Fengxiang (9977 HK), Singapore Medical (SMG SP), Shinsei Bank (8303 JP), and True (TRUE TB) / Total Access Communication (DTAC TB).

• On the 15 August, mapping technology outfit Nearmap Ltd (NEA AU) unanimously backed Thoma Bravo’s A$2.10/share Offer by way of a Scheme of Arrangement. 
• The Scheme Booklet has now been lodged with ASIC. The Independent Expert reckons the Offer is fair and reasonable. 
• The Scheme Meeting will be held on the 25 November, as previously flagged in August’s SID, with an expected implementation on the 15 December. 

• 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. However, such disclosures are by no means an absolute. 
• These insights may flag those companies where shares have been pledged. Stocks mentioned include Impro (1286 HK), Wealthking (1140 HK), C C Land (1224 HK), and China Bright (1859 HK).

• Copper is widely recognised to be in somewhat short supply, and EV/electrification would increase demand going forward (though slower Chinese homebuilding would soften it).
• A number of developments suggest a further squeeze in prices could be near and copper price strength along with AUD weakness makes an AUD-denominated OZL Takeover Price easier to raise.
• Short-Term positioning and longer-term supply constraints are currently battling for near-term import, but medium-term, there’s no escaping the imbalance. Looks like a buy now.

• In this insight, we provide a ranking system for targeting the bottom 5% of potential exclusion candidates in the upcoming MSCI Korea index rebalance in November.
• The ranking system is based on a combined weighted rankings based on MSCI weight, market cap, and ADTV.
• The six stocks that have received lowest weights include Meritz Financial Group, S 1 Corp, Amorepacific Group, CJ Corp, Green Cross Corp,  and LG Household & Health Care-Pref. 

• Jasmine International (JAS TB) is looking to sell its 99.8% interest in Triple T Broadband (TTTBB), and 19% stake in Jasmine Broadband  (JASIF TB) to Advanced Info Service (ADVANC TB).
• The sale required JASIF shareholder approval, but not all resolutions were approved at an EGM this week.
• This is a setback. However, the transaction remains on track.

• CSC and Intertrust have already obtained clearances from all different 13 required regulators. After several extensions, the Offer Period will now end on 31 October.
• Intertrust has had a far from stellar performance on the stock market. Hence, I believe acceptances will be over 80%. The offer will be declared unconditional and the shares delisted.
• Gross spread is 0.3% and the estimated annual return is 6.99% (settlement will be on or before 7 November. Long and tender/accept the offer.

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net outflow over the past week was ~US$1.8bn, split between Shanghai (-US$1.2bn) and Shenzhen (-US$0.6bn).
• The largest inflows were into WuXi AppTec (603259 CH) and BOE Technology (000725 CH). The largest outflows were in Kweichow Moutai (600519 CH) and Inner Mongolia Yili Industrial (600887 CH).

• Foreign investor selling has taken the foreign headroom on Kotak Mahindra Bank (KMB) to 22%. That should result in the stock being added to the FTSE All-World Index in March.
• The stock will initially be added to the index at an investability weight of 5%. Subject to >20% foreign headroom, the investability weight will increase by 5% at subsequent rebalances.
• Continued foreign selling could result in an MSCI weight increase if the headroom increases above 25%. That could still be some time away though.

• Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
• Overall, the net inflow over the past week was ~US$2.7bn, split (+US$1.38bn) for Shanghai and (+US$1.36bn) for Shenzhen.
• The largest inflows were into Tencent (700 HK) and Wuxi (2269 HK). The largest outflows Tracker Fund of Hong Kong (2800 HK) and Hang Seng H Share Index (2828 HK).

• LG Chem’s deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&F.
• Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
• SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.

• Bank of Kyoto (8369 JP) is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.
• That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell. 
• There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 April, and all five of the top holdings are also net sells (0.5-1.1 days).

• On the 14 September, healthcare provider Singapore Medical (SMG SP) announced a low-balled voluntary MBO from TLW at S$0.37/share, a 13.8% premium to last close. 
• The Offer is conditional on 90% of shares out held by the Offeror, and the TLW shareholders plus irrevocables hold 51.67% all-in. This 90% conditionality is firm. 
• The Circular is now out. The IFA (Zico Capital) says the Offer is “not fair but reasonable”. That seems reasonable. The Offer has NOT been declared final.

• Foreign shareholding in HDFC Limited (HDFC IN) has inched higher while moving a tad lower on HDFC Bank (HDFCB IN). Overall, no change in foreign room on the merged entity. 
• The merger could complete in Q1 2023 and there could be sizeable buying from MSCI trackers. There should be no change for FTSE trackers.
• The recently announced market consultation by NSE Indices should result in no buying/selling from passive trackers; there will be some additions to the NIFTY Index and Nifty Next 50 Index.

• In this insight, we take a look at the potential index changes for S&P ASX 200, 100, 50, and 20 in the run up to the December 2022 Rebalance.
• The top 5 highest ranked ASX 200 Potential ADDs have 10+ days to buy and a couple of these names could become intra-review additions. 
• Pilbara Minerals (PLS AU) is an ASX 50 ADD and Lendlease Group (LLC AU) is an ASX 50 DEL as it stands. 

• EVOC Intelligent Technology Company Limited H (2308 HK)’s delisting resolution was approved – 81.20 % of independent H Share votes cast FOR (7.05% of all independent H Shareholders AGAINST).
• The gross spread recently increased from 2.9% (11 October) to 7.5% (13 October) due to nervousness about another failed privatisation attempt after two failed bids. 
• The last trading date is 20 October. At last close and for the 7 November payment date, the gross and annualised spread to the offer is 5.4% and 164.7%, respectively.

• A week after JIP gets preferred status and we had rumoured bid prices, we now have an article saying JIC/Bain is still in it, and a new article today.
• Today’s “new” article says JIP’s bid price is what the first leak suggested, which is below ¥6,000/share. Other articles suggest bidders are finding that securing financing is tough. 
• Investors should look at process and understand the difference between this one and most others. It matters. Some news is not news, other than telling you the dance has started.

• Back on the 8 September, payment provider Tyro Payments (TYR AU) rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme. 
• Tyro has now announced it has received approaches from several parties, including Westpac (WBC AU). “None of these approaches are sufficiently definite … to warrant further disclosure at this time“.
• Shares are currently trading at A$1.59/share. Tyro recently raised its FY23 EBITDA guidance to A$28mn-34mn, up from A$23mn-29mn. 

• Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
• The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft’s stake further declined, and the LTV ratio was subsequently lowered.
• Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.

• The IFA has declared the Singapore Medical (SMG SP) VGO (S$0.37 cash or one new share in the offeror) from management (chairman, CEO, exec director) is “not fair but reasonable.” 
• The offer is light, and hitting the 90% minimum acceptance condition will be challenging. There is a remote chance of a bump as the offer has not been declared final.
• Irrevocables remain at 51.67% of outstanding shares. The current gross spread of 1.4% is not an attractive risk/reward profile. Take profits and head for the exit.

• Back on the 9 June, Urban planner China Vast Industrial Urban Development (6166 HK)  received a pre-conditional Offer, by way of a Scheme, from China Jinmao Holdings (817 HK).
• The cancellation (and final) price is HK$2.40/share, a ~30% premium to the undisturbed price. Pre-Conditions include approvals from SAMR, SASAC, and NDRC. 
• Those pre-cons have now been satisfied. The Scheme Doc is currently expected to be dispatched on or before the 31 October. There may be some slippage. 

• There was a lot of confusion around how NSE Indices would handle the HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger in its indices.
• The market consultation seeks to change the index methodology to bring it in line with other index providers. That will result in much lower turnover than the existing index methodology.
• Pidilite Industries (PIDI IN) is a high probability add to the NIFTY Index possibly in the first quarter of 2023. There will also be changes to Nifty Next 50 Index.

• Tyro Payments (TYR AU) confirmed that it has “received approaches from several parties expressing interest in a potential change of control transaction, including Westpac Banking (WBC AU).”
• Tyro previously rejected a A$1.27 offer from the Potentia consortium. Grok’s get-out clause with Potentia sets the floor price of a competing bid at A$1.52 per share.
• The last close of A$1.59 is higher than the floor price. Triangulating the value of a rival bid across several data points suggests a competing offer of around A$2.

• JBF now controls 63.66% of the share capital of Bobst. Tendered shares represent just c.10.3%. The additional acceptance period runs until 21 October.
• The CHF 78/share offer represents 6.6x EV/Fwd EBITDA vs. 7.5x for Swiss industrial machinery peers. Unsurprisingly, the shares have been trading slightly above terms since the (opportunistic) offer announcement. 
• If 3.01% of shares are tendered during the reopened period, JBF could potentially delist the company. Although this could be challenged in courts, buying above the offer price seems risky.

• In this insight, we take a look at the potential index changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) between now and the December 2022 Rebalance.
• There is an ongoing market consultation with significant implications for constituent selection and there is also a potential intra-review change due to the DTAC-TRUE merger.
• Based on the latest available data, there could three or four index changes during the December 2022 Rebalance depending on the outcome of the DTAC-TRUE merger.

• In January 2022, Recruit Holdings (6098 JP) launched a Tender Offer buyback to buy back shares from NTT Data, Hakuhodo, and TBS. 
• Today, Recruit announced another buyback of up to 42mm shares (2.57% of shares out) spending up to ¥150bn, to go from now until 14 March 2023 (5mos).
• This time the buyback should have better traction and market impact, but it is not overwhelming, and the impact will likely lessen at higher share prices.

• Blibli (1437710D IJ) is offering 17.77bn shares in its IPO at a price range of IDR 410-460/share. That could raise up to US$530m and value the company up to US$3.64bn.
• The stock will not get Fast Entry to the IDX30, LQ45, MSCI and FTSE indices, so no near-term support from passive buying.
• The stock could make it into the MSCI Small Cap Index in February and the FTSE All-World/All-Cap Index in June. Earliest inclusion in IDX30/IDX80/LQ45 indices could be in July.

• Hong Kong Chief Executive John Lee Ka-chiu will deliver his inaugural policy address on the 19 October, where he is expected to announce a number of “ground-breaking” measures.
• One such measure is non-residents who have owned property in Hong Kong for 3+ years may get their extra stamp duty refunded – if they take up permanent residency.
• Secondary home prices have declined  8% year-to-date, and are approaching a five-year low. Goldman Sachs expects home prices to decline 30% in 2023 from last year’s levels.  

• Thailand SET Index (SET INDEX) is a composite index which represents the price movement for all common stocks trading on the SET.
• SET50 and SET100 indices are calculated, respectively, from the stock prices of the top 50 and 100 listed companies on SET in terms of market capitalization and liquidity.
• In this insight, we take a look at the selection criteria and the historical price performance of past Rebalance Events.

• Since mid-September, spreads have shown a mixed performance across our liquid universe with a slight bias towards widening.
• Trade recommendations long ords / short prefs: BMW, Fuchs Petrolub, Handelsbanken, SSAB Svenska Stal.
• Recommendations Long prefs / short ords: Sixt, VW, MFE-Media for Europe, Grifols, Atlas Copco.

• Last Friday, small-cap logistics JREIT Mitsubishi Estate Logistics (3481 JP) (“MEL“) announced a follow-on equity offering to fund part of their recently-announced property acquisition. 
• The primary offer quantity is 51,000 units. In addition, there will also be an over-allotment quantity of 2,550 units. The total size of this offering could be roughly ¥23bn (~US$157mn). 
• 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.

• China Vast Industrial Urban Development (6166 HK) announced that all the pre-conditions were fulfilled. China Jinmao Holdings (817 HK)’s offer is HK$2.40 per share.
• The key condition is approval by at least 75% of disinterested shareholders (<10% of disinterested shareholders rejection). Shareholders with blocking stakes will be supportive.
• The offer is light, but the headcount test is not applicable. At last close and for a year-end payment, the gross and annualised spread is 0.8% and 4.0%, respectively.

• Nearing the end of the review period for the SZSE1000 Index, we estimate around 50 changes to the index. The first-order impact on the stocks is not large.
• Stocks that are not currently in Buy/Sell Stock Connect will be added to the list. That makes them eligible for inclusion in the MSCI and FTSE indices in February/March.
• 5 of the potential adds could be added to the MSCI China Index in February and 34 of the potential adds could be added to the FTSE All-World/All-Cap in March.

• TS LA reports earnings on October 19th, and we analyse expected moves using the options market
• Stock has suffered some production issues, but we think company has potential to beat the lowered estimates
• We identify some option strategies to play the event with goof risk/reward