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• Keppel Corp (KEP SP) shares will trade ex-distribution on 23 February and the settlement of the new Sembcorp Marine (SMM SP) shares is expected to take place on 1 March.
• MSCI has announced the inclusion of Sembcorp Marine (SMM SP) in the MSCI Singapore Free Index (SIMSCI INDEX) at the close on 1 March.
• There are a lot of recent shorts on Sembcorp Marine (SMM SP) and there could be buying on the stock following the announcement of the MSCI inclusion.

• Last night, MSCI announced Sembcorp Marine (SMM SP) will be added to MSCI Standard effective 2 March as the KOM Consideration Shares become tradable. This is something of a surprise.
• That other index family announced a temp line would be added to the index on receipt by Keppel shareholders. This dramatically changes the Day1 overhang arithmetic. 
• It erases most but not all of the Day 1 passive overhang, and means adding shares for the existing SMM portion. Medium-long-term active overhang is unchanged.

• For the recent conversion, the listing date is March 3rd, involving 500K shares. Despite the ongoing rally, there is a possibility of a significant price impact due to the volume.
• We still have 1,632,333 shares to be converted. This represents 6.5% of the SO. There is a high likelihood that these will also be applied for conversion soon.
• Assuming that it occurs in increments of 400-500K, there could be roughly 3-4 opportunities for shorting.

• Amvis Holdings Inc (7071 JP) (AH)’s founder aims to raise around US$250m via a secondary follow-on offering.
• The deal will increase the free-float of the stock and will lead to the stock being transferred to the Prime segment.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• Fujitec management is under the gun. Last week, both major international proxy advisors – ISS and Glass Lewis – generally favoured Oasis’ Spill The Board candidate slates.
• Fujitec Co Ltd (6406 JP), of course, had their opinion on the matter (Additional Explanatory Material, Response re ISS, Response re Glass Lewis) 
• How this breaks is a question. Shareholder structure analysis may take us there, but this could end mixed.

• Looking at the recent pattern, SKT’s fast-rising is quite noticeable. Its foreign room rose to 12.08%. On the other hand, KT’s foreign room growth seems to be slowing somewhat.
• SKT’s pace is fast. If the current pace continues, there will be even the possibility of inclusion with a full adjustment factor of 1.0, exceeding 25%, by the August review. 
• We should design a momentum trading setup targeting the point when SKT’s foreign room decline trend will be reflected into an MSCI re-inclusion momentum.

• Jiangnan (1366 HK) disclosed a scheme privatisation offer from Mr Chu Hui (Chairman and CEO) at HK$0.40 per share, a 107.3% premium to the undisturbed price (HK$0.193 on 13 February).
• The key condition is approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The shareholder with a blocking stake will be supportive. 
• The price is final and attractive in the context of historical prices and multiples. The scheme meeting is likely in mid-May. At last close, the gross spread is 12.7%.

• Samyang Foods (003230 KS) will replace Hyundai Greenfood (005440 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 12 April.
• We expect DGB Financial Group (139130 KS) will replace Meritz Securities (008560 KS) in early April.
• Then we expect another 3 changes at the regular rebalance in June. The potential adds have moved sharply higher recently and there are flows from other index trackers too.

• The Scheme Meeting for BGH/Sixth Street’s NZ$1.34/share Offer for church donor management play Pushpay Holdings (PPH NZ) will take place on the 3 March.
• Accident Compensation Corporation (ACC), holding 6.2% of shares out, said it will vote against the Scheme. Nikko Asset Management (1.4%) also said they will reject the Offer. 
• Shares have wobbled and are now 5.5% adrift of terms. BGH/Sixth Street still has the flexibility to bump.

• Alludo has declared its Offer of A$2.15 cash per Nitro Software Ltd (NTO AU) share free from all remaining conditions.
• Separately, Potentia’s due diligence is expected to conclude tomorrow, the 22 February, with the expectation it bumps its current offer of A$2.00/share.
• Currently trading at A$2.20 per share suggesting limited upside from here. 

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Sembcorp Marine (SMM SP) as the takeover of Keppel O&M nears. The deal goes effective 28 February after last week’s SMM shareholder approval.
• That will mean overhang. Lots of active overhang. There WILL be some index upweights, but index treatment remains nebulous, and one has to expect a lot more net index outflow.

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Keppel Corp (KEP SP) as the SMM takeover of Keppel O&M nears. The deal goes effective 28 February but KEP trades ex- on 23 February.
• While not as egregiously mis-priced as SCI vs SMM in autumn 2021, NEW KEPPEL appears under-priced here. 

• The announcement of the changes to the FTSE GEIS was made on Friday post market close. Friday was also the cutoff for the March review of the S&P/ASX indices.
• Monday is the review cutoff for some indices, while Friday is the announcement of the changes to the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX). 
• There were big outflows from the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) for yet another week taking YTD outflows to nearly US$3bn.

• The transaction completes on 28 February and the distribution in-specie of 49% new Sembcorp Marine (SMM SP) shares will be credited to Keppel Corp (KEP SP)‘s shareholders on 1 March.   
• While the potential index inclusions are likely to support new SMM shares, there is likely to be greater short-term downward pressure from the overhang created by the distribution in-specie. 
• New SMM trades at a premium P/NAV multiple of 1.81x vs peers. However, New SMM’s order book of S$18.1 billion implies an undemanding EV/order book of 0.60x vs historical ranges.

• Srisawad Power 1979 (SAWAD TB) is likely to join the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in early March following the DTAC/TRUE merger.
• Then there should be one change in June with Thai Life Insurance (TLI TB) replacing Jaymart PCL (JMART TB) in the index.
• There is one stock close to failing the liquidity test and that could lead to another change with a few stocks vying for index inclusion.

• Keppel Corp (KEP SP) shares will trade ex-distribution on 23 February and the settlement of the new Sembcorp Marine (SMM SP) shares is expected to take place on 1 March.
• MSCI has announced the inclusion of Sembcorp Marine (SMM SP) in the MSCI Singapore Free Index (SIMSCI INDEX) at the close on 1 March.
• There are a lot of recent shorts on Sembcorp Marine (SMM SP) and there could be buying on the stock following the announcement of the MSCI inclusion.

• For the recent conversion, the listing date is March 3rd, involving 500K shares. Despite the ongoing rally, there is a possibility of a significant price impact due to the volume.
• We still have 1,632,333 shares to be converted. This represents 6.5% of the SO. There is a high likelihood that these will also be applied for conversion soon.
• Assuming that it occurs in increments of 400-500K, there could be roughly 3-4 opportunities for shorting.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Osbert Tang, CFA as he shares more about his top trade ideas in China, the latest trends, and business opportunities in the space.

The webinar will be hosted on Wednesday, 22 February 2023, 17:00 SGT/HKT.

Osbert Tang is an equity analyst with over 20 years of experience with focuses on China transport, infrastructure, industrials and utilities sectors. He has been based in Shanghai since 2003, accumulated nearly 20 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities. Osbert has received votes from top-tier institutional investors and has been a highly-ranked transport and infrastructure analyst in the Asiamoney, Institutional Investors and Greenwich surveys. In addition to his extensive experience with international investment banks including RBS, ABN AMRO (both served as Shanghai Chief Representative), Paribas Asia Equity, Maybank Kim Eng and DBS Securities, he has been a senior analyst with Moody’s Investors Service with focus on ratings of China infrastructure and related LGFV issuers. He has also worked in the area of strategic development at Sun Hung Kai Properties Limited. Osbert holds a BBA from the Chinese University of Hong Kong, an MBA from the University of Texas at Austin and a MSSc in Applied Psychology from the City University of Hong Kong. He was accredited with the CFA charter in 1997, and is a member of both British Psychological Society and Hong Kong Psychological Society.

• China Renaissance (1911 HK) was once touted as a “leading investment bank and asset manager dedicated to the new economy“. At the time of its 1Q21 post-IPO high, it was.
• Late last Thursday, the 16 February, CR said it was unable to contact (hours, days, weeks?) Bao Fan, its chairman, CEO, and controlling shareholder. Shares subsequently fell 28%.
• Bao is the face of CR and instrumental in client dealing and complex large-scale deal making. Clarification is recommended before investors dip their toe back in the water.

• Last night, MSCI announced Sembcorp Marine (SMM SP) will be added to MSCI Standard effective 2 March as the KOM Consideration Shares become tradable. This is something of a surprise.
• That other index family announced a temp line would be added to the index on receipt by Keppel shareholders. This dramatically changes the Day1 overhang arithmetic. 
• It erases most but not all of the Day 1 passive overhang, and means adding shares for the existing SMM portion. Medium-long-term active overhang is unchanged.

• We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
• On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
• Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Sembcorp Marine (SMM SP) as the takeover of Keppel O&M nears. The deal goes effective 28 February after last week’s SMM shareholder approval.
• That will mean overhang. Lots of active overhang. There WILL be some index upweights, but index treatment remains nebulous, and one has to expect a lot more net index outflow.

• ABB India Ltd (ABB IN), Adani Wilmar (AWLTD IN), Canara Bank (CBK IN), Page Industries (PAG IN) and Varun Beverages Ltd (VBL IN) will be added to the index.
• Bandhan Bank Ltd (BANDHAN IN), Biocon Ltd (BIOS IN), Gland Pharma Ltd (GLAND IN), Mphasis Ltd (MPHL IN) and Paytm (PAYTM IN) will be deleted from the index.
• Given the large drop in the stock prices of the Adani Group companies, capping changes will result in buying on all non-F&O stocks in the index.

• The announcement of the changes to the FTSE GEIS was made on Friday post market close. Friday was also the cutoff for the March review of the S&P/ASX indices.
• Monday is the review cutoff for some indices, while Friday is the announcement of the changes to the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX). 
• There were big outflows from the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) for yet another week taking YTD outflows to nearly US$3bn.

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Keppel Corp (KEP SP) as the SMM takeover of Keppel O&M nears. The deal goes effective 28 February but KEP trades ex- on 23 February.
• While not as egregiously mis-priced as SCI vs SMM in autumn 2021, NEW KEPPEL appears under-priced here. 

• The transaction completes on 28 February and the distribution in-specie of 49% new Sembcorp Marine (SMM SP) shares will be credited to Keppel Corp (KEP SP)‘s shareholders on 1 March.   
• While the potential index inclusions are likely to support new SMM shares, there is likely to be greater short-term downward pressure from the overhang created by the distribution in-specie. 
• New SMM trades at a premium P/NAV multiple of 1.81x vs peers. However, New SMM’s order book of S$18.1 billion implies an undemanding EV/order book of 0.60x vs historical ranges.

• On the 14 May 2018, coalbed methane producer AAG Energy Holdings (2686 HK) announced a partial offer (50.5%) from Xinjiang Xintai Natural Gas (603393 CH) at HK$1.75/share. 
• Xinjiang Xintai has returned to the pit with a $1.85/share Offer by way of a Scheme. The Cancellation Price will NOT be increased.
• This is hardly a knockout price, at a 10.1% premium to undisturbed; and just a 2.2% premium over the highest closing price of HK$1.81/share in the past year.

• There are 41 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
• Onr new deals was discussed on Smartkarma this past week – AAG Energy (2686 HK)‘s Scheme.  Jiangnan (1366 HK) also suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
• Key updates took place for: Toshiba Corp (6502 JP), Newcrest Mining (NCM AU), Yashili International Holdings (1230 HK), Sembcorp Marine (SMM SP), and O2Micro International (OIIM US).

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Pertamina Geothermal is set to make its debut in the coming week.
• Placements picked up pace this week, with multiple deals across geographies.

• Srisawad Power 1979 (SAWAD TB) is likely to join the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) in early March following the DTAC/TRUE merger.
• Then there should be one change in June with Thai Life Insurance (TLI TB) replacing Jaymart PCL (JMART TB) in the index.
• There is one stock close to failing the liquidity test and that could lead to another change with a few stocks vying for index inclusion.

• There were some review cutoffs last week as well as the implementation of the PCOMP INDEX, IDX 30 Index, LQ 45 Index and IDX 80 Index. 
• The big event in the coming week is the announcement of the MSCI February QCIR on Friday morning Asia time with implementation at the close of trading on 28 February.
• Inflows to iShares Core MSCI Emerging Markets ETF (IEMG US) continue while IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) continues to see redemptions.

• Three quarters of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 June.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 11.47% at the June rebalance resulting in a one-way trade of CNY 10.11bn.
• The potential adds have outperformed the potential deletes and the CSI500 Index over the last few weeks. There could be more outperformance till nearer the end of the review period.

• MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
• FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
• Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

• On 8 February, MSCI announced special treatment for the Adani names in its indices, discussed in Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case. 
• Late on 15 February they came out with a revision of their implementation – which was problematic because some stocks had gone limit down many days in a row. 
• The stocks responded. But it clearly isn’t an easy implementation, and it clearly isn’t over. 

• ABB India Ltd (ABB IN), Adani Wilmar (AWLTD IN), Canara Bank (CBK IN), Page Industries (PAG IN) and Varun Beverages Ltd (VBL IN) will be added to the index.
• Bandhan Bank Ltd (BANDHAN IN), Biocon Ltd (BIOS IN), Gland Pharma Ltd (GLAND IN), Mphasis Ltd (MPHL IN) and Paytm (PAYTM IN) will be deleted from the index.
• Given the large drop in the stock prices of the Adani Group companies, capping changes will result in buying on all non-F&O stocks in the index.

• Hanwha Solutions received shareholder approval for its proposed demerger on February 13. The demerger will split Hanwha Solutions into two separate entities: Hanwha Galleria and Hanwha Solutions.
• Hanwha Solutions will experience a passive outflow of 0.92x ADTV at the closing price on February 24 for KOSPI 200. A similar passive inflow will occur on March 31.
• MSCI Standard will deliver an outflow of 0.43x ADTV at the close on March 31 as the weight of Hanwha Solutions, an existing constituent, will be reduced.

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Sembcorp Marine (SMM SP) as the takeover of Keppel O&M nears. The deal goes effective 28 February after last week’s SMM shareholder approval.
• That will mean overhang. Lots of active overhang. There WILL be some index upweights, but index treatment remains nebulous, and one has to expect a lot more net index outflow.

• Semiconductor memories, the most volatile part of the chip market, have declined dramatically since June
• During downturns memory chip prices typically collapse until they hit cost
• NAND appears to be selling at or near cost, but DRAM still has room for further declines

• The announcement of the changes to the FTSE GEIS was made on Friday post market close. Friday was also the cutoff for the March review of the S&P/ASX indices.
• Monday is the review cutoff for some indices, while Friday is the announcement of the changes to the Hang Seng family of indices and the SSE STAR50 (STAR50 INDEX). 
• There were big outflows from the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) for yet another week taking YTD outflows to nearly US$3bn.

• This insight comes as one-half of a pair. The problem: I cannot label one insight as a pair trade, and there are different dynamics at play.
• This insight discusses the dynamics of Keppel Corp (KEP SP) as the SMM takeover of Keppel O&M nears. The deal goes effective 28 February but KEP trades ex- on 23 February.
• While not as egregiously mis-priced as SCI vs SMM in autumn 2021, NEW KEPPEL appears under-priced here. 

• The Sembcorp Marine (SMM) EGM is scheduled for 16 February. If approved by shareholders, the Asset Co transaction and completion of the KOM restructuring will be done by 28 February.
• We expect no market trade from FTSE trackers, buying from MSCI trackers, while there is a question mark over treatment in the FTSE Straits Times Index (STI) (STI INDEX). 
• There could be selling in Sembcorp Marine (SMM SP) from active Keppel Corp (KEP SP) shareholders and that could have a bigger impact on the stock.

• The review period for the March rebalance ends today. We forecast 2 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
• We expect the index committee to continue using a 6-month minimum listing history. The impact on the potential deletes is a lot higher than the impact on the potential adds.
• With 5 changes to the index, estimated one-way turnover is 5.1% resulting in a one-way trade of CNY 4,549m. There is a reasonably large reverse funding trade.

• We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
• On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
• Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

• Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches. 
• They released earnings last Friday, but today released other – follow-on information. 
• Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.

• On 8 February, MSCI announced special treatment for the Adani names in its indices, discussed in Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case. 
• Late on 15 February they came out with a revision of their implementation – which was problematic because some stocks had gone limit down many days in a row. 
• The stocks responded. But it clearly isn’t an easy implementation, and it clearly isn’t over. 

• Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it. 
• Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position. 
• What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter. 

• Hanwha Solutions received shareholder approval for its proposed demerger on February 13. The demerger will split Hanwha Solutions into two separate entities: Hanwha Galleria and Hanwha Solutions.
• Hanwha Solutions will experience a passive outflow of 0.92x ADTV at the closing price on February 24 for KOSPI 200. A similar passive inflow will occur on March 31.
• MSCI Standard will deliver an outflow of 0.43x ADTV at the close on March 31 as the weight of Hanwha Solutions, an existing constituent, will be reduced.

• Jiangnan (1366 HK), a manufacturer of wires and cables for power transmission and distribution systems, was suspended yesterday at lunchtime pursuant to Hong Kong’s Code on Takeovers and Mergers.
• But not before the share price gained 63% on clear news leakage.
• Chu Hui, the chairman, CEO, and major shareholder, mulled taking the private six years ago. 

• After Asian indexes met targets we have now turned negative in a domino sequence.
• Our table pounding inflationary higher USD and higher yield thesis is seeing the dollar on the move with yield in hot pursuit.
• Bull divergence in yield and the USD warn or a multi month rise. This is just the beginning of the pain trade to unwind peak inflation and peak rate positioning.

• Mori Trust Sogo Reit (8961 JP) and Mori Trust Hotel Reit (3478 JP) will merge at the end of this month. 
• They pay divs, there is a unit split, then NEWCO. 
• If you are in the biz and you care, there is a small index thing to do.

• We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
• On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
• Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

• HK Electric Investments (2638 HK) will be deleted from the MSCI Hong Kong Index at the close on 28 February. This was largely expected.
• We estimate passive MSCI trackers will need to sell 172.3m shares (US$111m; 19.1 days of ADV to trade). That is a lot. But there are pre-positions on the stock.
• HK Electric Investments (2638 HK) has underperformed its peers and now trades at a lower price to book. There could be outperformance post the MSCI deletion.

• It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
• We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
• We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks. 

• Ito En Ltd (2593 JP) is a slightly strange stock in the grand scheme of things.
• It is expensive for its growth, and the shareholder register is such that it is subject to the whims and vagaries of forces over which investors may have no control.
• This time, it is MSCI. Stock prices go up, stocks go in the indices. Stock prices fall, they come out. It’s coming out this month. So who buys?

• Rakuten Bank, the online banking arm of Rakuten Inc (4755 JP), aims to raise around US$500m (estimated) in its Japan listing in April 2023. 
• RB is the largest internet bank in Japan, by number of accounts. As of Mar 2023, it had 13.39m deposit accounts with a total deposit base of JPY8.6tn. 
• In this note we take an early look at the IPO and talk about the positive aspects of its past performance.

• The target volume is 24,718,099 ordinary shares (13.2%) and 159,835 preferred shares (9.8%). That is, C&T will cancel all of its treasury shares in the next five years.
• C&T’s decision to cancel treasury shares clearly indicates that the family’s fundraising strategy is focused on stake sales rather than dividend increases.
• The number of shares inherited will be the volume Lee Seo-hyun will sell in the short term as this is within the range that minimizes the tax liability through LIFO.

• At the EGM held on January 31, O2Micro International (OIIM US)’s shareholders approved the Merger Agreement. Completion was subject to satisfying certain conditions, which appeared rudimentary. 
• An equity corporate action notice released yesterday (15 February) indicates the last day of trading will be the 24 February, with an effective date of 27 Feb.
• O2Micro is currently at a 2.7% gross spread. At the other end of the spectrum, Glory Star New Media (GSMG US) is at a staggering 79% spread, despite shareholder approval.

• Adways Inc (2489 JP) is an ad agency, ad platform, marketing platform, and a variety of sub-platforms serving certain mobile, PC, marketing, and app development niches. 
• They released earnings last Friday, but today released other – follow-on information. 
• Included was a buyback – up to 5.7mm shares (13.57% of shares out) for up to ¥2bn (9% of mktcap) – over the next 5.5 months. Seems big. Look closer.

• Shareholders have given SciClone Pharmaceuticals (6600 HK)‘s buyback the go-ahead which will result in the major shareholder holding (upward of) 31.63%, and the freedom to creep.
• As such, a concentrated shareholder register, primarily comprising entities that privatised SciClone in 2017, gets even more concentrated.
• Trading inexpensively ahead of the launch of a new (and approved) drug, SciClone is worth a second look. 

• Trend Micro Inc (4704 JP) is an interesting, but odd little company in an interesting odd little niche. They make cybersecurity products and are good at it. 
• Last summer, well-known activist Value Act Capital showed up on the tape in August with an 8.7% position. 
• What had been good dividend payout ratios are now cemented. Now there is a big buyback to return cash. Look for more. And as always, details matter. 

• Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP. 
• Despite that, we see some small positive signs across the various industrial segments. 
• On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

• A decrease in FIF on Adani Enterprises (ADE IN), Adani Transmission (ADANIT IN) and Adani Total Gas (ATGL IN) will result in selling from passive MSCI trackers on 28 February.
• At the last close, Adani Power (ADANI IN), Adani Total Gas (ATGL IN) and Adani Transmission (ADANIT IN) are at risk of being deleted from the MSCI India in May.
• We believe it is unlikely that MSCI will add the Additional Surveillance Measures companies to the list of Ineligible Boards for India, though we cannot rule it out completely.

• MatsukiyoCocokara (3088 JP) has run up quite well in the past year, rising strongly and outperforming Peers significantly. It has been the avatar of Inbound Rebound hopes and dreams.
• Over that time, forward EPS expectations have also improved, but not as much as price. MatsukiyoCocokara used to be cheap to peers on forward PER. Now it is not.
• 28 Feb sees an MSCI inclusion trade to swing 7% of shares from active to passive. Understanding where those come from is key.

• Yesterday, Indonesia’s second largest coal mining business Adaro Energy (ADRO IJ) announced a buyback. This follows another buyback which ended in December 2022.
• The Sep21-Dec22 buyback bought back 1bn shares, but did not spend all the money allocated to the buyback. This new one might buy back a similar quantity.
• Looking at Real World Float is the right frame of reference. And the stock was at a recent low vs a Peer Basket. 

• In this insight, we discuss three major reasons why foreigners are pouring so much capital into the Korean stock market this year.
• In the first two months of 2023 (as of 13 February), foreigners net purchased 8.2 trillion won in KOSPI included stocks.
• These three major reasons include meaningful corporate governance improvements, increasing probability of South Korea being included in the MSCI developed country status, and overall turnaround in the global equity markets.

• HK Electric Investments (2638 HK) will be deleted from the MSCI Hong Kong Index at the close on 28 February. This was largely expected.
• We estimate passive MSCI trackers will need to sell 172.3m shares (US$111m; 19.1 days of ADV to trade). That is a lot. But there are pre-positions on the stock.
• HK Electric Investments (2638 HK) has underperformed its peers and now trades at a lower price to book. There could be outperformance post the MSCI deletion.

• We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
• We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
• We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial. 

• We currently see 1 change for the ASX20 Index, 2 changes for the ASX100 Index, 4 changes for the ASX200 Index, 10 adds/7 deletes for the ASX300 Index in March.
• On average, the potential adds to each of the indices have outperformed the potential deletes with the largest outperformance for the ASX300 Index.
• Shorts have continued to increase positions on the potential deletes while covering their positions on the potential adds. We expect there are large pre-positions on some of the stocks now.

• It has been reported that Kakao has hired local brokerage firms to discuss the details of another tender offer of SM Entertainment shares (at more than 130,000 won).
• We believe that this has been the key reason why SM Entertainment’s shares rose an additional 5% on 15 February.
• We believe that eventually Kakao Group will win the M&A fight for SM Entertainment and shares of SM could rise further in the coming weeks. 

• OVERSEAS. SPX Rise as Cycicals/Tech bid; Higher Rates; Strong USD, No problem !   Market seems to have concluded that higher rates+strong economy is a workable outcome.
• JAPAN. NKY Futs +0.4% vs Cash; USDJPY weakens to 134.1; Weak Yen Narrative to dominate; Do not say to “Mr Yen” who sees 120 ;  BULLISH Inbound but priced in
• DAILY NUGGET. BayCurrent Consulting (6532) – Still lot of tailwinds..still BULLISH.

• Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
• Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
• No related investment opportunity but there may be a trade to do.

• Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
• It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
• The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.

• Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP. 
• Despite that, we see some small positive signs across the various industrial segments. 
• On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

• The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
• We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
• Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

• Link REIT (823 HK) (LREIT) aims to undertake a 1 for 5 rights issue at a subscription price of HK$44.20/unit, to raise around US$2.4bn.
• After announcing a S$2.2bn acquisition in late Dec 2022, the company explicitly mentioned that it didn’t need to raise any new capital. Thus, the rights issue marks an abrupt turnaround.
• In this note, we talk about the right issue, its previous acquisition and the overall implications.

• In a move to counter Lee Soo-man’s influence, S.M.Entertainment Co (041510 KS) intends to issue new shares (9.05% on a fully diluted basis) to Kakao Corp (035720 KS).
• Lee, with 18.4% in SM, responded by selling 14.8% to SM’s rival HYBE (352820 KS). HYBE concurrently announced a tender offer for an additional 25%, at ₩120,000/share, a 22% premium.
• Kakao and SM are less than impressed. But these developments are a power grab for the pioneer of K-pop.

• One constituent change is expected in the BATTERY index rebalancing as Ecopro Co Ltd surpassed Iljin Materials based on the average daily market cap during the review period.
• Ecopro Co Ltd is a pure holding company, so it may not be subject to inclusion. However, KRX recognizes related sales from unlisted subsidiaries as sales from the holding company.
• The actual passive impact of the rebalancing day will likely be 0.15x or more for both. This level can enable a long-short setup for these from a day trading perspective.

• REPT BATTERO Energy (REPT HK) is looking to raise US$1bn in its upcoming Hong Kong IPO. 
• REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs. 
• In this note, we will talk about the positive aspects of the deal.

• The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
• The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized. 
• The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.

• On 14 February 2023, Idemitsu Kosan (5019 JP) reported Q3 results. They were less impressive than one would have hoped. 
• Lower USDJPY and lower Dubai crude prices mean a JPY 90bn hit to inventory marks, but the rest of the petro business made almost no money in the quarter. 
• However, the company announced a large buyback. THAT is worth looking at. 

• After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering. 
• The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP. 
• This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.

• Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
• Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
• No related investment opportunity but there may be a trade to do.

• MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
• FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
• Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

• A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP). 
• DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
• DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster. 

• MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
• Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
• Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.

• Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
• It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
• The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.

• We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE. 
• There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks. 
• There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Hesai Group (HSAI US) provided the first Asia linked listing for the year.
• Things were quiet on the placement front owing to the annual earnings reporting season.

• Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
• Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
• Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

• Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
• Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
• We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024). 

• MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
• There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
• The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.

• After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering. 
• The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP. 
• This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.

• MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
• FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
• Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

• A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP). 
• DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
• DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster. 

• Engineering & Construction firm Jgc Corp (1963 JP) on Friday announced 9M results. Full-Year forecasts were revised, with revenue lowered, but OP, RP, and NP unchanged.
• The company then also announced a ToSTNeT-3 buyback of up to 4.77% of shares out for ¥20bn to be executed Monday 13 February pre-open. But details matter. 
• Four Important Takeaways: 1) sometimes a ToSTNeT-3 buyback is not a ToSTNeT-3 buyback, 2) that can be a good sign, and 3) sometimes Adjusted EV vs Adjusted EBITDA is OK.

• The stage is set for an equity/risk off decline after the SPX met our 4,200 rally objective as have Asian and European indices.
• We are treating the DXY 101 low as a key USD turn support that will see dollar upside follow through on the back of a bullish 10 yr yield breakout.
• Equity weakness due from mid- Feb into Q2. NDX is hovering near pivotal lows (tech/growth U/P). Scales are tipped toward new lows.

• The MSCI revised the Adani Group weighting after reviewing FF. Adani Enterprises (ADE IN)affected. Adani Green (ADANIGR IN), Adani Power (ADANI IN), and Adani Ports (ADSEZ IN) not affected. 
• Hongkong Land (HKL SP) is dirt cheap at 0.3x P/B. It is a China re-opening play. Plus the company is buying back shares. 
• The Nikkei didn’t write an article on Toshiba (6502 JP) when everyone else did. They waited another day, with what appears to be a zinger on price at “about ¥2trln“. 

• MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
• Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
• Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, Hesai Group (HSAI US) provided the first Asia linked listing for the year.
• Things were quiet on the placement front owing to the annual earnings reporting season.

• We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE. 
• There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks. 
• There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.