Most Read

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Travis Lundy as he gives us a quick rundown about what is the current situation that is happening with Adani Enterprises and where they are headed from this point on.

The webinar will be hosted on Wednesday, 1 February 2023, 17:00 SGT/HKT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

• The review period for the February Quarterly Comprehensive Index Review (QCIR) of the MSCI indices ended yesterday. There will be a number of changes in the Asia Pacific region.
• Most of the inclusions are in China and the country weight in the MSCI Emerging Markets Index should increase leading to outflows from other markets.
• On average, the potential adds have outperformed the potential deletes over the last few weeks. At a glance, pre-positioning appears to be lighter than in the past.

• 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.

• As discussed in Nikkei 225 March Review – Quiddity Leaderboard (Jan 2023) (and earlier versions), Oriental Land (4661 JP) is a candidate to join the Nikkei 225 in March 2023.
• As of early January, it was the top-ranked impact name with 11.8 days of ADV to buy, and if it underperformed the Nikkei from there, there’d be more to buy. 
• With the data collection period now complete, it is top-ranked, still. And it is still ~10-12 days to buy. Understanding shareholder structure, however, is key. So I dive in.

• Last Friday, Sembcorp Marine (SMM SP) announced it had Approval-In-Principle for its Proposed Combination with Keppel Corp (KEP SP), contingent on the Circular being despatched by 31 January 2023.  
• At 6:50pm local time on 31 January, Sembcorp Marine released its 679-page Circular (and EGM Announcement (16 Feb EGM)). Phew! 
• Now we have a deal in sight, we have to think about next steps. SMM NEWCO needs a story vs flow. Orderbook is nice but may not cut it near-term.

• 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 Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. 
• For companies with “low liquidity” the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. 
• Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2023.

• After Greatview Aseptic (468 HK) was suspended on the 30 January, it emerged that Shandong Xinjufeng (301296 CH) had entered a SPA to acquire Jardine Matheson (JM SP)‘s 28.22% stake
• Greatview has now confirmed the transaction. Shares were supposed to resume trading this afternoon but were immediately suspended again.
• Importantly, Inner Mongolia Yili Industrial Group (A) (600887 CH), Xinjufeng’s largest customer is a main competitor of Greatview’s largest customer. That may be an untenable situation, according to the announcement.

• For the month of January, four new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$3bn.
• The average premium for the new deals announced (or first discussed) in January was ~28%, which is distorted by the take under for Esso Thailand (ESSO TB).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• In this deep dive report, we initiate coverage on Softbank Group with a ¥6,300 target price and Neutral recommendation
• We are cautious on global tech and consider that the main risk to the story but a recovery in China sentiment provides some offset
• For Q3 results next week, we expect the defensive theme of the last two quarters to continue

• The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
• The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
• We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.

• We currently see 1 change for the ASX20, 2 for the ASX100, 4 changes for the ASX 200 and 9 adds/ 6 deletes for the ASX300 Index in March.
• Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks. 
• Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.

• The Adani Enterprises (ADE IN) FPO saw VERY muted demand (realtime available on NSE+BSE websites) on Day 1 Friday as the share price plummeted through the bottom of the range.
• The Adani Group responded to Hindenburg late Sunday with a 400-page rebuttal, cloaked in nationalistic terms. Hindenburg responded saying the company failed to answer 62 of 88 questions.
• This is not going away. They could lower the FPO price, or just pull the FPO. That won’t materially change the significant over-valuation of many Adani Group listco share prices.

• 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.

• Keisei Electric Railway Co (9009 JP) is trading “cheap” as Oriental Land (4661 JP) enjoys a zero-Covid revival.
• Preceding my comments on Keisei/Oriental Land, 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%.

• We provide details of the Osstem Implant tender offer as well as Chairman Choi’s children exchange of CB call options for BWs. 
• We believe that the majority of the minority shareholders in Osstem Implant are not likely to sell their shares at 190,000 won per share but hold on to it. 
• Over a longer time frame, Osstem’s share price could reach higher levels driven by its improving sales and profit growth, deep valuation discount to global peers, and further M&A fight. 

• The review period for the February Quarterly Comprehensive Index Review (QCIR) of the MSCI indices ended yesterday. There will be a number of changes in the Asia Pacific region.
• Most of the inclusions are in China and the country weight in the MSCI Emerging Markets Index should increase leading to outflows from other markets.
• On average, the potential adds have outperformed the potential deletes over the last few weeks. At a glance, pre-positioning appears to be lighter than in the past.

• The original bid was supposed to be presented fully-funded by 30 September 2022. Then it was early November, then late November, then early December, late Dec, early Jan, end Jan. 
• Today we find out that The Banks and The Preferred JIP Bidding Consortium will aim to reach agreement by 3 Feb. The Bloomberg article details are newish, and odd. 
• Shares have deteriorated and vs Peers, they are at their lowest point in many months. And the details do not make me confident this deal is clean yet. 

• Last Friday, Sembcorp Marine (SMM SP) announced it had Approval-In-Principle for its Proposed Combination with Keppel Corp (KEP SP), contingent on the Circular being despatched by 31 January 2023.  
• At 6:50pm local time on 31 January, Sembcorp Marine released its 679-page Circular (and EGM Announcement (16 Feb EGM)). Phew! 
• Now we have a deal in sight, we have to think about next steps. SMM NEWCO needs a story vs flow. Orderbook is nice but may not cut it near-term.

• Flight Centre Travel (FLT AU) is looking to raise US$127m from a fully underwritten institutional placement. 
• The proceeds will be used to acquire Luxury Travel Holdings (Scott Dunn), a UK-based luxury travel business.
• In this note, we will discuss deal dynamics, past deal performance, and share the scores on our ECM framework.

• The Adani Group listcos have been on a wild ride for the last few years, rising from 10x TTM EV/EBITDA in March 2020 to 60x at end-September 2022. 
• Adani Group “business incubator’ Adani Enterprises (ADE IN) last fall indicated it might raise $2.4bn of equity and combined 6 co market cap is down $135bn since.
• A short seller report last week put the cat amongst the pigeons. Now MSCI is consulting investors about what it might do regarding Things.

• The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
• The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
• There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP). 

• We currently see 1 change for the ASX20, 2 for the ASX100, 4 changes for the ASX 200 and 9 adds/ 6 deletes for the ASX300 Index in March.
• Passive trackers will need to trade over 3 days of ADV on 13 stocks, over 5 days of ADV on 9 stocks and over 10x ADV on 4 stocks. 
• Shorts have been covering positions on stocks where there are expected to be passive inflows and increasing positions on stocks that are expected to have passive outflows.

• The Adani Enterprises (ADE IN) FPO saw VERY muted demand (realtime available on NSE+BSE websites) on Day 1 Friday as the share price plummeted through the bottom of the range.
• The Adani Group responded to Hindenburg late Sunday with a 400-page rebuttal, cloaked in nationalistic terms. Hindenburg responded saying the company failed to answer 62 of 88 questions.
• This is not going away. They could lower the FPO price, or just pull the FPO. That won’t materially change the significant over-valuation of many Adani Group listco share prices.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Travis Lundy as he gives us a quick rundown about what is the current situation that is happening with Adani Enterprises and where they are headed from this point on.

The webinar will be hosted on Wednesday, 1 February 2023, 17:00 SGT/HKT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

• There are 2 trading days left in the review period. We expect 5 changes at the rebalance that will be announced end-February and implemented at the close on 30 March.
• A lot of the stocks were AMFI migrations and Biocon Ltd (BIOS IN) is a potential deletion from the MSCI India Index at the February QCIR.
• The drop in the Adani Group stocks that are part of the index will result in passive inflows on the non-F&O constituents due to capping at 15% of index weight.

• Today, a Nikkei article suggested (after other media suggested last week) that Renault SA (RNO FP) and Nissan Motor (7201 JP) have come to agreement about their new deal.
• Post-Close, an announcement. Two striking things about this “agreement” a) it comes many months after they started negotiating, and b) we have few details, and c) we’re missing a bit.
• Renault agrees to cap voting rights in Nissan. Nissan agrees to invest in RNO’s EV spinoff, and so far, they agree to strengthen the Alliance. What’s missing is interesting/key.

• In this insight, we take a look at the potential index changes and the resultant capping flows for the Hang Seng Tech Index (HSTECH INDEX) in March 2023.
• According to our estimation, there could be two changes for the HSTECH in March 2023 and there could be one-way index flows of US$365mn.
• The final index changes along with indicative capping and index weights could be published in Mid/Late-February 2023 and implemented in early-March 2023.

• Shandong Xinjufeng Technology Packaging (301296 CH) is seeking to acquire Jardine Matheson Holdings (JM SP)‘s 28.22% stake in Greatview Aseptic Packaging (468 HK) at HK$2.65/share.
• Greatview is currently suspended “pending the release of an announcement which contains inside information“, suggesting there is no follow on Offer for remaining shares. 
• Elsewhere, Matheson has resumed its share repurchase program, providing near-term support. 

• 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.

• Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
• Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
• Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

• The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
• The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
• We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.

• The Adani Group listcos have been on a wild ride for the last few years, rising from 10x TTM EV/EBITDA in March 2020 to 60x at end-September 2022. 
• Adani Group “business incubator’ Adani Enterprises (ADE IN) last fall indicated it might raise $2.4bn of equity and combined 6 co market cap is down $135bn since.
• A short seller report last week put the cat amongst the pigeons. Now MSCI is consulting investors about what it might do regarding Things.

• The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
• The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
• There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP). 

• Be long Kawasaki Kisen Kaisha (9107 JP) vs MOL and NYK. The shares are cheap on a forward basis. KLine is reducing the Real World Float, causing further potential squeeze.
• Sabana Industrial REIT (SSREIT SP)‘s Partial Offer at 0.88x book is not overwhelming, but it is also not a control stake. It is probably priced near-right.
• IF Osstem (048260 KS)‘s price were to go higher, it is conceivable there could be a bump, but don’t bet on it as long as the stock trades <KRW 190,000. 

• As forecast, DMCI Holdings (DMC) and UnionBank of the Philippines (UBP) will replace Megaworld Corp (MEG) and Robinsons Land Co (RLC) at the close on 3 February.
• The PSE is using float higher than 20% for San Miguel (SMC PM), Emperador (EMP PM) and AC Energy Corp (ACEN) – there will be passive buying on the stocks.
• Historically, the inclusions have outperformed the exclusions and there has been a big move in the stocks the day after announcement. Square off existing pre-positions by mid-week.

• Kanematsu Corp (8020 JP) announced two tender offers Friday to take out subsidiaries. One more liquid one. One very small sub. This is the larger, easier deal. 
• Kanematsu Electronics is an IT shop, designing and executing system integration and maintenance services. It is a great business. The takeout is a 33% premium to an all-time high.
• It might still be a bit cheap, but it is not egregious, and it would be quite difficult to block. 

• Kanematsu Corp (8020 JP) announced two tender offers late Friday to take out minorities in subsidiaries. One larger, safer deal. One smaller, illiquid, but potentially interesting one.
• This is the interesting one. It is being done at the wrong price, and it has investors who might care who have been long-time holders.
• This could get interesting. You have a buyer. A target. It’s pretty clean except for shareholder structure. And the buyer has room to pay up. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• While the holiday shortened week didn’t see much action in Asia, but there was one more ADR filing in the US, adding to the mini-pipeline.
• Adani’s ongoing FPO was the only live deal this week, although it had enough drama to make up for the lack of other deals.

• The acquirer would cancel the deal unless at least 2.394M shares (15.4% of SO) were tendered. This is the minimum purchase quantity condition that will trigger a cancellation.
• If the minimum purchase volume is exceeded, will there be a pro rata allocation risk? The answer is no. The acquirer will purchase all the tendered shares
• The cancellation risk seems slim as only 15.4% of the SO should be tendered, which doesn’t seem to be a challenging target.

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
• Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

• Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
• Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
• Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

• Jb Financial Group (175330 KS) will replace Meritz Fire & Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
• We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.
• DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS). 

• The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn. 
• Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of  a “con.”
• Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

• There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
• Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ). 
• With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

• The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
• We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
• The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

• The Adani Group stocks have taken a dive following the Hindenburg Research report. Group market cap is down more than US$47bn with company promoters taking the biggest hit.
• The Adani Enterprises FPO is almost certain to be undersubscribed. MSCI, in an unprecedented step, is monitoring publicly available information and is seeking feedback from the investment community.
• We find that the real float of some Adani Group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF.

• Kanematsu Electronics (8096 JP) has recommended Kanematsu Corp (8020 JP)’s tender offer of JPY6,200 per share, an 32.9% premium to the undisturbed price (27 January).
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the offer has been set to meet the 66.67% ownership ratio.
• The tender offer is attractive as it represents an all-time share price high and a premium to peer multiples. This suggests a done deal. 

• Posco International‘s recent merger with Posco Energy increased the share count. The distance from the float market cap borderline is catchable, given the current share price uptrend.
• Hanwha Aerospace will likely fail inclusion in this February review. The gap with the hurdle is not large, so it can aim for inclusion in the May review.
• Among Outside IMI, Korea Gas is tricky as it is a FOL stock. MSCI-concluded float is 30%, and the gap with the float market cap hurdle is still quite large.

• The review period for the upcoming rebalance of the MSCI, Nikkei 225, NIFTY, Nifty Next 50, SSE STAR50 and KRX New Deal Indices ends on 31 January.
• The IDX30, LQ45, IDX80, Global X Uranium ETF (URA US) rebalances will be implemented on 31 January while the PSEi Index (PCOMP INDEX) rebalance will be implemented on 3 February.
• There were inflows to Asian country ETFs and iShares MSCI Emerging Markets (EEM), and outflows from IShares MSCI Min Vol EM ETF (EEMV) and iShares MSCI Pacific ex Japan (EPP). 

• SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
• There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
• Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

• The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn. 
• Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of  a “con.”
• Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

• There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
• Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ). 
• With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

• Adani Enterprises is looking to raise INR200bn (US$2.4bn) via a further public offering (FPO). Bookbuild will begin tomorrow (27th Jan 23) and last till the end of the month.
• Adani Enterprises is the flagship company of the Adani Group. The group’s entities’ stock performance over the past few years has made the founder one of the richest persons globally.
• We have covered most aspects of the deal in our earlier note published. In this note, we talk about the recent updates and the deal pricing and structure.

• Jafco Co Ltd (8595 JP) announced the results of its Tender Offer Buyback today. They wanted to buy 16.8mm shares including 13.9mm from Murakami-san. He sold 9.63mm. Oops. 
• Pro-Ration was 69.25% which means that Murakami entities are still long about 4.276mm shares or 5.83% of shares out. 
• There should be some index selling, and some Murakami Overhang. There may be more overhang at recent prices.

• On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
• We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
• With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

• Nitto Denko (6988 JP) today announced Q3 results, lower full-year guidance with one-quarter left to go, sharply undercutting implied Q4 results vs the Street.
• The company also announced a buyback of 4.1-4.7% of shares out over the next 6mos. Assuming the share price falls in reaction, this could be closer to the top end.
• The buyback is non-negligible as a portion of Likely Real World Float and as such the situation is worth a look – for those with a position and those without.

• We are lacking short ideas in Asia given we are long most markets. India presents a fresh short idea after failing at trend and price resistance.
• The failure at trendline and 18,200 price resistance was touted as a bearish turn. We have now formed a bear flat that is set to break lower.
• Macro: Remains bullish and we will probe for a long at 17,500/300. 19,470 is our macro bull projection.

• Back on the 7th December, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management (known as the Five parties) at HK$1.88/share, a 24.5% premium to undisturbed. 
• Pre-Conditions were satisfied on the 15 December and the Composite Document was dispatched last night.
• The first close is the 24 February. Payment under the Offer is expected to be the 21 March.

• With a minimum acceptance hurdle of 50% and irrevocables of 60.14%, Acotec Scientific Holdings (6669 HK)‘s partial offer was always going to turn unconditional. 
• As per last night’s announcement, valid acceptances were 78.59%. The Offer has automatically been extended to the 9 February – this is the final close. Pro-ration is currently 82.7%.
• The minor quirk for partial Offers is that payment occurs within seven business days of the final close, not seven days from the Offer turning unconditional. 

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
• Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

• Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
• Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
• Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

• There are 3 changes for the IDX30 Index, 6 changes for the LQ45 Index, and 7 changes for the IDX80 Index at the rebalance to be implemented on 31 January.
• Largest passive inflows are expected to be on Sumber Alfaria Trijaya Tbk Pt (AMRT IJ) and Surya Esa Perkasa (ESSA IJ). 
• With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

• SenseTime Group (20 HK) was added to the Non-SDN Chinese Military-Industrial Complex Company (NS-CMIC) list on 10 December 2021. So, the stock is not a part of any global indices.
• There is a possibility that the stock is no longer restricted to U.S. investors and that could lead to multiple index inclusions over the next few months.
• Inclusion in the MSCI China Index could take place in February or May while inclusion in the FTSE All-World Index could take place in March.

• Adani Enterprises is looking to raise INR200bn (US$2.4bn) via a further public offering (FPO). Bookbuild will begin tomorrow (27th Jan 23) and last till the end of the month.
• Adani Enterprises is the flagship company of the Adani Group. The group’s entities’ stock performance over the past few years has made the founder one of the richest persons globally.
• We have covered most aspects of the deal in our earlier note published. In this note, we talk about the recent updates and the deal pricing and structure.

• On 19 January, the HKEX clarified the liquidity criteria as well as treatment of Differentiated Voting Rights (DVR) stocks and the criteria for current Northbound stocks to become Sell-only.
• We currently see 975 China A-shares becoming eligible for Northbound Stock Connect when the extension is implemented.
• With the extension likely to be implemented in June, there will be additions to the MSCI China Index, FTSE All-World Index and FTSE All-Cap Index in August and September.

• Jafco Co Ltd (8595 JP) announced the results of its Tender Offer Buyback today. They wanted to buy 16.8mm shares including 13.9mm from Murakami-san. He sold 9.63mm. Oops. 
• Pro-Ration was 69.25% which means that Murakami entities are still long about 4.276mm shares or 5.83% of shares out. 
• There should be some index selling, and some Murakami Overhang. There may be more overhang at recent prices.

• The Adani Enterprises (ADE IN) Further Public Offering (“FPO”) expected to raise Rs 200bn has its first leg publicly complete with anchor investors taking Rs 59.849bn. 
• Noted shortseller Hindenburg Research published a long report suggesting Adani Enterprises and indeed the Adani Group were over-priced according to fundamentals and were the result of  a “con.”
• Now the book build starts. Deal structure and Adani Group CFO comments continue to suggest that Liquidity is a Bug, not a Feature.

• As expected, Acotec Scientific Holdings (6669 HK)’s partial offer from Boston Scientific (BSX US) at HK$20 per share is now unconditional. The final closing date is 9 February.
• The current acceptances representing 78.59% of outstanding shares imply current proration is 82.71%. Current pro-ration suggests CA Medtech post-offer shares will be counted towards the public float.
• Based on the current proration of 82.71% and at the last close price of HK$19.78 per share, the breakeven price is HK$19.00 per share. 

• It’s a fair bet Hancock Prospecting and Mineral Resources (MIN AU) are actively discussing the final stages for Warrego Energy (WGO AU) behind the scenes.
• It is unlikely MinRes aggressively builds a ~19% stake in a company subject to a two-way takeover battle, and declares its position “strategic” with no intention of making an Offer. 
• This stake may be a bargaining chip from MinRes to keep Hancock on the sidelines in its tilt for Norwest Energy NL (NWE AU).

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
• Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

• Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There are 6 adds and 5 deletes with implementation at the close on 31 January.
• Estimated one-way turnover is in excess of 12% and will result in a one-way trade of US$207m. There are 11 stocks with estimated passive flows greater than 5x ADV.
• Some of the inclusions have had BIG rallies over the last couple of months and there could be profit taking on those names in the next few days.

• We don’t see a way for Sea Ltd (SE US)’s e-commerce business to turn profitable in the next few years.
• For the moment, the Digital-Entertainment segment is capable of absorbing most of e-commerce losses, but we are expecting the segment profitability to fall 70% to $135m per-quarter over the-next two-years.
• Once that happens, we think it will be game over for Sea Ltd.

• The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
• We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
• The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

• KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares. 
• The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow. 
• In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

• Olympus has been sold down relatively hard in the last couple of months. At the same time, we are at crunch time for the cancellation of the US ADR.
• This may create short-term overhang, but the medium-term overhang from substantial foreign net buying in H1 when USDJPY was going up may be larger. 
• This insight looks at the relative performance vs Peers, vs forward earnings expectations, USDJPY, etc.

• Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers. 
• It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.  
• CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable. 

• Maekyung exclusively reports MBK will do a tender offer to Osstem Implant shareholders at a 20% premium to buy a 15% stake.
• As Maekyung is a first-tier news outlet in Korea, we have to see enough credibility in this report. We should expect to see it in an official regulatory filing soon.
• We should design a play that actively utilizes the tender offer event very elaborately. Here, we need to consider immediate offerings and potential delisting from a longer-term perspective.

• Just over a year ago, leading Korean dental implant and dentistry supply company Osstem Implant (048260 KS) announced the largest-ever embezzlement case in Korea. The stock was suspended.
• There were fears about forced selling by the founder, and PE funds circled. Activist KCGI probably bought in Q3 but built a 5+% stake by end-December 2022.
• Korean PE Firms MBK and Unison Capital have now launched an MBO-style Tender Offer to buy 2.4-11.2mm shares in the company at a sharp premium to the pre-activism undisturbed price.

• SamE PREF’s relative underperformance compared to ORD has been getting a bit worse lately. And finally, today, it went down below -2.0σ on a 20-day moving average.
• This much diversion is the first in recent months, and the pref discount is close to last year’s peak. The dividend yield difference is also the widest in recent years.
• The current diversion appears to be a byproduct of the SamE overbuying amid the recent market rally, and we should expect a quick reversion.

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
• Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

• On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
• The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
• It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.

• With only 5 trading days to go in the review period, we see no constituent changes to the NIFTY Index (NIFTY INDEX) at the March rebalance.
• Pidilite Industries (PIDI IN) is the highest ranked non-index constituent, but its free float market cap does not exceed 1.5x the free-float market cap of Bharat Petroleum Corp (BPCL IN). 
• We do not expect LTIMindtree (LTIM IN) to be added to the index in March post the merger between Larsen & Toubro (LT IN) and Mindtree Ltd (MTCL IN). 

• KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares. 
• The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow. 
• In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

• In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
• They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
• Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.

• YFO offered another Press Release yesterday. This one outlines what they see as Corporate Governance failures and offers a NEW POLICY.
• The Corporate Governance failures are indeed, failures. Toyo’s Board has failed to be transparent with shareholders, and in not at least addressing the takeover proposal, has failed its duties.
• NEW POLICY? Elect new independent directors “capable of improving the long-term corporate value and maximizing the interests of the general shareholders.”  Soft war starts now.

• The review period for the March rebalance ends on 31 January, the changes will be announced towards end February and implemented at the close of trading on 9 March.
• We forecast one add/delete for the Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
• The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

• OVERSEAS.  Stocks Mixed as SPX -0.1% as NYSE Glitches on Open;  MSFT Beats  but Chip Giant Texas Instruments weak; DoJ calls for Google Ad Break up
• JAPAN.  NKY Futs -0.4% vs Cash; USDJPY steady at 130.19; Japan Freezes – No Joke; Nikkei Survey shows public sentiment toward Nuclear Power improving; Nidec misses; Elliot tgts DNP
• DAILY NUGGET. Is Japan Stuck ? This is the view of outgoing BBC reporter. We disagree – changes are happening.

• Mineral Resources (MIN AU) has revised its offer from 1 MinRes share for every 1,367 NWE shares to 1 MinRes share for every 1,300 NWE shares. The offer is unconditional. 
• The Norwest Energy NL (NWE AU) Board now recommends the offer. Most of the value uplift is due to the 17.4% increase in MinRes’ share price since 15 December.
• MinRes’ revised off-market takeover offer is fair in comparison to Warrego Energy (WGO AU)’s bids and historical ranges. However, this is predicated on the MinRes maintaining its share price run.

• Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers. 
• It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.  
• CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable. 

• The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
• Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

• 10 days ago I wrote Fujitsu (6702) Subsidiary Selldowns To Come after Bloomberg carried an article with the CEO. Not new news, but I was struck by the implications.
• Yesterday saw an article which pushed Fujitsu General (6755 JP) nearly 14% higher yesteday. Fujitsu Ltd (6702 JP) had launched an auction for its 42% stake. First round bids due imminently.
• This takes the urgency to a new level. People jumped into an already illiquid stock. How far can this go?

• New York-based hedge fund ValueAct has told Seven & I Holdings (3382 JP)’s shareholders to support them in their bid to spin off the 7-Eleven US convenience store business.
• Spinning off the only growth driver of the business does not seem like an idea that Seven & I or its shareholders are likely to entertain.
• We fear that ValueAct could be looking for reasons to call-off its investor-activism-campaign and perhaps is trying to squeeze out every last bit of gains as it exits its positions.

• MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
• This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
• Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.

• Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months. 
• Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
• Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.  

• On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
• The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
• It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.

• Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.  
• YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed. 
• There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

• OVERSEAS.  SPX +1.9% to close on highs; Beta-driven rally as Tech rebounds;  Dovish talk from 2 Fed Members;  Google joins the fray slashing 12,000 staff; US Banks not far behind.
• JAPAN.  NKY Futs +1.3% vs Cash; USDJPY 129.6;  CORE Inflation hits 4%;  Kishida: too early to discuss BOJ 2% policy exit;  Japan courts global elite grads; Population declines in 2022
• DAILY NUGGET.  Change of Direction with new BOJ Leadership? Ha, policy direction has already been decided, and whoever the Govt selects will just continue where Kuroda left off.

• OVERSEAS.  SPX +1.2% but all Action in Tech as SOX +5.5%; Barclay Sector upgrade spurs Semis; Fed Hikes in the rear view for now; Watch Copper – supply risks+China demand
• JAPAN. NKY Futs +0.9% vs Cash; USDJPY 130.65; Where US goes, Japan will follow: All about Tech; Kishida speech: Nuclear Power, Defense, Child support in focus; Wage hikes gather steam.
• DAILY NUGGET. Davos  on board with the coming of the Metaverse. We highlight this and think there are near term challenges.

• In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
• They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
• Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.