Most Read

Appier Group (4180 JP) had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.
The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.
Share price performance has not kept pace with potential, and yesterday’s BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest “risk” here.

JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance

Jafco Co Ltd (8595 JP) was the target of activist Murakami-san in August 2022. They threatened a poison pill. Murakami-san sold, then bought to 19.5%. They negotiated. He won.
His result excluded others. The market did not take it well. Murakami-san rejected taking a 1% hit to original terms (vs reference NAV). JAFCO went back to the drawing board.
Then submitted to greenmail at a higher price. The first buyback was agreed at ¥2,500 vs ¥2,651 NAV. The new one? ¥2,730-2,840 vs ¥2,513 NAV. Inexplicable – Spectacularly Bad Governance.

Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium

Nippon Steel Corporation (5401 JP) and Mitsui & Co Ltd (8031 JP) today announced they would buy out Nippon Steel & Sumikin Bussan (9810 JP), their steel-trading subsidiary.
The shares trade near an all-time high, but Nippon Steel is paying an 87% premium. (Interestingly, the high end of the DCF ranges suggest a 280% premium)
On fundamentals, this could have been higher, but given the shareholder structure, I expect it is a done deal as-is. The Tender Offer should start in February 2023.

BHP & OZL Enter Scheme Implementation Deed – Timing, Risk, & Index Effects

This morning, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) announced they had entered into a Scheme Implementation Deed at A$28.25/share (5wks after I said 3-6 weeks).
All terms are confirmed and there may be a fully-franked dividend up to A$1.75/share which would reduce terms to A$26.50. The OZL Directors unanimously recommend.
Anti-Trust approvals are needed in Brazil & Vietnam, other standard conditions, and the OZL Scheme Meeting should be late March early April. I expect this is done.

Mandatory Offer Arrives in Korea: Detailed Rules & Trading Ramifications

The target is those who purchase 25% or more of the shares of a listed company and become the largest shareholder with management rights.
The minimum volume of a mandatory offer is [(50% of total shares + 1 share) – the management right purchase volume].
We will be exposed to pro-rata risk, so it will be essential to figure out the nature and propensity of the shareholder composition to estimate the tendering rate in advance.

AMFI Stock Reclassification Preview (Dec 2022): A Bunch of Migrations

Near the end of the review period, we see 7 stocks moving from MidCap to LargeCap, 6 from LargeCap to MidCap, 8 from SmallCap to MidCap and vice versa.
One spin-off should be added to the MidCap segment, while a bunch of recent listings will be added to the SmallCap segment.
Stock migrating upwards have outperformed stocks migrating downwards and we expect there could be some mean reversion from the middle of January.

Swire Now Buying Back B Shares Only

In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

Nojima (7419) Launches Buyout of Conexio (9422)

Nojima Corp (7419 JP) is buying out Conexio Corp (9422 JP) majority owner Itochu Corp (8001 JP) along with minorities. At a 59% premium, it looks good.
However, in terms of normalised EV/EBITDA or EV/FCF multiple, this is not expensive.
And while the major seller/target and friendlies are oh so close, the register is more interesting than the yuho top 10 shareholder list suggests.

TIGER (WISE) Secondary Battery ETF Rebalancing in January: Names to Watch

The key to this rebalancing is the inclusion of WCP, which satisfies the requirements of minimum listing period and secondary battery sales amount.
As a hedge for the LONG WCP position, we can use Soulbrain and Solus Advanced, whose passive outflow is relatively high among those of a similar size to WCP.
Among large caps, we should pay attention to L&F, Posco Chemical, and Iljin Materials. However, we should be cautious about approaching them as an active trading target.

JAFCO (8595 JP): Murakami Gets His Way with a JPY2,500 Tender Offer

Jafco Co Ltd (8595 JP) and Murakami have reached an agreement on a revised tender offer for 16.8 million shares (23.60% of outstanding shares) at JPY2,500 per share.
The revised tender offer’s primary purpose remains to facilitate Murakami to tender his 19.53% shareholding at the expense of other shareholders and the misallocation of JPY42 billion (tender cost).
The justification for the transaction is weak as most of the benefits could have been achieved without it. This calls into question the Board’s ability to enhance value.

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Dec 22

Most Read: Omni Bridgeway, Prada S.P.A., Delta Electronics Thai, Beijing-Shanghai High Speed Railway-A, Appier Group, Jafco Co Ltd, Nippon Steel Trading Corporation, Tatsuta Electric Wire & Cable, Toshiba Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
Southbound Stock Connect Expansion: Potential Adds in 2023
SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
Overview of My Winners and Losers in 2022…And 5 High Conviction Ideas Going into 2023
Northbound Stock Connect Expansion: Potential Changes in 2023
Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk
JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance
Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium
ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium
Toshiba (6502 JP): Sanctions on YMTC Help Kioxia

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

Southbound Stock Connect Expansion: Potential Adds in 2023

Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.

SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out

Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.

Overview of My Winners and Losers in 2022…And 5 High Conviction Ideas Going into 2023

By Nicolas Van Broekhoven

The 2022 vintage of “5 High Conviction Ideas” had the weakest performance since 2017, with only China Shineway posting a positive return
Olam, Rex and Starhub all declined approximately 16% in FY22
Our 2023 vintage will hopefully perform better with 4 out of 5 favorites in the commodity space

Northbound Stock Connect Expansion: Potential Changes in 2023

On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.

Appier (4180) – Down But Not Out; Shareholder Structure Still The Biggest Risk

Appier Group (4180 JP) had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.
The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.
Share price performance has not kept pace with potential, and yesterday’s BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest “risk” here.

JAFCO (8595) Succumbs to Even Worse Greenmail – SPECTACULARLY BAD Governance

Jafco Co Ltd (8595 JP) was the target of activist Murakami-san in August 2022. They threatened a poison pill. Murakami-san sold, then bought to 19.5%. They negotiated. He won.
His result excluded others. The market did not take it well. Murakami-san rejected taking a 1% hit to original terms (vs reference NAV). JAFCO went back to the drawing board.
Then submitted to greenmail at a higher price. The first buyback was agreed at ¥2,500 vs ¥2,651 NAV. The new one? ¥2,730-2,840 vs ¥2,513 NAV. Inexplicable – Spectacularly Bad Governance.

Nippon Steel & Mitsui & Co to Buy Out Nippon Steel Trading (9810) At 87% Premium

Nippon Steel Corporation (5401 JP) and Mitsui & Co Ltd (8031 JP) today announced they would buy out Nippon Steel & Sumikin Bussan (9810 JP), their steel-trading subsidiary.
The shares trade near an all-time high, but Nippon Steel is paying an 87% premium. (Interestingly, the high end of the DCF ranges suggest a 280% premium)
On fundamentals, this could have been higher, but given the shareholder structure, I expect it is a done deal as-is. The Tender Offer should start in February 2023.

ENEOS to Buy Out Tatsuta Electric (5809) At 74% Premium

ENEOS Holdings (5020 JP) and subsidiary JX Nippon Mining & Metals Corporation announced today it would buy out minorities in miner and refiner Tatsuta Elec Wire & Cable (5809 JP).
The Tender Offer comes at a 74% premium for their 37% sub. 5% off a 2yr high, 10% off a 20-year high. This is likely to be a “done deal”.
JX probably starts with ~55% in the bag out of the 66.7% minimum. But the tender doesn’t start for ~ 6 months. Separately, importantly, there is a precedent here.

Toshiba (6502 JP): Sanctions on YMTC Help Kioxia

By Scott Foster

The U.S. government put YMTC on its Entity List in early December, effectively cutting it off from U.S. semiconductor equipment companies and other U.S. technology.
YMTC’s Xtacking architecture was good enough for Apple, but it will now have trouble maintaining its 5% market share, let alone ramping up production of its new 232-layer device.
This will take some of the competitive pressure off Kioxia and benefit Toshiba, which owns 41% of its shares.

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Dec 21

Most Read: Highwealth Construction, Prada S.P.A., Haidilao, Kanzhun, Kawasaki Kisen Kaisha, GoTo, Delta Electronics Thai, Beijing-Shanghai High Speed Railway-A, Shandong Fengxiang and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance
Southbound Stock Connect Expansion: Potential Adds in 2023
Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT
Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL
KLINE (9107) CEO Comes Out Swinging – More LPG Carriers and More Shareholder Returns THIS YEAR
GoTo IPO Lockup Expiry Follow-Up – Has Corrected but Has Traded Relatively Little Volume
SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out
Northbound Stock Connect Expansion: Potential Changes in 2023
Fengxiang (9977 HK): SPA Completed. Now For The Unconditional MGO
Good Morning Japan |Shock and Awe – BOJ Sends Ripple Though Markets in Kuroda’s Parting Shot

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance

The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
Stocks with buy flows dropped 1.82% on average on Friday while the stocks with sell flows rose 1.03%. On a flow weighted basis, the numbers were -2.01% vs +1.09%.
Given the large volumes at auction and the large moves on stocks, we cannot rule out the possibility that a lot of pre-positions were unwound at the close on Friday.

Southbound Stock Connect Expansion: Potential Adds in 2023

Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.

Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT

It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL

Kanzhun (BZ US) a.k.a. has been listed in the US since about the same time as DiDi Global (DIDI US), and it had similar but minor tech issues pre-listing.
On Friday 16 December, the company announced it would conduct a Listing by Introduction in Hong Kong under the ticker Zhipin (2076 HK), listing on 22 Dec.
That creates an interesting launch supply/demand dynamic, likely HS Tech inclusion in March 2023, and then Southbound much later in 2023.

KLINE (9107) CEO Comes Out Swinging – More LPG Carriers and More Shareholder Returns THIS YEAR

The Nikkei reported this AM that Kawasaki Kisen Kaisha (9107 JP) CEO was considering increasing shareholder returns this fiscal year. It already has a juicy div and a ¥100bn buyback.
The company announced its buyback, and an agreement by two holders of 39% to sell in a ToSTNeT-3 buy, then started buying in the market. Results are impactful.
The shares are up today on this news, though they gave some back after the BOJ news. The outlook for more share price impact is not bad.

GoTo IPO Lockup Expiry Follow-Up – Has Corrected but Has Traded Relatively Little Volume

GoTo pre-IPO shareholders were released from the lockup on 1st Dec 2022, which led to a 47% slide in its share price.
We had written about the upcoming lockup expiry in our earlier note, GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO.
While the price appears to be settling down now, given the intra-day trading limits in Indonesia, very little volumes have been transacted compared to the shares released from lockup.

SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out

Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.

Northbound Stock Connect Expansion: Potential Changes in 2023

On Monday, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Northbound Stock Connect, the eligible universe has been widely expanded to include constituents of the SSE A Share Index and the SZSE Composite Index.
There are 1,112 stocks that join the eligible universe, and 938 stocks currently meet the criteria for Northbound Stock Connect inclusion. There are implications for inclusion in global indices.

Fengxiang (9977 HK): SPA Completed. Now For The Unconditional MGO

A little over two months since PAG Capital won the judicial auction to acquire 70.92% of Shandong Fengxiang (9977 HK), the acquisition has now cleared all regulatory clearances, including SAMR.
PAG will now be required to make an unconditional Offer for all H-shares at HK$1.5132/share. Separately, PAG intends to delist Fengxiang which involves Scheme-like delisting resolutions.
This is done. The timing for approving the SPA was bang-on with my expectation.

Good Morning Japan |Shock and Awe – BOJ Sends Ripple Though Markets in Kuroda’s Parting Shot

By Mark Chadwick

OVERSEAS: SPX +0.1%, eakes out gains; BOJ takes the spotlight as Kuroda delivers “SHOCK AND AWE” (or just bad communication); TSLA at 2 year low-we are focused on deliveries
JAPAN: NKY Futs vs Cash -0.9% – mainly due to yen strengthening; BOJ’s change reverberates across markets; Positive 3Q Takashimaya preview positive read for Inbound; Courts support Nuke restarts
DAILY NUGGETS: The BOJ has started on the path towards policy normalisation, SIX MONTHS EARLY. No issues with the move – the shift was poorly communicated, or rather, NOT COMMUNICATED.

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Dec 20

Most Read: Highwealth Construction, Haidilao, Fujitec Co Ltd, Kurly Inc, China Education Group, Kanzhun, Prada S.P.A., Oriental Land, Sembcorp Marine and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance
Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT
Fujitec (6406) Activism Levelling Up – A Board Spill to Come?
Korea FSC’s Official Rule Changes for Local IPOs & Key Takeaways
Buy China Education Group on China Private Higher Education Sector Recovery
Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL
Good Morning Japan | No Shortage of Equity Negative News; BOJ to Stay Pat; Bullish 2023 ?
Southbound Stock Connect Expansion: Potential Adds in 2023
Oriental Land: Fantasy Springs, No Longer Enticing Investors, It’s Likely The Start Of The Breakdown
Straits Times Index Quiddity Leaderboard Mar 23: SMM Addition Could Cause SATS or KDCREIT Deletion

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance

The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
Stocks with buy flows dropped 1.82% on average on Friday while the stocks with sell flows rose 1.03%. On a flow weighted basis, the numbers were -2.01% vs +1.09%.
Given the large volumes at auction and the large moves on stocks, we cannot rule out the possibility that a lot of pre-positions were unwound at the close on Friday.

Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT

It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

Fujitec (6406) Activism Levelling Up – A Board Spill to Come?

Two years ago, I wrote about the history of activist attention on what was then the 8th largest elevator maker in the world Fujitec Co Ltd (6406 JP).
In Activist Pressure FINALLY Works on Fujitec (6406)- Going Up? (Albeit Slowly) I discussed what were still nascent efforts by Oasis to trigger change at the top.
On 30 November 2022, Oasis – which officially went above 5% only this past March but on 30 November reported 16.52% – called an EGM. It’s worth a look.

Korea FSC’s Official Rule Changes for Local IPOs & Key Takeaways

Extending bookbuilding period to seven days (and test-the-waters) is unlikely to make any real difference. Leaving the financial capacity check to underwriters will likely cause sharp confusion in the market.
The purpose of penalizing so-called hot money, like flippers and non-pricing institutions, is understandable. However, whether FSC has fully considered the side effects caused by uniformly applying this is questionable.
Expanding the allowable price range on a listing day is the most crucial point we should pay attention to, and we must design a post-IPO trading strategy accordingly.

Buy China Education Group on China Private Higher Education Sector Recovery

By Xin Yu, CFA

China private higher education sector is recovering with the supportive government policy
The sector trades at single digit P/E, which is attractive
China Education Group with its largest scale and solid trade record is a good candidate for investment

Boss Zhipin (2076 HK | BZ US) HK Dual Primary Listing on 22 Dec – Index, Southbound, and SPECIAL

Kanzhun (BZ US) a.k.a. has been listed in the US since about the same time as DiDi Global (DIDI US), and it had similar but minor tech issues pre-listing.
On Friday 16 December, the company announced it would conduct a Listing by Introduction in Hong Kong under the ticker Zhipin (2076 HK), listing on 22 Dec.
That creates an interesting launch supply/demand dynamic, likely HS Tech inclusion in March 2023, and then Southbound much later in 2023.

Good Morning Japan | No Shortage of Equity Negative News; BOJ to Stay Pat; Bullish 2023 ?

By Mark Chadwick

OVERSEAS: SPX down 4 in a row, -20%YTD; Higher UST Yields and Negative Homebuilder print pressure equities; Chief Twit’s followers want him out; China hints strong economic support in 2023
JAPAN: BOJ to stay pat; JP FY23 Budget largest ever; Kawasaki Kisen to lift ShrHldr Returns; Subaru gives up on PHVs; Toyota CEO thinks mkt not ready for EVs
DAILY NUGGET: We take a look at the upcoming boom in Hydrogen in the push to decarbonise; Our preferred play is MHI (7011)

Southbound Stock Connect Expansion: Potential Adds in 2023

Last evening, the CSRC and the SFC agreed to further deepen mutual stock market access between the Mainland and Hong Kong and promote the development of both capital markets.
For Southbound Stock Connect, eligible foreign companies primary-listed in Hong Kong will become eligible. That could mean 5 additions to Stock Connect.
Additionally, Southbound access via Shanghai Stock Connect will be expanded to being it in alignment with Shenzhen Stock Connect. That could see 131 stocks added to Shanghai Stock Connect.

Oriental Land: Fantasy Springs, No Longer Enticing Investors, It’s Likely The Start Of The Breakdown

By Oshadhi Kumarasiri

As earnings recovered following the COVID drop, Oriental Land (4661 JP)’s FY+2 EV/OP returned to around 40-60x range, which in our opinion is too expensive, especially in current market conditions.
The positivity surrounding the opening of Fantasy Springs got investors to pay huge multiples but Fantasy Springs is no longer looking enticing to investors.
With a miss and a downgrade to FY23 guidance on the horizon, we are expecting OLC’s share-price to break the long-term trend to the downside in the next few months.

Straits Times Index Quiddity Leaderboard Mar 23: SMM Addition Could Cause SATS or KDCREIT Deletion

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for the FTSE Straits Times Index (STI) (STI INDEX) between now and the March 2023 index review.
The Sembcorp Marine (SMM SP) – Keppel Corp (KEP SP) deal seems likely to complete in 1Q 2023.
Below is a look at the potential index flow consequences of this deal and other potential index changes between now and the March 2023 Rebalance.

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Dec 19

Most Read: DMCI Holdings, Haidilao, Toshiba Corp, Highwealth Construction, Alibaba (ADR), Kanzhun, Kakao Pay, Toyo Construction, E Mart Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes
Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT
Last Week in Event SPACE: NTT Data, Origin Energy, Toyo Construction, Haidilao, Toshiba
Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance
ECM Weekly (18th Dec 2022) – China ADRs, Skymark, Daiei, Weilong, KFintech, Sula, Endeavour, Adani
Good Morning Japan |Argentina and Messi Triumph! Recession Fears Persist – No Break for Equities
Kanzhun (BZ US/ 2076 HK): Dual Primary Listing & Potential HSTECH Inclusion
MSCI Korea: An Early Assessment of February Index Review
Merger Arb Mondays (19 Dec) – Toyo, Genesis/St Barbara, Norwest, Nitro, Tyro, Elmo, Yashili, O2Micro
KOSPI Size Index: Early Preview at One Fourth into Screening Period

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

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

Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT

It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

Last Week in Event SPACE: NTT Data, Origin Energy, Toyo Construction, Haidilao, Toshiba

Stay long NTT Data Corp (9613 JP) through mid-January. Then sell.
Origin Energy (ORG AU) may drift lower as the street crunches numbers, in tandem with a vacuum of news as Brookfield undertakes its due diligence.
Toyo Construction (1890 JP) is now upset that YFO has decided to release the reason why Toyo management didn’t.

Yuanta/P-Shares Taiwan Dividend Plus ETF: Day 1 Flows & Performance

The Yuanta/P-shares Dividend Plus ETF (0056 TT) started to rebalance its holdings on Friday and will continue to do so for the next 4 trading days.
Stocks with buy flows dropped 1.82% on average on Friday while the stocks with sell flows rose 1.03%. On a flow weighted basis, the numbers were -2.01% vs +1.09%.
Given the large volumes at auction and the large moves on stocks, we cannot rule out the possibility that a lot of pre-positions were unwound at the close on Friday.

ECM Weekly (18th Dec 2022) – China ADRs, Skymark, Daiei, Weilong, KFintech, Sula, Endeavour, Adani

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, things are started to cool down in to the year end with some smaller issuers still trying their luck to get listed before the year end.
On placements front, most of the action was in India with Australia seeing a large offering after a while.

Good Morning Japan |Argentina and Messi Triumph! Recession Fears Persist – No Break for Equities

By Mark Chadwick

OVERSEAS: WCUP: Argentina/Messi prevail; SPX -2.1%WoW on recession narrative; SPX option expiry exacerbates moves; Calls for new TESLA CEO; GS to cut 8% of workforce; Covid spreads in China
JAPAN: NKY Futs at -0.9% vs Cash; Defense Bill Approved – no tax hike till 2024; Lawson’s Seijo Ishii IPO postponed; Renesas suspends China ops on Covid; Decarbonization-related investments unabated
DAILY NUGGET: We look a the another attempt of the Japanese government at regional revitalization. Smells of pork barrel spending to us.

Kanzhun (BZ US/ 2076 HK): Dual Primary Listing & Potential HSTECH Inclusion

Kanzhun (BZ US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 22 December.
Following the changes to the handling of Dual-Primary-listed companies, Kanzhun (BZ US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
Kanzhun (BZ US)‘s inclusion will lead to other changes to the Hang Seng Tech Index (HSTECH INDEX) with an extra deletion to keep the number of index constituents at 30.

MSCI Korea: An Early Assessment of February Index Review

MSCI’s quarterly comprehensive index review begins with the February review. QIR disappears, and all quarters are subject to the SAIR rules.
Currently, no constituents face deletion risk. On the other hand, we have three potential additions: Hanwha Aerospace (012450 KS), Meritz Financial Group (138040 KS), and Kakao Pay (377300 KS).
Meritz Financial will likely take Meritz Fire’s place through a Continuation. Kakao’s chances have increased significantly due to the recent price rise and the comprehensive index review.

Merger Arb Mondays (19 Dec) – Toyo, Genesis/St Barbara, Norwest, Nitro, Tyro, Elmo, Yashili, O2Micro

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Genex Power Ltd (GNX AU), Golden Energy & Resources (GER SP), Origin Energy (ORG AU).
Lowest spreads Warrego Energy (WGO AU), Nitro Software Ltd (NTO AU), Chip Eng Seng Corp (CHIP SP), Uzabase Inc (3966 JP), Norwest Energy Nl (NWE AU), Elmo Software (ELO AU).

KOSPI Size Index: Early Preview at One Fourth into Screening Period

To MID migrants: Amorepacific Group (002790 KS), E Mart (139480 KS), Iljin Materials (020150 KS), Hanjin KAL (180640 KS), OCI (010060 KS), LX Semicon (108320 KS), and SOCAR (403550 KS)
To LARGE migrants: Hyundai Rotem (064350 KS), Hotel Shilla (008770 KS), GS Retail (007070 KS), CS Wind (112610 KS), and Posco International (047050 KS)
This time, the degree of predictability is high as the MC gap widened from an early point. So, we should consider building our position in phases from early next month.

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Dec 18

Most Read: DMCI Holdings, Omni Bridgeway, Tongcheng-Elong Holdings Ltd, Tietto Minerals Ltd, China Shenhua Energy Co H, Liontown Resources, TA Chen Stainless Pipe, Cromwell Property, Celltrion Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

PCOMP Index Rebalance Preview Feb 23: Higher Free Float Means Fewer Changes
S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes
HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes
Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ
MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion
Celltrion Group Companies – Sharp Increase in Dividends
Celltrion Siblings Announced Dividends: Trading Based on Past Patterns

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

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

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)

Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes

Filo Mining (FIL CN) and Tietto Minerals (TIE AU) are adds while Fresnillo (FRES LN), Galiano Gold (GAU US), Jaguar Mining (JAG CN) and Novo Resources (NVO CN) are deletes.
One way turnover is estimated at 4.3% resulting in a one-way trade of US$163m. There is over 1 day of ADV to trade on 24 stocks.
Largest inflows are on Filo Mining (FIL CN) and Tietto Minerals Ltd (TIE AU) while largest outflows are on Fresnillo PLC (FRES LN) and Centerra Gold (CG CN).

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

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

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the MVIS Global Rare Earth/Strategic Metals Index at the December rebalance.
There are free float and capping changes that will be implemented at the close on 16 December.
One way turnover is estimated at 4.26% and will result in a one-way trade of US$31.5m.

Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ

The rebalance implementation of the KOSPI2, KOSDQ150, CSI 300, CSI 500, STAR50 and other indices took place on 8/9 December. Plus MSCI/FTSE deletes due to Northbound Stock Connect changes.
Friday will see the implementation of the FTSE All-World/All-Cap, EPRA Nareit, S&P/ASX, KLCI, FTSE China and Sensex indices. The FTSE Taiwan Dividend+ Index will have the largest flows.
Big weekly redemptions from the Mirae Asset Tiger Top 10 ETF (292150 KS), ChinaAMC China 50 ETF (510050 CH) and IShares Core MSCI Asia Ex Japan ETF (3010 HK).

MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion

Cromwell Property (CMW AU) is a deletion from the MVIS Australia A-REITS Index at the close on 16 December.
Passive trackers will need to sell 13.9m shares (5 days ADV) of Cromwell Property (CMW AU) and there appears to be little to no pre-positioning on the stock.
There are a few other stocks that will have over 0.5 days of ADV to buy from passive trackers.

Celltrion Group Companies – Sharp Increase in Dividends

By Douglas Kim

Celltrion Inc, Celltrion Healthcare, and Celltrion Pharm all announced much higher dividend payments for this year as compared to last year.
Based on the new dividend payments, the dividend yields are as follows: (Celltrion Inc – 4.2%, Celltrion Healthcare – 4.2%, and Celltrion Pharm – 5%).
Merger of three companies is likely to have long-term positive impact on the their share prices. Although exact timing is uncertain, 2023 could be the year of this merger.

Celltrion Siblings Announced Dividends: Trading Based on Past Patterns

The three Celltrion companies are showing the same pattern of boosting share prices towards the yearend T-1 ex-date. This isn’t unique to Celltrion, but the intensity is high for them.
Celltrion’s yearend dividend effect has an inverse correlation with the market’s overall performance. Fortunately, this year’s market-wide performance was the worst in the past five years.
For this year, the dividend yield isn’t bad either, swing on Dec 17 to T-1 ex-date or day trade on T-1 ex-date should provide juicy returns based on past patterns.

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Dec 17

Most Read: Omni Bridgeway, Tongcheng-Elong Holdings Ltd, Tietto Minerals Ltd, Liontown Resources, Toshiba Corp, Anycolor, HKEX, Alibaba (ADR), Meritz Financial Group, Norwest Energy Nl and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)
MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes
Toshiba (6502) – Funding Secured!
2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!
China ADRs: PCAOB Resets the Clock on Delistings; Implications
China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter
MinRes’ “Unconditional” Offer For Norwest

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)

Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

MVIS Global Junior Gold Miners Index Rebalance: Two Adds, Four Deletes, Float Changes

Filo Mining (FIL CN) and Tietto Minerals (TIE AU) are adds while Fresnillo (FRES LN), Galiano Gold (GAU US), Jaguar Mining (JAG CN) and Novo Resources (NVO CN) are deletes.
One way turnover is estimated at 4.3% resulting in a one-way trade of US$163m. There is over 1 day of ADV to trade on 24 stocks.
Largest inflows are on Filo Mining (FIL CN) and Tietto Minerals Ltd (TIE AU) while largest outflows are on Fresnillo PLC (FRES LN) and Centerra Gold (CG CN).

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Float & Capping Changes

As expected, there are no adds or deletes for the MVIS Global Rare Earth/Strategic Metals Index at the December rebalance.
There are free float and capping changes that will be implemented at the close on 16 December.
One way turnover is estimated at 4.26% and will result in a one-way trade of US$31.5m.

Toshiba (6502) – Funding Secured!

A Nikkei article today suggests FUNDING SECURED for JIP’s deal for Toshiba Corp (6502 JP). Noises 2wks ago suggested this timing for a deal, but there are no terms yet.
The syndicate, led by SMBC and Mizuho, “has agreed to ¥1.2trln in loans.” The two leads take two-thirds but details suggest not all is as smooth as the headline suggests.
The remaining questions are whether the major holders will take the bait at that price, and/or whether JIC would come in over the top. I expect yes to the first.

2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!

“VTuber” (Virtual Youtuber) animated influencer company Anycolor (5032 JP) was listed on 8 June 2022 at ¥1530. The stock popped 214% on Day1.It is up another 60% since then.
Today Anycolor reported Q2 earnings (result, presentation) and revised its full-year forecast to 30 April. Revenues will be +7-18% vs forecast, OP +18-39%, NP +15-39%. Price is 43x forecast EPS.
The company also announced it is preparing a Section Transfer application, but gave little more info. So we dig into what THAT means.

China ADRs: PCAOB Resets the Clock on Delistings; Implications

After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.

China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now

Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.

Discussing Why Meritz Swap Spread Not Being Narrowed & When to Enter

The swap arb spread has been consistently within the 3% to 5% band since November 23, when arb trading should have actually started.
Meritz Financial’s buyback seems to be making it difficult to build positions on expectations that the price gap relative to Fire and Securities will converge quickly with the swap ratio.
As the actual risk of repaying financial borrows is small, we should start building up positions two weeks before the end of January, aiming to exit in early or mid-February.

MinRes’ “Unconditional” Offer For Norwest

Iron ore and lithium play Mineral Resources (MIN AU) is offering one new share for every 1,367 Norwest Energy (NWE AU), an onshore O&G play, in an off-market takeover.
The implied value of A$0.06/share under the Offer represents a 27% premium to NWE’s one-month VWAP.
MinRes currently owns 19.9% in Norwest. There is no minimum acceptance condition. This is done and will trade tight.

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Dec 16

Most Read: Haidilao, Omni Bridgeway, Toshiba Corp, China Communications Construction, Anycolor, Alibaba (ADR), HKEX, Yashili International Holdings, Adani Enterprises and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Haidilao’s Spin-Off of Super Hi: Index Implications
S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
Toshiba (6502) – Funding Secured!
CSI REITs Index: An Investable Benchmark Launches Today
2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!
China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now
China ADRs: PCAOB Resets the Clock on Delistings; Implications
Yashili/Mengniu: Are We There Yet?
Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Haidilao’s Spin-Off of Super Hi: Index Implications

Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we’ll talk about the latest developments, possible outcomes and implications.

Toshiba (6502) – Funding Secured!

A Nikkei article today suggests FUNDING SECURED for JIP’s deal for Toshiba Corp (6502 JP). Noises 2wks ago suggested this timing for a deal, but there are no terms yet.
The syndicate, led by SMBC and Mizuho, “has agreed to ¥1.2trln in loans.” The two leads take two-thirds but details suggest not all is as smooth as the headline suggests.
The remaining questions are whether the major holders will take the bait at that price, and/or whether JIC would come in over the top. I expect yes to the first.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

2023 High Conviction – Anycolor (5032) Aiming at TSE Prime and TOPIX – And How!

“VTuber” (Virtual Youtuber) animated influencer company Anycolor (5032 JP) was listed on 8 June 2022 at ¥1530. The stock popped 214% on Day1.It is up another 60% since then.
Today Anycolor reported Q2 earnings (result, presentation) and revised its full-year forecast to 30 April. Revenues will be +7-18% vs forecast, OP +18-39%, NP +15-39%. Price is 43x forecast EPS.
The company also announced it is preparing a Section Transfer application, but gave little more info. So we dig into what THAT means.

China ADRs Delisting – Christmas Came a Day Earlier than We Expected – No Delisting Risk for Now

Today PCAOB announced that they had secured complete access to inspect and investigate Chinese Firms for the first time in history.
This was on back of the Aug 2022 agreement between PCAOB, CSRC and MOF, which was followed up with a Hong Kong visit by PCAOB officials over Sep-Nov 2022.
We wrote about this on 14th Dec 2022 and expected the results to be out on Friday (16th Dec), they have come out a day earlier than we expected.

China ADRs: PCAOB Resets the Clock on Delistings; Implications

After getting ‘unprecedented access’ to inspect and investigate audit firms in the PRC, the PCAOB is vacating their 2021 determinations; there will be no ADR delistings in the near future.
PCAOB inspectors have identified numerous potential deficiencies that are consistent with what the PCAOB has encountered in other first-time inspections around the world.
The iShares MSCI China ETF (MCHI US), KraneShares CSI China Internet ETF (KWEB US) and NASDAQ Golden Dragon China Index (HXC INDEX) are trading lower in the U.S.

Yashili/Mengniu: Are We There Yet?

Back on the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
Pre-Conditions concern three sales and purchase agreements, all of which Yashili shareholders voted through on the 16 August.
From a regulatory standpoint, various conditions attached to Dumex China remain outstanding. But the wording in the most recent monthly update suggests the process is getting to the pointy end.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Adani Enterprises (ADE IN) is looking to raise INR200bn (US$2.4bn) via a further public offering. The company has obtained board approval and is now awaiting shareholder approval.
It is the flagship company of the Adani Group. The group’s listed entities’ stock performance over the past few years has made the founder one of the richest persons globally.
However, the stock is expensive and has had some issues in the past. In this note, we take an early look at the possible placement and its impact.

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Dec 15

Most Read: Omni Bridgeway, Alibaba (ADR), Li Auto, Haidilao, Toyo Construction, Acotec Scientific Holdings, Yashili International Holdings, China Communications Construction, WCP and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
HSTECH: Index Handling Changes & Flows in March
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
Acotec/Boston Scientific: Even Higher Proration
Toyo Construction (1890 JP): Pot Shots and Warning Shots
Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
CSI REITs Index: An Investable Benchmark Launches Today
Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we’ll talk about the latest developments, possible outcomes and implications.

HSTECH: Index Handling Changes & Flows in March

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications

On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue

In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.

Acotec/Boston Scientific: Even Higher Proration

Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg

Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP

WCP has the largest gap between the exercise and current prices (-16%). And its retail allocation is also the largest (5.44% of SO). In addition, it is subject to short-selling.
The deadline is January 2nd. A large-scale option exercise will be unavoidable if the share price does not exceed ₩54,000 by that date.
It is very likely that WCP’s share price will experience strong downward pressure for a week after January 2nd. We need to consider a position setup that actively utilizes this.

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Dec 14

Most Read: Li Auto, Omni Bridgeway, NTT Data Corp, Cromwell Property, Toyo Construction, Origin Energy, Haidilao, Endeavour Group, Okk Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Haidilao’s Spin-Off of Super Hi: Index Implications
HSTECH: Index Handling Changes & Flows in March
S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
NTT Buying NTT Data Shares – ¥40bn to Go
MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
Origin Energy: Gas Price Cap Compromises Brookfield’s Offer
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
Endeavour Group Placement – Recent Momentum Has Been Very Weak
Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities

Haidilao’s Spin-Off of Super Hi: Index Implications

Haidilao (6862 HK) intends to spin-off its 90% holding in Super Hi International Holding (SHI HK) with an ex-date of 16 December.
Super Hi International Holding (SHI HK) will be deleted from the Hong Kong Hang Seng Index and Hang Seng China Enterprises Index at the close on listing day.
There could be nationality changes and selling from MSCI and FTSE trackers as well, though the timing is uncertain at this point.

HSTECH: Index Handling Changes & Flows in March

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

NTT Buying NTT Data Shares – ¥40bn to Go

NTT (Nippon Telegraph & Telephone) (9432 JP) and NTT Data Corp (9613 JP) did a deal earlier this year to sell NTT’s global data business to NTT Data. Discussed here.
NTT sold 55% of its current overseas business in NTT Communications, Dimension Data, and NTT Security Group, in return getting 45% of NTT Data’s current global business, plus ¥112bn.
NTT would then spend ¥100bn of the ¥112bn increasing its stake. So far it has spent ¥58.39bn buying 18% of volume every day since Oct 1.

MVIS Australia A-REITs Index Rebalance: Cromwell Property (CMW) Is a Deletion

Cromwell Property (CMW AU) is a deletion from the MVIS Australia A-REITS Index at the close on 16 December.
Passive trackers will need to sell 13.9m shares (5 days ADV) of Cromwell Property (CMW AU) and there appears to be little to no pre-positioning on the stock.
There are a few other stocks that will have over 0.5 days of ADV to buy from passive trackers.

Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue

In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.

Origin Energy: Gas Price Cap Compromises Brookfield’s Offer

On the 10 November, Brookfield and EIG/MidOcean offered Origin Energy (ORG AU) shareholders $9.00/share, a 54.9% premium to last close, by way of a Scheme. The Offer is non-binding.
On the 9 December, the Aussie government said it would take action to limit the worst impacts of the forecast gas price increases to protect Australian households, industry, and manufacturers.
This includes a temporary price cap on new domestic wholesale gas contracts by east coast producers, such as Origin, for 12 months.

Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications

On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

Endeavour Group Placement – Recent Momentum Has Been Very Weak

Woolworths Ltd (WOW AU) plans to raise around US$438m via selling 5.5% of Endeavour Group (EDV AU).
Endeavour Group was demerged from Woolworths in Jun 2021 and it runs the drinks and hospitality business of Woolworths.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Nidec (6594) To Take Over Nidec OKK (6205), Squeezing Out Minorities