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• The number of FTSE TWSE Taiwan Dividend+ Index constituents will be increased from 30 to 50 in one step at the December rebalance.
• There are a few other changes to the index methodology, mainly around the cutoff ranks for inclusion/exclusion with a few additional constraints.
• We forecast 25 adds and 4 deletes to the index with one-way trade over US$2.2bn and big impact on many stocks due to inclusion, exclusion, capping and funding.

• The National Company Law Tribunal (NCLT) has ordered a meeting of HDFC Limited and HDFC Bank shareholders on 25 November to consider and approve the proposed Scheme of Amalgamation.
• Pidilite Industries (PIDI IN) is a high probability ad hoc inclusion to the NIFTY Index (NIFTY INDEX) with Tata Power (TPWR IN) a lower probability inclusion candidate.
• Tata Motors Ltd (TTMT IN) and Adani Enterprises (ADE IN) could be added to the SENSEX INDEX in December replacing HDFC Limited (HDFC IN) and Dr. Reddy’s Laboratories (DRRD IN).

• The review period for the MSCI November SAIR starts this week and will run till 31 October. We also near the end of the review period for many local indices.
• AIPL has announced a S&P BSE SENSEX Index market consultation while FTSE has announced the result of the FTSE TWSE Taiwan Dividend+ Index market consultation.
• There were big weekly inflows to ETFs that track China, Taiwan, Korea and Hong Kong equities.

• Kingston Financial (1031 HK) entered a trading halt pending an announcement under the Hong Kong Code on Takeovers and Mergers on 14 October. The shares are at all-time lows. 
• It is likely that Pollyanna Chu Yuet Wah (CEO and co-founder), the largest shareholder representing 75.61% of ordinary shares (80.09% of diluted shares), is seeking to privatise Kingston.
• As privatisation through a Bermuda scheme involves the headcount test, a decent premium is required – an offer at the 1-year average price of HK$0.33 implies a 63% premium.

• On 12 July, cash-rich mining mini-conglomerate (mining, contracting, equipment, etc) United Tractors (UNTR IJ) announced a buyback discussed in United Tractors (UNTR IJ) Buyback – Sure to Be Impactful. 
• The buyback was to go for three months but three months later, it was extended or another three months. 
• Performance has been good. How much has been bought back. Tough to know, but we can make some pretty educated guesses.

• On 20th September 2022, FTSE Russell commenced a market consultation with a goal of increasing the constituent count of the FTSE TWSE Taiwan Dividend+ Index from 30 to 50.
• On 13th October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50.
• In this insight, we take a look at the updated Ground Rules and Quiddity’s expectations for index flows during the December 2022 Rebalance.

• Ming Yuan Cloud Group (909 HK) listed in September 2020 and was included in major indices (MSCI, FTSE, HSTECH) over the next few months.
• The stock price slide over the last few months could lead to the deletion of the stock from the MSCI China Index and Hang Seng Tech Index (HSTECH INDEX). 
• Deletion and downward migration could result in an increase in the real float of the stock by 15% and add further downward pressure. Short interest has been increasing steadily.

• A successful bidder (identity unknown at the time of writing) has emerged for Shandong Fengxiang (9977 HK) controlling shareholder’s 70.92% stake at the base bid price of RMB1,372.2 million.
• As the bidder will hold 30% or more of the voting rights, it will result in an MGO at RMB1.383 per share (HK$1.526 at the median BOC FX of 0.9056).  
• The transfer of the sale shares is subject to completion procedures. Our best guess is the offer completes end-January 2023. At the last close, the gross spread is 15.6%. 

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), Shandong Fengxiang (9977 HK), O2Micro International (OIIM US).
• Lowest spreads – Tyro Payments (TYR AU),OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), True Corp Pcl (TRUE TB), Cocoaland Holdings (COLA MK), China VAST.

• Long/Short basket trading on an equal weight using only six stocks for a 10% ceiling reversion with SungEel and Sebitchem would have delivered a daily yield of close to 2%.
• An outright position on SungEel and Sebitchem and the biggest mover, Ecopro BM, alone would have delivered a pretty juicy yield of 4.2%.
• The rebalancing of this ETF is an event that allows you to bet on highly predictable share price movements by forming a basket with a relatively small number of stocks.

• Nearing the end of the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 13.67% at the December rebalance leading to a one-way trade of CNY 7.53bn.
• The potential adds have outperformed over the last 6 months but have given up some of the gains recently as market turned volatile. Expect outperformance as the review period ends.

• Call was to buy our long group for a mid-October short covering rally. Lofty CPI means we retest lows (late October). Top today for dip, better sell territory next week.
• NKY was our top long bet in our long basket (NKY, ASX, Euro Stoxx 50 and SPX) with a call to reduce with ideal sell levels due next week.
• At SPX 3,700+ we are rolling back into our short group. Ideal low due in late October.

• Kyushu-Based food services business and restaurant operator Plenus Co Ltd (9945 JP) announced Friday that its main holder had announced a Tender Offer. The Board voted to support the effort.
• The Tender Offer is at ¥2,640/share, a 37.5% premium to last, and which is just higher than the highest closing price since listing.
• This looks like a deal easy to get done. Decent premium, well above book, lifetime high on a low vol stock, not an awful multiple, and founder+cross-holders have 50%.

• Kingston Financial (1031 HK) entered a trading halt pending an announcement under the Hong Kong Code on Takeovers and Mergers on 14 October. The shares are at all-time lows. 
• It is likely that Pollyanna Chu Yuet Wah (CEO and co-founder), the largest shareholder representing 75.61% of ordinary shares (80.09% of diluted shares), is seeking to privatise Kingston.
• As privatisation through a Bermuda scheme involves the headcount test, a decent premium is required – an offer at the 1-year average price of HK$0.33 implies a 63% premium.

• As the recent share price volatility has grown, there have been significant changes in those on the borderline at the MSCI November SAIR.
• Additions: Hyundai Mipo Dockyard (010620), LOTTE Corp (004990),  and Ecopro (086520) & Deletions: Meritz Financial Group (138040), Amorepacific Group (002790), SK Chemicals (285130), and Green Cross (006280).
• We must wait on many names until the end, making the price impact more dramatic than usual, as the flow can be concentrated after the announcement.

• The review period for the MSCI November SAIR starts this week and will run till 31 October. We also near the end of the review period for many local indices.
• AIPL has announced a S&P BSE SENSEX Index market consultation while FTSE has announced the result of the FTSE TWSE Taiwan Dividend+ Index market consultation.
• There were big weekly inflows to ETFs that track China, Taiwan, Korea and Hong Kong equities.

• The Nikkei 225 closed the week +0.2% higher after sharp gains on Friday
• The Japanese yen dropped to a 32-year low on Thursday, trading at around 147.65 against the dollar, hitting its weakest point since August 1990
• Higher rates and weakening economic growth are proving a stern headwind for tech stocks; Yaskawa cut full year OP guidance

• In April, reportedly Renault (RNO FP) might sell Nissan (7201 JP) shares to support EV investments. We have news talks are coming to a head. The results won’t be pretty.
• The Nikkei says the JIP consortium is the “Preferred Bidder” for Toshiba Corp (6502 JP). That is a stalking horse. The proposed price of ¥2.5trn is also a stalking horse
• Reportedly the Widjaja Family may be looking to take Indonesian/Australian energy/met coal play Golden Energy & Resources (GER SP) private.

• In this insight, we highlight the pricing gap divergence of the major Korean holdcos and opcos amid market carnage.
• In general, more holdcos/quasi-holdcos have been outperforming the opcos in the past year, as compared to the previous years as more investors seek value-oriented, deep NAV discount stocks.
• We highlight 26 pair trades that involve Korean holdcos and opcos.

• On 20th September 2022, FTSE Russell commenced a market consultation with a goal of increasing the constituent count of the FTSE TWSE Taiwan Dividend+ Index from 30 to 50.
• On 13th October 2022, FTSE Russell confirmed that the number of constituents in the FTSE TWSE Taiwan Dividend+ Index will be increased from 30 to 50.
• In this insight, we take a look at the updated Ground Rules and Quiddity’s expectations for index flows during the December 2022 Rebalance.

• The number of FTSE TWSE Taiwan Dividend+ Index constituents will be increased from 30 to 50 in one step at the December rebalance.
• There are a few other changes to the index methodology, mainly around the cutoff ranks for inclusion/exclusion with a few additional constraints.
• We forecast 25 adds and 4 deletes to the index with one-way trade over US$2.2bn and big impact on many stocks due to inclusion, exclusion, capping and funding.

• Socionext (6526 JP) traded 15.1% higher than its IPO price on listing day. That gives it a market cap of JPY 141.4bn (US$963m).
• Socionext (6526 JP) will be added to the TPX INDEX in November and could be added to the MSCI SmallCap Index in February and the FTSE All-Cap Index in June.
• The close yesterday indicates there could be more buying behind while the TOPIX inclusion in November will be a source of short-term demand for the stock.

• Nearing the end of the review period, we expect there will be 18 changes to the SSE180 Index in December. The first-order impact on the stocks is not large.
• Stocks that are not currently in Buy/Sell Stock Connect will be added to the list. That makes them eligible for inclusion in the MSCI and FTSE indices in February/March.
• We see 6 of the potential/close adds being added to the MSCI China Index in February and 8 of the potential/close adds being added to the FTSE All-World/All-Cap in March.

• We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
• We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
• We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers

• GLP J-REIT (3281 JP) is looking to raise  around US$220m in its placement to acquire five assets, and increase its stake in a sixth one.
• We have covered a number of past deals by the company, almost all of which have done well.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Garena has introduced nine major updates to “Free Fire” since June last-year but none of them has managed to turn around the game’s declining trend and regain the lost users.
• With Sea Ltd (SE US) no longer capable of funding Shopee’s growth, we are expecting e-commerce to start losing its top-line growth potential from 4Q22.
• Even though we are predicting a lot of downside to Sea Ltd over the medium term, an okayish Q3 could see shares bouncing back from the bottom.

• Hong Kong brokerage Kingston Financial (1031 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code. 
• Chu Yuet Wah is the largest shareholder with 74.6% of shares out.
• Shares are down 98% from the January 2018 peak. A chunky premium may be on the cards if a firm Offer unfolds. 

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the December 2022 Rebalance.
• The reference period for the trading data used for the index selection ends on 31st October 2022.
• At present, I see one change for SENSEX, three changes for BSE 100, and six changes for BSE 200. 

• TSMC says limited impact from U.S. China restrictions — We crosscheck the comments.
• TSMC guidance was strong and gives hope for 1H23 industry improvement. Looks cheap on a cycle-adjusted PE.
• Intel has outperformed TSMC shares despite the recent TSMC rebound.

• We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Oct 14th based on HKEx daily reports.
• In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Wuxi Biologics (2269 HK), Aia (1299 HK).
• In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Wuxi Biologics (2269 HK).

• Overnight, a few news outlets are running with the story that Toshiba Corp (6502 JP) has granted “preferred bidder” status to the Japan Industrial Partners (JIP)-led consortium bid.
• JIP had originally signed up with public-private fund JIC, forming one of the four bids (the other three being CVC, Bain, and Brookfield) but JIP and JIC split last month.
• “Preferred Bidder status” is just that. It’s not exclusive, but one can read between the lines. But the articles have interesting details, including the first trial ballon price leak.

• Socionext (6526 JP) traded 15.1% higher than its IPO price on listing day. That gives it a market cap of JPY 141.4bn (US$963m).
• Socionext (6526 JP) will be added to the TPX INDEX in November and could be added to the MSCI SmallCap Index in February and the FTSE All-Cap Index in June.
• The close yesterday indicates there could be more buying behind while the TOPIX inclusion in November will be a source of short-term demand for the stock.

• We were Bearish on Fast Retailing, mainly due to valuation concerns against global peers. That view still stands.
• We expected cautious guidance reflecting a harsh macro environment. Fast surprised with bullish guidance. That could be a risk.
• We highlight the key slides from the results presentation and re-iterate our view that Fast should not trade at such a premium to its global peers

• GLP J-REIT (3281 JP) is looking to raise  around US$220m in its placement to acquire five assets, and increase its stake in a sixth one.
• We have covered a number of past deals by the company, almost all of which have done well.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• The number of FTSE TWSE Taiwan Dividend+ Index constituents will be increased from 30 to 50 in one step at the December rebalance.
• There are a few other changes to the index methodology, mainly around the cutoff ranks for inclusion/exclusion with a few additional constraints.
• We forecast 25 adds and 4 deletes to the index with one-way trade over US$2.2bn and big impact on many stocks due to inclusion, exclusion, capping and funding.

• Reportedly Macau authorities are not satisfied with some concessionaire proposals from gaming firms and require them to increase investment into non-gaming facilities under a concession retendering process
• Preceding my comments on some of the gaming plays such as Melco International Development (200 HK) and Genting Bhd (GENT MK) 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%.

• Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
• The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
• We spoke about the company’s past performance and undertook a peer comparison in our previous note. In this note, we’ll talk about our earnings estimates and valuation.

• Elmo Software (ELO AU) confirmed takeover interest from several parties, including Accel-KKR. Elmo previously disclosed on 14 June that it had discussions on a non-binding offer at A$6.10 per share.
• The previous talks ended because the bidder (Accel-KKR) could not progress to a binding offer due to changing tech valuations. Elmo has materially underperformed ASX SaaS peers since 14 June.
• The current conditions suggest a higher risk that the talks will fizzle out. Despite today’s 28% pop, the shares remain undemanding compared to peer multiples providing support to the shares. 

• Cloud-Based solutions provider Elmo Software (ELO AU) has confirmed it has received multiple expressions of interest from various parties, including Accel-KKR.
• No agreement has been reached with any parties, no pricing mentioned, nor whether data room access has been afforded.
• Earlier this year ELMO held discussions with Accel-KKR in regard to a change of control proposal at $6.10/share. That figure is a stretch in this market. 

• The strength about Giant Biogene is that the founders have R&D background, which helps build trust. Meanwhile, the financial performance was good, with three years of consistent high margins.
• The sustainability of high-profit model will face pressure due to increasing competition. The establishment of long-term core competitiveness and second growth point is important. Complex related-party transaction is another concern.
• Giant Biogene is in an industry that has a large potential for future growth in valuation. Its valuation should be lower than that of Bloomage and Imeik.

• SBI Holdings (8473 JP)‘s unit SBI Regional Bank Holdings KK (SBI 地銀ホールディングス株式会社) today announced it had received FSA authorisation to turn the company into a Bank Holding Company.  
• There are some technicalities involved. SBI announced it would buy 2.5mm shares of Shinsei on-market to get to 50.05% by end-March 2023. This will disappoint some, but…
• I expect investors should continue to look at the big picture. Technicalities are technicalities. Strategy is strategy. The big picture is unchanged and there isn’t that much room to manoeuvre. 

• Overnight, a few news outlets are running with the story that Toshiba Corp (6502 JP) has granted “preferred bidder” status to the Japan Industrial Partners (JIP)-led consortium bid.
• JIP had originally signed up with public-private fund JIC, forming one of the four bids (the other three being CVC, Bain, and Brookfield) but JIP and JIC split last month.
• “Preferred Bidder status” is just that. It’s not exclusive, but one can read between the lines. But the articles have interesting details, including the first trial ballon price leak.

• With a week to the start of the review period, we forecast one inclusion and a lot more deletions for the MSCI Korea Index at the November SAIR.
• The impact from passive fund trading is pretty large on the potential and close deletes while the impact is a lot more muted on the sole potential add.
• There will be pre-positioning on most of the names already and part of that shows up in sharply higher short interest on a few stocks.

• Socionext (6526 JP) raised around US$463m in its Japan IPO. The IPO consisted of 100% secondary shares.
• Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation.  
• In this note we will talk about the trading dynamics.

• Socionext (6526 JP) traded 15.1% higher than its IPO price on listing day. That gives it a market cap of JPY 141.4bn (US$963m).
• Socionext (6526 JP) will be added to the TPX INDEX in November and could be added to the MSCI SmallCap Index in February and the FTSE All-Cap Index in June.
• The close yesterday indicates there could be more buying behind while the TOPIX inclusion in November will be a source of short-term demand for the stock.

• Today after the close, large-cap logistics JREIT GLP J-REIT (3281 JP) (“GLP”) announced a follow-on equity offering to fund part of their recently-announced property acquisition. 
• The primary offer quantity is 215,962 units. In addition, there will also be an over-allotment quantity of 5,809 units. The total size of this offering could be roughly ¥33bn (~US$227mn). 
• Below is a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

• With near-on nine-month having lapsed since True Corp Pcl (TRUE TB) and Total Access Communication (DTAC TB) submitted an amalgamation report, the NBTC may conclude/clarify a sweeping resolution today.
• That resolution, prompted by DTAC and True, is expected to establish the NBTC has no authority to consider approving or rejecting the merger, although remedial measures may be enforced.
• Further rumours abound as I type that the NBTC decision may be delayed another week. 

• Lionheart Studio (426630 KS), a game development studio based in South Korea,  aims to raise around US$420m via its South Korean IPO.
• The company is majority owned by Kakao Games Corp (293490 KS), which after having recently hiked its stake, owned 54.94% of the company prior to listing.  
• We spoke about the company’s past performance in our previous note. In this note, we’ll undertake a peer comparison.

• After one month from the September batch of Hong Kong Connect inclusion, we provide an analysis on the stock inclusion for 12 stocks. 
• We analysed the inclusion by performance post announcement, performance post inclusion, inflows and analyst coverage.
• We continued to observed outperformance post the HSCI announcement but not the actual inclusion despite the fact that southbound inflows has a significant impact on the trading volume. 

• Back on the 18 August, aviation engine repair play PTB Group (PTB AU) entered into a Scheme Implementation Deed with PAG Holding, at $1.595/share, a 40.5% premium to last close.
• The Scheme Booklet has now been lodged with ASIC. The Independent Expert reckons the Offer is fair and reasonable. 
• The Scheme Meeting will be held on the 16 November, as previously flagged in August’s SID, with an expected implementation on the 9 December. 

• We see 9 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR. There are a few stocks close to the cutoffs.
• Inclusion in the index will require passive trackers to buy 7-14 days of ADV on the stocks. That increases to 18-55 days of delivery volume.
• There appears to be significant pre-positioning on a lot of the potential adds and the shareholding pattern as of end September should provide a better picture.

• In April, a Bloomberg story said Renault SA (RNO FP) might sell shares in Nissan Motor (7201 JP) to support its investment in EVs. They might sell to Nissan, others.
• Renault shares popped hard, this two months after CEO Luca de Meo had said Renault might split, investing in and listing its EV business separately.  But since then? Crickets.
• Over the weekend, we have news talks are coming to a head. My feeling? The results won’t be pretty – a messy agreement which inspires nobody, but probably still works.

• SBI Holdings (8473 JP)‘s unit SBI Regional Bank Holdings KK (SBI 地銀ホールディングス株式会社) today announced it had received FSA authorisation to turn the company into a Bank Holding Company.  
• There are some technicalities involved. SBI announced it would buy 2.5mm shares of Shinsei on-market to get to 50.05% by end-March 2023. This will disappoint some, but…
• I expect investors should continue to look at the big picture. Technicalities are technicalities. Strategy is strategy. The big picture is unchanged and there isn’t that much room to manoeuvre. 

• 90% of the way through the review period of the Kospi 200 Index December rebalance, we see two potential changes to the index. There is another potential inclusion failing liquidity.
• This rebalance is expected to have the lowest turnover as compared to any of the Kospi 200 Index rebalances over the last few years. Partly lower markets, partly no IPOs.
• That said, passive trackers are estimated to need to trade over 10 days of ADV on one of the potential adds and both potential deletes.

• Nearing the end of the review period, we expect there will be 18 changes to the SSE180 Index in December. The first-order impact on the stocks is not large.
• Stocks that are not currently in Buy/Sell Stock Connect will be added to the list. That makes them eligible for inclusion in the MSCI and FTSE indices in February/March.
• We see 6 of the potential/close adds being added to the MSCI China Index in February and 8 of the potential/close adds being added to the FTSE All-World/All-Cap in March.

• Socionext (6526 JP) raised around US$463m in its Japan IPO. The IPO consisted of 100% secondary shares.
• Socionext is a fabless semiconductor provider which commenced operations after integrating the system on a chip (SoC) businesses of Fujitsu Semiconductor Limited and Panasonic Holding Corporation.  
• In this note we will talk about the trading dynamics.

• The KRX gives three heads-up types: WARNING (illegal trading), ADMINISTRATIVE (insolvency), & ATTENTION (inappropriate accounting). Those losing eligibility are ADMINISTRATIVE (KOSPI 200) and ADMINISTRATIVE + ATTENTION (KOSDAQ 150).
• Those designated as WARNING keep the eligibility for KOSPI 200/KOSDAQ 150 unless delisting is decided. We can find these heads-up designations on the KRX website, which is available in English.
• Osstem is currently an ATTENTION issue, so ineligible at this point. Knotus was designated as a WARNING issue in June and underwent a trade suspension. Nevertheless, it maintains eligibility.

• Back on the 26 April, church donor management tech play Pushpay Holdings (PPH NZ) announced “unsolicited, non-binding and conditional expressions of interest or approaches from third parties“. No price was mentioned. 
• Roughly a month later, BGH Capital and Sixth Street, both existing shareholders, entered into a cooperation agreement with respect to a potential transaction for Pushpay. Again, no price was provided. 
• Pushpay has now announced it has received a non-binding proposal. Word on the street this involves BGH. Still, no price was made public. A 30% premium to undisturbed is ~NZ$1.34/share.

• With a week to the start of the review period, we forecast one inclusion and a lot more deletions for the MSCI Korea Index at the November SAIR.
• The impact from passive fund trading is pretty large on the potential and close deletes while the impact is a lot more muted on the sole potential add.
• There will be pre-positioning on most of the names already and part of that shows up in sharply higher short interest on a few stocks.

• Overnight, a few news outlets are running with the story that Toshiba Corp (6502 JP) has granted “preferred bidder” status to the Japan Industrial Partners (JIP)-led consortium bid.
• JIP had originally signed up with public-private fund JIC, forming one of the four bids (the other three being CVC, Bain, and Brookfield) but JIP and JIC split last month.
• “Preferred Bidder status” is just that. It’s not exclusive, but one can read between the lines. But the articles have interesting details, including the first trial ballon price leak.

• The TSE announced its first large FFW rebalance under new rules and Market Segmentation. ~1,000 names see FFW drop 5% or more. 100+ rise 5+%. Reverse funding trades are significant.
• Top BUY flow: Toyota, Olympus, Daiichi Sankyo, Tokio Marine, JP Holdings with an average of 4.0 days’ ADV to buy. Softbank/9984, MitCorp, Hitachi, Suzuki, Marubeni average 4.8 days to SELL.
• 493 names start their phased weight reduction out of TOPIX because they do not meet the hurdle for minimum trading value. And… Shinsei is the most impressive SELL name.

• We see 9 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR. There are a few stocks close to the cutoffs.
• Inclusion in the index will require passive trackers to buy 7-14 days of ADV on the stocks. That increases to 18-55 days of delivery volume.
• There appears to be significant pre-positioning on a lot of the potential adds and the shareholding pattern as of end September should provide a better picture.

• As a follow-on to TOPIX October 2022 Rebal – BIG Names with BIG Flows which discussed ¥2.1trln a side flows overall, this insight analyses and proposes intra-sector baskets.
• In general, the sector-neutral BUYs vs SELLs baskets of all names where Index Shares change by 10% or more have seen BUYs sharply outperform SELLs in the past three weeks.
• Look for pre-positioning unwinds so trading BUY vs SELL baskets which have bucked the trend, banks and chemicals – might be worthwhile. Otherwise, pick your spots. Use the flow.

• At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.
• Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.
• Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.

• In April, a Bloomberg story said Renault SA (RNO FP) might sell shares in Nissan Motor (7201 JP) to support its investment in EVs. They might sell to Nissan, others.
• Renault shares popped hard, this two months after CEO Luca de Meo had said Renault might split, investing in and listing its EV business separately.  But since then? Crickets.
• Over the weekend, we have news talks are coming to a head. My feeling? The results won’t be pretty – a messy agreement which inspires nobody, but probably still works.

• Bilibili Inc (BILI US) listed in the US in April 2018. It eventually listed in Hong Kong under the ticker Bilibili (9626 HK) in March 2021 as a Secondary Listing. 
• Bilibili (9626 HK)  announced 16 March 2022 it intended to pursue a HK Primary Listing.  Application was announced on 2 May 2022, Circular a month later. Results announced 29 September.
• As of 3 October, it is a Dual Primary Listing, making it eventually eligible for Southbound Trading. But there as confusion as to when. Hint:  It’s March 2023.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Shandong Fengxiang (9977 HK), Alliance Aviation Services (AQZ AU), 111 Inc (YI US), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
• Lowest spreads – Tyro Payments (TYR AU), OZ Minerals Ltd (OZL AU), Nitro Software Ltd (NTO AU), MACA Ltd (MLD AU), Singapore Medical (SMG SP), Jinke Smart Services (9666 HK).

Our latest Webinar looks at news updates on Shinsei, Toa Oil, and Toyo Construction. To help us explore the implications for investors, we welcome Insight Provider Travis Lundy of Quiddity Advisors. 

The webinar will be hosted on Wednesday, 12 October 2022, 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.

• Nearing the end of the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 9 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 13.67% at the December rebalance leading to a one-way trade of CNY 7.53bn.
• The potential adds have outperformed over the last 6 months but have given up some of the gains recently as market turned volatile. Expect outperformance as the review period ends.

• Back on the 21 October 2016, Hisense Home Appliances Group Co., Ltd. H (921 HK) announced it would invest  RMB1.7bn of “idle” funds into wealth management products, or ~HK$1.43/share.
• Between 16 September 2022 and 8 October, Hisense announced it has invested HK$1.13bn of idle funds in wealth management products.
• Hisense reckons the investment is “beneficial for enhancing efficiency of use of idle self-owned funds“. But if truly idle, they should be returned to shareholders.

• Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.
• The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.
• The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.

• As a follow-on to TOPIX October 2022 Rebal – BIG Names with BIG Flows which discussed ¥2.1trln a side flows overall, this insight analyses and proposes intra-sector baskets.
• In general, the sector-neutral BUYs vs SELLs baskets of all names where Index Shares change by 10% or more have seen BUYs sharply outperform SELLs in the past three weeks.
• Look for pre-positioning unwinds so trading BUY vs SELL baskets which have bucked the trend, banks and chemicals – might be worthwhile. Otherwise, pick your spots. Use the flow.

• The TSE announced its first large FFW rebalance under new rules and Market Segmentation. ~1,000 names see FFW drop 5% or more. 100+ rise 5+%. Reverse funding trades are significant.
• Top BUY flow: Toyota, Olympus, Daiichi Sankyo, Tokio Marine, JP Holdings with an average of 4.0 days’ ADV to buy. Softbank/9984, MitCorp, Hitachi, Suzuki, Marubeni average 4.8 days to SELL.
• 493 names start their phased weight reduction out of TOPIX because they do not meet the hurdle for minimum trading value. And… Shinsei is the most impressive SELL name.

• At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.
• Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.
• Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.

• We expect a few adds to the HSCI in December followed by a lot more change in March. We could finally reach 80 HSI INDEX constituents in December.
• There will be a handful of adds to the FTSE All-World/All-Cap indices in December. But there will be many changes to the FTSE TWSE Taiwan Dividend+ Index in December.
• There were large inflows to the Yuanta/PShares Taiwan Dividend Plus ETF (0056 TT), Hang Seng H Share Index ETF (2828 HK) and Tracker Fund of Hong Kong Ltd (2800 HK). 

• We see 9 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR. There are a few stocks close to the cutoffs.
• Inclusion in the index will require passive trackers to buy 7-14 days of ADV on the stocks. That increases to 18-55 days of delivery volume.
• There appears to be significant pre-positioning on a lot of the potential adds and the shareholding pattern as of end September should provide a better picture.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – CALB (3931 HK)‘s weak debut. Betagro (BTG TB) will open its books for its THB17.4 billion (US$462 million) from 10 to 25 October.
• Event-Driven developments – Link Administration (LNK AU), MACA Ltd (MLD AU), Tyro Payments (TYR AU), Eagle Cement Corp (EAGLE PM), O2Micro International (OIIM US), Singapore Medical (SMG SP). 

• AIPL has commenced a market consultation on amending the index universe to only include stocks that are a part of the Futures & Options (F&O) segment of the market.
• This is likely driven by a bunch of Adani-group companies that are at the cusp of index inclusion and are not a part of the F&O market.
• Post implementation of the change, Tata Motors Ltd (TTMT IN) is a likely inclusion to the index in December, though that depends on Dr. Reddy’s Laboratories (DRRD IN) being deleted.

• 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, HK IPOs continued to struggle with CALB (3931 HK) joining Leapmotor (9863 HK) and Onewo (2602 HK) with its tepid performance.
• Given the mid-week HK holiday and the ongoing golden week, there weren’t any large placements this week.

• Betagro (BTG TB) is looking to raise about US$460m in its Thailand IPO.  
• Betagro is an integrated agro-industrial and food business in Thailand. 
• Betagro identified three Thailand-listed companies which we included in our peer comparison exercise to determine how it has fared against its direct peers. 

A few years ago I started this series, and I updated it last year. Since last year, it has been a top 10 insight in terms of views. 

I personally think it is important for investors of all types to understand WHO OWNS WHAT. 

Many fundamental investors are reticent to spend any time on this but there are many reasons why active investors in Japan should be interested in understanding the ownership and shareholder dynamics of passive investors in Japan.

• SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
• The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
• My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

• With 85% of the review period complete, we see 10 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
• There are a few stocks that are close adds/deletes on market cap and liquidity and could make it into the final list depending on price/volume over the next few weeks.
• The potential adds have outperformed the potential deletes over the last month and pre-positioning could continue till the end of the review period.

• Hero Motocorp (HMCL IN) has been outperforming the Nifty 50 over the last 6M
• Our flash checks done in the south suggests the outperformance may not last long
• Failure of a model, high competitive intensity, and changing preferences can again lead to high inventory levels leading to a possible correction in wholesales post-festive season. 

• Sumitomo has offered $22.75/share in cash, 27% premium, for the 48% stake it doesn’t hold in Myovant, whose Board has rejected the offer and is open to negotiate.
• The sell-side forecasts peak sales of over $2 billion for Orgovyx and Myfembree. Myovant also has a co-marketing deal with Pfizer could be worth $3.8 billion in milestones.
• My TP is $22.84 (in line with consensus and the offer price). The market certainly believes that Sumitomo could be preparing a sweetened offer. Will Orgovyx become a blockbuster?

• At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.
• Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.
• Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.

• On 7 October, SKC Co Ltd (011790 KS) announced that it will conduct a share buyback of 1.89 million shares, representing 5% of outstanding shares.
• We continue to maintain a Negative view of SKC Co.
• We remain concerned about lack of clear measures to protect existing minority shareholders if its major subsidiaries (such as Nexilis) complete IPOs in the next several years.

• The TSE announced its first large FFW rebalance under new rules and Market Segmentation. ~1,000 names see FFW drop 5% or more. 100+ rise 5+%. Reverse funding trades are significant.
• Top BUY flow: Toyota, Olympus, Daiichi Sankyo, Tokio Marine, JP Holdings with an average of 4.0 days’ ADV to buy. Softbank/9984, MitCorp, Hitachi, Suzuki, Marubeni average 4.8 days to SELL.
• 493 names start their phased weight reduction out of TOPIX because they do not meet the hurdle for minimum trading value. And… Shinsei is the most impressive SELL name.

• Chairman Kim of the FSC mentioned potential rule changes in disclosing the names of short sellers at the state audit last Thursday.
• The first is to reveal the identity of short sellers who traded through a swap contract with a broker, which is currently exempt from the short-selling disclosure obligation.
• The second is to disclose the identity of investors caught in illegal short-selling activities, mostly naked short-selling and wall-crossing.

• Why KakaoBank (323410 KS) , Kakao Games Corp (293490 KS) and Kakao Pay (377300 KS) were hit recently
• Aside from the sum of the 3, why Kakao Corp (035720 KS) is getting hit further
• Are near the bottom or is there more to go? 

• After 18mos of hints, and two rights recapitalisations at Sembcorp Marine (SMM SP), SMM and Keppel Corp (KEP SP) announced a deal to merge their O&M businesses at end-April.
• Keppel shareholders would receive ~18 shares of SMM per share of Keppel owned, Keppel spins out the equity of its legacy rig assets and leaves the O&M biz clean.
• The structure announced lets us examine “forward KEP”, and anticipate interest and valuations post-spin, which is “supposed to” happen in Q4. We’re in Q4 now, and Keppel is interesting here.

• SBI Holdings (8473 JP)‘s subsidiary has reportedly filed its application to become a Bank Holding Company, the definition being a company holding a 50% or greater stake in a bank.
• The day after I last wrote, Shinsei announced it had received approval to change its name to SBI Shinsei Bank as of 4 January 2023.
• My expectation is the move above 50% happens sooner rather than later. And in that case, investors should think about their approach. Get your cowbells ready.

• With 85% of the review period complete, we see 10 potential changes to the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
• There are a few stocks that are close adds/deletes on market cap and liquidity and could make it into the final list depending on price/volume over the next few weeks.
• The potential adds have outperformed the potential deletes over the last month and pre-positioning could continue till the end of the review period.

• The lack of minority shareholders participation in Kakao Pay Securities rights offering is likely to be viewed negatively by many investors since Kakao Pay may need to inject more capital.
• On 8 June 2022, Alipay sold 5 million shares of Kakao Pay and Alipay put a lockup on its remaining 46 million shares in Kakao Pay for another 120 days.
• All in all, we continue to have a Negative view of Kakao Pay. 

• KOSDAQ 150’s December rebalancing will feature seven regular changes and two special entries.
• Among the additions, we should focus on Dear U and ISC, which have a balanced level of liquidity and flow, rather than those theme stocks with high volatility.
• As for Nature Holdings, Eoflow, and Nextin, I suggest a more aggressive entry point due to low trading volume. Then, I’d basket-trade the deletions on equal weight.

• Jardine Cycle & Carriage (JCNC SP) is currently trading at a ~9% discount to NAV, around the narrowest since the post-Covid nadir in April 2020.
• JCNC’s recent results highlighted a marked improvement in its unlisted Vietnamese automotive ops. 
• Weakness in the Indonesian rupiah has taken some of the shine off Astra International (ASII IJ)‘s strong sales growth. 

• The volatile market environment prompted us to seek for companies with secured demand, high earnings quality and solid financial position – Fu Shou Yuan International (1448 HK) fits these criteria.
• It has established earnings record, favourable demographic environment, good reserve for growth and upside from geographical expansion. We like its emphasis on shareholder return through rising payout and share buyback. 
• Its net cash position, which amounted to 20% of the market capitalisation, adds further comfort to us. Meanwhile, valuations are not stretched relative to international peers.

• We looked at HSBC and ICBC to consider relative vol surfaces 
• We evaluate relative risks of credit deterioration in China on both stocks
• We suggest a relative value vol trade that offers good risk reward in various scenarios

• With OP up by 22% YoY to beat the consensus estimate by ¥2.0bn, Seven & I turned in a strong 2QFY23 along with a considerable upgrade to FY23 guidance.
• However, the post-earnings price reaction seems to suggest that the market is a bit worried about the short-term performance of Seven & I Holdings (3382 JP)’s US convenience store business.
• In addition, the struggling non-core businesses whose future remains undecided could also be weighing in on Seven & I’s price performance.

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net outflow over the past week was ~US$0.15bn, split between Shanghai (+US$0.05bn) and Shenzhen (-US$0.20bn).
• The largest inflows were into Kweichow Moutai (600519 CH) and Zhejiang Huayou Cobalt (603799 CH). The largest outflows were in LONGi Green Energy Technology (601012 CH) and CATL (300750 CH).