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• A third of the way through the review period, we see one potential change. There are four stocks that are close to inclusion zone and could lead to more changes.
• Currently, Miwon Specialty Chemical Co (268280 KS) is an add while Hyundai Home Shopping Network (057050 KS) is a delete.
• Samyang Foods (003230 KS), Lotte Confectionery (280360 KS), Unid Co Ltd (014830 KS) and Miwon Commercial (002840 KS) are close adds currently.

• Socionext (6526 JP) is looking to raise up to US$285m in its Japan IPO.
• Socionext is a fabless semiconductor provider in Japan. Sales and profitability has been on an overall uptrend, and design wins in earlier fiscal years should materialize in the coming periods. 
• However, the firm has generated a substantial portion of revenue from a related party and is reliant on a particular foundry for its front-end manufacturing.

• In August, Janaghan Jeyakumar, CFA published his leaderboard and flow estimates for the FTSE Taiwan Dividend+ Rebalance which starts today and runs through next Thursday.
• Late in August, I recommended a basket trade. Since then, the BUY basket has outperformed the SELL basket by 7.6%. Set & Forget it is up 7.2%.
• I provided timing in the basket trade. Now it is time to swing the other way. 

• Today before the open, China’s State Administration for Market Regulation (SAMR) finally announced the approval of the takeover of Hitachi Metals (5486 JP). This was what delayed things. 
• The approval had actually been issued on 7 September, and the collected approvals in the week to the 12th were announced today. Some media outlets had the info yesterday.
• I expect it is likely that the Bain Tender Offer to buy Hitachi Metals will be announced today after the close, or at latest, early next week.

• Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
• We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case. 
• A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.

• The rebalancing trading will be at the close on October 13. The AUM currently amounts to ₩1.32T with 28 constituents, implying that the passive impacts wouldn’t be insignificant.
• It will likely show a similar pattern to the last rebalancing. With no constituent change, weight adjustment by 10% cap of top stocks leads to weight adjustment of the rest.
• An important variable here is the entry of newly listed stocks. SungEel Hitech and Sebitchem, the two larger cap stocks, appear to have a reasonably high inclusion probability.

• HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
• Implied vols are low and options offer a great way to play a tactical long
• We highlight a relative value vol trade vs the SPX

• Through its 43.58% ownership in lithium carbonate producer Lanke Lithium Industry, Keda Industrial Group (600499 CH) is well placed to benefit from the increase in lithium demand.
• Lanke’s capacity has recently been upgraded to 30,000 tonnes. Also, Keda is adding capacity to its own integrated anode materials factory in Fujian to capture the ever-rising demand. 
• Overseas ceramic business will see solid growth from key markets in Africa as Keda raises capacity by 65% by FY23. The stock’s valuations are inexpensive relative to peers. 

• We are Negative on Keda Industrial over the next year due to a potential downturn in the ceramics machinery market, uncompelling valuations, and concerns about expansion into lithium battery materials. 
• Keda Industrial Group is one of the world’s leading suppliers of building ceramic machinery and equipment.
• Its A-Shares listed on Shanghai Stock Exchange and it completed a private placement of GDRs listing the shares in SIX Swiss Exchange in July 2022. 

• This is an equity spinoff where the existing shareholders receive shares in the spun-off company. But this creates two LISTED companies. In such a case, there won’t be appraisal rights.
• PASSIVE’s selling flow towards the trade suspension tends to be offset by ACTIVE’s buying flow aiming for value accretion. So, developing a timely entry/exit between these opposing flows is critical.
• Holdco’s 30% rule dynamic generally, in relative terms, leads to an increase in the value of Opco’s stake and a decline in the value of Holdco’s stake.

• Atlas Arteria (ALX AU) is acquiring 66.67% in Skyway Concession Company LLC, the concessionaire of the Chicago Skyway for an equity value of US$2.013bn (A$3.098bn).
• The acquisition will be funded by a fully underwritten 1:1.95 ANREO to raise A$3.098bn. The offer price of A$6.3/share is a 13.7% discount to TERP and 19.3% discount to last.
• The increase in market cap could result in Atlas Arteria (ALX AU) being added to the S&P/ASX 50 Index at the December rebalance.

• Yesterday, SBI Holdings (8473 JP) announced it would launch a tender offer to buy 33.4-51% of Aruhi Corp (7198 JP) at ¥1,500/share – a 48.5% premium to the close. 
• ARUHI – Japan’s largest “mortgage bank” – was listed in late 2017. Long ago, its predecessor was named SBI Mortgage. This is SBI buying back in. 
• Inside we look at valuations, shareholder structure, pro-ration. There are opportunities here.

• In a surprise move, Genting Bhd (GENT MK) – or Genting Malaysia (GENM MK) – has joined the six incumbents in bidding for new casino licences in Macau.
• The bidding process follows Macau’s record low monthly gaming revenue in July after casinos were closed for 12 days in response to a Covid outbreak.
• Casinos have re-opened, yet there is little to cheer about as business remains muted. The six winners are expected to be announced by the end of November or early December.

• In August, Janaghan Jeyakumar, CFA published his leaderboard and flow estimates for the FTSE Taiwan Dividend+ Rebalance which starts today and runs through next Thursday.
• Late in August, I recommended a basket trade. Since then, the BUY basket has outperformed the SELL basket by 7.6%. Set & Forget it is up 7.2%.
• I provided timing in the basket trade. Now it is time to swing the other way. 

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• We previously discussed the IPO in CALB IPO: The Bull Case and CALB IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• The 1Q and truncated 1H numbers outline the highest growth among peers, customer diversification and sequential improvement in gross margin. The IPO is worth a look.

• Several local Korean media reported that the initial book building results for the WCP IPO has been disappointing.
• The IPO could be priced close to 60,000 won to 65,000 won won, which would be about 19%-25% lower than the low end of the IPO price range.
• The final decision as to whether or not WCP will go ahead with the IPO at lower price or delay it altogether is expected to be made on/near 19 September.

• Today before the open, China’s State Administration for Market Regulation (SAMR) finally announced the approval of the takeover of Hitachi Metals (5486 JP). This was what delayed things. 
• The approval had actually been issued on 7 September, and the collected approvals in the week to the 12th were announced today. Some media outlets had the info yesterday.
• I expect it is likely that the Bain Tender Offer to buy Hitachi Metals will be announced today after the close, or at latest, early next week.

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products.
• In our previous note, we undertook a peer comparison. In this note, we will talk about valuations.

• The rebalancing trading will be at the close on October 13. The AUM currently amounts to ₩1.32T with 28 constituents, implying that the passive impacts wouldn’t be insignificant.
• It will likely show a similar pattern to the last rebalancing. With no constituent change, weight adjustment by 10% cap of top stocks leads to weight adjustment of the rest.
• An important variable here is the entry of newly listed stocks. SungEel Hitech and Sebitchem, the two larger cap stocks, appear to have a reasonably high inclusion probability.

• HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
• Implied vols are low and options offer a great way to play a tactical long
• We highlight a relative value vol trade vs the SPX

• FTSE announced the results of the September SAIR for the FTSE All-World/All-Cap indices on Friday. There are 243 changes (adds, deletes, migrations across AW/AC) across Asia-Pac.
• The largest inflows will go to PSMC (6770 TT), Sumber Alfaria Trijaya (AMRT IJ),  Daqo New Energy (DQ US) and Tianqi Lithium (002466 CH).
• FTSE will switch index membership from the US ADRs to the HK listings for New Oriental Education & Technology Group (9901 HK) and XPeng (9868 HK). 

• Atlas Arteria (ALX AU) is acquiring 66.67% in Skyway Concession Company LLC, the concessionaire of the Chicago Skyway for an equity value of US$2.013bn (A$3.098bn).
• The acquisition will be funded by a fully underwritten 1:1.95 ANREO to raise A$3.098bn. The offer price of A$6.3/share is a 13.7% discount to TERP and 19.3% discount to last.
• The increase in market cap could result in Atlas Arteria (ALX AU) being added to the S&P/ASX 50 Index at the December rebalance.

• Yesterday, SBI Holdings (8473 JP) announced it would launch a tender offer to buy 33.4-51% of Aruhi Corp (7198 JP) at ¥1,500/share – a 48.5% premium to the close. 
• ARUHI – Japan’s largest “mortgage bank” – was listed in late 2017. Long ago, its predecessor was named SBI Mortgage. This is SBI buying back in. 
• Inside we look at valuations, shareholder structure, pro-ration. There are opportunities here.

• Changes to the S&P/ASX indices, FTSE All-World/All-Cap, VanEck Vectors Rare Earth/Strategic Metals (REMX US) and VanEck Vectors Junior Gold Miners (GDXJ US) will be implemented at the close on Friday.
• There are quite a few stocks that have over 5 days of ADV to trade from passive trackers. Pre-positions will be built up on a lot of names.
• Short interest has increased on a lot of additions/upweights and decreased on the deletions/downweights.

• Semiconductor revenues continue to fall. which appears to be a repeat of the collapse in 2019
• Spot market prices, a leading indicator, are soft for both DRAM and NAND flash
• It is likely that semiconductor revenues will end the year by returning to the trendline of their historical growth of 3.9%

• In a surprise move, Genting Bhd (GENT MK) – or Genting Malaysia (GENM MK) – has joined the six incumbents in bidding for new casino licences in Macau.
• The bidding process follows Macau’s record low monthly gaming revenue in July after casinos were closed for 12 days in response to a Covid outbreak.
• Casinos have re-opened, yet there is little to cheer about as business remains muted. The six winners are expected to be announced by the end of November or early December.

• Back on the 19 May, SAIC (600104 CH) acquired China Zhengtong Auto Services (1728 HK)‘s 71.04% stake in Dongzheng Automotive Finance (2718 HK) at a judicial auction. This triggered the mandatory Offer.
• SAIC confirmed a possible unconditional mandatory cash Offer for Dongzheng on the 26 May.
• The Composite Doc has now been dispatched. The Offer is open for tendering and closes on the 16 October

• Hyundai Heavy Industries (HHI) was listed on Korea Exchange on 17th September, 2021. Its one year lock-up will expire on 17th Sep, 2022.
• Hyundai Heavy Industries (HHI) is a South Korean shipbuilder. The company is majority owned by Korea Shipbuilding & Offshore Engineering (009540 KS) after the latter’s spin-off in 2019.
• In this note, we will talk about the upcoming lock-up expiry, along with recent updates.

• HPSP (403870 KS) and Sungeel Hitech (365340 KS) are the candidates for Early Entry in the December rebalancing as they sit comfortably within the Early Entry zone.
• Rsupport (131370 KS) and Kona I (052400 KS) are safe deletion bets. If they are not deleted through the rebalancing process, they will most likely be excluded by Early Entry.
• HPSP and SungEel should see an inflow equivalent to 0.9x and 0.8x ADTVs, respectively. Rsupport and Kona I will likely suffer an outflow of 3.4x and 3.8x ADTVs, respectively.

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• We previously discussed the IPO in CALB IPO: The Bull Case and CALB IPO: The Bear Case. This note updates our view for the PHIP and recent developments.
• The 1Q and truncated 1H numbers outline the highest growth among peers, customer diversification and sequential improvement in gross margin. The IPO is worth a look.

• Utter carnage in arb-world this week, as Frasers Hospitality Trust (FHT SP) fails, Link Administration (LNK AU) and Ramsay Health (RHC AU) are potentially next, and now Giordano (709 HK).
• 46.04%. That’s the only number that matters, which represents the total shares owned by the Cheng family plus shares tendered. 
• The Chengs are restricted from launching another Offer for 12 months. Giordano will be sold off today, however, this is a buy if it retraces to around the undisturbed levels.

• Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn. 
• The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
• Buyback impact-related trade timing has worked for Canon. Ricoh’s buyback ends imminently. There may be a trade to do here.

• Atlas Arteria (ALX) aims to raise around US$2bn (A$3bn) via a non-renounceable entitlement offer to fund the purchase of its majority interest in Chicago Skyway.
• Over the past few months, ALX has garnered interest from IFM which has increased its stake to 19.99%. IFM had publicly opposed this acquisition.
• In this note, we will talk about the deal dynamic and run the deal through our ECM framework.

• The market cap review period for the December rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) started on 1 September and will end 30 November.
• We currently see one high probability change and two lower probability changes to the index at the upcoming rebalance.
• There are a couple of lower probability adds/deletes that will have between 3-5 days of ADV to trade from passive funds and could be interesting from a trading angle.

• Atlas Arteria (ALX AU) is acquiring 66.67% in Skyway Concession Company LLC, the concessionaire of the Chicago Skyway for an equity value of US$2.013bn (A$3.098bn).
• The acquisition will be funded by a fully underwritten 1:1.95 ANREO to raise A$3.098bn. The offer price of A$6.3/share is a 13.7% discount to TERP and 19.3% discount to last.
• The increase in market cap could result in Atlas Arteria (ALX AU) being added to the S&P/ASX 50 Index at the December rebalance.

• KKR cannot improve the terms of its offer but left the door open by stating that a deal can be quickly closed if the Board is willing to reset expectations.
• The transaction is stuck in an impasse as Ramsay Health Care (RHC AU) will not recommend KKR’s offer until it is improved, and KKR says it cannot improve terms.
• The peers’ shares have been, on average, flat since the undisturbed date. The shares are trading slightly below the undisturbed price and are attractive on fundamentals.

• Back on the 11 April, Chinese internet data center services provider VNET (VNET US) announced a non-binding proposal from Hina Group and Shanghai’s Industrial Bank at an utterly underwhelming US$8.00/ADS.
• Then crickets. A reported tilt from MBK Partners failed to materialise.
• VNET has now announced a preliminary non-binding proposal from founder Josh Sheng Chen, at a similarly underwhelming price of US$8.20/ADS. 

• Indonesian water treatment play Moya Holdings Asia (MHAL SP) has announced an Exit Offer from Tamaris Infrastructure, an Anthoni Salim-controlled entity.
• The Offer price is S$0.092/share, a 41.5% premium to last close. The Offer price will not be increased.
• The Offer requires approval from 75% of disinterested shareholders. Tamaris and its concert parties hold 72.84%.

• Changes to the S&P/ASX indices, FTSE All-World/All-Cap, VanEck Vectors Rare Earth/Strategic Metals (REMX US) and VanEck Vectors Junior Gold Miners (GDXJ US) will be implemented at the close on Friday.
• There are quite a few stocks that have over 5 days of ADV to trade from passive trackers. Pre-positions will be built up on a lot of names.
• Short interest has increased on a lot of additions/upweights and decreased on the deletions/downweights.

• China just announced game approval for September batch. More games were approved in September compared to July, June and August.
• Pace of China game approval continued to pick up albeit at a much slower pace than pre-tightening.
• Tencent continue to score zero and Netease managed to get one game approved in 14 months. 

• The UK Financial Conduct Authority will approve Dye & Durham’s Offer for Link Administration (LNK AU) provided it backstops restitution and/or redress payments that the FCA may levy on … 
• … Link Fund Solutions Limited (LFSL) in relation to its management of the Woodford Fund. The amount? Up to a maximum ~A$523mn.
• The FCA decision is not final. LFSL does not agree with its view. If D&D does not accept this commitment then a condition under the Scheme may not be satisfied.

• In a somewhat extraordinary turn of events, the Scheme Meeting for the Frasers Hospitality Trust (FHT SP) takeover did not garner enough votes to get to YES. 
• About 3% of units (about 8% of minorities) came out against. But only 18.8% of minorities actually voted. The deal has failed. The bidders can’t come back for a while.
• The units are trading down nearly 25% today as a result. This is cheap against both hospitality and major S-REIT peers. Inside, I discuss Overhang and Divs.

• The offeror and acceptances reached 46.04%, just short of the 50% minimum acceptance condition. The offeror has decided to let the Giordano International (709 HK) offer lapse.
• The offer fell short of the 50% threshold as the Cheng family mistakenly assumed that shareholders behind Halycon’s stake were friendly shares, which would support the offer.
• The downside will be muted as the shares are trading in line with the 1-year average forward P/E, minorities thought the offer was low, and David Webb is a buyer.

• 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%.
• This could result in three deletions from the index which will result in three stocks being added to the index. Passive trackers selling the deletes will push the stocks lower.
• The three current constituents could remain in the index if they sell stock to increase the free float. That would in turn put downward pressure on the stocks.

• KODEX Battery ETF rebalancing began on September 8 and runs until this Tuesday, the 14th.  Its AUM is 1.3 trillion won, and the number of constituents is only 25.
• The quantity change in one CU for the 13th was confirmed. Tomorrow’s are estimates based on equal daily weights. With still two-thirds to go, the flow/price impact looks still juicy.
• SK Innovation, L&F, LG Energy, and Ecopro will show a significant size in weight change and passive flow, so they are safe names for a LONG SHORT basket trading.

• PropertyGuru (PG) tried to raise around US$300m when it undertook a merger with Bridgetown 2 SPAC in Mar 2022.
• The transaction valued PropertyGuru at an EV of US$1.35bn and equity value of US$1.78bn. It is now trading at less than half that valuation and with very limited liquidity.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• 21Vianet Group (VNET US) disclosed a privatisation proposal from the founder at US$8.20 per ADS, a 2.5% premium to The Hina Group/Industrial Bank’s offer of US$8.00 (disclosed on 11 April).
• The data centre industry continues to be a hotbed for M&A. Bloomberg reported on 27 July that MBK Partners is mulling an offer for VNET. 
• The offer is unattractive, and Mr Cheng, with 28.79% of voting rights, will need the support of other substantial shareholders. This latest offer underlines the current mispricing of the shares

• Canon Inc (7751 JP) has announced two buyback programs this year of ¥50bn each. Ricoh Company Ltd (7752 JP) announced one in May for ¥30bn. 
• The result is 2.9% bought back vs 4.4%. The accretion nod goes to Ricoh. But so does the overhang nod going forward.  Effissimo+Crossholders is 40% for Ricoh. Mid20s for Canon.
• Buyback impact-related trade timing has worked for Canon. Ricoh’s buyback ends imminently. There may be a trade to do here.

• CALB aims to raise around US$1.5bn in its Hong Kong IPO.
• CALB undertakes design, R&D, production and sales of EV batteries and Energy Storage Systems (ESS) products. 
• In this note, we talk about the updates from the company’s recent PHIP filings.

• FCA approval, a condition precedent, will be granted subject to a condition that Link Administration (LNK AU) makes funds available to cover any redress payments related to the Woodford matters.
• The FCA’s maximum redress payment is £306 million. The timeline and amount of the final FCA fine remain unknown. Dye&Durham/DND and Link will struggle to find a resolution.
• With a 30 September end date, the deal is teetering on collapse. The share price may prove attractive for long-term value investors as it reflects a sizeable FCA fine.

• The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
• The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
• There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
• Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).

• Frasers Hospitality Trust (FHT SP)’s scheme just fell shy of clearing the value test as 74.88% of the total votes cast approved the scheme resolution vs the 75% requirement.
• The shares were trading tight to terms as Frasers Property Ltd (FPL SP)’s offer of S$0.714 comprising of S$0.70 cash per share + permitted distributions (estimated 1.356 cents) was attractive.  
• We estimate that the surprising deal break will likely lead to a 15-20% share price fall. The last close price is around 24% higher than the undisturbed price (S$0.57).

• Less than halfway through the review period, we see 6 stocks moving from MidCap to LargeCap and vice versa, and 7 stocks moving from SmallCap to MidCap and vice versa.
• There are a bunch of stocks that are close to the cutoff ranks and there will be more change as we move deeper into the review period.
• Over the last 6months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward. Given the large divergence, there will be a pullback at some point.

• Shidax Corp (4837 JP) is under offer for a partial tender by Oisix ra daichi (3182 JP). Unison Capital is expected to tender their shares.  
• Unison may not want to go against the board but a direct transfer (i.e. not tender offer) is still possible. 
• Some Independent Board Members have suggested the company buy Unison’s shares back. This might work BUT the end game is still the same. 

• 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, a few large Hong Kong IPOs are lining up to launch soon.
• Placements picked up this week in Japan and India with most being secondary deals.

• Nearly 90% of the way through the review period, we see 4 changes using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• There are overlaps in the inclusions using 6/12 month minimum listing history, so there is less risk if the index committee switches from 6 to 12 months at the review.
• Using a 6 month minimum listing history, one-way turnover is estimated at 5.07% and will result in a one-way trade of CNY 2,795m.

For our next Corporate Webinar we are glad to welcome Bukalapak’s Director – Strategy, Corp Comms and IR, Carl Reading.

In the upcoming webinar, Carl will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Henry Soediarko. The Corporate Webinar will include a live Q&A session.
 
This Corporate Webinar will be hosted on Tuesday, September 20, 17:00 SGT

• Hagl Jsc (HAG VN) is an inclusion while An Phat Holdings (APH VN) and CEO Group (CEO VN) are deletes from the MVIS Vietnam Index at the September rebalance.
• There are a lot of float and capping changes that will result in one-way turnover of 12% and a one-way trade of US$45m.
• There are a lot of stocks that have over 1 day of ADV to trade and there could be opportunities to enter/exit positions on a move in the stocks.

• KODEX Battery ETF rebalancing began on September 8 and runs until this Tuesday, the 14th.  Its AUM is 1.3 trillion won, and the number of constituents is only 25.
• The quantity change in one CU for the 13th was confirmed. Tomorrow’s are estimates based on equal daily weights. With still two-thirds to go, the flow/price impact looks still juicy.
• SK Innovation, L&F, LG Energy, and Ecopro will show a significant size in weight change and passive flow, so they are safe names for a LONG SHORT basket trading.

• The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
• The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
• There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

• Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
• Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
• We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

• Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
• One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
• Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

• 111 Inc (YI US), the largest virtual pharmacy network in China, disclosed a privatisation proposal from a co-founder-led consortium at US$3.66 per ADS, a 20.0% premium to the undisturbed price. 
• For privatisation to succeed, shareholders representing two-thirds of shares present and voting need to approve the deal. The co-founders represent 92.04% of the total voting power.
• The offer price is unattractive but this is a done deal. At the last close, the gross and annualised spread for a January 2023 completion is 11.6% and 33.4%, respectively. 

• Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
• In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
• Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.

• There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
• The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
• Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

• Compared to the tightly crowded KOSPI 200, the sector ETFs’ rebalancing flow trading appears relatively less crowded, which led to a significantly higher flow/price correlation on the rebalancing day.
• The KRX now delivers the rebalancing results of the KRX Sector & K-New Deal Indexes only to paying customers. This can increase the profit effect of acquiring prior information.
• So, safe play, which builds up a position from the time this information is acquired, rather than an aggressive preemptive position build-up, can still obtain a sufficient level of juice.

• There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
• Key updates took place for Link Administration (LNK AU),  Giordano International (709 HK), and Hitachi Transport System (9086 JP).

• We believe the market may have missed the important acquisition of 3D printing firm, SLM Solutions
• The 3D printing market is expected to grow rapidly driven by industrial applications that require accurate products and rapid time to market
• We believe the acquisition is a good fit for Nikon and that the realization of synergies could see SLM making a meaningful profit contribution

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Genex Power Ltd (GNX AU), Infomedia Ltd (IFM AU), 111 Inc (YI US).
• Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU).

• The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
• The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
• The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

• Although lesser-known, this Swedish company dominates one of the most lucrative segments of the global casino industry.
• In our view, it is probably the only investable casino company, and despite its size, still has a massive growth runway ahead.
• Our DCF model implies a 15%-20% total return for the company’s long-term shareholders.

• Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
• One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
• Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

• Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
• Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
• We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

• There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
• The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
• Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

• The Nikkei was up +2.15% over the past week (-2% YTD): the yen was 1.2% weaker at ¥142/$
• The news was focused on the sharp drop in the yen with even the BoJ Governor Kuroda noting some undesirable effects
• The proportion of female directors rose to 9%, a slight increase over 7.4% in the previous year

• We analyzed the latest HK SFC report for aggregate short position as of Sep 2nd.
• Top short increases and decreases were tabulated for one week and four week period. 
• We highlight short spike for Tencent, Meituan, Jd.com, Baidu, and Cosco Shipping.

• China Aviation Lithium Battery (CALB) is getting ready for an IPO in Hong Kong.
• In the past several days, CALB received the approval from the Hong Kong stock exchange for an IPO.
• In the next two years, CALB expects its production capacity for lithium batteries to increase to about 55 GWh which is more than 6x the capacity at end of 2021. 

• Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
• We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case. 
• A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.

• The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
• The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
• There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

• S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
• We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
• There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.

• The FTSE TWSE Taiwan indices get rebalanced in line with the standard FTSE Global indices – on the third Friday of September. 
• The most interesting one is the probably the least famous. It has only one change but it has massive re-weightings because of the way the index is constructed. 
• Historical patterns suggest a right-way long-short basket, reversed on the event, is a good trade.

• The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
• If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
• We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

• Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly. 
• Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
• Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.

• Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
• The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
• But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support. 

• Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
• Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
• We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we provide our earnings estimates and thoughts on valuation.

• US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
• RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
• NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.

• Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme. 
• Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer. 
• Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

• We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 9th 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), Aia (1299 HK), Xiaomi (1810 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), Ck Asset (1113 HK).

• The correlation and sensitivity between passive flow and price impact have been significantly high for adds/deletes. So, we need a basket-trade setup focusing on potential adds/deletes.
• We will see 12 changes for Semicon and 6 for Autos. Bank won’t present any change.
• SK Square and Iljin Hysolus are the most prominent names to join the KRX Sector Indices this time. They will have a passive impact of 2.03x and 3.97x ADTVs, respectively.

• There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
• If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
• There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

• It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
• Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
• With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.

• Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
• Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
• Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU). 

• The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
• Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
• Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

• The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
• If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
• We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

• Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
• The next step is the rescheduled second court hearing on the 15 September.
• The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.  

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we provide our earnings estimates and thoughts on valuation.

• Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
• Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
• The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

• Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
• The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
• But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support.