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• 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.

• Pan Shiyi and Pan Zhangxin – Chairman and CEO respectively of SOHO China (410 HK) – have tendered their resignations, with immediate effect. 
• Both are resigning “to focus on supporting the arts and philanthropic pursuits“.
• That sounds like a “donation” is on the cards. And the Pans selling their stake in SOHO China would nicely fund that donation.

• The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN. 
• That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%. 
• The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.

• 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). 

• 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.

• 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.

• 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%.

• KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
• The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
• Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.

• 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.

• In February 2022, Noritsu Koki (7744 JP) – longtime holder of JMDC Inc (4483 JP) – sold 2/3 of its holdings to Omron (6645). Omron made a US$1bn new bet.  
• Shares fell after Q1 results, and then fell another 7% in 2 days after the company announced a primary offering for ¥22bn to international investors, ¥11bn to Omron. 
• High PER but Fundamental Forecasts are up-and-to-the-right, and there is a surprising amount of flow mitigation from passive investor activity the next 3 months.

• The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
• Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP). 
• Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.

• The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
• Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
• The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company. 

• JMDC Inc (4483 JP) aims to raise around US$235m, US$150m coming via an international offering and the rest via issuing shares to its largest shareholder, Omron Corp (6645 JP) . 
• The company plans to use the proceeds to repay some of its debt that was taken on earlier to acquire other companies.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
• Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
• I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.

• Late last night, Giordano International (709 HK) announced the Offeror – the Cheng Family – had 44.98% in the bag after 20.41% of shares out had been tendered.
• The Offer has been extended for one week, until the 13 September. 
• Whether investors receive the Offer consideration AND the interim divided is still up for debate.

• The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN. 
• That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%. 
• The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.

• Porsche is getting ready for an IPO to be completed by the end of this year. However, the final decision on the IPO is still subject to market conditions.
• The expected valuation of the Porsche IPO is 60 billion to 85 billion euros ($60 billion to $85 billion).
• Qatar Investment Authority has already committed to a 4.99% stake in the Porsche IPO. 

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• According to Frost & Sullivan, in terms of installed capacity in 2021, CALB ranked seventh globally among EV battery companies with a 3.2% market share.
• The key elements of the bull case rest on a large and growing market, rising market share, explosive top-line growth and ambitious capacity expansion plans.

• Discounts to NAV of covered holdcos have mainly widened or stayed at the same level during August/beginning of September, in line with the loses in the main indexes.
• Discounts to NAV (5 September): Alba, 46.1%; GBL, 34.1%; Heineken Holdings 21.3%; Industrivärden C, 10.1%; Investor B, 18.9%; Porsche Automobile Holding 29.4%. The spread of Rio Tinto DLC tightened to 14.5%.
• Spreads tend to widen in bear markets but short-term recoveries provide opportunities on tightening discounts. Recommended trades are: Industrivärden C vs. listed assets, Porsche, Rio Tinto (DLC).

• Over the past year, we’ve seen the stock price of Kintor fluctuate largely, which was mainly driven by its COVID-19 drug proxalutamide. However, we are not optimistic about its outlook.
• There are big concerns about the credibility of management. The suspicion caused by mistrust leads us to suggest that investors directly enter the “show me the result” mode.
• Shares plunged after the announcement of the Placing. Obviously, Kintor Pharmaceutical (9939 HK) is short of money. Considering the potential risks behind, we are bearish on Kintor. 

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
• Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP). 
• Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
• Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
• The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company. 

• In early May 2022, Yamada Denki (9831 JP) launched a GINORMOUS buyback program. I wrote about it suggesting the company meant business. The stock popped outright and vs Peers.
• Then it fell back, and has only recently started moving back up. Surprising given buyback dynamics but it may have been overhang. If so, that overhang should be gone now.
• And the stock is cheap, a chunk of the register is sticky, so this could get squeezier now.

• On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
• The stated purpose in the Tender Offer Announcement is “Stability of Management Rights.” This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.
• The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).

• The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
• The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
• We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.

• The offeror and acceptances reached 44.98%, just short of the 50% minimum acceptance condition. The closing date has been extended to 13 September. 
• If the offer is declared unconditional on or before 8 September, Giordano International (709 HK) shareholders who accept the offer will get HK$1.88 but not the dividend of HK$0.085.
• The offeror likely remains confident that it will hit the 50% threshold. At the last close, the gross and annualised spread for 17 Sep payment is 1.1% and 37.2%, respectively.

• The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
• Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
• I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
• The stated purpose in the Tender Offer Announcement is “Stability of Management Rights.” This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.
• The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).

• This is a cash offer. So, there is no stock swap arbitrage here. To participate in this tender, we must buy SK Chemicals shares by the 19th.
• We have proration risk. Discovery will buy on a pro-rata basis if exceeding the target volume. So, we could be at a loss.
• This is an over-the-counter transaction. So both STT and CGT apply. The STT rate is 0.43% of the tendered amount and we have a 22% CGT rate for the profit.

• In early May 2022, Yamada Denki (9831 JP) launched a GINORMOUS buyback program. I wrote about it suggesting the company meant business. The stock popped outright and vs Peers.
• Then it fell back, and has only recently started moving back up. Surprising given buyback dynamics but it may have been overhang. If so, that overhang should be gone now.
• And the stock is cheap, a chunk of the register is sticky, so this could get squeezier now.

• Although not many, there are strong candidates for a safe play aimed at constituent change. Inclusion: Lotte Confectionery & Exclusion: Samyang Holdings
• Lotte Confectionery’s average daily market cap must fall by more than 30% to be pushed out of the borderline. Samyang Holdings’s market cap gap to the second-lowest one is 17%.
• The trading volume of these two is so small that a significant passive impact (relative to DTV) will likely occur. We should consider a little more aggressive approach, timing-wise.

• 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), Infomedia Ltd (IFM AU), Link Administration (LNK AU), True Corp Pcl (TRUE TB).
• Lowest spreads – MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Link Net (LINK IJ), Tassal (TGR AU), Frasers Hospitality Trust.

• It is hard to see how Kyocera can avoid a significant slowdown in sales and earnings growth given the weakness in electronics markets and the overall economy.
• R&D and capital spending continue to rise, putting pressure on margins and offsetting gains from the weak yen.
• Valuations are not compelling. Watch out as the share price drops back from its recent high.

• The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
• The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
• We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

Asian Sea (ASIAN TB) announced its plans to list the pet food business currently held in the 100% subsidiary Asian Alliance International (AAI), subject to regulatory approvals.  Asian Sea will hold a majority stake (not less than 70%) in the spun-off subsidiary post listing. This could potentially help unlock value for Asian Sea assuming the high growth pet food subsidiary could attract greater investor interest and superior valuation, post listing. Currently Asian Sea (ASIAN TB)  trades at low double digit P/E in line with other Thailand based sea food processing companies.

In this insight, we discuss likely value upside to Asian Sea (ASIAN TB)  based on Asian Alliance’s possible valuations upon listing (based on its reported financials).

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• China MeiDong Auto (1268 HK) presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). 
• China MeiDong Auto (1268 HK) ‘s integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. 
• The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. 

• MHI has a roadmap for becoming carbon neutral by 2040.  The transition to a decarbonized society will be funded by green/transition bonds
• MHI has issued its first green/transition bond amounting to 10 billion yen
• We remain bullish on MHI and believe it is a key beneficiary of decarbonization trends in Japan

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• Although not many, there are strong candidates for a safe play aimed at constituent change. Inclusion: Lotte Confectionery & Exclusion: Samyang Holdings
• Lotte Confectionery’s average daily market cap must fall by more than 30% to be pushed out of the borderline. Samyang Holdings’s market cap gap to the second-lowest one is 17%.
• The trading volume of these two is so small that a significant passive impact (relative to DTV) will likely occur. We should consider a little more aggressive approach, timing-wise.

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
• There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
• The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
• We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
• Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher. 

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

• Yesterday FTSE Russell announced two Asian additions to its FTSE EPRA Nareit Global Developed Index – Sekisui House (1928 JP) and Healthcare & Medical Investment Corporation (3455 JP). 
• Sekisui House is larger cap, and will see big dollars added. H&M IC is much smaller and will see less, but has had a huge run-up, outright and relative.
• Trading impact will be significant on both tickers in terms of days of ADV.

• Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
• Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
• There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• The index changes for the FTSE UK Indices for the September 2022 Rebalance were announced yesterday. There will be 3 changes for FTSE 100 and 8 changes for FTSE 250.
• These index changes are mostly in line with our expectations in FTSE UK Quiddity Leaderboard Sep 2022: Avast, Meggitt, Brewin, and a Busy Rebalance Month. 
• However, there a couple of surprises. In this insight, we take a closer look at our expectations for index flows and potential trading ideas

• ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
• This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
• ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look.  Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
• In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
• Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.

• Yesterday FTSE Russell announced two Asian additions to its FTSE EPRA Nareit Global Developed Index – Sekisui House (1928 JP) and Healthcare & Medical Investment Corporation (3455 JP). 
• Sekisui House is larger cap, and will see big dollars added. H&M IC is much smaller and will see less, but has had a huge run-up, outright and relative.
• Trading impact will be significant on both tickers in terms of days of ADV.

• Hang Lung (10 HK) recently announced it had acquired 1.3% in Hang Lung Properties (101 HK) over a one-year period, increasing its holding to 59.5%.
• HLG currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
• HLG is the most basic of Holdco structures – there is almost a 100% overlap in the stub ops with HLP’s property investments. 

• Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
• Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
• There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

• Kadokawa announced yesterday that subsidiary From Software would conduct a third-party allocation of shares to Sony and Tencent. 
• The allotment values From Software at about ¥120bn with Tencent acquiring 16.25% and Sony acquiring 14.09% of the company. 
• This creates opportunities for both Sony and Tencent and likely puts Kadokawa on track to eventually be acquired though timing may be somewhat later than we had anticipated.

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous note, we spoke about the company’s past performance,  PHIP updates and undertook a peer comparison. In this note, we will talk about valuations.

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

• Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
• We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
• Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher. 

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• The Cheng-family Offer for Giordano International (709 HK) became open to tendering after the Composite Doc was issued on the 15 August.
• With the first close less than a week away, acceptances are minimal – ~3.6%.
• Separately, David Webb, who definitely will not be tendering, has increased his stake to 5.79%.

• Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
• The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
• Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK). 

• Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
• In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
• Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.

• BYD (1211 HK)’s shares declined by -8% on disclosure that Berkshire Hathaway Inc Cl B (BRK/B US) trimmed its stake from 20.04% to 19.92% of outstanding H Shares. 
• Berkshire will likely follow its PetroChina (857 HK) playbook and materially sell down over the next few months. Buffet stated that the PetroChina exit was “a decision based on valuation.”
• Berkshire will apply the same investment discipline to the BYD stake. While the shares are trading at a discount to historical multiples, the Berkshire stake is an overhang.

• EVE Energy (300014 CH), PetroChina (601857 CH) and Shaanxi Coal (601225 CH) replace Anhui Conch (600585 CH), CPIC (601601 CH) and Zhangzhou Pientzehuang (600436 CH) at the close 16 September.
• Estimated one-way index turnover at the rebalance is 3.1% and will result in a one-way trade of CNY 1,678m.
• PetroChina (601857 CH) is also an inclusion to the FTSE All-World Index while China Pacific Insurance (2601 HK) is a delete from the Hang Seng China Enterprises Index (HSCEI INDEX). 

• Yankuang Energy Group (1171 HK) will replace Shenzhou Intl Group Holdings (2313 HK) in the FTSE China 50 Index at the close on 16 September.
• Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK).
• Short interest on Yankuang Energy Group (1171 HK) is over 10 days of ADV to cover and around 10% of float. That could help the stock move higher.

• The deal size amounts to ₩572B at a volume of 28.54M shares. The per-share disposal price is ₩20,050, a 7.6% discount from the previous day’s closing price, ₩21,700.
• Enerbility can be a timely LONG target of pension-driven flow in the context where the NPS is seen actively doing portfolio rebalancing lately.
• The volume digested by wall crossing seems quite small, as suggested by yesterday’s short selling volume, the flow volatility range is highly likely to be concentrated in one direction.

• For the month of August, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$8.5bn.
• The average premium for the new deals announced (or first discussed) in August was ~41%, and a year-to-date average of 38%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.

• 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.

• We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.  
• We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
• Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• We need a hedge to short SKT on the 31st. For this, we need to consider trading SKT ADR, which is pretty liquid as DTV reaches nearly $8mil.
• The play structure is simple. It exploits the pattern that passive flow is concentrated on underlying shares rather than ADRs. We witnessed this pattern in the last two cases.
• Passive outflow may be aggravated since SKT leaves not only STANDARD but also sub-indices such as ESG. So, the degree of a temporary DR premium can get thicker.

• Doosan Corp (000150 KS) is looking to raise up to US$435m from trimming a portion of its stake in Doosan Enerbility (034020 KS).
• The deal isn’t exactly a large one to process at just 5.2 days of three month ADV. Shares are offered at a discount range between 5.1-7.8%.
• As there wasn’t a specific mention of the former’s intention to sell, we would argue that the deal isn’t particularly well flagged.

• Bando sold all of its 17% stakes through a club deal. Of this, about 3.8% went to LX Pantos. The remaining 13% found a new home among several institutional investors.
• Outright shorting for Hanjin Kal seems to require a bit more cautious approach. That’s because there is still no definitive information on the owners of the 13% stake.
• If the price correction does not go as harshly as expected and expectations for a proxy battle resurface, we should consider switching to flow trading aimed at MSCI inclusion.

• Nitro Software Ltd (NTO AU) entered a trading halt in response to an AFR report that Potentia has lobbed an indicative non-binding proposal at A$1.58 per share.
• Potentia’s offer follows its success in securing a 17% stake at A$1.58 per share on Monday night. The stake is large enough to deter rival schemes. 
• The offer is opportunistic and unattractive. However, the ability of Potentia to relatively quickly secure a significant stake suggests that the Board will be under pressure to engage.

• Nuclear power is a clean energy source that contributes to energy savings and emissions reduction in society.
• SASAC backed CGN Power (1816 HK) is China’s leading nuclear play, accounting for 55% of on-grid nuclear power generation, but just 1.2% of China’s total installed capacity of power generation.
• As one of the few listed nuclear -plays in Asia, CGN trades at undemanding multiples, together with an attractive ROE and yield.

• After the market close today, Doosan Corp (000150 KS) announced that it plans to sell a 4.5% stake in Doosan Enerbility (034020 KS) in a block deal sale.
• The discount range on the block deal price is 5.1% to 7.8% based on today’s closing price of 21,700 won.
• This block deal sale should have a positive impact on Doosan Corp but a negative impact on Doosan Enerbility.

• Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
• The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
• Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK). 

• It was a busy week with a lot of review cutoffs for the FTSE country indices and the announcement of the STAR50 INDEX changes for September.
• The coming week has the implementation of the JPXNK400, MSCI, HSI, HSCEI and HSTECH rebalances. Plus announcements of the changes to the FTSE, NIFTY and S&P/ASX indices.
• There were outflows from iShares MSCI All Country Asia ex-Japan ETF (AAXJ US), IShares Core MSCI Asia Ex Japan ETF (3010 HK) and KraneShares CSI China Internet ETF (KWEB US). 

• Friday in US time, the China Securities Regulatory Commission (CSRC), China’s MOF, and the US Public Company Accounting Oversight Board (PCAOB) “agreed” on a Statement of Protocol.
• This SoP sets the outlines for PCAOB access to inspect/investigate audit papers and accounting firms in China and HK for companies listed in the US.
• The releases’ difference in language is to be expected – different constituencies – but as PCAOB Chair Williams said, “Now we will find out whether those promises hold up.”

• The index committee has continued to use a 6 month minimum listing history leading to five changes to the SSE STAR50 (STAR50 INDEX) in September.
• One-Way turnover is estimated at 4.07% and will result in a one-way trade of CNY 2,265m. Passive trackers will need to trade between 1-5 days ADV on the adds/deletes.
• The adds have outperformed the deletes and the CSI500 Index since the end of the review period. We’d look to buy the adds and hedge with CSI500 Index futures.

• On 26th Aug 2022, PCAOB and CSRC announced that they had entered into an agreement granting US authorities access to investigate public accounting firms headquartered in China and HK.
• On 2nd Apr 2022, CSRC put out a draft for public comments on the revision of certain provisions which would allow easier access by overseas regulators to China ADRs audits.
• In this note, we’ll talk about the latest developments and its implications.

• 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), Infomedia Ltd (IFM AU), Ramsay Health Care (RHC AU), Resapp Health (RAP AU), True Corp Pcl (TRUE TB).
• Lowest spreads MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), MyDeal.com.au Ltd (MYD AU), China Vast Industrial Urban Development (6166 HK) 

• This event provides three trading angles. 1. merger swap arbitrage, 2. passive flow trading, and 3. proxy battle-triggered momentum trading. But a proxy battle would be the only actionable one.
• The market will likely see the dissolution of Hanmi Healthcare, owning a 6.43% stake in the holding company as a prelude to a full-fledged proxy battle.
• Predicting the triggering timing is difficult, but we should note that the mother is 72 years old. How long she will remain in the current managerial position is highly doubtful.

• The revenue growth rate decelerated, but operating loss shrank in 2Q22.
• We believe the the revenue reclassification is unnecessary and suspicious.
• We set a downside of 19% and a price target of HK$148.

• Back on the 26th July, diversified contractor MACA Ltd (MLD AU) announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to the undisturbed price.
• The Bidder’s Statement was dispatched on the 9 August. After rejecting NRW Holdings (NWH AU)‘s non-binding proposal (implied consideration of $1.085/share), MACA dispatched the Target Statement on the 25 August.
• Thiess has now lifted its all-cash Offer to A$1.075/share – a 34.4% to undisturbed. MACA is trading marginally through the revised terms. The first closing date is the 12 September. 

• We are two-thirds of the way through the review period for the December review of the S&P BSE SENSEX Index (SENSEX INDEX). Changes become effective at the close 16 December.  
• We see Adani Green Energy (ADANIGR IN) as the highest ranked non-constituent in inclusion zone, while Dr. Reddy’s Laboratories (DRRD IN) is the lowest ranked constituent in deletion zone.
• Passive trackers will need to trade over 10 days of delivery volume on Adani Green Energy (ADANIGR IN) and Dr. Reddy’s Laboratories (DRRD IN), so the impact will be significant.

• Theiss has improved its MACA Ltd (MLD AU) offer from A$1.025 to A$1.075 per share. The offer is conditional on 90% minimum acceptances, FIRB approval and no prescribed occurrences.
• Theiss increased its shareholding to 15.90% of outstanding shares due to acceptances from MACA founders and directors. This is a stumbling block to a potential NRW Holdings (NWH AU) scheme. 
• While the value of NRW’s default option remains higher than Thiess’ revised offer, it is increasingly unlikely that NRW will start a bidding war.