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• 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.

• 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). 

• Based on an admittedly somewhat finger-in-the-air estimate of probability of privatisation,  shorting Toshiba Corp (6502 JP) here against its Peer Basket is probably not a good outcome.
• Swire Pacific (19 HK) has started buying back with 3.5x the average ADV impact on Bs vs As. That is likely to continue. 
• KKR’s all cash A$88/share Offer for Ramsay Health (RHC AU) is off. The alternative Offer has a lower implied value, and has been unceremoniously rejected, despite Ramsay’s horrible FY22 numbers.

• Ramsay Health Care (RHC AU) disclosed that the KKR & Co Inc (KKR US) consortium withdrew its indicative proposal but remains committed to the alternative proposal, which the Board earlier rejected. 
• The alternative proposal, while inferior to the indicative proposal, is still attractive and better than the status quo of no deal. The Board will engage for an improved offer. 
• The value gap between the parties is not huge, and a deal is possible. The upside (20% to alternative proposal) vs downside (-9% to undisturbed price) is worth a punt. 

• As China’s property market melts down, shares of property management companies are following suit.
• And there are increasing governance issues attached to these management units as a slew of questionable parent/subsidiary transactions unfold. 
• Valuations for property management companies are trading at multi-year lows. That trend is likely to continue.

• I recommend focusing on the ceiling regression play. In this regard, SK Innovation has the most notable regression spread, and we should use Samsung SDI as a hedge against it.
• As for constituent change, SungEel HiTech is firmly positioned with a market cap of ₩1.34T and a float rate of 50%. And it belongs to the Waste batteries keyword.
• But, it is unclear whether SungEel will be in the top 25 in scoring. We should patiently wait until confirmation as it’s still a worthy candidate requiring our attention.

• 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: PTB Group Ltd (PTB AU)‘s and Bright Scholar Education (BEDU US).
• Key updates took place for Ramsay Health Care (RHC AU), Pendal Group (PDL AU), Nearmap Ltd (NEA AU), Xiamen International Port H (3378 HK), andMACA Ltd (MLD AU).

• 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, China Tourism’s listing appears to have set the ball rolling for others to follow.
• After a flurry of activity in the prior week, there weren’t any major placements this 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), 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) 

• We expect Emperador (EMI SP) to be added to the FTSE Straits Times Index at the September rebalance after meeting the free float, market cap and liquidity requirements. 
• As the lowest ranked current index constituent, we expect Comfortdelgro Corp (CD SP) will be deleted heaping pressure on the beleaguered stock with over 4 days of ADV to sell.
• Emperador (EMP PM) is an inclusion to the FTSE All-World Index and there is a lot to buy on that line from passive trackers at the close on 16 September.

• The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
• Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
• 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.

• Entities related to noted Japanese activist Yoshiaki Murakami had bought 11+%, suggested 15%, proposed 51%, and pestered Jafco Co Ltd (8595 JP) for an asset sale and super-large buyback. 
• JAFCO decided to launch a poison pill process as a hostile takeover defence mechanism, with the Record Date at August month-end.
• The shares popped. I was bearish. It turns out Murakami affiliates sold the pop. And this starts the range trade.

• KKR has all-but-abandoned its A$88/share cash offer for Ramsay Health Care (RHC AU),  Australia’s largest private hospital group.
• KKR’s alternative proposal involves $88/share for the 5,000 RHC shares, followed by A$78.20/cash + 0.22 Ramsay Generale de Sante (GDS FP) shares thereafter – or an indicative value of A$84.93/share.
• Despite announcing horrible annual results, Ramsay’s board considers the alternative proposal to be meaningfully inferior to the KKR’s indicative proposal of $88.00/share.

• NDX was our top US short bet from 13,750/500.  NDX below 13,000 is a risk off pivot for the global cycle. Conviction call to build NDX short on strength.
• NDX 13k will now act as resistance with 12,500 and 12,100 downside targets. SPX reaction rise due Monday with resistance at 4,130/70.
• Risk cycle peak rolled a bit early (before late August) sold weaker markets early (NDX, DAX, Taiwan, HK, Korea).

• 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.

• Model Solution makes prototypes to mainly check design and function in the product development stage, which is before the mass production stage of new products such as IT devices. 
• The IPO price range is from 24,000 won to 27,000 won. The expected market cap of the IPO is from 153 billion won to 173 billion won.
• The company had sales of 61.1 billion won (up 9.9% YoY) and operating profit of 8.9 billion won (up 32.1% YoY) in 2021.

• With JY Lee pardoned this past Monday, there is a lot of speculation about the speed of restructuring
• A lot will depend on what happens with whether Samsung Life will be forced to sell its shares in Samsung Electronics
• What should be done for the best of the family and shareholders is to buyout the pref shares

• 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). 

• So far, SungEel is in the top 50, currently ranked 38th. Given that the gap with 50th place is more than ₩100B, its early entry in December is very likely.
• Rsupport is currently at the bottom with an average daily market cap of ₩0.27T. However, there are four other names under ₩0.30T, so we have to wait a little longer.
• SungEel can expect a passive inflow equivalent to 1.0x ADTV. Combined with potential passive inflows from the local battery ETFs, it will form a quite solid flow momentum until December.

• Short notional in Hong Kong is HK$439bn and has been falling over the last 18 months due to a drop in the market.
• In terms of short notional to issue market cap, the Information Technology, Materials, Health Care and Consumer Discretionary sectors are up there, with Communication Services, Real Estate the least shorted.
• Over the year, the largest shorts in terms of notional have been built on Xiaomi Corp, Meituan, JD.com, AIA Group Ltd, Postal Savings Bank of China, Orient Overseas, Techtronic Industries.

• AMMB Holdings (AMM MK) and Ql Resources (QLG MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) at the December rebalance.
• One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.
• Westports Holdings (WPRTS MK) is a close add and there could be changes over the next few months as we approach the end of the review period.

• Ramsay Health Care (RHC AU) notes that discussions with KKR are ongoing, but the indicative proposal is held up by due diligence access to Ramsay Generale de Sante (GDS FP).
• KKR proposed an alternative proposal that the Board rejected as “meaningfully inferior.” KKR remains interested, and its shenanigans are likely a move to nudge down the price.
• At the last close, the risk/reward profile is favourable as the downside due to a deal break (-3% estimated decline) is lower than the upside (+20%) to the indicative proposal.

• Entities related to noted Japanese activist Yoshiaki Murakami had bought 11+%, suggested 15%, proposed 51%, and pestered Jafco Co Ltd (8595 JP) for an asset sale and super-large buyback. 
• JAFCO decided to launch a poison pill process as a hostile takeover defence mechanism, with the Record Date at August month-end.
• The shares popped. I was bearish. It turns out Murakami affiliates sold the pop. And this starts the range trade.

• KKR has all-but-abandoned its A$88/share cash offer for Ramsay Health Care (RHC AU),  Australia’s largest private hospital group.
• KKR’s alternative proposal involves $88/share for the 5,000 RHC shares, followed by A$78.20/cash + 0.22 Ramsay Generale de Sante (GDS FP) shares thereafter – or an indicative value of A$84.93/share.
• Despite announcing horrible annual results, Ramsay’s board considers the alternative proposal to be meaningfully inferior to the KKR’s indicative proposal of $88.00/share.

• Another notable flow event is coming in the Korean local market. Samsung Life is preparing to shift from an index fund-focused management to an ETF-centric one.
• Samsung Life’s conversion process will take 2-3 months. We need to secure guidelines on the conversion procedure, phased conversion volume, and the percentage of conversion to theme ETFs.
• This can, in some cases, produce significant short-term flow events, as Samsung Life may accelerate the transfer of funds to KODEX’s theme ETFs during the conversion process.

• The new Mastercard Binance debit card allows users to make purchases with selected cryptocurrencies in their Binance wallet and will first be rolled out in Argentina.
• BNB, the Binance native token, will benefit from network effect as adoption for the crypto card grows.
• Binance is expanding its payment strategy as a tool to drive user adoption and expand its ecosystem.

• 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 previous close.
• The Bidder’s Statement was dispatched on the 9 August. After rebuffing NRW Holdings (NWH AU)‘s non-binding proposal, MACA has now dispatched the Target Statement.
• The IE deems the Offer, which remains subject to FIRB and ACCC approvals, to be fair. The first closing date is the 12 September. 

• The EURO STOXX 50 Index is one of the most highly-watched indices in mainland Europe and the annual index review takes place in September.
• In Euro Stoxx 50 Quiddity Leaderboard for Sep 22: Eurozone’s Annual Big Impact Rebal Trades, we looked at the Potential ADDs/DELs and the historical performance of Rebalance Events. 
• With less than a week left until the Reference date, we take a final look at the rankings in this insight.

• Chongqing Hongjiu Fruit (6689 HK) is looking to raise up to US$93m in its HK IPO.
• Chongqing Hongjiu Fruit (CHJF) is a multi-brand fresh fruit distributor in China with an end-to-end supply chain. They have 1.0% market share as China’s second largest fruit distributor
• CHJF had grown at an impressive rate even in the face of COVID-19. In this note, we will take a look at its valuations vs that of listed peers.

• The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
• Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
• 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.

• Pendal Group and Perpetual Ltd have entered into a SID where Pendal shareholders will receive 1 share of Perpetual for every 7.5 shares in Pendal, plus cash of A$1.976/share.
• While this is a premium to the last close and undisturbed prices, it is a discount to longer term prices. The Pendal Board has unanimously recommended the offer though.
• In the short-term expect short covering on Pendal Group (PDL AU) and increased shorts on Perpetual Ltd (PPT AU) as arbs step in to close the gap.

• AMMB Holdings (AMM MK) and Ql Resources (QLG MK) could replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) at the December rebalance.
• One way turnover is estimated at 2.87% and the impact of passive flows is larger on the potential adds as compared to the potential deletes.
• Westports Holdings (WPRTS MK) is a close add and there could be changes over the next few months as we approach the end of the review period.

• The index constituent weights of the FTSE TWSE Dividend+ Index will be capped during the upcoming September 2022 Index quarterly index review.
• In addition, Elan Microelectronics (2458 TT) could also get deleted as discussed in FTSE TWSE Quiddity Leaderboard Sep 2022: Elan Micro (2458 TT) Could Be a Big Negative Surprise 
• In this insight, we take a look at Quiddity’s expectations for index flows resulting from these events. 

• Ramsay Health Care (RHC AU) notes that discussions with KKR are ongoing, but the indicative proposal is held up by due diligence access to Ramsay Generale de Sante (GDS FP).
• KKR proposed an alternative proposal that the Board rejected as “meaningfully inferior.” KKR remains interested, and its shenanigans are likely a move to nudge down the price.
• At the last close, the risk/reward profile is favourable as the downside due to a deal break (-3% estimated decline) is lower than the upside (+20%) to the indicative proposal.

• Short notional in Hong Kong is HK$439bn and has been falling over the last 18 months due to a drop in the market.
• In terms of short notional to issue market cap, the Information Technology, Materials, Health Care and Consumer Discretionary sectors are up there, with Communication Services, Real Estate the least shorted.
• Over the year, the largest shorts in terms of notional have been built on Xiaomi Corp, Meituan, JD.com, AIA Group Ltd, Postal Savings Bank of China, Orient Overseas, Techtronic Industries.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website. 
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute. 
• These insights also flag those companies where shares have been pledged, both recently and ongoing.

• On the 4 April, asset manager Pendal (PDL AU)‘s board unanimously determined the indicative cash/scrip Offer proposal from Perpetual (PPT AU) undervalued the current and future value of the company.
• Pendal And Perpetual have now entered into a SID such that Pendal shareholders will receive 1 Perpetual share for every 7.5 Pendal shares plus $1.976 cash for each Pendal share.
• The negotiation clincher was the increase in the cash component by A$0.306/share. Should the deal complete, Pendal will hold 47% in the enlarged entity.

• US fintech Chime, another high-profile fintech in Softbank’s Vision Fund 2 portfolio, sees its secondary market valuation in the private market fall by nearly 50% on a year-to-date basis
• Chime had been planning to IPO in 1H 2022, with its IPO valuation estimated at close to USD40bn; poor market conditions have led to the IPO being shelved
• Chime’s reduced valuation is another hit to Softbank’s portfolio, which has yet to feature a recent “down round”, and which we believe negatively impacts its Vision Fund 2 in particular

• Our earnings projections for China Tourism Group Duty Free Corp Ltd (1880 HK) are 14% and 18% below market consensus respectively. We think these are more realistic expectations.
• At IPO price of HK$158, CDFC H-share sits on 23.9x FY23F PER. We think it is difficult to trade above 22x – the average for top consumer discretionary names.
• Weakened visitor appetite to Sanya, potentially higher discounts, increase in border opening, higher fixed cost and uncertainties for duty free policies beyond 2025 are negative earnings factors.

• Past the midway mark in the review period, we see 18 potential changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the December rebalance.
• We estimate a one-way turnover of 3.32% at the December rebalance leading to a one-way trade of CNY 8.55bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index over the last few months, with the outperformance widening over the last few weeks.

• We do not forecast any deletions from the FTSE TWSE Taiwan Dividend+ Index in September. There will be a lot of flow from dividend yield changes and capping changes.
• Based on the closing prices from 22 August, we estimate one-way turnover of 13.6% at the September rebalance resulting in a one-way trade of TWD 19,664m (US$653m).
• Passive inflows will be focused (for the most part) on stocks that have underperformed and outflows will mainly be on recent outperformers.

• We expect Emperador (EMI SP) to be added to the FTSE Straits Times Index at the September rebalance after meeting the free float, market cap and liquidity requirements. 
• As the lowest ranked current index constituent, we expect Comfortdelgro Corp (CD SP) will be deleted heaping pressure on the beleaguered stock with over 4 days of ADV to sell.
• Emperador (EMP PM) is an inclusion to the FTSE All-World Index and there is a lot to buy on that line from passive trackers at the close on 16 September.

• The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
• Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
• 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.

• China Tourism Group Duty Free Corporation Limited (CDF) raised around US$2.4bn in its H-share listing in Hong Kong, after pricing its IPO at HKD158/share.
• As per Frost & Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
• In this note, we talk about the deal pricing and the trading dynamics.

• Swire Pacific (19 HK) has bought back B/A shares in ratios of 63/37 and 72/28 over two days.  Listing Rules suggest the ratio has to be higher than 76.71/23.29. 
• Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• CTG Duty-Free Group has priced its IPO at HK$158 per share, at a slight premium to the midpoint of the indicative IPO price range of HK$143.5-165.5 per share.
• At HK$158 per share, the company raised net proceeds of HK$15,892.3 (approx. US$2.0bn) and the IPO is priced at an almost 30% discount to CTG’s A-share last close price.
• Cornerstone investors subscribed for approx. 38.4% of the H-share offering (or 1.9% of the total issued share capital of the company post-offering) with some existing shareholders subscribing under placing guidelines.

• The index constituent weights of the FTSE TWSE Dividend+ Index will be capped during the upcoming September 2022 Index quarterly index review.
• In addition, Elan Microelectronics (2458 TT) could also get deleted as discussed in FTSE TWSE Quiddity Leaderboard Sep 2022: Elan Micro (2458 TT) Could Be a Big Negative Surprise 
• In this insight, we take a look at Quiddity’s expectations for index flows resulting from these events. 

• Intouch Holdings (INTUCH TB)‘s discount to NAV is back to levels last seen in November 2021, where euphoric trading was rolling over subsequent to Gulf Energy Development (GULF TB)‘s VTO.
• Intouch’s net cash increased in the 2Q22 and its look-through interim dividend payout is the highest in at least five years.
• I’d be shorting Intouch here and buying Advanced Info Service (ADVANC TB), with a view to mean reversion of ~25% NAV discount. 

• China Tourism Group Duty Free Corp Ltd (1880 HK)/CTGDF priced its H Share at HK$158.00 per share to raise net proceeds of US$2.0 billion. The H Share starts trading tomorrow.
• The H Share listing price implies an AH discount of 27.2% at A Share price of RMB189.80. This compares to an average AH discount of 46.6% of listed AH shares.
• The China Tourism Group Duty Free Corp Ltd (601888 CH) A Shares are trading close to fair value. The H Shares valuation is unattractive compared to peers. 

• We do not forecast any deletions from the FTSE TWSE Taiwan Dividend+ Index in September. There will be a lot of flow from dividend yield changes and capping changes.
• Based on the closing prices from 22 August, we estimate one-way turnover of 13.6% at the September rebalance resulting in a one-way trade of TWD 19,664m (US$653m).
• Passive inflows will be focused (for the most part) on stocks that have underperformed and outflows will mainly be on recent outperformers.

• Since late June when I recommended to not be long Toshiba vs Peers, Toshiba has fallen 9.5% vs Peers (-6% on its own and an equal-weighted Peer Basket is +3.9%).
• If one assumes the likelihood of a privatisation has not gone down, and the likely takeout price is the same, back-end adjusted, probability-adjusted IRRs are up 6-8%, to decent levels.
• This changes my recommendation from Bearish to Probability-Adjusted Bullish, but it is nuanced, and it is still a range trade.

• Ten names, five each for each direction, are almost guaranteed to migrate between MID and LARGE. From the last time we checked, Hyundai Marine and Hanmi Science are newly added.
• The rebalancing trading day is September 8, and both directions of MID⇔LARGE cause significant passive impact. So, Long/Short basket trading is a practical approach, starting about 20 days before effective.
• We should consider approaching this event in conjunction with the MSCI IR. This is because of Hyundai Mipo Dockyard, the only candidate likely to join the MSCI Standard this November.

• We expect Emperador (EMI SP) to be added to the FTSE Straits Times Index at the September rebalance after meeting the free float, market cap and liquidity requirements. 
• As the lowest ranked current index constituent, we expect Comfortdelgro Corp (CD SP) will be deleted heaping pressure on the beleaguered stock with over 4 days of ADV to sell.
• Emperador (EMP PM) is an inclusion to the FTSE All-World Index and there is a lot to buy on that line from passive trackers at the close on 16 September.

• And on the 6th Day, Swire Pacific (A) (19 HK) commenced its buyback. 
• It took until the 6th day for Swire to start its buyback, and now that it has started, we may have a little better idea of the parameters. And impact. 
• So far, they appear to be bending the rules a little, but it is still the way it should be. So there is still a trade here to do.

• Last week Yum China Holdings Inc (9987 HK)  announced it has applied for voluntary conversion to a primary listing on the Hong Kong Stock Exchange.
• Should all necessary approvals from the HKEx be satisfied, Yum will become dual primary listed on the New York Stock Exchange and the HKEx.
• This regulatory process, facilitated by rules introduced by the HKEx over the past year, enables the de-listing of the ADRs and the smooth transition to a sole HK listing.

• Monday 22nd August 2022 was the base date for the FTSE TWSE Taiwan 50 and Taiwan Mid-Cap 100 Indices for the September 2022 Rebalance.
• With the reference period for selection now complete, we take a look at the potential ADDs and DELs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices.
• One special candidate, Elan Microelectronics (2458 TT) could be in for a big negative surprise when the results are announced in a couple of weeks.

• Bright Scholar Education (BEDU US) (BSE), an operator of schools across China, the UK, and the US, received an Offer earlier this year from Huiyan Yang, the chairperson.
• Yang is offering US$3.32/ADS – adjusted for the recent reverse split – a 44% premium to the undisturbed price. 
• Yang controls 92.5% of the votes. There is no shareholder vote on this transaction should a firm Offer unfold.

• The FTSE EPRA Nareit Index September rebalance will use data from 22 August. The changes will be announced on 31 August and implemented at the close on 16 September.
• Healthcare & Medical Investment Corporation (3455 JP) is a potential inclusion, while there are a few others that are close adds on market cap & other criteria.
• 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.

• Back on 2 June, SOE terminal operator Xiamen International Port (3378 HK) announced a pre-conditional Offer of $2.25/share from Xiamen Port Holding, a Fujian SASAC-controlled entity.
• The pre-conditions  – NDRC, MoC, SAFE, and CSRC – were fulfilled on the 16 August.
• The Composite Doc is now out. The H-class meeting will be held on the 16 September. There is no tendering condition. Payment should be the 6 October.

• 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). 

• A busy Friday with the end of the S&P/ASX review period and announcement of changes to the Hang Seng family of indices and FTSE AW/AC at the September rebalance.
• Monday is the review cutoff for the FTSE TWSE Taiwan 50, STI, FTSE China 50 and A50 indices, among others. STAR50 Sep changes announcement expected post market close on Friday.
• There were some big inflows into Asia focused ETFs during the week, while the outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week.

• There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
• 19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
• Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.

• We do not forecast any deletions from the FTSE TWSE Taiwan Dividend+ Index in September. There will be a lot of flow from dividend yield changes and capping changes.
• Based on the closing prices from 22 August, we estimate one-way turnover of 13.6% at the September rebalance resulting in a one-way trade of TWD 19,664m (US$653m).
• Passive inflows will be focused (for the most part) on stocks that have underperformed and outflows will mainly be on recent outperformers.

• Daiwa House Reit Investment (8984 JP) is looking to raise around US$98m to acquire four new properties. 
• Overall, the deal is well flagged with Daiwa House REIT (DHR) making capital raises almost an annual routine. The acquisition would be accretive to DPU as well.
• In this note, we will look at the assets to be acquired, impact on forecast and portfolio, and run the deal through our framework.

• Ten names, five each for each direction, are almost guaranteed to migrate between MID and LARGE. From the last time we checked, Hyundai Marine and Hanmi Science are newly added.
• The rebalancing trading day is September 8, and both directions of MID⇔LARGE cause significant passive impact. So, Long/Short basket trading is a practical approach, starting about 20 days before effective.
• We should consider approaching this event in conjunction with the MSCI IR. This is because of Hyundai Mipo Dockyard, the only candidate likely to join the MSCI Standard this November.

• Today is the review cutoff and we expect SinoPac Holdings (2890 TT) to replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index in September.
• Passive Taiwan50 trackers will need to buy over 5 days ADV on SinoPac Holdings (2890 TT) and sell less than a days ADV on Powerchip Semiconductor Manufacturing Corp (6770 TT). 
• Powerchip Semiconductor Manufacturing Corp (6770 TT) has been added to the FTSE All-World Index and those trackers need to buy around 96.5m shares.

• PetroChina (601857 CH) and EVE Energy (300014 CH) could replace China Pacific Insurance (Group) (601601 CH) and Zhangzhou Pientzehuang Pharmaceutical Co. (600436 CH) in the index at the September rebalance.
• Assuming both changes are implemented, estimated one-way turnover is 2.24% and will result in a one-way trade of CNY 1,180m.
• There has been no announcement from FTSE yet on the potential increase in the number of index constituents from 50 to 100.

• Softbank (9982 JP) is knocking on 6,000 compelling resistance that sets up a short trade just under this barrier. 5,300 lower pattern support is the level to test/break.
• RSI is also building energy for a powerful breakout from the triangle/flat range with a bear spin.
• 6,000 is a stiff barrier and if it caps will set in motion a higher degree decline to retest the 4,200-macro support line.

• The local market is betting that Samsung Electronics will announce an additional shareholder return measure. Special dividends or buyback? They lean towards a buyback.
• It is unlikely that it will be another pref-skewed buyback. The Lee family needs cash now, so preventing the dilution of voting shares becomes the top priority. 
• Hence, we should not have high expectations for a further decline in the pref discount. Instead, we should consider designing a short position aimed at block sales.

• 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). 

• The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
• There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.

• SenseTime Group (20 HK)‘s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX. 
• Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
• Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.

• There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
• 19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
• Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.

• A busy Friday with the end of the S&P/ASX review period and announcement of changes to the Hang Seng family of indices and FTSE AW/AC at the September rebalance.
• Monday is the review cutoff for the FTSE TWSE Taiwan 50, STI, FTSE China 50 and A50 indices, among others. STAR50 Sep changes announcement expected post market close on Friday.
• There were some big inflows into Asia focused ETFs during the week, while the outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week.

• There are no changes to the index names, but FAF and capping changes will lead to a one-way turnover of 4.5% and one-way flow of HK$3,287m.
• An increase in the FAF from 3% to 40% will result in passive inflows of HK$1.18bn for SenseTime Group (20 HK) – that is over 5 days of ADV.
• There are large shorts on some of the stocks that will have passive outflows and some of these positions could be covered on implementation day.

• The Hang Seng Index Team announced four changes to the Hang Seng Index, bringing membership to 73 from 69, on its way to 80, but later than originally targeter mid-2022. 
• Additions are China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK), and Baidu (9888 HK). 
• Official placeholder turnover is about 3.8%. Small changes due to capping updates still to come. China Shenhua and possibly Chow Tai Fook look interesting as trades.

• The Hang Seng Index Team announced the index review for the Hang Seng Tech Index Friday after the close. There were no additions or deletions.
• However, there is a 4.9% one-way turnover on reasonably heavy FAF and capping changes. Sensetime sees a huge FAF increase. Tencent, Meituan, and Kuaishou get re-capped higher. Xiaomi lower.
• There is a fair bit of flow, but the obvious big name – SenseTime Group (20 HK) – has potential overhang. Watch Haier Smart Home Co Ltd (6690 HK). 

• On Friday the Hang Seng announced the changes to the HSCEI for the September rebalance. SenseTime Group (20 HK) is an ADD. China Pacific Insurance (2601 HK) a DELETE.
• Meituan (3690 HK) and Tencent (700 HK) see their weights re-capped upwards. Alibaba Group (9988 HK) capped slightly lower. There are a number of FAF changes.
• Little stands out other than the China Pacific Insurance (2601 HK) deletion. It runs low volatility vs Peers so could be a good buy on dip.

• 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 are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Infomedia Ltd (IFM AU), Resapp Health (RAP AU), Lifestyle International Holdings (1212 HK).
• Lowest gross spreads are MACA Ltd (MLD AU), Dongzheng Automotive Finance (2718 HK), Excelpoint Technology (EXLP SP), Xiamen International Port H (3378 HK), MyDeal.com, Giordano International (709 HK).

• Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
• Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
• There will be passive selling once the buyback is complete, but the stocks should run up prior to that.

Pre-open today, a day after the FTSE/JSE announced its expected capping rule for Naspers (NPN SJ) and Prosus NV (PRX SJ) in the September FTSE/JSE index rebalances (the cap at 6% of index for each of the stocks is only valid for the FTSE/JSE Capped SWIX All Share and Capped SWIX Top 40 indices), and a week after the Exchange Offer closed…

…Prosus (PRX NA) has announced a US$5.0bn buyback.

The buyback starts today and goes for a year. 

What kind of impact are we looking at?   It’s interesting.

• AEM reported stellar 1H22 results beating street estimates as well as far outpacing their own guidance. CHIPS act in USA will benefit company in FY23.
• Stock reaction (+6%) muted despite great outlook and management optimism. Despite record results and strong outlook, stock is down YTD. 
• AEM is cheap trading at only +/-10x FY22 EPS, too low given the growth and consistent margins profile. Fair Value remains 8 SGD.

• The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
• The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

• In February 2022, I discussed why Appier Group (4180 JP) could be an interesting TOPIX Inclusion Candidate in TOPIX Inclusion Pre-Event: Appier Group (4180 JP) 
• Earlier this month, I reiterated my view in TOPIX Inclusions: Who Is Ready (Aug 2022) identifying Appier Group as the best pick among all current TOPIX Inclusion candidates.
• Since my last insight, the share price has risen sharply and that has important implications for the company’s Prime market ambitions.

• SenseTime Group (20 HK)‘s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX. 
• Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
• Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.

• The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
• There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.

• There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
• 19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
• Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.

• There are no changes to the index names, but FAF and capping changes will lead to a one-way turnover of 4.5% and one-way flow of HK$3,287m.
• An increase in the FAF from 3% to 40% will result in passive inflows of HK$1.18bn for SenseTime Group (20 HK) – that is over 5 days of ADV.
• There are large shorts on some of the stocks that will have passive outflows and some of these positions could be covered on implementation day.

• BA Airport Leasehold REIT (BAREIT TB) (BAREIT) is looking to raise about US$290m in its Thailand IPO. 
• BA Airport Leasehold REIT (BAREIT), sponsored by Bangkok Airways, is Thailand’s first airport REIT.
• It aims to utilise the IPO proceeds, combined with a debt issuance to lease a number of properties located in Samui Airport. 

• The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
• The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

• LX Semicon (108320 KS) is looking to transfer from the KOSDAQ market to the KOSPI market. Shareholder meeting is 23 September and the transfer will happen soon after if approved.
• LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index on the suspension date. There is zero chance of the stock being included in the Kospi 200 Index.
• Nextin (348210 KS) is a high probability inclusion to the KOSDAQ 150 Index in December but could be an early inclusion in  September to replace LX Semicon (108320 KS).

• MACA Ltd (MLD AU) has indicated that NRW Holdings (NWH AU)‘s A$1.085/share Offer is inferior to Thiess’ conditional A$1.025/share takeover offer.
• The reasons for the rejection are expected to be fleshed out at MACA’s full years results briefing.
• NRW’s Offer is higher, has a lower shareholder approval, and provides MACA shareholders the option of cash, scrip or a combination of both. But is subject to scaling.

• The ACCC has raised concerns about Qantas Airways (QAN AU) proposed acquisition of Alliance Aviation Services (AQZ AU). The ACCC’s final decision is on 17 November.
• Qantas knew a lengthy ACCC approval process was highly likely and committed to an additional special dividend in the SID to reflect this risk. 
• Qantas has its work cut out to address the ACCC concerns. Nevertheless, due to the selloff, the current price offers almost a free option on Qantas securing ACCC approval.

For our next Webinar, we have the pleasure of welcoming back Analyst Nicolas Van Broekhoven, who will go through his latest picks in the Singapore market, highlighting key stocks and names to watch out for in the Lion City.

The webinar will be hosted on Wednesday, 24 August 2022, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buy-side for 15 years, and worked most recently at a medium-sized boutique asset management firm. He grew up in Europe, went to university in the US and has been living in Singapore for the last seven years, which has given him a broad scope on the world and investing in general. He considers himself a generalist investor with a preference for small and mid-cap companies and special situations. However, a large-cap that has gone temporarily out of favour might also pique his interest.

• Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first “second buyback within a single year” since 2014.
• History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
• Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical “quality premium.”

• A little long in the tooth but the Scheme Doc for Frasers Hospitality Trust (FHT SP) was released this morning. 
• It is the standard multi-hundred page document (in this case 502 pages). And it does little other than tell the same weak story as the announcement did.
• But the price is unchanged and the Scheme Meeting is 10 September 2022. This looks like it will be a done deal. 

• It seems clear that Kakao Bank’s situation is not good as the block deal risk exposure has increased. Additional disposable volume is 15% owned by the non-strategic institutional shareholders.
• The factor that will reverse this, flow-wise, is MSCI’s float adjustment. But chances are low. So, we’d better maintain a short position betting on Kakao Bank’s further correction.
• Nevertheless, if that happens, Kakao Bank will welcome additional passive flows equal to the amount of passive money currently parked, which is a major event causing a significant passive impact.

• Ptb Group Ltd (PTB AU) entered a scheme implementation deed (SID) with Precision Aviation Group (PAG). The offer comprises A$1.595 + dividend up to A$0.03 per share (total of A$1.625).
• The offer price is attractive. The key conditions are shareholder approvals and FIRB approval. The scheme meeting is on 16 November. 
• This is a done deal. At last close and for the 2 December payment, the gross and annualised spread to the offer + div is 3.8% and 13.5%, respectively.

• The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
• There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.