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Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK).
SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.

Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications

Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)

Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS).

LX Semicon (108320 KS) – Section Change, Index Flow and KOSDAQ150 Replacement

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).

LX Semicon KOSDAQ→KOSPI Migration Event: Index Rebalance Trading

LX Semicon announced that its board approved KOSPI migration on August 17. This migration requires shareholder approval, and a shareholder meeting will be scheduled for September 23.
The outflow of KOSDAQ 150 is estimated to be -1.37x ADTV. A passive impact of this magnitude should cause a price movement of at least 3%p.
But LX Semicon’s GICS sector won’t change after the KOSPI migration. We should refrain from trading with expectations for the possibility of KOSPI 200 inclusion at this point.

Giordano (709 HK): Interim Divy – But Perhaps Not If You Tender

Giordano International (709 HK) has announced 1H22 net profit of HK$97mn compared to HK$60mn in 1H21.
Of interest is the declaration of an interim dividend of HK$0.085/share.
The ex-dividend date is the 20 September. Whether you get the dividend plus the Offer Price depends when the Offer closes (or is extended), and/or whether the Offer turns Unconditional.

Ping An A/H Premium: Near The High End

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.

Japan Excellent REIT (8987) – Possible Sustained Flow Event

Japan Excellent (8987 JP) has been the worst-performing Office J-REIT amongst the existing crop since the end of 2019.
Today, we got news of a possible flow event – a buyer.
There is room here for Japan Excellent to outperform over the next several months.

ANZ Renounceable Entitlement Offer – Retail Shortfall Size Within Expectations at A$688m (US$475m)

ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
The institutional part of the entitlement offer saw a strong take up and the retail take up was within our expectations as well.
In this note, we will talk about the retail shortfall bookbuild and other updates since our last note.

Giordano’s Improving Outlook and Surprising Dividend Provide Deal-Break Support

By Arun George

Giordano International (709 HK)’s 1H22 net profit of HK$97 million was within the HK$91-101 million positive profit range. The IFA noted that interims do not change its advice.
The Board surprisingly declared an interim dividend of HK$0.085 per share. As the ex-div falls after the final closing date, shareholders who accept the offer will not receive the dividend.
The incrementally positive outlook and dividend highlight Giordano’s value. The results have pushed our deal break/intrinsic value to align with the VGO price.

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Aug 18

Most Read: Meituan, Xinjiang Daqo New Energy, ESR-LOGOS REIT, Appier Group, Hancom Inc, NEC Corp, SK Telecom, Net Marketing, Trina Solar Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
Update on the S-REIT Re-Allocation Trade
Appier Group (4180 JP): Now TOPIX-Ready!
KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)
Meituan Bear Pressure Accelerating
NEC (6701) | Significantly Undervalued with Upcoming Catalyst
MSCI Korea Flow Trading for August 31st
Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal
SSE50 Index Rebalance Preview: Sector Rotation To Continue

Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications

Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going

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.

Update on the S-REIT Re-Allocation Trade

In June-July I warned of a reinvestment trade into S-REITs due to the S$2.0-3.0bn cash-out by investors in Mapletree North Asia Commercial Trust and sellers into the SPHREIT Chain Offer.
Many investors who would need to re-allocate. The trade was to buy major S-REITs. From my last insight, a basket is up 5.3%. MCT has already topped out vs peers.
The question is…. is there still a trade left to run?

Appier Group (4180 JP): Now TOPIX-Ready!

By Janaghan Jeyakumar, CFA

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.

KOSDAQ150 Ad Hoc Index Rebalance: Hancom (030520) To Replace Vidente (121800)

Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS).

Meituan Bear Pressure Accelerating

By Thomas Schroeder

June 27 call to sell strength in line and showing increasing downside pressure below the 185 support (now resistance).
Dual top at 210 induced a turn well under trendline resistance. Break of bear wedge support confirmed the macro sell signal.
Below 166 targets 140 where a stall in the decline/bounce is due (resistance near 160-66) but expected to give way for a test on the 110 low zone.

NEC (6701) | Significantly Undervalued with Upcoming Catalyst

By Mark Chadwick

NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025
NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off
NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced

MSCI Korea Flow Trading for August 31st

MSCI Korea’s August QIR features one deletion: SK Telecom. But Woori Financial, HYBE, and LG Energy will also present a notable impact as they face float rate changes.
We should consider executing flow trading on these names, even SKT, towards the effective date as much as possible, as the flow magnitude wouldn’t be enough to act proactively.
It’s been witnessed that SK Telecom’s recall and liquidation of short positions have been made preemptively this time, minimizing the risk of price distortion on the effective date.

Net Marketing Japan (6175) “MBO” Tender Offer – Done Deal

Bain Capital Private Equity launched a deal for Net Marketing (6175 JP) at a 63% premium.
That should be enough to get it done on its own, despite coming below the IPO price of 5yrs ago.
In any case, Shareholder Structure makes this a completely done deal.

SSE50 Index Rebalance Preview: Sector Rotation To Continue

Over 80% of the way through the review period for the December rebalance, we see 7 stocks in inclusion/exclusion zone. However, there can be a maximum of 5 changes.
We estimate a one-way turnover of 3.9% at the December rebalance leading to a one-way trade of CNY 2.85bn.
The potential adds have outperformed the potential deletes and the SSE50 Index (SSE50 INDEX) by a wide margin over the last few months.

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Aug 17

Most Read: Jardine Matheson Holdings, Sayona Mining, Meituan, Jafco Co Ltd, Yashili International Holdings, Xinjiang Daqo New Energy, Australia and New Zealand Banking Group (ANZ), China Tourism Group Duty Free Corp Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Jardine Matheson (JM SP): MSCI Blues
S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears
Tencent (700 HK) To Divest Meituan (3690 HK) – Impact and Index Implications
JAFCO (8595) Vs Murakami – It’s On, So We Wait
Yashili’s Pre-Condition EGM Approval Secured
Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications
CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going
ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall
CTG Duty Free H-Share Listing: Not Even Attractive at the Lower End
Is It Time To Buy China?

Jardine Matheson (JM SP): MSCI Blues

Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.

S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears

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.

Tencent (700 HK) To Divest Meituan (3690 HK) – Impact and Index Implications

Reuters this afternoon carried an article that Tencent (700 HK) was seeking to divest “US$24bn” (17%) of $78bn market cap delivery company Meituan (3690 HK) by year-end to mollify domestic regulators.
Tencent would seek to launch a share sale within 2022 “if market conditions are favourable.” Meituan shares tanked 9%, immediately.
The article suggests disposal via block sale (faster than negotiating with a private buyer), odd given Tencent’s Q1 2022 experience with the JD.com unwind. But it leads to BIG flows.

JAFCO (8595) Vs Murakami – It’s On, So We Wait

Entities related to noted Japanese activist Murakami Yoshiaki have bought 11.5-15% of Jafco Co Ltd (8595 JP) in recent weeks; JAFCO has gotten upset and announced defensive measures.
Murakami wants JAFCO to sell its large stake in Nomura Research Institute Ltd (4307 JP) and buy back shares. JAFCO is saving that stake for a rainy day.
The shares have popped. There is a poison pill EGM Record Date coming. It’s worth thinking through the implications.

Yashili’s Pre-Condition EGM Approval Secured

By Arun George

Yashili International Holdings (1230 HK) independent shareholders unanimously approved the proposed transactions at the 16 August EGM, a crucial step for China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
The remaining pre-condition is the completion of the 25% Yashili acquisition. The completion conditions suggest that this pre-condition is low risk and will likely be completed soon.
The value test is only applicable to the scheme. At last close and for a November completion, the gross and annualised spread to the offer is 8.1% and 29.6%, respectively.

Tencent’s Potential Sale of Meituan Stake – Read Across to Other Stocks & Index Implications

Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others.
A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

CSI300 Index Rebalance Preview: Outperformance Continues & Could Keep Going

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.

ANZ Renounceable Entitlement Offer – Could Be a Relatively Large (A$550-750m) Retail Shortfall

By Shifara Samsudeen, ACMA, CGMA

ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
The institutional part of the entitlement offer saw a strong take up and the shares have held up well since the deal was announced.
In this note, we will talk about the upcoming retail shortfall bookbuild and other updates since our last note.

CTG Duty Free H-Share Listing: Not Even Attractive at the Lower End

CTG Duty Free Group has filed for a HKEx listing and plans to raise net proceeds of US$1.98bn at the midpoint of the IPO price range of HK$143.5-165.5 per share.
The company’s indicative IPO price range is at a 27-37% discount to the company’s last close of RMB194.75 per share.
In this insight, we discuss our key concerns on CTG’s financials and our thoughts on the company’s valuation.

Is It Time To Buy China?

By Michael J. Howell

Investors are overly pessimistic, but China may already be a contrarian ‘buy’
Latest economic data show positive surprises. GDP momentum is rising but investor positioning data evidence another big cut in exposure to China
Monetary policy stable and supportive. No sign of credit bust, or boom. Great potential for policy ‘pivot’ later in 2022

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Aug 16

Most Read: Swire Pacific Ltd-Cl B, China Tourism Group Duty Free Corp Ltd, Evergreen Marine Corp, Jardine Matheson Holdings, Giordano International, Alibaba Group, HLB Inc, Softbank Corp, Sayona Mining and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Swire A Vs Swire B – Regulatory Nuances REALLY Matter
China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals
Jardine Matheson (JM SP): MSCI Blues
Giordano (709 HK): Offer Doc Out. Terms Declared Final
China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong
CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views
HLB Capital Increase: Offering Terms & Trading Dynamics
2022 JPX Nikkei 400 Rebal Update – Going the Right Way
S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears

Swire A Vs Swire B – Regulatory Nuances REALLY Matter

Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn.
A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them.
The conclusions are surprising, and lead to one clear trading idea.

China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium

CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.

Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals

MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

Jardine Matheson (JM SP): MSCI Blues

Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.

Giordano (709 HK): Offer Doc Out. Terms Declared Final

On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK).
The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.
The Composite Document is now out with a first close on the 5 September. The Offer Price has now been declared final. That’s a surprise.

China Internet Weekly (15Aug2022): Alibaba, Tencent, Meituan, TikTok, JD, NetEase, Dingdong

By Ming Lu

Express parcels increased by 8% YoY in China in July.
TikTok was still the top non-game app in the world in July.
Meituan raised its prices of bike sharing on August 10.

CTG Duty Free (601888 CH) H-Share IPO: 2Q22/Outlook Updates and Valuation Views

By Osbert Tang, CFA

At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of China Tourism Group Duty Free Corp (601888 CH) is not attractive enough.
2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.
Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.

HLB Capital Increase: Offering Terms & Trading Dynamics

This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.

2022 JPX Nikkei 400 Rebal Update – Going the Right Way

As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly ‘smart’ vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it’s doing even better.
This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.

S&P/ASX Index Rebalance Preview: Adds Outperform Deletes As Review Period End Nears

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.

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Aug 15

Most Read: Kasikornbank PCL, Swire Pacific Ltd-Cl B, Adani Green Energy, Evergreen Marine Corp, China Tourism Group Duty Free Corp Ltd, Piedmont Lithium, Giordano International and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
China Tourism Group A/H Listing – Discount Is Enticing at the Low-End
Swire A Vs Swire B – Regulatory Nuances REALLY Matter
Impact of Potential Changes to India F&O Eligibility Criteria
Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals
China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium
ECM Weekly (14th Aug 2022) – China Tourism, A/H Listing, Hongjiu Fruit, Socar, Betagro, ThaiBev, GQG
A-H Premium Weekly: Tianqi Lithium at New Lost Post H-Share IPO
S&P/ASX Quiddity Leaderboard Sep 2022: Potential Last Minute Surprises
Giordano (709 HK): Offer Doc Out. Terms Declared Final

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise

As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

China Tourism Group A/H Listing – Discount Is Enticing at the Low-End

China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$2.5bn in its H-share listing in Hong Kong.
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 run the deal through our ECM framework.

Swire A Vs Swire B – Regulatory Nuances REALLY Matter

Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn.
A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them.
The conclusions are surprising, and lead to one clear trading idea.

Impact of Potential Changes to India F&O Eligibility Criteria

A news report has indicated that SEBI is looking to tighten criteria used for inclusion and continued availability of stocks in the Futures & Options (F&O) segment of the market.
Our analysis shows 30 stocks could be deleted from the F&O segment while another 12 are close to deletion zone. If applied objectively, 22 stocks could be added to F&O.
Deletion from the F&O segment could see two stocks dropped from the Nifty Next 50 Index while inclusion in F&O could see two stocks added to the NIFTY Index.

Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals

MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

China Tourism Group Duty Free (1880 HK) IPO: Offer Details, Index Inclusion, AH Premium

CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.

ECM Weekly (14th Aug 2022) – China Tourism, A/H Listing, Hongjiu Fruit, Socar, Betagro, ThaiBev, GQG

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 launched its US$2.5bn IPO.
There were no major placements this week and it likely to remain that way in the near future owing to it being earnings season.

A-H Premium Weekly: Tianqi Lithium at New Lost Post H-Share IPO

By Ke Yan, CFA, FRM

We analyse the changes of A/H premium on 142 stocks over the last week. The average A/H premium of 142 A/H stocks are 116.5%, increased by 3.0ppt over last week.
The average A/H premium changed by 3.0ppt week on week, led by Real Estate, financials, and consumer discretionary sectors.
We highlight A/H premium changes of Great Wall Motor, Guangzhou Auto, Hisense Home, Tianqi Lithium, Jiangxi Copper, Angang Steel, Maanshan Iron, BBMG, Alcoa, Zoomlion, Cansino, Holly Futures, and ABC.

S&P/ASX Quiddity Leaderboard Sep 2022: Potential Last Minute Surprises

By Janaghan Jeyakumar, CFA

With the Reference Period for the September 2022 Rebalance nearing its end, we take a final look at the potential index changes for ASX 300, 200, 100, 50, and 20.
AVZ Minerals (AVZ AU) and Firefinch Ltd (FFX AU) are both members of the ASX Index family and are currently suspended from trading. There could be index consequences here.
Based on current data, I expect 7 ADDs/DELs for the ASX 200 Index and 22 ADDs and 18 DELs for the ASX 300 Index.

Giordano (709 HK): Offer Doc Out. Terms Declared Final

On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK).
The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.
The Composite Document is now out with a first close on the 5 September. The Offer Price has now been declared final. That’s a surprise.

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Aug 14

Most Read: Softbank Group, Alibaba (ADR), Kasikornbank PCL, Guangdong Investment, Hong Kong Hang Seng Index, Posco International Corporation, Dollar Index, Samsung Electronics, Evergreen Marine Corp, Mayne Pharma and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
S&P Global Water Index: Market Consultation Driven Potential Changes
HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications
Posco International Merger: Deal Structure & Arbitrage Dynamics
U.S. Dollar Topping?; Bullish Reversals Continue; Ideas in Growth/Cyclicals, Financials
Samsung’s Lee Jae-Yong Receives Pardon & Get Out of Jail Card: A Signal of Major M&As by Samsung?
Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals
Mayne Pharma (MYX AU): CDMO Business Sale- A Step Towards Focus Solely on Specialty Pharma

Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications

Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications

Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc

This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future.

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise

As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

S&P Global Water Index: Market Consultation Driven Potential Changes

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

HFCAA, AHFCAA, China ADRs & FTSE Index Treatment: Speeding Up The Process & Implications

The Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.

Posco International Merger: Deal Structure & Arbitrage Dynamics

We still have the chance to become eligible. We will still receive the rights if we buy Posco International next Tuesday. But we will exercise them at ₩20,590, NOT ₩27,801.
Given that there is little cancellation risk, we can capitalize on the price falling below the appraisal price by opening both Long and Short at the same price.
We close Short if the price goes under ₩20,590 and fix the arb spread by exercising the rights with Long.

U.S. Dollar Topping?; Bullish Reversals Continue; Ideas in Growth/Cyclicals, Financials

By Joe Jasper

This is now the third Int’l Compass/third week in a row where we are discussing an increasing number of country indexes experiencing bullish 3.5-9-month downtrend reversals.
Importantly, all of the previously mentioned indexes are holding above their breakout levels (i.e., there has yet to be any failed breakouts).
Now, the U.S. dollar (DXY) is starting to show early signs of topping. We continue to believe that global equities are going through a bottoming process.

Samsung’s Lee Jae-Yong Receives Pardon & Get Out of Jail Card: A Signal of Major M&As by Samsung?

On 12 August, the South Korean government finally gave a presidential pardon to Samsung’s heir Lee Jae-Yong.
With Lee Jae-Yong given the presidential pardon, there is an increasing likelihood that the Samsung Group could become more aggressive in making major global M&As in the next several years.
Three major M&As that Samsung could make in the next several years include ARM, Infineon, and NXP Semiconductor.

Index Rebalance & ETF Flow Recap: MSCI, S&P Global Water, TW Div+, FTSE JP, STI, OZ Minerals

MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

Mayne Pharma (MYX AU): CDMO Business Sale- A Step Towards Focus Solely on Specialty Pharma

By Tina Banerjee

Mayne Pharma (MYX AU) is selling its U.S.-based CDMO business, Metrics Contract Services for $475 million. The transaction is expected to close by the end of 2022.
Allowing for reinvestment needs, the net proceeds from the sale will be used to repay the syndicated debt facility and return surplus capital to shareholders.
Combined oral contraceptive Nextstellis remains the company’s most significant commercial opportunity. While Nextstellis was launched in the U.S. in June 2021, Mayne has launched Nextstellis in Australia in July 2022.

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Aug 13

Most Read: Kasikornbank PCL, Swire Pacific (A), Japan Post Insurance, China Tourism Group Duty Free Corp Ltd, Swire Pacific Ltd-Cl B, Taiwan Semiconductor (TSMC) – ADR and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG
Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears
China Tourism Group A/H Listing – Updates from Revised Filing and Quick Thoughts on Valuation
Japan Post Insurance (7181 JP) – Reading Between The Lines
China Tourism Group A/H Listing – Discount Is Enticing at the Low-End
Swire A/B (19 HK / 87 HK)’s BIG Buyback Programme
Swire A Vs Swire B – Regulatory Nuances REALLY Matter
Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch
CTG Duty Free H Share Listing: Valuation Insights

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise

As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG

Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.
Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers.
The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.

Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears

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.

China Tourism Group A/H Listing – Updates from Revised Filing and Quick Thoughts on Valuation

China Tourism Group Duty Free Corporation Limited (CDF) now aims to raise US$2-3bn in its H-share listing in Hong Kong.
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 will talk about the recent updates from its revised filings and revisit valuations.

Japan Post Insurance (7181 JP) – Reading Between The Lines

Japan Post Insurance (7181 JP) reported soft Q1 Tuesday on negative existing policy premium growth and higher (covid-related) underwriting claims costs. Guidance was unchanged but JPI also announced a buyback.
The buyback structure is designed to keep Japan Post Holdings (6178 JP) under 50% to continue to abide by the strictures and goals of the Japan Postal Privatisation Act.
50% or more will be done in a ToSTNeT-3 buyback Thursday morning 12 August. The rest will be bought on market. Impact is non-negligible. And JPI is cheap cheap cheap.

China Tourism Group A/H Listing – Discount Is Enticing at the Low-End

China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$2.5bn in its H-share listing in Hong Kong.
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 run the deal through our ECM framework.

Swire A/B (19 HK / 87 HK)’s BIG Buyback Programme

Swire Pacific (19 HK) has announced a “small” buyback at HK$4bn, but it is a material portion of ADV.
What remains unknown is how the buyback will be split. The split will only be known once buyback volumes are announced.
Swire is trading cheap at a look-through forward P/B of 0.28x compared to its five-year average of 0.38x, and the two-year average pre-Covid of 0.48x.

Swire A Vs Swire B – Regulatory Nuances REALLY Matter

Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn.
A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them.
The conclusions are surprising, and lead to one clear trading idea.

Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch

By Vincent Fernando, CFA

TSMC’s ADR premium has fallen substantially and is at the lower end of its 3-year range
ASE’s ADR premium is in contrast near the upper end of its range
ChipMOS ADRs are now trading at a discount to their Taiwan shares

CTG Duty Free H Share Listing: Valuation Insights

By Arun George

China Tourism Group Duty Free Corp Ltd (601888 CH) has launched its H Share listing at HK$143.50-165.50 per share. Pricing is on 18 August and listing on 25 August.
In CTG Duty Free H Share Listing: Another False Dawn?, we noted that on a fundamental view, we would prefer to remain on the sidelines.
Our valuation analysis suggests that the A Shares are trading close to fair value and the H Share valuation is unattractive compared to peers. We would pass on the listing.

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Aug 12

Most Read: Softbank Group, Kasikornbank PCL, Swire Pacific (A), Emperador, Japan Post Insurance, Toyo Corp, China Tourism Group Duty Free Corp Ltd, True Corp Pcl and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise
Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears
Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG
STI Index Rebalance Preview (Sep): Close to the Cutoffs
Japan Post Insurance (7181 JP) – Reading Between The Lines
Toyo Tecnica (8151) – BIG Buyback
Past A/H Listings Performance – Most of the Deals Haven’t Done Much
True/DTAC: Merger Support Increasingly Tenuous

Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications

Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications

Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome

By Kirk Boodry

Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically

MSCI August 2022 Index Rebalance: The Last QIR Throws Up One Big Surprise

As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

Swire Pacific (19 HK/87 HK) Buyback: Bigger Than It Appears

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.

Swire A/B (19 HK / 87 HK) Buyback Programme – It’s REALLY BIG

Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.
Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers.
The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.

STI Index Rebalance Preview (Sep): Close to the Cutoffs

Emperador (EMI SP) currently is just outside the inclusion zone for the FTSE Straits Times Index (STI) (STI INDEX) and a small price bump is needed for index inclusion.
If Emperador (EMI SP) is added to the index, Comfortdelgro Corp (CD SP) could be deleted as the lowest ranked index constituent.
Emperador (EMP PM) is a high probability inclusion to the FTSE All-World Index at the September SAIR and the stock could move higher over the next couple of weeks.

Japan Post Insurance (7181 JP) – Reading Between The Lines

Japan Post Insurance (7181 JP) reported soft Q1 Tuesday on negative existing policy premium growth and higher (covid-related) underwriting claims costs. Guidance was unchanged but JPI also announced a buyback.
The buyback structure is designed to keep Japan Post Holdings (6178 JP) under 50% to continue to abide by the strictures and goals of the Japan Postal Privatisation Act.
50% or more will be done in a ToSTNeT-3 buyback Thursday morning 12 August. The rest will be bought on market. Impact is non-negligible. And JPI is cheap cheap cheap.

Toyo Tecnica (8151) – BIG Buyback

Toyo Corp (8151 JP) is a smallcap electronics firm specialising in sensors/testers/loggers for industrial and data system processes, large scale antennae systems, high tech medical equipment, remote sensing equipment, etc.
They have seen their (extraordinarily seasonal) revenues go mostly nowhere over the past ten years, but they have, until recently, accumulated cash and securities.
On 10 August, the company announced a LARGE buyback of up to 8.44% of shares out. The details suggest

Past A/H Listings Performance – Most of the Deals Haven’t Done Much

China Tourism Group Duty Free Corporation Limited (CDF) is gearing up to launch Hong Kong’s largest listing so far this year, with a reported deal size of around US$2-3bn.
Prior to the deal launch, we’ve had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
Overall, most of the recent A/H listings haven’t done much over the first month.

True/DTAC: Merger Support Increasingly Tenuous

Reportedly, the board of the National Broadcasting and Telecommunications Commission (NBTC), Thailand’s telco regulator, has called for a more detailed analysis of the deal’s impact on competition, consumers and industry.
This follows recent calls by Thailand’s opposition Move Forward party urging the NBTC to block Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB)‘s merger.
Both DTAC and True are trading tight to terms – especially True. Time to take down borrow.

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Aug 11

Most Read: Guangdong Investment, Softbank Group, Lite On Technology, Kakao Pay, Magic Empire Global, GQG Partners, Shinoken Group, Canon Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P Global Water Index: Market Consultation Driven Potential Changes
Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications
FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September
MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome
Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
SGX FTSE Taiwan Index Futures – The Most Liquid Taiwan Offshore Contract
GQG Partners IPO Lock-Up – Tightly Held by Founders, PAC Could Exit
Shinoken (8909) MBO – Decent Premium, Still Light, Will Someone Push?
Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints

S&P Global Water Index: Market Consultation Driven Potential Changes

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

Softbank Confirms BABA Selldown – Big Changes on Softie’s Balance Sheet and BABA Index Implications

Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true.
The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early.
This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications

FTSE TWSE Taiwan Dividend+ Index Rebalance Preview: BIG Capping Changes in September

We do not expect any deletions from the FTSE TWSE Taiwan Dividend+ Index in September, but there will be a lot of passive flow due to capping changes.
Based on the closing prices from 9 August, we estimate one-way turnover of 11.2% at the September rebalance resulting in a one-way trade of TWD 15,754m (US$525m).
Most stocks with expected passive inflows are trading near their recent lows (leading to higher dividend yield), while most stocks with expected passive outflows have rallied recently (lower dividend yields).

MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals.
The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom.
The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom).

Softbank Group Shock Settlement of Forward Alibaba Contracts Is Worrisome

By Kirk Boodry

Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically

Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride

Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings? This is not OK. And it smacks of something unsavoury.

SGX FTSE Taiwan Index Futures – The Most Liquid Taiwan Offshore Contract

The SGX FTSE Taiwan Index Futures are CFTC certified and started trading on 20 July 2020 and use the FTSE Taiwan RIC Capped Index as the underlying.
Volumes on the SGX FTSE Taiwan Index Futures have increased significantly since launch and the ADTV for July was US$3.34bn versus US$509m for the MSCI Taiwan Index Futures.
At US$4.86bn, open interest for the SGX FTSE Taiwan Index Futures is also substantially higher than the open interest on the MSCI Taiwan futures at US$797m.

GQG Partners IPO Lock-Up – Tightly Held by Founders, PAC Could Exit

GQG Partners (GQG) raised US$868m in its Australia IPO in Oct 2021. Its IPO linked lockup is set to expire soon.
GQG is a global investment boutique with a focus on managing active equity portfolios.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Shinoken (8909) MBO – Decent Premium, Still Light, Will Someone Push?

Today Shinoken Group (8909 JP) announced it was the subject of an MBO where the CEO-founder invited Integral – a local PE fund – to help him restructure and grow.
It is at a 45% premium to last, and management negotiated the price from a relatively insulting initial bid of ¥1,300 to ¥1,600 in the end, but it’s still light.
It is not hugely light, but it is not a full price. It could definitely be a bit higher. The question is whether active foreigners will push.

Looking at Canon Buyback Dynamics History – Patterns Vs Peers Gives Execution Hints

Canon Inc (7751 JP) has just started its 17th buyback in 15 years. Like the 16 before, this one is for ¥50bn.
The patterns/dynamics of the canon buybacks in the past are remarkable when compared to buybacks of other companies.
There are outperformance and under-performance patterns vs Peers, and it is worth taking note if you have a position to trade.

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Aug 10

Most Read: Guangdong Investment, Harmonic Drive Systems, Lifestyle International Holdings, Inpex Corp, EVOC Intelligent Technology Company Limited H, Magic Empire Global, Nexon, Kakao Pay, SOCAR, Foosung Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P Global Water Index: Market Consultation Driven Potential Changes
FTSE Japan: Potential Inclusions in March Following TSE Restructure
Lifestyle (1212 HK): Thomas Yau’s Scheme
Inpex (1605 JP) – Earnings, Forecasts and a BIGLY Buyback
EVOC (2308 HK)’s Merger By Absorption
Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
SOCAR IPO Book Building Results
Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea

S&P Global Water Index: Market Consultation Driven Potential Changes

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

FTSE Japan: Potential Inclusions in March Following TSE Restructure

Stocks that migrated from the JASDAQ and Mothers Boards to the Standard Market in April will be eligible for inclusion in the FTSE All-World/All-Cap indices at the March 2023 SAIR.
Currently, we see 4 potential inclusions to the All-World Index and 12 potential inclusions to the All-Cap Index. There are some close adds on market cap and liquidity.
The potential adds underperformed the TOPIX Index from April to June, but there has been a significant outperformance since then.

Lifestyle (1212 HK): Thomas Yau’s Scheme

Thomas Yau, Lifestyle International Holdings (1212 HK)‘s controlling shareholder, is offering to take the company private by way of a Scheme at HK$5/share, a 62.3% premium to last close.
Independent shareholders comprise 23.51% of shares out, therefore the blocking stake at the forthcoming Court Meeting is 2.351% of shares out.
The Offer price is final. No dividends will be paid during the Offer period.

Inpex (1605 JP) – Earnings, Forecasts and a BIGLY Buyback

Today Inpex Corp (1605 JP) announced Q2 earnings (results, presentation), a revised full-year forecast due to higher crude and lower yen, an 11%-above-guidance dividend, and a big buyback.
The buyback is for up to 120mm shares spending up to ¥120bn, to run through year-end. Practically speaking, it is limited to 80mm shares or so at current price.
This should be a non-negligible portion of Real World Float, and I expect the buyback to have impact over the next five months.

EVOC (2308 HK)’s Merger By Absorption

After shares were suspended on the 1 August, electronics play and property developer EVOC Intelligent Technology Company Limited H (2308 HK) has announced a privatisation at HK$1.75 per H-share.
This Offer is by way of a Merger by Absorption, which incorporates a Scheme-like vote. There is no tendering condition.
The premium to last close is just 15.13%; however, it is a 42.28% premium to the five-day closing average. This is EVOC’s third privatisation attempt in the past five years.

Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride

Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings? This is not OK. And it smacks of something unsavoury.

Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term

Nexon (3659 JP) reported Q2 earnings and Q3 forecasts today. Everything is generally “in-line” to tilting slightly light. But USD/yen volatility matters a lot.
The company announced a small dividend hike, from largely meaningless to ever-so-slightly less meaningless. And a plan to buy back ¥100bn of shares over 3 years.
The inheritance tax issue remains a big one, but overhang appears delayed and buyback accretion is small, and also appears delated. And there’s an index sell at end-September.

MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals

We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals.
The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom.
The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom).

SOCAR IPO Book Building Results

SOCAR announced its IPO book building results. The IPO price has been determined at 28,000 won (18% lower than the low end of the IPO range).
Our base case target price for SOCAR is 27,176 won, which is 3% lower than the IPO price of 28,000 won.
We remain Negative on this IPO due to lack of upside. There were 348 companies involved in the IPO survey with the final demand ratio of 56 to 1.

Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea