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• The Companies (Amendment) Act 2021 of the Cayman Islands (Amendment Act), which will come into force on 31 August 2022, will abolish the current ‘headcount test’.
• Those companies incorporated in the Cayman Islands, and subject to a members’ Scheme of Arrangement, were previously required to satisfy the headcount test under section 86 of the Companies Act.
• This development clarifies previous uncertainty/ambiguity which could arise, with ‘take private’ deals of Cayman-incorporated, Hong Kong-listed companies, where a Scheme is the favoured privatisation path.

• Indonesian Digital Banks are an increasing focus for investors given their potential to serve the huge numbers of underbanked in Indonesia through tapping into e-commerce and fintech ecosystems and customers.
• Players such as Bank Jago,Allo Bank Indonesia, PT Bank Neo Commerce, and Bank Rakyat Indo Agroniaga lead the field with the potential to tap their respective potential ecosystems.
• We prefer Bank Jago and Allo Bank Indonesia, given the former’s exposure to the GoTo‘s ecosystem and the latter’s to CT Corp, Bukalapak, and Grab (GRAB US). 

• Canon Inc (7751 JP) reported Q2 earnings early last week. Shares dropped 4% the next day but closed down only 1%. Now they are above the prior close. 
• They biked the dividend nicely (was ¥45/share last year, guided to ¥50 this year, but made ¥60/share instead. 
• And now they have announced another ¥50bn buyback on top of the one announced in May. Fourth time in 14 years a second tranche is announced in one year. 

• There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.
• Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).
• Oriental Land (4661 JP) is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the Nikkei 225 (NKY INDEX) at the September rebalance.

• Bajaj Finance Ltd (BAF IN) [“BAF”] reported Q1FY23 PAT of approx. INR 2600cr which puts it on track to post INR 11,000cr+ PAT in FY23, in line with our projections. 
• BAF is back on its pre-COVID growth trajectory as also highlighted in our prior note. Q1FY23 AUM growth came in at 6.2% QoQ and annualized ROE is back to 20%+.
• The strong Q1FY23 earnings is despite elevated competition in the marketplace which led BAF to forgo business where margin profile was not attractive.

• The Ninth Annual JPX Nikkei 400 Index Review was announced on Friday 5 August. There are 36 Inclusions, 34 Deletions. They are mostly in line with Janaghan Jeyakumar, CFA‘s predictions.
• The “BIG SELL” is Oriental Land (4661 JP). The “BIG BUY” is Softbank Corp (9434 JP) as he predicted 11 months ago. There are some down-weights from capping.
• Oriental Land is also a potential Nikkei 225 Inclusion as discussed in Nikkei 225 Sep22 Annual Review; Data Final, Predictions Unch’d; Strategy Involved. 

• Hyundai Oilbank, this year’s biggest fish, dropped the IPO. Another big fish, CJ Olive Young, also officially announced that it would give up its listing.
• The bookbuilding results of SOCAR turned out to be disastrous, suggesting an increased possibility that a higher-than-typical flow level will likely be seen in WCP and K Bank. 
• In particular, despite the valuation issues, we should pay attention to the possibility of an unexpected level of local institutional flows flocking to WCP, which has less schedule risk.

• Participate in SJM Holdings (880 HK)‘s Excess Application Auction, though one would need to bid for a fantastically large quantity of shares to get anything, because everyone else will
• At a 11% gross spread to terms, and potential 4Q22 completion, Yashili(1230 HK) IS A CLEAR BUY. The world is a bit risk averse and it shows up in spreads.
• The ‘headcount test‘ for Cayman-incorporated companies failed to move with the times and address the fact that the majority of shares of Hong Kong-listed companies were held by HKSCC Nominees.

• The Nikkei was up 0.6% last week (-2.1% YTD) while the yen weakened 1.2% to 135/$ 
• Prime Minister Kishida met with US House Speaker Nancy Pelosi. China cancelled a meeting between the Foreign Ministers of Japan and China.  
• Record high temperatures of 40c, record high Covid cases, 575k people evacuated due to torrential rain & flooding…..keep calm and carry on.

• Alcoa Corp is seeing improving shipment volumes and benefitting heavily from the stronger U.S. dollar as well as the higher alumina price index.
• Higher costs and lower aluminum and alumina premiums combined with lower metal prices, which included about $40 million to set inventories to net realizable value, more than offset those advantages.
• It is worth highlighting that Alcoa holds accreditations from the Aluminum Stewardship Initiative, the most comprehensive independent system for auditing ethical aluminum production.

• With the review period for the September rebalance of the Nikkei 225 (NKY INDEX) complete, we take a look at the potential inclusions and exclusions for the index.
• The conclusions of the market consultation have been announced and that will mean we switch to a semi-annual rebalance. So we take a look at potential changes in March 2023.
• The announcement of the changes for the next rebalance should be made in the first week of September and will be implemented at the close on 30 September.

• SJM Holdings (880 HK) announced earnings on Monday and a HK$3bn Rights Issue last night designed to inject capital into Macau gaming licensee SJM Resorts. 
• An increase in share capital is required to pre-qualify for then tender process where the Macau Govt would allocate a 10-year gaming concession starting 1 Jan 2023. 
• 54.7% SJM Holder/Parent Sociedade de Turismo e Diversões de Macau (STDM) had previously extended a loan to SJM designed to allow SJM to inject capital to SJM Resorts.

PT Metrodata Electronics, Tbk (MTDL:IJ), publicly listed company on Indonesia Stock Exchange since 1990, is a Digital Solution Provider and Technology Innovator in Indonesia that leads and enables the digital economy hub. MTDL builds strategic alliances with world-class ICT companies. The Company has two main business units, including Distribution Business (providing World-Class ICT Hardware and Software) that handles distribution through Omnichannel to partnered dealers (both offline and online) and ICT solution companies, as well as runs an e-commerce business (e-catalogue for Government/B2G). Its Distribution network covers more than 150 cities in Indonesia and has more than 5,200 channel partners and more than 100 world-class IT products and service brands. The second business unit, Solution & Consulting Business, is a digital solution provider that provides a complete range of ICT solutions based on Metrodata’s 8 Pillars of Digital Solutions, which consist of Cloud Services, Big Data & Analytics, Hybrid IT Infrastructure, Security, Business Application, Digital Business Platform, Consulting & Advisory Services, and Managed Services to support digital business transformation, for Enterprise, Corporate, SME, and Public Sector segment.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.

• Semirara Mining And Power Corp (SCC PM) will replace Security Bank (SECB PM) in the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the close of trading on 5 August.
• Passive trackers will need to buy 5.5 days of ADV on Semirara Mining And Power Corp (SCC PM) and sell nearly 30 days of ADV on Security Bank (SECB PM).
• Historically, the adds have outperformed the deletes and there has been a pop/drop in the adds/deletes the day after announcement. Square off existing pre-positions by mid week.

• Alibaba’s revenue stopped growing for the first time on record.
• We still believe the revenue growth rate will recover in the December quarter.
• We believe the stock price will have at least an upside of 29% after a significant plunge.

• Shenzhou Intl Group Holdings (2313 HK) is a high probability deletion in September, while JD Health (6618 HK) is currently the highest ranked non-constituent stock.
• There are a couple of other stocks that are close to the inclusion/exclusion thresholds and price changes over the next few weeks will determine if there are any more changes.
• Short interest on JD Health (6618 HK) is high in terms of days to cover and as a percentage of free float. Covering could take the stock higher.

• Alibaba Group (9988 HK)’s 1QFY23 results were above consensus but it was still quite disappointing with revenue and OP declining 0.1% and 19.1% YoY respectively.
• Withholding the disclosure of active buyers, which Alibaba was proudly speaking of in the previous quarter, is a tell-tale sign that the business is undergoing some serious trouble.
• With expectations of 9.4% YoY OP growth in the next 3-quarters and 42% YoY OP growth in FY24, we think consensus is optimistic from 2QFY23 and bound for a correction.

• Canon Inc (7751 JP) reported Q2 earnings early last week. Shares dropped 4% the next day but closed down only 1%. Now they are above the prior close. 
• They biked the dividend nicely (was ¥45/share last year, guided to ¥50 this year, but made ¥60/share instead. 
• And now they have announced another ¥50bn buyback on top of the one announced in May. Fourth time in 14 years a second tranche is announced in one year. 

• Lifestyle International Holdings (1212 HK) was suspended this morning pursuant to Hong Kong’s Takeovers Code. 
• Thomas Lau is the largest shareholder with 74.97%, as he has been since April 2019.
• A possible Offer ahead of a (potentially) improving retail outlook and the imminent opening of its Kai Tak project? 

• The ACCC is seeking views on whether Dye & Durham’s proposed sale of GlobalX and the Australian operations of SAI Global, is sufficient to approve Link Administration (LNK AU)‘s takeover.
• Separately, the postponed Scheme meeting will be held on the 22 August.  The Independent Expert continues to conclude that the Revised Scheme is fair and reasonable.
• The proposed date for the announcement of ACCC’s findings is the 8th September, one day prior to the Second Court Date.

• The data is largely unchanged since the Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out set of predictions published 15 days ago.
• The consultation results are out. They are as expected too. This has the hallmarks of a VERY well-signalled trade. But it’s a biggie. The funding trade alone is ¥600bn.
• Because of the data, market conditions, and the variability of choice at the edges, I believe that warrants particular strategy.

• Hankyung, published an article that GIC (the Government of Singapore Investment Corp) is in the process of buying a stake in LG Energy from LG Chem.
• Hankyung is one of the two most well-established economic daily newspapers in Korea, along with Maekyung. So, we must see that this article has considerable credibility.
• GIC will likely close the deal before an additional passive flow event kicks in. LG Chem is also highly likely to prefer to close the deal as soon as possible.

• SJM Holdings (880 HK) announced earnings on Monday and a HK$3bn Rights Issue last night designed to inject capital into Macau gaming licensee SJM Resorts. 
• An increase in share capital is required to pre-qualify for then tender process where the Macau Govt would allocate a 10-year gaming concession starting 1 Jan 2023. 
• 54.7% SJM Holder/Parent Sociedade de Turismo e Diversões de Macau (STDM) had previously extended a loan to SJM designed to allow SJM to inject capital to SJM Resorts.

• As of the last close, we see SinoPac Holdings (2890 TT) replacing Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the September rebalance.
• However, Powerchip Semiconductor Manufacturing Corp (6770 TT) is a high probability inclusion to the FTSE All-World Index that will be implemented at the same time.
• Passive trackers will need to buy 6 days of ADV on SinoPac Holdings (2890 TT). The impact is lower on PSMC (6770 TT) but short interest is very high.

• Alibaba’s revenue stopped growing for the first time on record.
• We still believe the revenue growth rate will recover in the December quarter.
• We believe the stock price will have at least an upside of 29% after a significant plunge.

• Hoya Corp (7741 JP) today announced great Q1 earnings and a bullish above-consensus revenue forecast for this fiscal year. It also announced a small share buyback. 
• However, the dominant factor in flows near-term will be pre-positioning for a possible Nikkei 225 inclusion in September. That is what will push the stock around. In or not. 
• Hoya has recently outperformed a Peer Basket despite forward expected EPS and EBIT not seeing relative improvement. That suggests some relative risk if it doesn’t get selected for Nikkei 225.

• Aier Eye Hospital Group (300015 CH) could replace China Pacific Insurance (Group) Co., (601601 CH) in the FTSE China A50 Index (XIN9I INDEX) at the September rebalance.
• The inclusion of PetroChina (601857 CH) in the FTSE All-World Index could result in another change to the XIN9I Index with Zhangzhou Pientzehuang Pharmaceutical (600436 CH) at risk of deletion.
• There has been no announcement from FTSE yet on the potential increase in the number of index constituents from 50 to 100, though that could happen any time.

• AMTD Digital’s stock price has started to sink and now there are news that the Cheung Kong (CK) Group (HK) wants to sell its stake in AMTD Group Co.
• The discussion of the CK Group disposing its stake in AMTD Group altogether is likely to further negatively impact AMTD Digital’s share price.
• Li Ka-Shing and his family probably want to distance themselves from all the unnecessary media attention given to AMTD Digital (HKD US) and AMTD Idea Group (AMTD US). 

• Microstrategy Inc (MSTR US)‘s Michael Saylor will now assume the new role of Executive Chairman and Phong Le, MSTR’s President, will serve as the company’s new CEO.
• As Executive Chairman, Saylor will focus more on MSTR’s bitcoin acquisition strategy and related bitcoin advocacy initiatives.
• With one of the most bullish and influential players in the industry now focusing on crypto, this should be considered bullish, according to some media reports. That’s a desperate takeaway.

• Giant Biogene (GB) aims to raise around US$500m in its Hong Kong IPO.
• GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
• In this note, we talk about the not-so-positive aspects of the deal.

• The data is largely unchanged since the Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out set of predictions published 15 days ago.
• The consultation results are out. They are as expected too. This has the hallmarks of a VERY well-signalled trade. But it’s a biggie. The funding trade alone is ¥600bn.
• Because of the data, market conditions, and the variability of choice at the edges, I believe that warrants particular strategy.

• Orica Ltd (ORI AU) have announced a fully underwritten A$650m institutional share placement at a price of A$16/share to fund the acquisition of Axis Mining Technology.
• Orica Ltd (ORI AU) are using the recent strength in the stock price to raise A$282m more than needed for the acquisition.
• The offering should result in an intra-quarter increase in shares in the MSCI, FTSE and S&P/ASX indices that should result in buying of 6.75m shares from passive trackers.

• AMTD Digital is the biggest bubble of 2022, which is ready to pop. AMTD Digital provides digital solutions platform in Asia.
• AMTD Digital currently has a market cap of US$371 billion (US$2,002 per ADS share) (as of 1:40PM NYC time). The company’s market cap is more than JPMorgan Chase & Co.
• No doubt, AMTD Digital is the biggest bubble in 2022 and the bursting of this huge bubble will also devastate (mostly) retail investors in the US. 

• Orica Ltd (ORI AU) is launching an institutional offering of shares today to fund the purchase of Axis Mining Technology to expand the Digital [Mining] Solutions offering.
• Orica has launched an equity offering of >2x the size of the takeover (adds A$280mm of working capital). Both acquisition and placement are expected to be accretive in Year1.
• There will be a separate SPP on the follow. Expect this to be well-received and expect “fast money” to be rebuffed. There is significant passive buying to do.

• BABA HK is following Tencent’s path and pattern to new lows as BABA is pressing on pattern support after completing a counter trend rally and dual top (120).
• 100 near resistance and sell zone for a test on 80. New low projections at 66 and 60. Bear pressure to resume after an uptick attempt.
• On a new low the macro picture will begin to show bull divergence/support for a bullish Q4.

• ResApp Health (RAP AU) has entered into an amended and restated Scheme Implementation Deed concerning a proposed takeover by Pfizer Inc (PFE US). 
• After a sensitivity/specificity cough trial fell short of a March pilot study, Pfizer Offered A$0.146/share on the 21 June. Shares have traded wide to terms since on possible retail pushback.
• The revised consideration of $0.208/share matches the preferred value and within the assessed value range of $0.146 – $0.279/share determined by the Independent Expert’s Report on 14 July 2022.

• Orica Ltd (ORI AU) is looking to raise US$450m (~A$650m) from issuing 40.6m primary shares at a 7% fixed discount to its last close.
• The proceeds will be used to fund the acquisition of Axis Mining Technology and the firm’s working capital needs.
• The deal is relatively large one to process, representing 22.3 days of three month ADV and 9.2% of current mcap.

• Hankyung, published an article that GIC (the Government of Singapore Investment Corp) is in the process of buying a stake in LG Energy from LG Chem.
• Hankyung is one of the two most well-established economic daily newspapers in Korea, along with Maekyung. So, we must see that this article has considerable credibility.
• GIC will likely close the deal before an additional passive flow event kicks in. LG Chem is also highly likely to prefer to close the deal as soon as possible.

• Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
• In this insight, I have defined six key Segment Transfer requirements which prove to be decisive in this process.
• At present, there are 51 names that satisfy all of these conditions and there are more names that are close to being that group.

• On the 6 May, Yashili International Holdings (1230 HK) announced a pre-conditional Offer, by way of a Scheme, from China Mengniu Dairy Co (2319 HK).
• Pre-Conditions concern three sales and purchase agreements, including Danone selling, and Mengniu acquiring 25% of Yashili at HK$1.20/share. A 16 August EGM will enable shareholders to vote on the SPAs.
• Assuming the SPAs are approved, Mengniu will make an Offer at HK$1.20/share, a 161% premium to the undisturbed price.  

• With the review period for the September rebalance of the Nikkei 225 (NKY INDEX) complete, we take a look at the potential inclusions and exclusions for the index.
• The conclusions of the market consultation have been announced and that will mean we switch to a semi-annual rebalance. So we take a look at potential changes in March 2023.
• The announcement of the changes for the next rebalance should be made in the first week of September and will be implemented at the close on 30 September.

• The data is largely unchanged since the Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out set of predictions published 15 days ago.
• The consultation results are out. They are as expected too. This has the hallmarks of a VERY well-signalled trade. But it’s a biggie. The funding trade alone is ¥600bn.
• Because of the data, market conditions, and the variability of choice at the edges, I believe that warrants particular strategy.

• 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.

• AMTD Digital (HKD US) shares are up 230x since its listing at US$7.80 per ADS on 15 July. Its market cap is a staggering US$334 billion.
• AMTD Idea Group (AMTD US) accounts for 99.4% of the voting power. In January 2022, it increased its AMTD Digital shareholding to 97.1% of outstanding shares at US$1.2 billion valuation.
• AMTD Digital’s financials are uninspiring and cannot justify the share price ramp. No sane valuation methodology can support the share price.    

• Uber (UBER US) is looking to raise US$420m in its share sale in Zomato (ZOMATO IN). The selldown will be a clean-up sale.
• Uber had earlier inherited its stake in Zomato in 2020 when it sold UberEats India to the latter. 
• We had earlier flagged the possibility of a selldown given that most of Zomato’s investors would come off their respective one-year lockups. 

• AMTD Digital is the biggest bubble of 2022, which is ready to pop. AMTD Digital provides digital solutions platform in Asia.
• AMTD Digital currently has a market cap of US$371 billion (US$2,002 per ADS share) (as of 1:40PM NYC time). The company’s market cap is more than JPMorgan Chase & Co.
• No doubt, AMTD Digital is the biggest bubble in 2022 and the bursting of this huge bubble will also devastate (mostly) retail investors in the US. 

• Eight stocks are highly likely to migrate with a substantial passive flow. Compared to the early phase of the screening period, GS Engineering & Construction newly made the list.
• Most names should show a quite substantial passive flow (x ADTV). In particular, KCC Corp and BGF Retail deserve our special attention for their expected passive impact.
• The flow occurs on high potential migration stocks about 20 days before the effective date. So I would start building Long/Short Basket positions with the above eight names around mid-August.

• Community group buying is starting to face multiple headwinds from funding shortages to excessive price competition.
• Even though Pinduoduo (PDD US) is yet to announce any job cuts or scaling back of operations, we think the operating environment shouldn’t be much different from competitors.
• With QoQ revenue growth at a standstill and sales and marketing cost cutting almost fully exhausted, we think the current consensus expectations are too optimistic and bound for a correction.

• SK REITs (395400 KS) announced today that it will conduct a rights offering worth 210 billion won, representing 25% of its current market cap of 829 billion won.
• The rights offering will allow SK REITs to acquire SK U Tower. The rights offering price is 5,060 won, which is 5.4% discount to the current price of 5,350 won.
• We would subscribe to this SK REITs rights offering. The SK U Tower in Bundang has excellent location and it has SK Hynix as the main tenant.

• EVOC Intelligent Technology Company Limited H (2308 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 1 August.
• It is likely that after two failed attempts, Mr Chen Zhi Lie, the ultimate controlling shareholder, will try a third time to privatise EVOC.
• The previous offer of HK$1.50 per H Share in 2020 marginally missed the 90% minimum acceptance condition. Expect a similar structure with a likely slightly higher offer price.  

• SenseTime Group (20 HK) stock has been crushed following the lock-up expiry at the end of June with the stock now trading 40% below the IPO price.
• The company has recently bought back stock providing some support. More importantly, SenseTime Group (20 HK) was included in Southbound Stock Connect on 29 July.
• We expect a big increase in the free float adjustment factor (FAF) in the Hang Seng Indexes at the September rebalance that will provide some much needed passive inflows.

• Last Friday saw the end of the review period for the upcoming rebalance of the MSCI, NIFTY, NKY and STAR50 indices, among others.
• The coming week has the implementation of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and NIFTY100 Index rebalances at the close on 5 August.
• There were big inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) last week with over US$500m flowing in.

• After a prolonged delay, the Cayman Islands legislative gazette was published on 29 July, which stated that the amended Cayman Islands Act would come into force on 31 August. 
• The Act will remove the headcount test for schemes, eliminating a layer of uncertainty for controlling shareholders wishing to privatise listed Cayman-incorporated companies.
• In light of this development, we look at current active privatisations, past failed privatisations and rumoured transactions which stand to gain a new lease of life from this Act.

• Semirara Mining And Power Corp (SCC PM) will replace Security Bank (SECB PM) in the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the close of trading on 5 August.
• Passive trackers will need to buy 5.5 days of ADV on Semirara Mining And Power Corp (SCC PM) and sell nearly 30 days of ADV on Security Bank (SECB PM).
• Historically, the adds have outperformed the deletes and there has been a pop/drop in the adds/deletes the day after announcement. Square off existing pre-positions by mid week.

• Electronics Parts and Devices manufacturer Minebea Mitsumi (6479 JP) has announced a 25% premium Tender Offer to take over connector-maker Honda Tsushin Kogyo (6826 JP). 
• It is not an overwhelming bid, but is supported by Panasonic Corp (6752 JP) which owns an equity affiliate stake, and crossholders and friendly shareholders hold a lot.
• This looks like it will complete, despite being a little light on price. 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• There were no major IPO launches during the week. Soosan will list early next week.
• There were a number of placements/blocks across the region, including GDR launches for Swiss listing.

• The Companies (Amendment) Act 2021 of the Cayman Islands (Amendment Act), which will come into force on 31 August 2022, will abolish the current ‘headcount test’.
• Those companies incorporated in the Cayman Islands, and subject to a members’ Scheme of Arrangement, were previously required to satisfy the headcount test under section 86 of the Companies Act.
• This development clarifies previous uncertainty/ambiguity which could arise, with ‘take private’ deals of Cayman-incorporated, Hong Kong-listed companies, where a Scheme is the favoured privatisation path.

• With the review period for the September rebalance of the Nikkei 225 (NKY INDEX) complete, we take a look at the potential inclusions and exclusions for the index.
• The conclusions of the market consultation have been announced and that will mean we switch to a semi-annual rebalance. So we take a look at potential changes in March 2023.
• The announcement of the changes for the next rebalance should be made in the first week of September and will be implemented at the close on 30 September.

• Tencent and Huawei launched beta tests for car-hailing platform almost simultaneously.
• Alibaba begins to disconnect Ant Group to avoid implicating each other.
• Missfresh dismissed almost all employees in its headquarters in Beijing.

• Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn – 20% of mkt cap.
• On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency – the last “earning asset” except for the 55% stake in Khan Bank. 
• This lifts shadow book value even higher… Deep value with a catalyst. BUT… in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a… pawnshop?

• SenseTime Group (20 HK) stock has been crushed following the lock-up expiry at the end of June with the stock now trading 40% below the IPO price.
• The company has recently bought back stock providing some support. More importantly, SenseTime Group (20 HK) was included in Southbound Stock Connect on 29 July.
• We expect a big increase in the free float adjustment factor (FAF) in the Hang Seng Indexes at the September rebalance that will provide some much needed passive inflows.

• Given recent corporate events in S-REIT land, there could be some considerable money to be allocated to the sector near-term
• Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX. This will make BABA Southbound-eligible
• At 0.81x newly-lowered book value, Australian Unity Office Fund (AOF AU) is trading at a relatively low multiple. 

• Last Friday saw the end of the review period for the upcoming rebalance of the MSCI, NIFTY, NKY and STAR50 indices, among others.
• The coming week has the implementation of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and NIFTY100 Index rebalances at the close on 5 August.
• There were big inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) last week with over US$500m flowing in.

• Semirara Mining And Power Corp (SCC PM) will replace Security Bank (SECB PM) in the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the close of trading on 5 August.
• Passive trackers will need to buy 5.5 days of ADV on Semirara Mining And Power Corp (SCC PM) and sell nearly 30 days of ADV on Security Bank (SECB PM).
• Historically, the adds have outperformed the deletes and there has been a pop/drop in the adds/deletes the day after announcement. Square off existing pre-positions by mid week.

• The approval by Yashili International Holdings (1230 HK) independent shareholders of the proposed transactions at the 16 August EGM is a pre-condition to the HK$1.20 per share privatisation proposal.
• Shareholders will pass the ordinary resolutions at the EGM so that they can vote on the attractive privatisation proposal. The key risk is timing around the satisfaction of the pre-conditions.
• China Mengniu Dairy Co (2319 HK)’s offer remains attractive in the context of multiples and historical share prices. At the last close, the gross spread to the offer is 10.1%.

• Several news media outlets reported that Meituan (3690 HK)  Ele.me and other food delivery platforms were summoned over food safety problems as well as price war among them.
• Food delivery platforms are ordered to strictly follow food safety management responsibilities and also prevent price wars that disrupt the market order.
• Though the anti-trust fine of RMB3.44bn was thought to be the end of an almost year long regulatory crackdown on Meituan, it seems that this is far from over.

• Chinese net capital outflows are again picking up to a US$600 billion annual clip. Chinese Yuan has also been under-pressure from the strong US dollar
• People’s Bank (PBoC) forced to tighten domestic monetary conditions to help Yuan, despite COVID-19 lockdowns
• Tighter Chinese Liquidity hurts World economy, reinforcing recession threat and hurting commodity markets

• After a prolonged delay, the Cayman Islands legislative gazette was published on 29 July, which stated that the amended Cayman Islands Act would come into force on 31 August. 
• The Act will remove the headcount test for schemes, eliminating a layer of uncertainty for controlling shareholders wishing to privatise listed Cayman-incorporated companies.
• In light of this development, we look at current active privatisations, past failed privatisations and rumoured transactions which stand to gain a new lease of life from this Act.

• 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.
• The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Resapp Health (RAP AU), Ramsay Health Care (RHC AU), Yashili International Holdings (1230 HK), Link Admin. 
• Lowest gross spreads are Hwa Hong Corp (HWAH SP), Excelpoint Technology (EXLP SP), Giordano International (709 HK), MyDeal.com.au Ltd (MYD AU), Cocoaland Holdings (COLA MK), MACA Ltd (MLD AU). 

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Thai Life Insurance (TLI TB)‘s underwhelming debut, Chongqing Hongjiu Fruit (CHF HK) is pre-marketing a US$200-300m IPO, WCP (WCP KS) pushed back its US$692m IPO to mid-September. 
• Event-Driven developments at Ramsay Health Care (RHC AU), Yancoal Australia (YAL AU), Genex Power Ltd (GNX AU), MACA Ltd (MLD AU), Yashili International Holdings (1230 HK), China Vast, Hwa Hong.         

• Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
• The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
• Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.

• Anhui Conch Cement, China Citic Bank and Tongwei will replace Chongqing Zhifei Biological, Gree Electric Appliances and PetroChina in the FTSE China A50 Index at the close on 17 June.
• All changes are as we expected, but there are still trades to do off the back of the announced changes.
• Estimated one-way index turnover at the rebalance is 2.83% and will result in a one-way trade of CNY1,436m. There is negligible impact of the funding trade on the other stocks.

• Alibaba Group (9988 HK) announced yesterday that it is seeking to change its listing status in Hong Kong to a primary listing before the end of 2022.
• With the risk of de-listing from the US, a dual-primary-listing in Hong Kong would allow Alibaba (ADR) (BABA US) to smoothly transition all its trading from the US to Hong Kong.
• In addition, the company could possibly use this opportunity to raise more money from capital markets as it is desperately seeking funding for its loss making ventures.

• China Education Group (839 HK) has retreated 23% from recent high with no regulatory and company news. Given its secured earnings growth outlook, we see an opportunity. 
• We believe drivers are higher enrollment and tuition, further capacity growth, good progress in overseas education and light capex. There are positive developments in these aspects recently. 
• CEG may return unused share buyback funds to shareholders via dividend, suggesting a potential resumption of payout. At just 5.7x PER for FY23F, its growth prospect is undervalued.

• Latest FOMC meeting sounded ‘surprising’ dovish, but this is less surprising if we consider the US Fed is only six months away from a probable policy pivot
• Evidence seems to confirm the US and World economies are already in recession. This will get worse because a major Global Liquidity shock has already been delivered 
• This looks like a bear market rally. Bears have two down-legs, split by an often vicious spike.  Effects of a bigger recession on 2H, 2022 profits needs to be discounted

• Amber Enterprises India (AMBER IN)  is one of the key ODM players in the RAC and related industry.
• However, there are couple of puzzling forensic takeaways, especially in F22 where company had reported high growth in numbers.
• These primarily include the rationale behind debt increase, puzzling subsidiary numbers, discrepancy in inventory verification, etc.

• Thiess is launching an agreed offer to acquire 100% of MACA Ltd (MLD AU) at AUD 1.025/share, in cash, cum dividend, a 28% premium, 2.8x EV/Fwd EBITDA. Minimum acceptance condition is 90%.
• Thiess is gaining scale with the acquisition of MACA. I believe that in the future ACS/Hochtief/CIMIC will seek to acquire the whole of Thiess.
• Gross spread (as of 29 July) is 2.43%, for a deal with high chances to complete. I would be long at this price.

• Given recent corporate events in S-REIT land, there could be some considerable money to be allocated to the sector near-term
• Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX. This will make BABA Southbound-eligible
• At 0.81x newly-lowered book value, Australian Unity Office Fund (AOF AU) is trading at a relatively low multiple. 

• The current shareholder structure of Kyoto Bank, where domestic financial institutions are the top shareholders and still continue to hold cross-shareholdings, will make it difficult to pass the shareholder proposal.
• In environment of continued sluggish bank earnings, the dividend income from policy shareholdings and the huge unrealized gains on stocks are valuable assets for weathering this difficult business environment.
• Kyoto Bank’s policy will change when the interest rate environment changes and earnings are expected to improve, or when the shareholder structure changes due to a significant reduction in cross-shareholdings.

• Last Friday saw the end of the review period for the upcoming rebalance of the MSCI, NIFTY, NKY and STAR50 indices, among others.
• The coming week has the implementation of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and NIFTY100 Index rebalances at the close on 5 August.
• There were big inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) last week with over US$500m flowing in.

• Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
• The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
• Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.

• At the September rebalance, we expect changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index. Announcement is on 2 September with implementation on 16 September.
• Potential adds/deletes with large flow and impact include Shopping Cntrs Austrls (SCP AU), Sayona Mining (SYA AU), Charter Hall Social Infrastructure REIT (CQE AU) and Capricorn Metals (CMM AU).
• Shorts have increased significantly on a few stocks over the last few weeks, indicating that there could be some pre-positioning on these stocks.

• There are 3 changes each for the IDX30 Index and LQ45 Index and 11 changes for the IDX80 Index at the upcoming rebalance to be implemented on 29 July.
• There is passive inflow on Bank Jago Tbk PT (ARTO) due to index inclusion, and on Bank Rakyat Indonesia (BBRI) and Bank Central Asia (BBCA) due to capping changes.
• With only 4 days to implementation, there will be relatively big moves on stocks that have large flow/impact from passive fund trading.

• Expectations are spreading in the market that the free-float rate of LG Energy will increase from 9% to 15% at the MSCI August QIR. However, this possibility is quite low.
• Only 1.57% will be reflected in this QIR, and 4.26% will be in November. So, the August IR will see 0.59x ADTV, and the November IR will welcome 2.93x ADTV.
• A conservative approach is still valid for flow trading on LG Energy for now, and a more aggressive approach is needed with long/short trading with LG Chem.

• If short-selling accounts for more than 30% of total daily trade volume, it will be newly designated as an overheated short-selling stock, resulting in a one-day short-selling ban.
• If the stock price falls by more than 5% on the day of the short-selling restriction, the restriction period is automatically extended by one more day.
• We should pay attention to a possible increase in the trading volume of single-stock futures (SSF) due to short-selling bans, which can result in a more significant basis distortion.

• Powerchip Semiconductor Manufacturing Corp (6770 TT) (PSMC) is looking to raise US$420m via its GDS offering.
• The firm is offering 23.3m GDSs (350m common shares at a 1 GDS to 15 common shares ratio) at a 6-9% discount to last close. 
• The deal is well flagged via both media reports and the company’s announcements. Short interest has been growing in tandem as well.

• Advantest Corp (6857 JP) yesterday announced Q1 results, with Revenues/OP/NP at record levels, a H1 div hike of 30%, guidance well ahead of consensus, and a buyback.  
• They also announced a Mid-Term Plan revision which shows forward guidance better than consensus. 
• The buyback is smaller than the last one BUT float is not what you think it is. Understanding float dynamics here is key.

• Baijiu, the most popular liquor in China, is perhaps one of the most addictive and profitable alcoholic beverages in this planet.
• The focus of this insight is a pair trade (go long on Luzhou Laojiao and go short on Jiangsu Yanghe Brewery).
• The major reasons for this pair trade include higher sales growth rate and ROE for Luzhou Laojiao as well as capitalize on the recent share weakness of Luzhou vs Jiangsu.

• BFI Finance Indonesia continued to see rapid momentum behind its recovery with new bookings in 2Q2022 hitting all time highs and spreads improving to 13.5% with NPFs declining.
• The company’s growth is driven by the non-dealer used vehicle market with new bookings coming mainly through agents and repeat customers, and digital initiatives in place to improve origination.
• BFIN is the best quality multifinance player in Indonesia, with an ROE now above 21%. There will be more collaboration and synergies with Bank Jago going forward further driving growth.

• Renesas stock is down around 8% following quarterly earnings and a very conservative Q3 outlook
• We think the market is over reacting and believe that Renesas is a key beneficiary of secular growth in auto and industrial electronics
• The stock trades at a discount to global peers, despite a strong story for improving shareholder returns

• Glencore is looking to raise US$293m (A$422m) from selling its stake in Yancoal Australia (YAL AU). This would be a clean up sale.
• Glencore has been sitting on its stake for a while now, and the two have a JV in the Hunter Valley Operations, the latter which commenced in Jul 2017.
• The deal, while a large one to process at 135.6 days of three month ADV, represents just 5.6% of Yancoal Australia’s current mcap.

• FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
• There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
• The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.

• SK Telecom (017670 KS) has continued to underperform KT Corp (030200 KS) even as foreign investors continue buying. Local institutions have been selling the stock.
• With foreign room currently at 1.68% and consistently below 3.75% recently, SK Telecom (017670 KS) should be deleted from the MSCI Korea Index at the August QIR.
• There will be more selling from FTSE trackers in September. With the SK Tel/KT Corp price ratio trading at the lows, the passive selling could provide a good entry point.

• In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
• In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
• Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.

• If short-selling accounts for more than 30% of total daily trade volume, it will be newly designated as an overheated short-selling stock, resulting in a one-day short-selling ban.
• If the stock price falls by more than 5% on the day of the short-selling restriction, the restriction period is automatically extended by one more day.
• We should pay attention to a possible increase in the trading volume of single-stock futures (SSF) due to short-selling bans, which can result in a more significant basis distortion.

• Australian Unity Office Fund (AOF AU) was the subject of six successive bids by Starwood between 2018-2020 and a bid by Charter Hall (CHC AU) and Abacus Property (ABP AU).
• Large AOF shareholder Hume knocked back the ABP/CHC bid and Starwood never got to the final stages. But Aliro Group’s (CEO is ex-CHC) bid at A$2.45 got Hume’s support. 
• Then on 25 July, Aliro walked. And the shares fell. From A$2.21 to A$1.80. Ouch. 

• MACA Ltd (MLD AU) recently announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to previous close.
• The Offer is subject to limited conditions, including FIRB , ACCC sign-off, no prescribed occurrences, no issue of convertible securities, derivatives, or other rights, and 90% minimum acceptances.
• The Offer has unanimous support from MACA’s board. Applications to FIRB and the ACCC have already been submitted. The announcement suggests MACA remains open to alternative approaches.

• Shin Etsu Chemical (4063 JP) reported Q1 earnings after the close on 27 July, and they blew the lights out. Higher margins and 10-year record high Q1 progression ratios.
• The company also announced guidance which was pretty healthy, but progression ratios suggest it is conservative.
• The company announced its second ¥100bn buyback in three months. This one lasts 6 months so impact will be lower, but it will have some impact.

• JG Summit Holdings (JGS PM) aims to raise around US$185m via selling 2.5% of Manila Electric Company (MER PM) (Meralco) via a block trade.
• This appears to be the first selldown by JG Summit and doesn’t appear to have been very well flagged either.
• In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

• Powerchip Semiconductor Manufacturing Corp (6770 TT) (PSMC) is looking to raise US$420m via its GDS offering.
• The firm is offering 23.3m GDSs (350m common shares at a 1 GDS to 15 common shares ratio) at a 6-9% discount to last close. 
• The deal is well flagged via both media reports and the company’s announcements. Short interest has been growing in tandem as well.