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• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
• I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
• The impact on Real World Float is non-negligible. One name in particular is deserving of attention. 

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) this morning made a flurry of announcements. First and foremost, ANZ withdrew from discussions on MYOB.
• Q3 earnings ended 30 June saw revenue +5%, lending up 3%yoy, markets revenue +7%, NIM up 3bp (rising rates helps). Basel3 APRA Level2/Level1 CET1 Ratios were 11.1%/10.4%. 
• But the big news: ANZ is buying SunCorp Bank from SunCorp (SUN AU) for A$4.9bn (1.3x NTA), and will raise A$3.5bn through a 1 for 15 renounceable rights offering.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO. The stock was listed on 27th Jan 22. Its six-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• With over 90% of the review period complete, Adani Enterprises (ADE IN) is a high probability inclusion to the NIFTY Index (NIFTY INDEX) and will replace Shree Cement (SRCM IN). 
• We estimate passive NIFTY Index (NIFTY INDEX) trackers will need to buy nearly 7% of the real float on Adani Enterprises (ADE IN) and the stock should continue to outperform. 
• Adani Green Energy (ADANIGR), Adani Transmission (ADANIT) and Avenue Supermarts Ltd (DMART) have higher average free float market caps and could be included if added to the F&O segment.

• Swire Pacific (A) (19 HK) expands its beverages ops, its best-performing unlisted segment, via the acquisition of Coke bottling operations in Vietnam and Cambodia. 
• Preceding my comments on Swire – and Swire Properties (1972 HK) and Cathay Pacific Airways (293 HK) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
• This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack. 
• And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) this morning made a flurry of announcements. First and foremost, ANZ withdrew from discussions on MYOB.
• Q3 earnings ended 30 June saw revenue +5%, lending up 3%yoy, markets revenue +7%, NIM up 3bp (rising rates helps). Basel3 APRA Level2/Level1 CET1 Ratios were 11.1%/10.4%. 
• But the big news: ANZ is buying SunCorp Bank from SunCorp (SUN AU) for A$4.9bn (1.3x NTA), and will raise A$3.5bn through a 1 for 15 renounceable rights offering.

• GlaxoSmithKline PLC (GSK LN) shareholders on 6 July overwhelmingly approved the long-awaited demerger of its GSK Consumer Healthcare unit newly-named Haleon (HLN LN) earlier this month. 
• While not originally universally-desired (Elliott wanted a sale), it was overwhelmingly approved. Haleon lists Monday 18 July with a £40+bn valuation resulting in FTSE 100 and Stoxx Europe 600 changes.
• GSK investors get 1 share of Haleon for every share of GSK held. Post-demerger, the public owns 55%, Pfizer ~32%, GSK ~13%. Lockup ends 10 November. There will be overhang.

• ANZ aims to raise around US$2.4bn (A$3.5bn) via a renounceable entitlement offer to part fund the purchase of Suncorp Bank.
• In our view, neither the fundraising nor the acquisition appear to be particularly well flagged. ANZ’s withdrawal from MYOB talks might be the most positive thing about the announcement.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• The KRX will list 20 new single stock futures (SSF) and 5 single stock options (SSO) next Monday, July 25, including LG Energy Solution (373220 KS).
• It seems very probable that the replacement demand for futures (short) will increase substantially due to a possible saturation of the loan market.
• This situation, coupled with local pensions’ basis trading, can lead to a significantly distorted basis. We should do basis trading or play pair trading (with LG Chem) on this.

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO. The stock was listed on 27th Jan 22. Its six-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

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

• Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
• With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base. 
• But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• Berkshire appears set to exit BYD (1211 HK) partially or in full. But why signal to market well in advance?
• United Tractors (UNTR IJ)‘s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.
• The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.

• 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), Ramsay Health Care (RHC AU), Australian Unity Office Fund (AOF AU), Link Administration (LNK AU). 
• The lowest gross spreads are Hwa Hong Corp (HWAH SP), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP), Giordano International (709 HK), Dongzheng Automotive Finance (2718 HK). 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Tianqi’s soggy debut in Hong Kong despite its wide discount will probably put Hong Kong ECM back in snooze mode for a while
• There were no major placements this week and its likely to remain that was as we approach the half-yearly results season.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• 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 and Chinese ADRs.
• On the ECM front, Tianqi Lithium (9696 HK) listed its H Shares, WCP (WCP KS) plans to launch a KRW900 billion (US$692 million) IPO in August. 
• Event-Driven developments at Link Administration (LNK AU), DTAC/True, BYD (1211 HK), Genting Singapore (GENS SP), Tassal (TGR AU), Resapp Health (RAP AU), Dongzheng Automotive Finance (2718 HK).      

• WCP will enter the KOSDAQ 150 with a passive inflow of about 530K shares, 1.5% of SO, at the close on December 8.
• WCP will be added to the TIGER ETF on October 14 with a passive inflow of about 345K shares, 1.0% of SO, at the close on October 14.
• From a flow trading perspective, the flow volume is certainly substantial enough to design a passive flow trading setup in conjunction with the lockup release schedule.

• The Uniti Group Ltd (UWL AU) Scheme Meeting was held Friday, approving both General Scheme Resolution and Rollover Shares Scheme unanimously. The MBD Bidco deal is done. 
• Friday after the close, the S&P DJI Global Index team announced that Uniti would be deleted from the ASX200 21 July at the close.
• Gold miner West African Resources (WAF AU) was chosen as the replacement. It’s a decent-sized inclusion and should have been well-flagged last week but may have been ignored.

• GlaxoSmithKline PLC (GSK LN) shareholders on 6 July overwhelmingly approved the long-awaited demerger of its GSK Consumer Healthcare unit newly-named Haleon (HLN LN) earlier this month. 
• While not originally universally-desired (Elliott wanted a sale), it was overwhelmingly approved. Haleon lists Monday 18 July with a £40+bn valuation resulting in FTSE 100 and Stoxx Europe 600 changes.
• GSK investors get 1 share of Haleon for every share of GSK held. Post-demerger, the public owns 55%, Pfizer ~32%, GSK ~13%. Lockup ends 10 November. There will be overhang.

• Just days after BYD (1211 HK) surpassed Tesla Motors (TSLA US) as the world’s largest electric vehicle producer by sales, is Warren Buffet cashing in his chips?
• 225mn shares of BYD  – 7.73% of the H shares – moved into CCASS yesterday. These are Berkshire Hathaway’s shares. 
• For a shareholder who has kept his holding in share certificates for 13 years, this development suggests the possibility of a partial or full exit. 

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Bitcoin displays a high conviction bear wedge that will break lower with momentum, and bleed into the global risk cycle given the recent tight correlation.
• Previous bear wedge breakdowns have been reliable and resulted in high momentum drops. Platform illiquidity/closures a system risk. 
• MACD set for a bear turn from resistance that concurs with a decline toward the 15,600 target.

For our next Webinar, we are delighted to welcome back Analyst Henry Soediarko, who will go through his latest stock picks in the ASEAN region, and offer his outlook for 2H 2022.

The webinar will be hosted on Wednesday, 20 July 2022, 17:00 SGT/HKT.

Henry Soediarko is a Long & Short Investment Ideas generator for Asian Equities with 10 years of experience in a Hedge fund focused on bottom-up ideas, searching out mispriced ideas and misunderstood investment theses. He provides on-the-ground insights in various Asian markets with a sway towards ASEAN. 

• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• We estimate passive trackers will need to sell 45.3m shares (A$226m; 10.2 days of ADV) on Uniti Group Ltd (UWL AU) at the close on 21 July.
• With over 10 days of ADV to buy from passive trackers and only 4 days to implementation, West African Resources (WAF AU) could outperform its peers till 21 July.

• Hyundai Motor (005380 KS) launched its long-awaited Ioniq 6 on 14 July. This is the first EV sedan by Hyundai Motor.
• Ioniq 6 could be a big winner for Hyundai Motor. Among all the features of Ioniq 6, the driving range is the biggest improvement versus Ioniq 5. 
• The combination of attractive price, sleek design, and higher driving range is likely to result in a strong demand for Ioniq 6.

• Alkem Laboratories Ltd (ALKEM IN) earns 71% of total revenue from domestic business, which is the most important growth lever of the company. Domestic business revenue grew 29% in FY22.
• The company dominates the anti-infective segment, through its mega brands, with a market share of 12.9%. In the chronic segment, Alkem is growing fast to emerge as a significant player.
• Regular new product launches, including biosimilars, should continue to contribute to Alkem’s growth and fill portfolio gaps. Entry into new therapies would also be an important growth engine, going forward.

• WCP will enter the KOSDAQ 150 with a passive inflow of about 530K shares, 1.5% of SO, at the close on December 8.
• WCP will be added to the TIGER ETF on October 14 with a passive inflow of about 345K shares, 1.0% of SO, at the close on October 14.
• From a flow trading perspective, the flow volume is certainly substantial enough to design a passive flow trading setup in conjunction with the lockup release schedule.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• SOCAR revised its IPO prospectus. What has changed is the date when the book building for the institutional investors starts (4 August). 
• The IPO price range remains at 34,000 won to 45,000 won. The IPO base offering size is also between US$120 million to US$159 million. 
• We maintain our base case valuation of Socar (target price of 27,967 won), which is 18% lower than the low end of the IPO price range of 34,000 won. 

• There could be one change to the S&P/ASX 200 (AS51 INDEX) in July following the privatisation of Uniti Group Ltd (UWL AU). 
• Then there will be a whole bunch of changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index in September as part of the regular rebalance. 
• There is large short interest on a couple of the potential adds and a lot of the potential deletes. That will drive stock price moves closer to implementation.

• 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.

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
• With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base. 
• But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.

• Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
• The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
• Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.

• The Healthcare Realty Trust (HR US) / Healthcare Trust Of America (HTA US) transaction is heading towards climax with the critical HR and HTA shareholder votes set for July 15 
• The odds are that activist investor and HR shareholder will not succeed in derailing the deal which it opposes from closing on July 20 
• Notwithstanding the significant spread compression seen in recent weeks, there remains an attractive short-term opportunity for the arbs  

• WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO.
• WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries
• In this note, we will talk about the not-so-positive aspects of the deal.

• The ETF operator (TIGER)’s index tracking conformity was high enough to create trading opportunities aimed at the rebalancing flow.
• Flow/Price directions were mostly synched with only a few exceptions. Of particular importance is that the price impact was substantial compared to the passive flow size. 
• The yield of the tradable names suitable for a basket based on the projected passive impact size was 4.51%.

• Bloomberg reported MGM Resorts International (MGM US) recently approached Genting Singapore (GENS SP)’s controlling shareholder, Genting Bhd (GENT MK), to express an interest in a deal.  
• While the discussions with MGM Resorts have fizzled out, other potential suitors are reportedly interested. Shares are in a trading halt pending a response to an SGX query.
• Genting Singapore trades at a discount to peers. Precedent transactions suggest a potential privatisation price of at least S$1.00 per share, a 33% premium to the last close. 

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net outflow over the past week was ~US$1.28bn, split between Shanghai (-US$0.85bn) and Shenzhen (-US$0.43bn)
• The largest inflows were into Aier Eye Hospital (300015 CH) and Shenzhen Mindray  (300760 CH). The largest outflows were in China Merchants Bank (600036 CH) and Sungrow Power (300274 CH).

• The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
• We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
• There will be large flows on the current index names at the September rebalance due to capping.

• 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.

• Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
• The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
• Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Today is the rebalancing trading day of WISE’s three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
• The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
• Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), & CJ ENM (035760 KS)

• Astra International (ASII IJ) is coming up cheap after United Tractors (UNTR IJ) positively responded to its large share buyback announcement. Yet both companies are looking attractive here. 
• Preceding my comments on Astra and United Tractor are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• According to Reuters, Alibaba Group (9988 HK)’s supermarket chain Freshippo is seeking to raise around $400-500m from a fresh funding round which values the loss making company at $6.0bn.
• The fact that Alibaba is willing to dilute ownership at a significant discount to its expected valuation is an additional sign that Alibaba could be running into some financial difficulties.
• Having slashed spending budgets of its smaller investments and more down rounds expected in ventures that are considered too big to fail, we anticipate a challenging time ahead.   

• We use a simple framework to analyse 3 exchange tokens’ value and we find FTT and LEO tokens are decent bear market plays.
• For crypto exchanges, buying the token is the only way for non-VC investors to gain exposure to the growth. Private valuations could differ greatly from the publicly traded valuations. 
• While exchange tokens are the easiest to understand and most equity-like in the traditional finance sense, we can also further apply the framework to tokens on other protocols.

• Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
• The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
• Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.

• The EURO STOXX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
• Historically, these Rebalance events have had significant volume impact and they generally involve large cap names. 
• In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2022.

• 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

• The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
• We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
• There will be large flows on the current index names at the September rebalance due to capping.

• The increase of 225.2 million CCASS shares deposited with Citibank matches Berkshire Hathaway Inc Cl B (BRK/B US)’s stake. BYD (1211 HK) closed -12% down on speculation of a selldown.   
• The H Share recently touched all-time highs and trades at a significant premium to historical multiples. BYD has a recent history of a selldown by a substantial shareholder (Himalaya Capital).
• Berkshire has made a 33x gain on its BYD investment, excluding dividends. Taking money off the table would align with Berkshire’s value investing mandate.

• Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
• The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
• Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

• Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
• Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG’s undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG’s CEO Bing Zhang. 
• The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it’s a low-balled Offer.

• This post explains how the rebalancing of the KOSPI 200 and KOSDAQ 150 is calculated. So, please note that this post does not have any investment recommendations.
• Both indices have the same calculation method. However, the thresholds are different. They screen stocks using the three metrics: Market Cap, ADTV, and Market Cap Ranking (buffer).
• The concept itself of these three metrics is not difficult. However, ranking it cumulatively often confuses us.

• In this insight, we discuss a pair trade involving going long on Inner Mongolia Yili Industrial Group (A) (600887 CH)(“Yili”) and going short on China Mengniu Dairy Co (2319 HK).
• Yili has more impressive financial metrics than China Mengniu Dairy in terms of ROE, operating margins, and sales growth. However, Yili is trading at lower EV/EBITDA than China Mengniu Dairy.
• Yili should be trading at premium valuation than China Mengniu Dairy. Therefore, we believe Yili is well poised to outperform China Mengniu Dairy’s share price in the next 12 months. 

• 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.

• WCP (WCP KS), a lithium-ion batteries separator company, is planning to launch a KRW900 billion (US$692 million) IPO in August.  
• The price range of KRW80,000-100,000 implies a market cap of KRW2.7-3.4 trillion (US$2.1-2.6 billion).
• WCP has attractive fundamentals due to the favourable demand/supply balance, technology, strong revenue growth and improving margins. 

• Today is the rebalancing trading day of WISE’s three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
• The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
• Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), & CJ ENM (035760 KS)

• Just days after BYD (1211 HK) surpassed Tesla Motors (TSLA US) as the world’s largest electric vehicle producer by sales, is Warren Buffet cashing in his chips?
• 225mn shares of BYD  – 7.73% of the H shares – moved into CCASS yesterday. These are Berkshire Hathaway’s shares. 
• For a shareholder who has kept his holding in share certificates for 13 years, this development suggests the possibility of a partial or full exit. 

• Emperador Inc (EMP PM) is pre-marketing a secondary listing on the SGX IPO by raising US$300-500 million, according to press reports. 
• Emperador has established a track record of decent revenue growth, profitability and cash generation over the years. 
• While the fundamentals are solid the valuation looks full in comparison to peers and historical trading ranges. 

For our next Webinar, we are excited to welcome Analysts Said Desaque and Osbert Tang, CFA , who will go over China’s latest potential $220 billion stimulus through a massive sale of special bonds. The Analysts will each present their views on the situation and a Q&A will follow.

The webinar will be hosted on Wednesday, 13 July 2022, 17:00 SGT/HKT.

Said DeSaque is a professional economist with over 33 years of experience covering the global economy, with significant expertise in the US, China, Japan, and emerging markets. He worked with US investment banks for 25 years covering institutional investors in Europe, Middle East, Far East and Australia. He covers financial markets on a multi-asset basis, and has been an independent economist covering the global economy and financial markets for the past 8 years since founding DeSaque Macro Research in London.

Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, where he accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.

• Tianqi Lithium (TL) raised around US$2bn via its H-shares listing. It undertakes mining of lithium ore and manufacturing of lithium concentrate, lithium compounds and derivatives.
• TL was the largest producer of mined lithium globally in terms of output in 2020 and ranked third in terms of revenue generated from lithium in 2020.
• In this note, we talk about the updates since our last note, along with the trading dynamics.

• Life Insurance Corp of India (LIC) (LICI IN) and Tata Power (TPWR IN) will be added to the Nifty 100 Index (NSE100 INDEX) and Nifty Next 50 Index (NIFTYJR INDEX). 
• Nmdc Ltd (NMDC IN) will be deleted from the CPSE ETF (CPSEBE IN) and there will be no replacement in the index.
• The NMDC deletion along with capping changes means that there is decent volume (and ADV) to buy on quite a few names in the CPSE ETF (CPSEBE IN).

• The price diversion between LG Chem and LG Energy has deepened considerably over the past two days. The sigma is currently -2.35. It is virtually the most extreme level year-to-date.
• LG Energy’s immediate-term overhang risk will likely offset the upcoming passive inflow event. In addition, the intensity of their price cointegration has not been weakened in recent months.
• Therefore, we should consider setting up reversion trading from this point on, aimed at the lockup release on July 27.

• Tianqi Lithium (002466 CH) priced its H Share at HK$82.00 per share to raise net proceeds of HK$13,062 million (US$1.7 billion). The H Share will start trading tomorrow.
• The H Share listing (HK$82.00) and grey market price (HK$76.50) imply an AH discount of 45% and 49%, respectively. This compares to Ganfeng Lithium (1772 HK)’s current 35.3% AH discount.
• The relative valuation is attractive. At the H Share listing price, Tianqi Lithium (9696 HK)’s H Share trades at a -6% discount to the median peers’ CY2022 P/B multiple.

• The increase of 225.2 million CCASS shares deposited with Citibank matches Berkshire Hathaway Inc Cl B (BRK/B US)’s stake. BYD (1211 HK) closed -12% down on speculation of a selldown.   
• The H Share recently touched all-time highs and trades at a significant premium to historical multiples. BYD has a recent history of a selldown by a substantial shareholder (Himalaya Capital).
• Berkshire has made a 33x gain on its BYD investment, excluding dividends. Taking money off the table would align with Berkshire’s value investing mandate.

• 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

• We turn bullish on Fast Retail as the current quarter marks the bottom for China sales
• The company continues to surprise in its mastery of gross margins and operating costs
• China is key, but the US is emerging as a new (and profitable) growth driver

• Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
• There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
• Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.

• The July-end TOPIX FFW Rebalance is larger than most expected, I believe. 
• There should be US$3.5bn one-way, with only a couple of major buy names.
• Chugai Pharmaceutical (4519 JP), Canon Inc (7751 JP), Unicharm Corp (8113 JP), Kubota Corp (6326 JP), Asahi Group Holdings (2502 JP), and Shiseido (4911) are each US$170mm+ to sell.

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

• Mercari Inc (4385 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 28 July.
• There are a lot of FFW changes, mainly reductions. This leads to large funding inflows on the large index stocks.
• We estimate the inclusion of Mercari and the FFW changes will lead to a one-way turnover of 0.56% leading to a one-way trade of JPY 442.23bn (US$3.25bn).

• In mid-January, I wrote about Mercari’s likely TOPIX inclusion 4-5 months later. 4.5mos later, it had been included (Mercari (4385) TOPIX Inclusion, Finally… And It’s Bigger Than It Looks) .
• The publicly-visible announcement data often does not show TOPIX inclusion parameters. A little sleuthing gets you there. 
• It’s still bigger than it looks, but some large holders have recently been selling.

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

• Just as investors were starting to get comfortable investing in Chinese big tech, the Government has imposed new fines on a range of tech companies.
• Meanwhile, the June ending quarter could yet again be a disspointment with growth curtailed through lack of funding for loss making businesses.
• Having gained around 50% in June 2022 through signs of easing the tech crackdown, these new fines and a weak June-ending quarter could resend tech valuations to March-2022 lows.    

• The Link Administration (LNK AU) Board will not recommend Dye&Durham/DND’s revised lower offer of A$4.57 per share due to shareholder feedback, the underlying value and alternative options.
• The slightly above guidance is designed to show that Link’s contribution to DND’s build a billion objective remains on track and there is little chance of triggering the MAC clause.
• DND needs to secure a deal this week to use its attractive deal financing, according to AFR. This could be the cue for DND to give a little more.

• The Samsung Electronics single-stock futures trading volume has increased significantly. In the most recent F 202207, the futures/cash TV ratio soared to 80%, considerably higher than the usual 40% level.
• Local pension funds are doing spot/futures arbitrage quite aggressively on Samsung Electronics, resulting in unintended consequences, including the 1P discount distortion we witnessed on June 16.
• This 1P discount distortion provides a higher spread than futures/spot arbitrage. So, we need to preemptively set up pref arbitrage while closely monitoring Samsung Electronics’ basis.

• After the market close today, Seoul Economic Daily reported that Socar is likely to delay its IPO to later on. 
• Although Socar has not formally announced that it will delay the IPO, we believe that there is a high probability that the IPO will be postponed. 
• The overall sentiment on the Socar IPO appears to be negative by many institutional investors, unless the company reduces the IPO price range substantially. 

• Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
• There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
• Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Tianqi managed to pull off the largest HK IPO so far this year, a good listing could see a pickup in other large deals.
• For placements, SK IE couldn’t hold on to its deal price, while Ming Yang kicked off what might be a busy GDR season.

• 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), Ramsay Health Care (RHC AU), Link Administration (LNK AU), Australian Unity Office Fund (AOF AU).
• The lowest gross spreads are Hwa Hong Corp (HWAH SP), Excelpoint Technology (EXLP SP), Uniti Group Ltd (UWL AU), Giordano International (709 HK), MyDeal.com.au Ltd (MYD AU).

• Q1 OP +8%, but core OP (pre-adjustments) fell 18% YoY on significant decline in profitability 
• Bulls may point to the surprising strength in orders, but the boost from China re-opening and weaker yen are not reflective of the underlying outlook
• We think Yaskawa will be hard-pressed to make full year guidance of ¥72b. Stay bearish for now

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