Most Read

Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

The New FEFTA List (With 7&I (3382) As “Core”) Is Not a Big Hurdle for Couche-Tard

On Friday 13 September, the Ministry of Finance of Japan released revisions to the list (Japanese, English) of company classifications under the Foreign Exchange and Foreign Trade Act (FEFTA)
It appears 72 names were newly upgraded to “Core” (“3”), 21 newly listed companies (since the last list in Nov 2021) were labeled “3”, and six lost their Type3 designation.
Seven & I Holdings (3382 JP) saw breathless news articles Friday suggesting a foreign takeover became more difficult. Not really.

Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism

The change in control of Raysum Co Ltd (8890 JP) has a complex backstory. But one week shy of two years ago, Oasis launched a buyout to own 65%.
The company had a strong MTMP. Oasis paid ¥1,700/share to own 65%. The MTMP came through, there was an offering, and it stayed near ¥3,000/share.
Now Hulic Co Ltd (3003 JP) has come out with a Tender Offer to buy the company for ¥5,913/share. That’s a 94% premium and 3.5x what Oasis paid 2yrs ago.

Auckland Airport (AIA NZ) Placement: Index Impact

Auckland Intl Airport (AIA NZ) has announced an underwritten placement of NZ$1.2bn and a non-underwritten retail offer to raise NZ$200m.
The stock is trading near the low end of its range over the last few years and the 7% discount from the last close should attract investor interest.
We estimate passive trackers will need to buy around 13.5% of the placement shares coinciding with the settlement date on 20 September.

MV Australia Equal Weight Index Rebalance: One Add, Two Deletes, Capping to Drive Flow

Pro Medicus Ltd (PME AU) will be added to the MV Australia Equal Weight Index while IGO Ltd (IGO AU) and nib holdings (NHF AU) will be deleted.
Constituent changes, float changes and capping changes result in a one-way turnover of 6.9% leading to a round-trip trade of A$330m.
Shorts are pretty big in Pro Medicus Ltd (PME AU) while there has been a recent spike in short interest for IGO Ltd (IGO AU).

Midea Group H Share Listing (300 HK): Trading Debut

Midea Group Co Ltd A (000333 CH) priced its H Share at HK$54.80 to raise HK$31,014 million (US$4.0 billion) in gross proceeds. The H Share will be listed tomorrow.
The H Share listing price implies an AH discount of 21.4% at the A Share price of RMB63.51. This compares to Haier Smart Home (6690 HK)‘s AH discount of 13.8%.
Futu grey market data shows that the H Shares closed 5.1% higher at HK$57.60. Our valuation analysis suggests that the H Share listing price is attractive.

Seven & I Holdings (3382 JP): Core Designation Does Not Change Couche-Tard’s Calculus

On 13 September, the Ministry of Finance of Japan added 7&I to a list of “core” designated companies based on results of voluntary inquiries to all listed companies.
Several media reports suggest that the change in 7&I’s designation to core would complicate the proposed acquisition by Alimentation Couche-Tard (ATD CN). The core designation will not change Couche-Tard’s strategy.
The change to 7&I’s designation to core will paradoxically push Couche-Tard to firm up its revised offer. An undemanding valuation protects the downside of a no-deal situation.

Pre-IPO Midea Group H Share – Here Are the Risks Behind

By Xinyao (Criss) Wang

For the reasons why Midea is eager to IPO in HK, investors shouldn’t just look at the surface of its glory, but delve into the “real motives” behind capital operations.
The policy of subsidizing the trade-in of home appliances belongs to “early overdraft of demand” and is unsustainable. Valuation logic for the performance increment brought by such policy is P/B.
If Midea cannot achieve the expected breakthroughs in To B business or internationalization in 2025-2026 to hedge against the weak domestic business, Midea’s performance/valuation in following years would inevitable decline.

Auckland Airport Placement – Large NZ$1.4bn Raising, with ACC’s Overhang to Contend With

By Clarence Chu

Auckland Intl Airport (AIA NZ) is looking to raise NZ$1.4bn (US$863m) in its primary follow-on offering. The offering includes a NZ$1.2bn underwritten placement, together with a NZ$200m non-underwritten retail offer.
The underwritten placement alone is a large one for the stock to digest at 168 days of three month ADV.
In this note, we run the deal through our ECM framework and comment on deal dynamics.

Insights on the Odds of MBK Ramping up the Tender Price by 20%

MBK can cut their target volume to 12% and, with 2 trillion won, raise the tender price to ₩800,000, leaving them a 20% cushion.
MBK’s tight schedule aims to hit the 6.98% target while minimizing price volatility and market risk by shortening the offer window.
MBK plans to sweeten the deal by about 20%, similar to Hankook, aiming for a 6.98% target with a 20% price hike from the start.

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Sep 16

Most Read: Korea Zinc, Evolution Mining, Taiwan Semiconductor (TSMC) – ADR, Seven & I Holdings, Midea Group Co Ltd A, K Bank, AAC Technologies Holdings, Ingenia Communities, Hyundai Rotem Company, China Traditional Chinese Medicine and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MBK Partners and Jang Family Partner to Control Korea Zinc + Tender Offer of 14.6% of Korea Zinc
MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$1bn
MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2bn
The New FEFTA List (With 7&I (3382) As “Core”) Is Not a Big Hurdle for Couche-Tard
Midea Group: Offer Upsized at Top Tier. Updated Valuation Analysis
K Bank IPO Preview
Quiddity Leaderboard HSTECH Dec 24: One Change Possible; US$538 Capping Flows One-Way
MV Australia A-REITs Index Rebalance: Ingenia Communities Deleted
Global Index Korea: Hyundai Rotem Is the Only One Screened. Watch for a Possible LS Electric Repeat
Merger Arb Mondays (16 Sep) – China TCM, Canvest, GA Pack, Raysum, Seven & I, Fuji Soft, Dyna-Mac

MBK Partners and Jang Family Partner to Control Korea Zinc + Tender Offer of 14.6% of Korea Zinc

After the market close on 12 September, Maekyung Business Daily reported that MBK Partners will become the largest shareholder of Korea Zinc (010130 KS) along with Young Poong (000670 KS).
MBK Partners, along with Youngpoong and advisor Jang Hyung-jin, also plans to conduct a tender offer of 14.6% stake in Korea Zinc.
The tender offer price for Korea Zinc is 660,000 won per share, which is 18.7% higher than the closing price on 12 September.

MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$1bn

There are 2 adds and 3 deletes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September. Plus there are capping and float changes.
Estimated one-way turnover is 11.4% resulting in a round-trip trade of US$1.14bn. There are 16 stocks with over 1x ADV to trade from passive trackers.
The largest inflows are expected in B2Gold Corp, Evolution Mining and Pan American Silver while the largest outflows are from Kinross Gold and Cia de Minas Buenaventura SAA.

MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2bn

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in September but there are a lot of float and capping changes.
TSMC – ADR and NVIDIA are the largest sells with buying spread across ASML Holding NV, Qualcomm Inc, Applied Materials and Micron Technology.
The selling in NVIDIA Corp (NVDA US) will add to the selling from the Technology Select Sector SPDR (XLK US) due to the market consultation.

The New FEFTA List (With 7&I (3382) As “Core”) Is Not a Big Hurdle for Couche-Tard

On Friday 13 September, the Ministry of Finance of Japan released revisions to the list (Japanese, English) of company classifications under the Foreign Exchange and Foreign Trade Act (FEFTA)
It appears 72 names were newly upgraded to “Core” (“3”), 21 newly listed companies (since the last list in Nov 2021) were labeled “3”, and six lost their Type3 designation.
Seven & I Holdings (3382 JP) saw breathless news articles Friday suggesting a foreign takeover became more difficult. Not really.

Midea Group: Offer Upsized at Top Tier. Updated Valuation Analysis

By Devi Subhakesan

Midea Group(000333 CH) has increased the shares on offer in Hong Kong by 15% to 565.9 million shares, priced at the top end of the range at HKD54.8 per share.
With strong investor interest, the company may exercise an over allotment option that could take the deal size to USD 4.6 billion.
Midea’s Hong Kong pricing reflects a nearly 21% discount to its A-share closing price, compared to the average 33% discount for dual-listed companies between Hong Kong and Shanghai or Shenzhen.

K Bank IPO Preview

K Bank finally provided its IPO prospectus which includes more details of the IPO than what the company already announced about the IPO several days ago.
Bankers used KakaoBank, SBI Sumishin Net Bank, and Bancorp Inc as comps. Average PBR of 2.56x was used to value K Bank.
Some investors will question the inclusion of overseas comps including SBI Sumishin Net Bank and Bancorp in the valuation of K Bank.

Quiddity Leaderboard HSTECH Dec 24: One Change Possible; US$538 Capping Flows One-Way

By Janaghan Jeyakumar, CFA

The HSTECH Index tracks the performance of the top 30 technology companies listed in Hong Kong that have high business exposure to certain technology themes.
In this insight, we take a look at the rankings of potential ADDs and potential DELs for the December 2024 index rebal event.
At present, we see one ADD and one DEL. If this index change takes place, there could be US$538mn capping flows one-way.

MV Australia A-REITs Index Rebalance: Ingenia Communities Deleted

Ingenia Communities (INA AU) will be deleted from the Vaneck Vectors Australian Property ETF (MVA AU) in September. There are float changes and capping changes too.
Estimated one-way turnover is 2.9% and will result in a one-way trade of A$19m.
After declining over the last year, shorts have started to tick higher in Ingenia Communities (INA AU).

Global Index Korea: Hyundai Rotem Is the Only One Screened. Watch for a Possible LS Electric Repeat

The cutoff market cap is around ₩3.6T, and Hyundai Rotem is the only stock that screens into the inclusion zone.
Hyundai Rotem might see a repeat of LS Electric’s pattern: heavy chasing towards screening and a big dive at the decision. Watch for aggressive momentum trades starting late September.
The stock with the lowest full market cap, Kum Yang, is at risk, but Celltrion Pharm is close behind. KT Corp’s exclusion might save Kum Yang or Celltrion Pharm.

Merger Arb Mondays (16 Sep) – China TCM, Canvest, GA Pack, Raysum, Seven & I, Fuji Soft, Dyna-Mac

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Raysum Co Ltd (8890 JP), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), China Traditional Chinese Medicine (570 HK).
Lowest spreads: Fuji Soft Inc (9749 JP), Dyna Mac Holdings (DMHL SP), Seven & I Holdings (3382 JP), Tohokushinsha Film (2329 JP), Alps Logistics (9055 JP).

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Sep 15

Most Read: NVIDIA Corp, China Shipbuilding Industry Group Power, Midea Group Co Ltd A, Palantir Technologies , Evolution Mining, Taiwan Semiconductor (TSMC) – ADR, Raysum Co Ltd, K Bank, Seven & I Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Select Sector Indices: Inflows to Apple, Palantir, Dell Will Add to SPX Buying
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight
Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism
MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$1bn
MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2bn
Raysum (8890 JP): Hulic (3033 JP)’s Tender Offer a Done Deal
K Bank IPO Preview
(Mostly) Asia-Pac M&A: Seven & I, Hotel Property, Hulic, Joban Kosan, Dyna Mac, Fuji Soft, Descente

Select Sector Indices: Inflows to Apple, Palantir, Dell Will Add to SPX Buying

Constituent changes to the S&P 500 INDEX and weight changes as a result of the market consultation proposals being adopted will result in a round-trip trade of US$31.5bn.
The largest one-way turnover is expected in the Consumer Staples Select Sector SPDR Fund, Technology Select Sector SPDR, Materials Select Sector SPDR and Communication Services Select Sector SPDR Fund.
The inflows to Apple (AAPL US), Palantir Technologies (PLTR US) and Dell Technologies (DELL US) will add to the buying from the S&P 500 INDEX (SPX INDEX) trackers.

CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight

There are 3 changes for the S&P 500 INDEX, 8 changes for the S&P Midcap400 Index and 15 changes for the S&P SmallCap600 Index at the September rebalance.
Dell Technologies (DELL US) and Palantir Technologies (PLTR US) were finally added to the S&P 500 INDEX (SPX INDEX) and there is huge size to trade in the stocks.
There will also be big buying in Apple (AAPL US) following a float increase driven by Berkshire Hathaway Inc Cl A (BRK/A US) selling last quarter.

Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism

The change in control of Raysum Co Ltd (8890 JP) has a complex backstory. But one week shy of two years ago, Oasis launched a buyout to own 65%.
The company had a strong MTMP. Oasis paid ¥1,700/share to own 65%. The MTMP came through, there was an offering, and it stayed near ¥3,000/share.
Now Hulic Co Ltd (3003 JP) has come out with a Tender Offer to buy the company for ¥5,913/share. That’s a 94% premium and 3.5x what Oasis paid 2yrs ago.

MV Global Junior Gold Miners Index Rebalance: Round-Trip Trade of Over US$1bn

There are 2 adds and 3 deletes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September. Plus there are capping and float changes.
Estimated one-way turnover is 11.4% resulting in a round-trip trade of US$1.14bn. There are 16 stocks with over 1x ADV to trade from passive trackers.
The largest inflows are expected in B2Gold Corp, Evolution Mining and Pan American Silver while the largest outflows are from Kinross Gold and Cia de Minas Buenaventura SAA.

MV US Listed Semiconductor 25 Index Rebalance: Round-Trip Trade Over US$2bn

There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in September but there are a lot of float and capping changes.
TSMC – ADR and NVIDIA are the largest sells with buying spread across ASML Holding NV, Qualcomm Inc, Applied Materials and Micron Technology.
The selling in NVIDIA Corp (NVDA US) will add to the selling from the Technology Select Sector SPDR (XLK US) due to the market consultation.

Raysum (8890 JP): Hulic (3033 JP)’s Tender Offer a Done Deal

Raysum Co Ltd (8890 JP) has recommended Hulic Co Ltd (3003 JP)’s tender offer at JPY5,913, a 94.2% premium to the last close price of JPY3,045.
The tender offer runs from 17 September to 30 October (30 business days), with payment commencing from 7 November. The offer represents an all-time high.
This is a done deal, as the irrevocable (Oasis) represents a 63.88% ownership ratio. With a knockout offer, the required 7.7% minority acceptance rate is easily achieved.

K Bank IPO Preview

K Bank finally provided its IPO prospectus which includes more details of the IPO than what the company already announced about the IPO several days ago.
Bankers used KakaoBank, SBI Sumishin Net Bank, and Bancorp Inc as comps. Average PBR of 2.56x was used to value K Bank.
Some investors will question the inclusion of overseas comps including SBI Sumishin Net Bank and Bancorp in the valuation of K Bank.

(Mostly) Asia-Pac M&A: Seven & I, Hotel Property, Hulic, Joban Kosan, Dyna Mac, Fuji Soft, Descente

I tally 40 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Six new deals: Hotel Property (HPI AU), Guotai (1788 HK)/Haitong (6837 HK), Joban Kosan (9675 JP), Dyna Mac (DMHL SP), Korea Zinc (010130 KS)/Young Poong Precision (036560 KS), Hulic (3003 JP).
Key updates took place on Namoi Cotton Co Operative (NAM AU), Seven & I Holdings (3382 JP), Fuji Soft (9749 JP), Descente (8114 JP), & Silverlake Axis (SILV SP).

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Sep 14

Most Read: Midea Group Co Ltd A, China Shipbuilding Industry Group Power, Ibiden Co Ltd, Fuji Soft Inc, Korea Zinc, Young Poong, Raysum Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea
Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)
Midea HK Listing: Valuation Insights
Fuji Soft (9749) – Fuji Softer
StubWorld: Young Poong & MBK Jostle For Control Of Korea Zinc (010130 KS)
NAV Analysis of Young Poong and Three Potential Scenarios of Choi Family’s Strategy to Fight Back
Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism
Clearing up Legal Confusion on Counter Offers and Getting a Clear Read on the Korea Zinc Tender

Midea Group (300 HK): Priced at Top End; Offer Size Adj Option Exercise Would Ease Index Fast Entry

Media reports indicate that Midea Group (000333 CH) has priced its H-shares IPO at HK$54.8/share, the top of the range. That is a 19.85% discount to the A-shares.
Reports also indicate that the IPO was oversubscribed multiple times with Hillhouse and GIC putting in large orders. That could result in the Offer Size Adjustment Option being exercised.
The exercise of the Offer Size Adjustment Option will take the IPO raise to HK$31bn (US$3.98bn) and index inclusion in some of the larger indices will become a lot easier.

CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea

MBK launches a tender offer to acquire 14.6% of Korea Zinc at ₩660,000 per share, a ₩2T deal with an 18.7% premium. Offer runs from September 13 to October 4.
On top of that, MBK’s also rolling out a tender offer for Young Poong Precision at ₩20,000 per share—a hefty 113% premium over yesterday’s close.
Spread action is possible if the Choi family counters, driving volatility. The market’s watching for a higher bid, which could create trading opportunities amid rising spread volatility.

Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)

By Shifara Samsudeen, ACMA, CGMA

Late last month, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
Everyone was expecting a delay, but that caused the stock to fall. Then tech/AI fell out of bed, Ibiden crashed, then China export restrictions noise/pushback caused further delay.
I saw a 9% gross spread yesterday and thought “Geez”, that’s a buy.” A day later, it’s 6%. Still wide, still interesting. And that has set a boundary.

Midea HK Listing: Valuation Insights

Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.

Fuji Soft (9749) – Fuji Softer

When Bain came out saying they would bid more, with preparation to launch in November, KKR launched early to see if they could get the jump, discussed here.
The stock popped when the Bain’s bid was obviously serious, and supported by the Founding Family, but it went to Bain’s “5% higher” plus another 5%. I was bearish.
But I signalled willingness to change my mind if the stock price dropped. It has dropped.

StubWorld: Young Poong & MBK Jostle For Control Of Korea Zinc (010130 KS)

MBK has teamed up with Young Poong (000670 KS) to secure control of Korea Zinc (010130 KS) via Partial Tender Offers for Korea Zinc and Young Poong Precision (036560 KS).
Preceding my comments on Young Poong, Korea Zinc, and Young Poong Precision 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%.

NAV Analysis of Young Poong and Three Potential Scenarios of Choi Family’s Strategy to Fight Back

We have significantly raised the NAV of Young Poong to 965,193 won (up 105% than previously). Our current NAV estimate of the company is 150% higher than current price.
Some traders have been positioning for Young Poong to be deleted from the KOSPI200 in the next round of rebalancing. Young Poong is not likely to be deleted from KOSPI200.
We also provide three potential scenarios of the Choi family’s strategy to fight back to gain control of Korea Zinc.

Hulic (3003) Launches TOB to Take Out Raysum (8890) – HUGE Win for Good Governance And Activism

The change in control of Raysum Co Ltd (8890 JP) has a complex backstory. But one week shy of two years ago, Oasis launched a buyout to own 65%.
The company had a strong MTMP. Oasis paid ¥1,700/share to own 65%. The MTMP came through, there was an offering, and it stayed near ¥3,000/share.
Now Hulic Co Ltd (3003 JP) has come out with a Tender Offer to buy the company for ¥5,913/share. That’s a 94% premium and 3.5x what Oasis paid 2yrs ago.

Clearing up Legal Confusion on Counter Offers and Getting a Clear Read on the Korea Zinc Tender

Since Choi and his affiliates can’t buy shares directly, his only play is to recruit more white knights to boost his stake.
He needs at least 6% from the 23% free float, costing over ₩800 billion. This hefty price tag is why the stock hasn’t moved much from the tender offer price.
The market isn’t ruling out Hyundai getting aggressive to secure Korea Zinc’s nickel, making this a hot trading point during the tender offer.

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Sep 13

Most Read: Samsung Kodex Banks ETF, China Shipbuilding Industry Group Power, Korea Zinc, Ibiden Co Ltd, Young Poong Precision, Raymond Lifestyle, Alibaba Group Holding , Trial Holdings, China Resources Beverage and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea
Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)
MBK Partners and Jang Family Partner to Control Korea Zinc + Tender Offer of 14.6% of Korea Zinc
Tender Offer of 43.4% Stake in Young Poong Precision by MBK
Raymond Lifestyle: A Value Play in Ethnic Wear with Special Situation Potential
When Dissenting REALLY Pays Off
Trial Holdings IPO Lockup – Large Number of Small Holders Hold Around US$400m of Stock
CR Beverage IPO: The Bear Case

KRX Value-Up Index Will Have Two Separate Indices, Excellent & Promising, With 150 Constituents

KRX plans to launch the Value-Up Index as two separate indices: the “Excellent Value-Up Index” and the “Promising Value-Up Index.”
The universe will include 150 constituents from KOSPI 200 and KOSDAQ 150. Allocation between indices is undecided, with sector limits on number and weight confirmed.
The key indicators (ROE, PBR, shareholder return rate) remain unchanged. The Promising Index’s weights are undisclosed, but the Excellent Index favors financial and automotive stocks.

CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

MBK’s Dual Tenders for Korea Zinc and Youngpoong Precision: The Largest Deal Ever in Korea

MBK launches a tender offer to acquire 14.6% of Korea Zinc at ₩660,000 per share, a ₩2T deal with an 18.7% premium. Offer runs from September 13 to October 4.
On top of that, MBK’s also rolling out a tender offer for Young Poong Precision at ₩20,000 per share—a hefty 113% premium over yesterday’s close.
Spread action is possible if the Choi family counters, driving volatility. The market’s watching for a higher bid, which could create trading opportunities amid rising spread volatility.

Shinko Electric (6967 JP) Takeover – Time To Buy Dips, and Ibiden (4062 JP)

Late last month, Shinko Electric Industries (6967 JP) announced that the JIC consortium Tender Offer due to be launched by end-August would be delayed. Next update? January 2025.
Everyone was expecting a delay, but that caused the stock to fall. Then tech/AI fell out of bed, Ibiden crashed, then China export restrictions noise/pushback caused further delay.
I saw a 9% gross spread yesterday and thought “Geez”, that’s a buy.” A day later, it’s 6%. Still wide, still interesting. And that has set a boundary.

MBK Partners and Jang Family Partner to Control Korea Zinc + Tender Offer of 14.6% of Korea Zinc

After the market close on 12 September, Maekyung Business Daily reported that MBK Partners will become the largest shareholder of Korea Zinc (010130 KS) along with Young Poong (000670 KS).
MBK Partners, along with Youngpoong and advisor Jang Hyung-jin, also plans to conduct a tender offer of 14.6% stake in Korea Zinc.
The tender offer price for Korea Zinc is 660,000 won per share, which is 18.7% higher than the closing price on 12 September.

Tender Offer of 43.4% Stake in Young Poong Precision by MBK

After the market close on 12 September, Hankyung Business Daily reported that MBK Partners plans to conduct a tender offer of 43.43% stake in Young Poong Precision.
The tender offer price is 20,000 won per share (113% higher than the closing price on 12 September).
Choi family currently controls Young Poong Precision. MBK plans to secure a controlling stake and obtain voting rights for the 1.85% stake in Korea Zinc held by Young Poong Precision.

Raymond Lifestyle: A Value Play in Ethnic Wear with Special Situation Potential

By Nimish Maheshwari

Raymond Lifestyle (RAYMONDL IN) recently demerged from Raymond Limited. Since Raymond Limited was part of various indexes, Raymond Lifestyle was not. Index Fund selling led to a correction.
The correction made Raymond Lifestyle a special situation value bet.
The cherry on the cake is strong management guidance and a foray into the untapped non branded and unorganized apparel segment

When Dissenting REALLY Pays Off

Back in August 2017, Xingxuan Technology, a privately held Cayman Islands company operating in the online food delivery space in China, was transferred by way of a statutory merger.
The buyer was Alibaba Group (9988 HK)-backed Rajax, the key seller, Baidu (9888 HK). The dissenter, having paid US$125mn for its shares, was offered cash/scrip worth an estimated US$42mn.
The dissenter considered terms low-balled. The judge agreed. The uplift? 659%.

Trial Holdings IPO Lockup – Large Number of Small Holders Hold Around US$400m of Stock

By Sumeet Singh

Trial Holdings (5882 JP) raised around US$259m in Mar 2024. Its IPO lockup is set to expire soon.
TH operates a network of retail stores in Japan that offer one-stop shopping under its everyday low price (EDLP) model.
In this note, we will talk about the lockup dynamics and possible placement.

CR Beverage IPO: The Bear Case

China Resources Beverage (CRB HK), China’s largest purified drinking water company, has received HK listing approval for a US$1 billion IPO.
In CR Beverage IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on core business’ pricing pressure, a slow pace of revenue diversification, a sizeable pre-IPO dividend, and margin and FCF generation below its key peer.

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Sep 12

Most Read: Midea Group Co Ltd A, Terumo Corp, Joban Kosan, Descente Ltd, China Shipbuilding Industry Group Power, Samsung Electronics Pref Shares, Hanwha Galleria , Puig Brands and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
Midea Group HK IPO Valuation Analysis
Taking Advantage of Terumo (4543) Weakness And After-Offering Flow
Joban Kosan (9675) – Fortress Buys Out a Fukushima Tourism Asset
Itochu’s Big Plans for Descente – Shame Investors Won’t Get a Look In
CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar
Midea HK Listing: Valuation Insights
Exploring Why Samsung Electronics’ Pref Discount Narrowing Took a Sharp Turn Yesterday
Hanwha Galleria Tender Results Are in with No Proration Issue Despite a Fat Spread. What’s Next?
Puig Brands (PUIG SM): 50/50 Global Index Inclusion for Largest Spanish IPO Since 2015

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows

The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

Midea Group HK IPO Valuation Analysis

We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares.
We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
Pricing of this offering is expected to be completed on 13 September and listing on 17 September.

Taking Advantage of Terumo (4543) Weakness And After-Offering Flow

Terumo Corp (4543 JP) was able to hang in well after the announcement, up until the day or two before pricing date, then the shares were walloped into Pricing.
After pricing, they have fallen and erased most of the discount. That’s an opportunity.
The shares have underperformed Peers, and there is flow to come. This deal was, as advertised, smaller than it first appeared.

Joban Kosan (9675) – Fortress Buys Out a Fukushima Tourism Asset

In the annals of foreign buyers of Japanese tourism-related real estate assets, there have been a few good examples, and several disasters. Yesterday, we got a new suitor for assets.
Fortress SPV Ontario GK will attempt to buy out Fukushima-based Joban Kosan (9675 JP) through a double Tender Offer.
There is a history here of a bump on an MBO on an associated company. That may have caused it to trade at a premium on Day 1. It’s unrelated.

Itochu’s Big Plans for Descente – Shame Investors Won’t Get a Look In

By Michael Causton

Itochu’s Textile division continues to execute the directive from its CEO to expand reach and coverage in the fashion and lifestyle sectors, with sports one of the major target categories.
It will completely absorb Descente as part of this plan, meaning the brand is likely to become one of the largest in the portfolio.
The ongoing tender offer will likely succeed giving Itochu a bargain and investors no stake in the future.

CSI300 Index Rebalance Preview: Round-Trip Trade Tops US$6bn as ETF Creations Soar

By Shifara Samsudeen, ACMA, CGMA

There could be 17 changes at the December rebalance with the Industrials sector gaining 3 index spots and the Information Technology sector losing 3 spots.
We estimate one-way turnover of 2.9% at the rebalance leading to a one-way trade of CNY 21.96bn (US$3.1bn). There are 22 stocks with over 3x ADV to trade.
Impact on the stocks has increased as creations in ETFs linked to the CSI 300 Index continue. That flow will reverse from the deletions in the next few months.

Midea HK Listing: Valuation Insights

Chinese home appliance maker Midea has announced the terms for its IPO. The company plans to raise $3.46bn at an indicative price range of HK$52.0-54.8 per share.
The company has a diversified product portfolio, well-balanced exposure to domestic as well as overseas markets and a growing robotics business.
As we expected, the HK offering is priced at around 25% discount to it’s A-shares and our analysis suggests that Midea’s HK offering is priced attractively.

Exploring Why Samsung Electronics’ Pref Discount Narrowing Took a Sharp Turn Yesterday

Samsung’s preferred shares lagged significantly behind the common shares yesterday, showing the largest daily sigma move we’ve seen in a while.
Samsung’s delayed value-up announcement, despite regulatory pressure, has fueled speculation about a potential Biologics stake purchase from C&T.
It’s time to pause the trade on Samsung’s preferred discount narrowing that I highlighted in early August. The main inflection point will be when Samsung makes its value-up announcement.

Hanwha Galleria Tender Results Are in with No Proration Issue Despite a Fat Spread. What’s Next?

Hanwha Galleria’s tender offer, led by Kim Dong-sun, closed today with a subscription rate just over 80%, according to the local brokerage after market close.
Retail investors in small caps like Hanwha Galleria often skip tender offers, hoping for price gains. Kim Dong-sun may try to buy the remaining 10-15% soon, possibly via open-market buys.
Watch for signs that Kim Dong-sun might go for a second tender to take Galleria private. He might be aiming to avoid taxes and boost his stake’s value.

Puig Brands (PUIG SM): 50/50 Global Index Inclusion for Largest Spanish IPO Since 2015

By Dimitris Ioannidis

Puig Brands (PUIG SM) will be added in SXXP and SXXE at the close of 20 September 2024. Forecasted demand is ~1.6m shares, ~$36m and ~2.7 ADV.
The security is at risk of failing the fcap threshold hence inclusion in November 2024 due to a recent price drop and a substantial portion of shares outstanding being unlisted.
The company closely exceeds the minimum public voting rights and its inclusion is expected in December 2024. Forecasted demand is ~4.5m shares, ~$101m and ~7.5 ADV.

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Sep 11

Most Read: Midea Group Co Ltd A, Seven & I Holdings, Trent Ltd, Midea Real Estate Holding , KT Corp, CELSYS, PC Partner, Nextdc Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
Midea Group H Share Listing (300 HK): Valuation Insights
Seven & I Holdings (3382 JP): State of Play
SENSEX Index Rebalance Preview: Trent Could Replace Bajaj Finserv; BUT F&O Adds Could Change That
Midea Group HK IPO Valuation Analysis
Midea Real Estate (3990 HK): Now Trading Ex-In-Specie
Timing a Trade to Capitalize on KT’s November Global Index Deletion and the ETF Recall
TOPIX Inclusions: Who Is Ready (September 2024)
PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore
NEXTDC Placement – Good Track Record but Seems Opportunistic

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows

The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

Midea Group H Share Listing (300 HK): Valuation Insights

Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.
Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

Seven & I Holdings (3382 JP): State of Play

Despite Seven & I Holdings (3382 JP)‘s rejection, Alimentation Couche-Tard (ATD CN) remains prepared to enter collaborative and friendly discussions to focus on finding greater value for 7&i shareholders.
Couche-Tard’s options are to return with a revised offer, go hostile or walk away. Couche-Tard will likely test the Board’s resolve by returning with a higher offer.
The Board’s options are to go through the motions (appointing IFAs), conduct a market check or launch a more aggressive action plan to placate restive shareholders.

SENSEX Index Rebalance Preview: Trent Could Replace Bajaj Finserv; BUT F&O Adds Could Change That

As things stand, Trent Ltd (TRENT IN) could replace Bajaj Finserv (BJFIN IN) in the S&P BSE SENSEX Index (SENSEX INDEX) at the close on 20 December.
Addition to the F&O list could see Zomato (ZOMATO IN) added to the index instead. That could then result in two changes to the S&P BSE SENSEX Index in December.
Trent Ltd (TRENT IN) is also an inclusion to the NIFTY Index (NIFTY INDEX) later this month and the pool of shares available for active investors is getting smaller.

Midea Group HK IPO Valuation Analysis

We would subscribe to the HK offering of Midea Group due to its attractive valuations, strong fundamentals, and meaningful price discount relative to the A shares.
We believe a premium valuation relative to the comps is appropriate for Midea Group due to its higher sales growth, EBIT margin, and ROE.
Pricing of this offering is expected to be completed on 13 September and listing on 17 September.

Midea Real Estate (3990 HK): Now Trading Ex-In-Specie

Back on the 23 June 2024, property developer Midea Real Estate Holding (3990 HK) announced the in-specie distribution of its core ops, either in unlisted scrip, or HK$5.90/share in cash.
The in-specie involved distributing 97.8% of Midea’s assets (involved in property development and sales); accounting for 95% of revenue and ~91% of profit. All figures as at FY23.
Midea went ex yesterday, closing down just HK$4.87/share. Midea, ex-in-specie, is currently trading at a trailing 0.6x P/B, and 2.3x PER. Pricing looks full.

Timing a Trade to Capitalize on KT’s November Global Index Deletion and the ETF Recall

KT’s foreign room is likely staying below 3.75% for November, setting up an ETF recall play. We’ve seen short-term buying pressure in similar past index reshuffles.
The ETF recall impact peaks right after the announcement. KT’s May downweight saw a 5% spike in two trading days post-announcement.
KT’s price moves more with downweights than SK Telecom’s because of higher overseas borrowing demand. This trend should hold, so setting up a position before the November announcement makes sense.

TOPIX Inclusions: Who Is Ready (September 2024)

By Janaghan Jeyakumar, CFA

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.
SUNWELS Co (9229 JP) and Macbee Planet (7095 JP) moved to the Prime market in July 2024 and their TOPIX Inclusion events took place at the end of August 2024.
We currently have CELSYS (3663 JP), Japan Eyewear Holdings (5889 JP), and Core Concept Technologies Inc (4371 JP) in our TOPIX Inclusions pre-event watchlist.

PC Partner (1263 HK): Goodbye Hong Kong; Hello Singapore

On the 18th June, personal computer parts and accessories play PC Partner (1263 HK) (PCP) announced a SGX listing was under consideration; and a possible withdrawal of the HKEx listing.
PCP’s 30th August announcement provided clarity on a step-by-step approach for the HKEx withdrawal. I recently held zooms with the SFC and SGX for added clarification.
PCP’s exchange relocation is predicated on PCP’s operational expansion into new markets, in particular, Southeast Asia. How and when the SGX becomes the preferred trading exchange remains an unanswered question.

NEXTDC Placement – Good Track Record but Seems Opportunistic

By Sumeet Singh

Nextdc Ltd (NXT AU) aims to raise around US$366m via a fully underwritten institutional placement, along with another US$133m via a non-underwritten SPP.
The company has undertaken a number of deals in the past, most of which have done ok. Although this one appears to be a bit opportunistic.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

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Sep 10

Most Read: Alibaba Group Holding , Midea Group Co Ltd A, NVIDIA Corp, Haitong Securities Co Ltd (H), Seven & I Holdings, Terumo Corp, K Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
Select Sector Indices: Inflows to Apple, Palantir, Dell Will Add to SPX Buying
Midea Group H Share Listing (300 HK): Valuation Insights
Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player
7&I Rejects ACT’s Bid As Too Low, Not Worth Discussing, ACT Whines, 7&I Taps The Sign
Midea A/H Listing – Bigger Deal, Better Pricing
Terumo Placement Follow-Up – Correction Has Been Inline with Recent Cross-Shareholding Unwind
Terumo (4543 JP): The Current Playbook
K Bank IPO – The Biggest IPO in Korea in 2024

Alibaba (9988 HK/BABA) Dual Primary Listing: Are We There Yet?

In its last update, Alibaba Group announced that the company was preparing for its primary listing in Hong Kong and the process was expected to complete by the end August.
The Board meets on 14 August to approve results for the three months ending June. Could there be an announcement on the dual primary listing too?
Mainland Chinese own between 3.5%-15.5% of companies that converted from Secondary to Dual-Primary in the last few years. Similar buying in Alibaba could take the stock higher from here.

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows

The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

Select Sector Indices: Inflows to Apple, Palantir, Dell Will Add to SPX Buying

Constituent changes to the S&P 500 INDEX and weight changes as a result of the market consultation proposals being adopted will result in a round-trip trade of US$31.5bn.
The largest one-way turnover is expected in the Consumer Staples Select Sector SPDR Fund, Technology Select Sector SPDR, Materials Select Sector SPDR and Communication Services Select Sector SPDR Fund.
The inflows to Apple (AAPL US), Palantir Technologies (PLTR US) and Dell Technologies (DELL US) will add to the buying from the S&P 500 INDEX (SPX INDEX) trackers.

Midea Group H Share Listing (300 HK): Valuation Insights

Midea Group Co Ltd A (000333 CH) has launched its H Share listing at HK$52.00-54.80 per share. Pricing will be on 13 September, and the listing on 17 September.
We previously discussed the listing in Midea Group H Share Listing: Latest Updates Points to a Business in Rude Health and Midea Group H Share Listing: AH Discount Views.
Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.

Guotai Junan (2611 HK) & Haitong (6837 HK) Merger Creates China’s Major Player

Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK), two of China’s leading state-backed brokerages, intend to merger via a share swap, subject to regulatory approvals.
Via a Merger by Absorption. GJS will issue new A and H shares to Haitong shareholders. The ratio hasn’t been firmed. Upon completion, the MergeCo creates China’s largest securities entity.
A merger is welcome – possibly mandated – amid challenging capital markets and a tightening regulatory backdrop.

7&I Rejects ACT’s Bid As Too Low, Not Worth Discussing, ACT Whines, 7&I Taps The Sign

Late last week, the Nikkei reported Seven & I Holdings (3382 JP) would send a letter to Couche-Tard saying they reviewed ACT’s Proposal and deemed it “inadequate.” Indeed it was.
7&i then published the Board’s letter, saying 7&i remained open to discussions but ACT’s Offer “grossly undervalued” 7&i’s intrinsic value and lacked in other areas. ACT responded with a “letter.”
But ACT’s “letter” was a press release aimed not at 7&i but the public. 7&i released a terse response today. ACT is the suitor. It needs to act like it.

Midea A/H Listing – Bigger Deal, Better Pricing

By Sumeet Singh

Midea Group Co Ltd A (000333 CH) aims to raise up to US$3.5bn in its H-share listing, the deal is somewhat larger than what was being spoken about earlier.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the deal background in our previous notes. In this note, we talk about valuations.

Terumo Placement Follow-Up – Correction Has Been Inline with Recent Cross-Shareholding Unwind

By Clarence Chu

A group of shareholders are looking to raise around US$1.36bn from selling ~5% stake in Terumo Corp (4543 JP).
We have covered the background of the deal in our earlier note, Terumo Placement – US$1.4bn Secondary Selldown, Buyback Should Aid Deal Dynamics.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

Terumo (4543 JP): The Current Playbook

Since the US$1.4 billion secondary placement announcement, Terumo Corp (4543 JP)’s shares are down 3.5% from the undisturbed price of JPY2,771 per share (29 August).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Terumo’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 10 September. Despite Kokusai and Honda’s disappointing performance, the average large Japanese placement tends to generate positive returns.

K Bank IPO – The Biggest IPO in Korea in 2024

K Bank is the biggest IPO in Korea in 2024. The IPO price range is from 9,500 won to 12,000 won. It is offering 82 million shares in this IPO.
According to the bankers’ valuation, the expected market cap of the company is from 4.0 trillion won to 5.0 trillion won.
The IPO deal size is 779 billion (US$579 million) to 984 billion won (US$732 million).

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Sep 09

Most Read: CPMC Holdings, SK Biopharmaceuticals , Palantir Technologies , Yancoal Australia, Hankook & Company, Midea Group Co Ltd A, Haitong Securities Co Ltd (H), 99 Speed Mart Retail Holdings, Far Eastern New Century and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCI Index Rebalance: 38 Adds, 29 Deletes & Changes to Southbound Stock Connect
Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix
S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight
S&P/ASX Index Rebalance (Sep 2024): Two Big Surprises; Positioning Is Mixed
KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company
Midea Group (300 HK): IPO Open Now; Upcoming Index Flows
Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)
Ohayo Japan | Volatile Week Ahead
99 Speedmart Holdings IPO Trading – Poised for a Steady Listing
Quiddity TDIV/50/100 Sep 24 Rebal: 100% Hit Rate; Perfectly Positioned for Our Trade

HSCI Index Rebalance: 38 Adds, 29 Deletes & Changes to Southbound Stock Connect

There are 38 adds and 29 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
We expect 33 of the 38 HSCI inclusions to be added to Stock Connect while we expect 27 of the 29 HSCI deletions to be removed from Southbound Stock Connect.
Since the start of the calendar year, shares held though Southbound Connect have increased in 22 of the 27 HSCI deletions that will also be removed from Stock Connect.

Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix

Got surprised by KRX adding POSCO Holdings to the Battery Index. Normally predictable rebalancing went off-script with this unexpected move.
POSCO Holdings, not Posco Future M, replaced Ecopro BM. Plus, Alteogen Inc is replacing SK Biopharmaceuticals in the BBIG, driving notable flow.
Consider a day trading long POSCO Holdings and short Ecopro BM. Also, a long-short futures basket could be worth exploring for names with big passive flows.

S&P500/400/600 Index Rebalance: Dell, Palantir Make It (Finally!); Apple Upweight

There are 3 changes for the S&P 500 INDEX, 8 changes for the S&P Midcap400 Index and 15 changes for the S&P SmallCap600 Index at the September rebalance.
Dell Technologies (DELL US) and Palantir Technologies (PLTR US) were finally added to the S&P 500 INDEX (SPX INDEX) and there is huge size to trade in the stocks.
There will also be big buying in Apple (AAPL US) following a float increase driven by Berkshire Hathaway Inc Cl A (BRK/A US) selling last quarter.

S&P/ASX Index Rebalance (Sep 2024): Two Big Surprises; Positioning Is Mixed

There are 2 changes for the S&P/ASX100 Index, 3 changes for the S&P/ASX 200 (AS51 INDEX) and 16 adds/ 8 deletes for the S&P/ASX300 Index.
The two big surprises are the inclusion of Guzman Y Gomez (GYG AU) and Yancoal Australia (YAL AU) in the S&P/ASX 200 (AS51 INDEX) and S&P/ASX300 Index.
The adds to the indices have outperformed the deletes over the last few months and there could be profit-taking in the next few days.

KRX Sector Rebalance Shocker: Massive Flow Impact on Hankook & Company

Hankook & Company is unexpectedly entering Autos, the only large-cap inclusion, likely getting a significant weight and facing a massive flow impact.
Like BBIG, this single-day flow event driven by one or two ETFs means smaller front-running impact, but names like Hankook & Company could see early positioning due to massive flows.
I’ll position in big impact names two days before the ETF rebalance trading. I’ll then go long on a basket of those with over 0.5x ADTV at Wednesday’s close.

Midea Group (300 HK): IPO Open Now; Upcoming Index Flows

The Midea Group (300 HK) IPO is being offered at a price range of HK$52-54.8/share, a discount of 20.9%-25% to Midea Group. That will raise US$3.28bn-US$3.46bn for the company.
Midea Group (300 HK) will not get Fast Entry to the HSCI but will be added to Southbound Stock Connect on 14 October once the price stabilisation period has ended.
Midea Group (300 HK) should get Fast Entry to one global index and that could lead to inclusion in the iShares China Large-Cap (FXI) (FXI US) too.

Haitong Securities (6837 HK): Evaluating the Potential Merger with GTJA (2611 HK)

On 6 September, Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) entered a legally binding agreement to merge through absorption and share exchange.
The high-profile merger aligns with the Chinese government’s ambition to reform the brokerage sector and create world-class investment banks. The merger would result in the largest China broker by assets.
In this note, we evaluate the potential share exchange ratio and the risks to satisfying the conditions for implementing the potential merger.

Ohayo Japan | Volatile Week Ahead

By Mark Chadwick

U.S. stocks slumped Friday, capping a volatile week as weak August jobs data fueled concerns about the economy
Seiren: Hong Kong’s activist fund Oasis Management acquired a 6.28% stake in Seiren, becoming its third-largest shareholder
Toyota announced plans to produce next-generation EV batteries at new plants in Fukuoka and Hyogo prefectures.

99 Speedmart Holdings IPO Trading – Poised for a Steady Listing

By Clarence Chu

99 Speed Mart Retail Holdings (99SPD MK) raised around US$530m in its Malaysia IPO. The IPO had been a mix of primary and secondary shares.
99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

Quiddity TDIV/50/100 Sep 24 Rebal: 100% Hit Rate; Perfectly Positioned for Our Trade

By Janaghan Jeyakumar, CFA

The ADDs/DELs for the TDIV, T50, and T100 indices for the September 2024 index rebal event was confirmed after market close on Friday 6th September 2024.
There will be one change for the T50 index and four separate changes for the T100 index. One of the T100 changes will also trigger a TDIV index deletion.
In this insight, we have presented our final estimates for the index flows for ADDs/DELs and capping flows for the TDIV index.

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Sep 08

Most Read: Nomura Research Institute, Fast Retailing, Bajaj Housing Finance, Nextdc Ltd, China Tourism Group Duty Free Corp Ltd, SK Biopharmaceuticals , Midea Group Co Ltd A, The Born Korea, Korea Stock Exchange KOSPI 200 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped
Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
Australia/NZ Real Estate: Stocks With (Large) Passive Flows
China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected
Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix
Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res
The Born Korea IPO Valuation Analysis
EQD | KOSPI 200 OVERSOLD, It Could Bounce This Week
Japan Weekly | Assets Under Pressure; Kao Out Performs

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX).
Fast Retailing (9983 JP)‘s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!)
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.

Mar25 Nikkei 225 Rebal Predictions: Likely 2 IN, 2 OUT, Again; Minimal Surprise Factor

The Sep24 Nikkei 225 Review Results are out, discussed in Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT.
That lets us move to Mar25 Nikkei 225 Rebal predictions. For the moment, I see 2 IN and 2 OUT, again.
And at the moment, another Fast Retailing capping exercise looks likely, for roughly US$3bn a side to trade.

Bajaj Housing Finance IPO: Offering Details & Index Inclusion

Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.

Australia/NZ Real Estate: Stocks With (Large) Passive Flows

There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here.
Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.

China A50 ETF Rebalance: Two Adds, Two Deletes, as Expected

The iShares A50 China (2823 HK) and CSOP China A50 (2822 HK) ETFs will rebalance their holdings at the close on 20 September.
China National Nuclear Power (601985 CH) and Huaneng Lancang River Hydropow (600025) will replace China Tourism Group Duty Free (601888 CH) and Yihai Kerry Arawana (300999 CH) in the ETFs.
Passive trackers are estimated to buy between 0.3-0.5 days of ADV in the adds and sell between 0.4-1.1 days of ADV in the deletes.

Key Flow Trading Opportunities After KRX Suddenly Added POSCO Holdings to the BBIG Battery Mix

Got surprised by KRX adding POSCO Holdings to the Battery Index. Normally predictable rebalancing went off-script with this unexpected move.
POSCO Holdings, not Posco Future M, replaced Ecopro BM. Plus, Alteogen Inc is replacing SK Biopharmaceuticals in the BBIG, driving notable flow.
Consider a day trading long POSCO Holdings and short Ecopro BM. Also, a long-short futures basket could be worth exploring for names with big passive flows.

Weekly Deals Digest (08 Sep) – Midea, Fuji Soft, Pasco, Seven & I, Xingda, CPMC, PSC, Rex, Latin Res

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) IPO.
Event-Driven developments: Fuji Soft Inc (9749 JP), Pasco Corp (9232 JP), Seven & I Holdings (3382 JP), Xingda International (1899 HK), CPMC Holdings (906 HK), Psc Insurance (PSI AU).

The Born Korea IPO Valuation Analysis