Most Read

• At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
• We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
• The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.

• No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
• The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
• There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).

• 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.
• Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024
• There are couple of other pre-event names that we have been tracking for the past few months.

• In August when Bain announced that it would launch a Tender Offer for T&K Toka Co Ltd (4636 JP) I suggested in my first piece it was the wrong price. 
• I suggested it needed another ¥1,000 added onto the price. If the ¥1,300 price Dalton initially indicated seemed low to T&K TOKA, another ¥100 doesn’t seem right.
• It took time. Now it looks like a tender offer launch is imminent. The stock has traded through terms for almost 5 months, but not by a lot.

• Wilmar International (WIL SP)‘s current implied stub and simple ratio (Wilmar/Yihai Kerry Arawana Holdings C (300999 CH)) are both at all-time highs. 
• Preceding my comments on Wilmar 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%.

• 2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022  while placements showed upward momentum.
• We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.
• For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

• In this note, we will take a look at broker performance for HK IPOs and placements in 2023. 
• The following dataset includes all HK IPOs and placements above US$100m, which amounted to a total of 27 deals.
• The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.

• In this insight, we analyze the top 10 performing stocks in KOSPI in each of the past five years (2019-2023) as well as for this entire period.
• The top 10 performing stocks in KOSPI were up on average 310% in 2023, sharply outperforming KOSPI which was up 19%. 
• There are some important takeaways from a review of the top 10 performing stocks in each of the five years in KOSPI, including market cap, sector rotation, and turnarounds.

• Mitsubishi Corp (8058 JP) is looking to raise US$100m via trimming a portion of its stake in Ayala Corporation (AC PM).
• Despite being not explicitly well flagged, Mitsubishi had sold before back in Jan 2019, and in Mar 2018. Thus, we would argue that the deal here is somewhat expected.
• While the deal would represent 43 days of the stock’s three month ADV, the recent selldowns by Mitsubishi had held up in the first week.

• In this note, we will take a look at the Asia Pacific IPO pipeline for 2024, starting with Hong Kong.
• This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
• The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

• The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

• The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO. 
• This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO. 
• This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.

• With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
• China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
• There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.

• In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
• ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
• A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.

• No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
• The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
• There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).

• At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
• We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
• The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.

• TDCX (TDCX US), a Singapore-headquartered digital customer experience (CX) provider, has announced a preliminary non-binding proposal from Laurent Junique, founder/CEO, and largest shareholder (98.3% of the voting power).
• Junique is offering US$6.60/ADS, a 39% premium to the 30-day VWAP, but a 63% discount to its IPO price a little over two years ago. 
• One issue dogging TDCX is the key man risk given Junique’s almost absolute control. Now he’s trying to take the company private on the cheap.

• Hollysys Automation Technologies (HOLI US) has announced that an EGM is scheduled for February 8th to vote on the merger agreement with Ascendent Capital Partners. 
• The Offer price remains at US$26.50/ADS. The shareholder approval required is simple majority. Regulatory approvals include NDRC, MoC and SAFE. Maybe a national security review.
• And the Dazheng consortium? Apparently insufficient information as to its financing sources and consortium structure ruled it out. Separately, the SGM to spill the board has now been called off. 

• In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 Indices in the June 2024 index rebal event.
• As things stand, there could be one index change for the SENSEX index. 
• There could be four ADDs/DELs for the BSE 100 index and four ADDs/DELs for the BSE 200 index.

• We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
• The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk. 
• For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.

• Posco DX (022100 KS) continues to drop following its section transfer from the KOSDAQ market to the KOSPI market. Short interest in the stock nearly halved in December.
• There were big net inflows to China ETFs with creations in CSI 300 Index ETFs and redemptions in ETFs tracking the CSI 500 Index and CSI 1000 Index.
• Creations continued in the iShares Emerging Markets ex China (EMXC US) ETF with units outstanding reaching a new high.

• Alibaba is transforming into a leaner, more efficient and more profitable technology company with sharpened focus on core business and shareholder return.
• While we don’t expect growth to define the company in the near future, high single-digit P/E more than compensates for the lack of it.
• This worst-performing and cheapest technology stock among global peers stands a big chance of staging a comeback in 2024 in our view.

• The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
• STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.

• Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 13.35% ownership ratio. 
• Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high. 

• With a few weeks to go in the review period, CGN Power (1816 HK) and Yankuang Energy Group (1171 HK) could be added to the ETF in March.
• China Resources Beer Holdings (291 HK) and Wuxi Biologics (2269 HK) are potential deletions while there is another stock close to deletion zone.
• There are a lot of shorts on Yankuang Energy in terms of days of ADV and as a percentage of float while short interest on the other stocks is lower.

• On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering. 
• Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain. 
• This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.

• Stay long in HS Holdings (8699 JP).But beware. It is possible that there is a slightly uncomfortable outcome. 
• Celltrion Pharm (068760 KS) is up 37% since the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger completed; and Inc is up 22%. That’s A LOT of expectation baked in. 
• NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.

• The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
• The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.

• 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 – Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
• Event-Driven developments – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), Weiqiao Textile Co (2698 HK), Vinda International (3331 HK).

• 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 – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Probiotec Ltd (PBP AU), Adbri (ABC AU).
• Lowest spreads – Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), A2B Australia (A2B AU), Tietto Minerals Ltd (TIE AU), IJTT Co., Ltd. (7315 JP). 

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
• We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
• The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
• There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US). 

• Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
• With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
• Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

• On the 13 December, Bloomberg reported that the Recco-led group consortium was weighing a revised Offer to be “significantly higher than the $26.50-a-share cash offer from Ascendent Capital”
• On the 24 December, a buyer consortium led by Dazheng Group announced an all-cash proposal of US$29.00/share, a 9.4% premium to Ascendent’s Offer. “Credible” financing is in place.
• “The Consortium stands ready to engage with the Board“.  The Board should engage. The one curious aspect of this latest Offer is the apparent absence of Recco’s involvement. 

• The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO. 
• This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO. 
• This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.

• Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 13.35% ownership ratio. 
• Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high. 

• I tally 50 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
• Two new deals discussed this week: AOKI Holdings (8214 JP)‘s MBO and in-specied-triggered MTO got Kerry Express Thailand (KEX TB).
• Key updates took place on: JOYY (YY US), Tietto Minerals Ltd (TIE AU)and Pact Group Holdings (PGH AU).

• Posco DX (022100 KS) continues to drop following its section transfer from the KOSDAQ market to the KOSPI market. Short interest in the stock nearly halved in December.
• There were big net inflows to China ETFs with creations in CSI 300 Index ETFs and redemptions in ETFs tracking the CSI 500 Index and CSI 1000 Index.
• Creations continued in the iShares Emerging Markets ex China (EMXC US) ETF with units outstanding reaching a new high.

• Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
• Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
• Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.

• The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
• The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
• If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.

• Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
• Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
• The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024. 
• The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.

• While domestic revenues may have slowed, Uniqlo’s domestic OP shows upside potential driven by gross margin growth and a gradual reduction in SG&A costs.
• Meanwhile, we expect Uniqlo’s International business OP to surpass ¥75bn, driven by a rebound in China demand  and strong momentum in South Korea, SE Asia & Ocenia.
• Thus, we see the upcoming earnings as a compelling opportunity for trading Fast Retailing (9983 JP).

• In this insight, we take a look at a group of names with reasonably high likelihood of being involved in index changes for the Hang Seng Index in March 2024.
• The index changes for the March 2024 index rebal will be announced on 16th February 2024.
• While the Hang Seng Index selection process is highly subjective, we continue to believe that identifying eligible names and grouping them by conviction level could be a valuable exercise.

• The family which owns and controls ubiquitous Nagoya supermarket chain Aoki Super (9977 JP) will acquire the 47% it does not own in an MBO. 
• This appears to be an estate planning exercise, creating a context to hand off ownership from the 77yr old former CEO to his 44yr old son and current CEO. 
• This comes in at a 44% premium, an all-time high price, and 15+x forecast FCF (even if the forecast looks a little light). This gets done easily.

• Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range. 
• We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
• Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.

• Last week Kerry Logistics Network (636 HK) (KLN) announced it would in-specie its entire 52.1% stake in Kerry Express Thailand (KEX TB) (KET).
• As S.F. Holding (002352 CH) holds a controlling 51.5% stake in KLN after the 2021 partial Offer, it will hold 26.8% in KET post-in-specie. That triggers an unconditional MTO.  
• The MTO price will be THB5.50/share. The key regulatory approval is Thai SFC. That won’t be an issue. 

• Aoki Super (9977 JP) has recommended an MBO tender offer of JPY3,800 per share, a 43.9% premium to the undisturbed (5 January). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 13.35% ownership ratio. 
• Based on the irrevocables, the minimum acceptance condition requires a 28.6% minority acceptance rate. This acceptance rate is achievable as the offer represents an all-time high. 

• Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot. 
• Another delayed their treatment at the last minute, and eliminated a cross-flow.
• But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected. 

• The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
• There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS). 

• Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
• Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
• Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.

• Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
• Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
• The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.

• The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
• The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
• If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
• We highlight 38 pair trades that involve Korean holdcos and opcos.
• Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024. 
• The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.

• Back in October, I wrote in PICC’s (1339 HK) Lifetime Low Implied Stub that People’s Insurance (1339 HK) was trading at an all-time low implied stub. It’s widened further since. 
• Over the past 12-months, excluding PICC’s 68.98% stake in PICC Property & Casualty (2328 HK), the market has assigned HK$42.6bn less for PICC’s steady and profitable life/health insurance stub ops.
• What gives? Falling interest rates is one. EV insurance in another. Yet this bifurcation is extreme.

• Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation. 
• Ola is the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of the Ministry of Road Transport and Highways.
• The bull case rests on rising market share in a growing market, a rapid growth phase, increasing gross margin and a favourable cash conversion cycle.   

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Indika Energy
• Lippo Malls Indonesia Retail Trust
• SK Hynix
• Vedanta Resources

• Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
• NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
• But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

• We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
• We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot. 
• Another delayed their treatment at the last minute, and eliminated a cross-flow.
• But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected. 

• BYD’s sales volume grew by 45% YoY in December, higher than 31% YoY in November.
• For the whole year 2023, BYD’s total sales volume rose by 62%.
• We conclude the stock has an upside of 74% for 2024.

• Shriram Finance (SHFL IN) is a high probability add and UPL Ltd (UPLL IN) is a high probability delete at the NIFTY Index (NIFTY INDEX) rebalance in March.
• There is a lower probability of Bharat Electronics (BHE IN) or Trent Ltd (TRENT IN) replacing Bharat Petroleum Corp (BPCL IN) at the rebalance.
• Jio Financial Services (JIOFIN IN), Avenue Supermarts Ltd (DMART IN) and Zomato (ZOMATO IN) will enter the running once added to the F&O segment of the market.

• After biopharmaceuticals developer and producer Celltrion Inc (068270 KS) recently completed its merger with Celltrion Healthcare (091990 KS), Celltrion Pharm (068760 KS) came (more) into focus.
• Pharma is now up ~37% since Inc and Healthcare merged.
• That’s quite a lot of expectation baked in.  Probably too much.

• We discuss the end of the mandatory lock-up periods for 41 stocks in Korea in January 2024, among which 4 are in KOSPI and 37 are in KOSDAQ.
• These 41 stocks on average could be subject to further selling pressures in January and could underperform relative to the market.
• Among these 41 stocks, top five market cap stocks include Posco International, Doosan Robotics, Rainbow Robotics, Qualitas Semiconductor, and PhilEnergy.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
• We highlight 38 pair trades that involve Korean holdcos and opcos.
• Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.

• The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
• There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS). 

• Overseas: SPX -0.8%, Nasdaq -1.2% extending losses for second day; Apple downgraded. 10Y yields above 4%. 
• Today: NKY Futs -1.2% v cash. JPY143; Expect weak start to year’s trading. Oil prices up +3%
• Japan: Earthquake aftermath disrupts retail, services, and transport; 55 confirmed dead, with widespread destruction. Despite short-term challenges, Japanese equity markets historically resilient to earthquake impacts.

• Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
• With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
• Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

• Canara Bank (CBK IN) could replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the March rebalance.
• Passive trackers will need to buy 2 days of ADV on Canara Bank (CBK IN) while selling over 1 day of ADV on Bandhan Bank Ltd (BANDHAN IN). 
• The impact is even higher where passives will need to buy nearly 6x delivery volumes in Canara Bank and sell 3x delivery volumes in Bandhan Bank Ltd.

• Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot. 
• Another delayed their treatment at the last minute, and eliminated a cross-flow.
• But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected. 

• We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
• We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
• There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

• The discounts to NAV of covered holdcos have mainly widened during December. Discounts to NAV: C.F.Alba, 49.1% (vs. 47.1%); GBL, 36.6% (vs. 34.9%); Heineken Holding, 16.7% (vs. 14.5%);
• Industrivärden C, 5.4% (vs.4.9%); Investor B, 13.5% (vs. 14.6%); Porsche Automobile Holding, 37.1% (vs. 39.9%).  The spread of Rio DLC widened to 24.2% (vs.17.2%).
• What seems interesting: in holding trades, Porsche SE/vs. listed assets and the Rio DLC: long RIO LN/short RIO AU.

• KRX’s lack of a standardized English translation platform may lead to non-standardized terminology and varying translation quality. KRX stresses cross-checking Korean and English disclosures due to potential errors. 
• The 3-day lag between Korean and English disclosures poses timeliness challenges, requiring consistent cross-checking. Overall, the process for foreign investors using Korean market disclosure sites remains largely unchanged.
• The common procedure should still be to first check disclosures using English titles, then convert to Korean for reading. If English disclosures exist, utilize them for cross-checking.

• Under the requirements of the Amended Mongolian Banking Law (Feb 2021), Khan Bank (KHAN MO) needed to IPO. It did, and HS Holdings (8699 JP)‘s stake fell to 49.77%. 
• It was de-consolidated. They were locked up for 6mos. The look-through financials are easier now. The company has bought back stock and trades at <0.5x book.
• But the Mongolian Banking Law required one more thing. All D-SIBs had to get all shareholders below 20% by 31 December 2023. It’s not clear that happened. 

• Japan Airline’s Flight JL516 operated by a two-year-old Airbus A350-900 burst into flames upon landing at Haneda Airport, apparently hitting a small Japanese Coast Guard aircraft  
• 379 passengers and crew were safely evacuated, but five of six crew on a Japanese coast guard aircraft were unaccounted for
• Haneda Airport runaways are all closed, aircraft heading to Haneda are diverted to other airports or flights aborted altogether   

• Hyundai Hyms is getting ready to complete its IPO in KOSDAQ in January. The total IPO offering amount is 43.5 billion to 54.9 billion won. 
• The company is offering 8.7 million shares in this IPO, of which 40% are old shares and 60% are new shares. 
• Hyundai Hyms specializes in shipbuilding equipment. Hyundai Hyms’s main business includes shipbuilding equipment and related services. 

• There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios early next year.
• The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
• Shorts have started to increase on some of the stocks and there will be further positioning as we near the liquidity event.

• 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 – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU). 
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU). 

• The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
• SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp. 
• STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.

• The BIG Risk is that Fujitsu Ltd (6702 JP) sells its stake in Fujitsu General (6755 JP) to someone in a below-market tender offer.
• Swire Pacific (A) (19 HK) may still see more outperformance from its  latest buyback. But it’s up ~29% since the company announced it was buying both the As and Bs. 
• Li Ning (2331 HK)‘s shares continue to edge up after its founder recently increased its stake. 

• For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
• The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
• This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

• Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
• With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion. 
• Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.

• APR is getting ready to complete an IPO in KOSPI in February 2024. The IPO price range is from 147,000 won to 200,000 won. 
• According to the bankers’ valuation, the company’s valuation is expected to range from 1.1 trillion won to 1.6 trillion won post IPO. 
• The company’s best selling product is its skin care beauty device product called Medicube Age-R. 

• TSMC: 9.2% Premium — Spread Fell But Remains Historically High; Short Interest Spiked for ADRs
• UMC: Trading at -1.2% Discount — Still Uncompelling, Wait for Lower Levels
• ASE: Drops to 7% Premium — Could Soon Be at a Level to Go Long

• On 29 December, Ecopro Group announced large selling of Ecopro Co Ltd (086520 KS) and Ecopro BM (247540 KS) by Daisy Partners worth 272 billion won in December.
• Daisy Partners is a company 100% owned by Chairman of Ecopro Group Lee Dong-Chae and his family members.
• Daisy Partners is likely to sell more shares in Ecopro Co and Ecopro BM in the next several years to increase the foundation’s capital to about 500 billion won.

• The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/​Livent: Enlarged Charging Unit is on track.
• As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
• The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

• The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
• Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
• We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

• Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
• Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
• Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK). 

• It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
• The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
• There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

• Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
• NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
• But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

• In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
• In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
• The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.

• Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders. 
• The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
• The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move. 

• Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
• In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
• Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

• The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
• The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
• There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US).