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• 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.

• 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). 

• Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
• Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
• That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

• The spot prices of the newly listed SSFs generally exhibited a notable upward trend. This trend was consistently more pronounced in KOSDAQ-listed stocks compared to KOSPI-listed ones.
• Various factors, including actions by ETF operators, may contribute. Their SSF purchases could deepen contango, leading to temporary spot price increases through arb spread seekers anticipating this development.
• We should focus on a potentially consistent price pattern persisting before a sufficient learning effect accumulates. The tight schedule after July increases the likelihood of similar opportunities next March.

• 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. 

• SOUTHBOUND flows showing momentum tendencies this past week on a single-stock basis. Hs up vs As quite strongly. Liquid Hs even better.
• SOUTHBOUND saw HK$1.2bn of net IN-flows in the 3-day week to 29 Dec. Total flows were HK$88bn.
• Bullish end to year for SOUTHBOUND owners but they did not mark the close. They were, however, big buyers of high-div SOEs.

• 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: Seedheiwa (1739 JP)‘s (now Meldia DC) Tender Offer; and Boart Longyear (BLY AU)‘s ignominious exit. 
• Key updates took place on: Orecorp (ORR AU), Symbio Holdings (SYM AU), IJTT (7315 JP), Shidax Corp (4837 JP), Ohizumi Mfg (6618 JP), and Hollysys Automation Technologies (HOLI US).

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• 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). 

• On 27 December, Kum Yang announced that its shares will be listed on the US stock market in the form of DRs, resulting in its shares rising by 11.7%.
• The listing of Kum Yang ADRs is likely to have a short-term positive impact on its share price as this is likely to reduce free float of local common shares.
• Nonetheless, over the next 6-12 months, we expect Kum Yang’s share price to trade much lower (30% or more) as its shares are highly overvalued. 

• Nike’s Q2 results lead to a 12% drop in its shares, affecting sector peers Onon, Skechers, and Asics with significant declines.
• Challenging trading conditions in China and Europe, coupled with a subdued digital traffic outlook from Nike, raise broader concerns for the sector.
• Asics stock declines 20% post-Nike’s fall, presenting an attractive buying opportunity with an estimated 20% upside, positioning Asics as a cost-effective play in the global performance running market.

• The Nikkei 225 (NKY INDEX) is about to close up for the 3rd consecutive week (CC=+3), it’s towards the Q3 resistance level at 33984: it’s short-term overbought.
• There is a good chance that the index will pull back in the next 1-3 weeks, at the moment it looks like the rally has “stalled”.
• The pullback may be an opportunity to buy again, and ride a rebound to previous highs, we will discuss LONG levels in a separated insight.

• 2023 is the worst year for our “Buy the Worst” strategy as it returned -34.5% YTD, underperforming the HSI by 20.7pp. The two property names are the key drags.
• Despite a poor 2023, the strategy has still outperformed the HSI by 17.9pp for 2018-2023. It remains significantly better than buying the winners in the current year.
• For 2024, our strategy is to switch to Li Ning (2331 HK), Country Garden Services (6098 HK), Meituan (3690 HK), Wuxi Biologics (2269 HK), and Zhongsheng Group (881 HK). 

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight is Li Ning (2331 HK) and Meitu Inc (1357 HK).

• The spot prices of the newly listed SSFs generally exhibited a notable upward trend. This trend was consistently more pronounced in KOSDAQ-listed stocks compared to KOSPI-listed ones.
• Various factors, including actions by ETF operators, may contribute. Their SSF purchases could deepen contango, leading to temporary spot price increases through arb spread seekers anticipating this development.
• We should focus on a potentially consistent price pattern persisting before a sufficient learning effect accumulates. The tight schedule after July increases the likelihood of similar opportunities next March.

• On December 26, Nihon Kohden (6849 JP) shares jumped ~15% as the company was a beneficiary of the ban on Apple (AAPL US)’s latest smartwatch models.
• Nihon Kohden reported better-than-expected result in H1FY24. The company raised FY24 revenue forecast to ¥221.5B (+7% YoY) from ¥215.0B. The company has also raised FY24 operating and net profit guidance.
• Currently consensus expects 2% YoY revenue growth for the company in FY25. With strong demand for existing products and new launches, the expectation seems to be conservative.  

• Main conclusions up-front:It’s getting harder to disentangle politics from price movements in China, with the government becoming more involved in the equity market.
• In stark contrast to their U.S. counterparts, Chinese banks are grappling with the weight of growing savings from consumers and businesses.
• This surge is impacting their profitability, while the real estate sector’s challenges continue to linger.

For our next Corporate Webinar we are glad to welcome Lendlease Global Commercial REIT’s CEO, Mr Kelvin Chow.

In the upcoming webinar, Kelvin will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. Angus will also be providing an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

In the spirit of the festive season, one of the attendees will also be awarded an Amazon Kindle as part of our lucky draw.

The Corporate Webinar will be hosted on Tuesday, 9 January 2024, 19:00 SGT.

About Lendlease Global Commercial REIT

Lendlease Global Commercial REIT’s portfolio comprises two leasehold properties in Singapore, Jem (office and retail property) and 313@somerset (retail property), and three freehold Grade A office buildings, Sky Complex, in Milan. It has a total net lettable area of approximately 2.1 million square feet, with an appraised value of S$3.65 billion. Other investments include a stake in Parkway Parade and the development of a multifunctional event space on a site adjacent to 313@somerset.

• 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.

• IJTT Co., Ltd. (7315 JP) was perhaps one of the lower-priced parent takeovers (Isuzu remains central to the bidder post-buyout) at 0.46x book. Today, the last day, it got bumped.
• The new price is ¥850/share vs ¥812/share. +4.7% and a whopping 0.48x book now. ¥850 is where the stock traded just before the announcement. It immediately jumped to ¥875/share.
• It appears Isuzu is not getting any more money out of this, but they should be OK. They are buying back in at 0.48x book. With leverage. 

• On 27 December, Kum Yang announced that its shares will be listed on the US stock market in the form of DRs, resulting in its shares rising by 11.7%.
• The listing of Kum Yang ADRs is likely to have a short-term positive impact on its share price as this is likely to reduce free float of local common shares.
• Nonetheless, over the next 6-12 months, we expect Kum Yang’s share price to trade much lower (30% or more) as its shares are highly overvalued. 

• Swire Pacific (19 HK)‘s NAV discount has narrowed, and implied stub widened, after announcing its latest buyback. Separately, Swire Properties (1972 HK) flagged a HK$4.5bn writedown on its investment property.
• Preceding my comments on Swire 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%.

• The Vietnamese government is in the midst of a campaign to eradicate corruption in its domestic real estate industry, which has seen bribery and embezzlement amounting to close to 3% of the country’s gross domestic product (GDP).
• Despite the high-profile corruption cases that have brought the sector’s financing channels to a standstill, the aggregate credit risk profile of the Vietnamese real estate industry has largely improved in recent months, after deteriorating, on the back of widespread monetary policy support from the Vietnamese government.
• The troubled sector saw a spike in its Criat credit cycle index (CCCI) since the middle of last year when deleveraging efforts for the industry by the Vietnamese government were first announced.

• Drilling services company Boart Longyear (BLY AU) has agreed to a takeover by American Industrial Partners. Boart’s five largest shareholders – collectively holding 98.86% of shares out – are supportive.
• Highly-Leveraged Boart copped the brunt of the GFC, and never fully recovered. American Industrial Partners’ Offer values Boart at A$543mn against its 2007 IPO value of A$2.3bn.
• The takeover is expected to be completed in the first quarter of 2024. This is done.

• The Nikkei 225 (NKY INDEX) is about to close up for the 3rd consecutive week (CC=+3), it’s towards the Q3 resistance level at 33984: it’s short-term overbought.
• There is a good chance that the index will pull back in the next 1-3 weeks, at the moment it looks like the rally has “stalled”.
• The pullback may be an opportunity to buy again, and ride a rebound to previous highs, we will discuss LONG levels in a separated insight.

• Covestro AG (1COV GR) has been the subject of a potential takeover from ADNOC since Bloomberg reported on 20 June. The last reported potential offer is €60/share (c.€11.3 billion).
• ADNOC could be willing to offer €64.5 (7.1x EV/EBITDA on mid-cycle €2,110 million EBITDA), but Covestro is rumoured to seek €70/share (typical chemicals 6x on €2,675 million EBITDA, likely demanding).
• Considering a takeout price of €60, gross spread is 11.7% and the shares are pricing a 64% probability of deal completion. I’d be long at €53/share, as downside seems limited.

• Overseas: SPX +0.0%, Marginal gains on penultimate trading day. Oil -3%
• Today: NKY Futs -0.3% v cash. JPY141; JGC to study hydrogen production on moon!
• Japan: Japanese firms consider delisting to enhance management amid governance reforms, requiring Tokyo Stock Exchange Prime section companies to appoint external directors for increased board independence.

• 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.

• 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.

• Nike (NKE US) reported 2QFY24 results last week with a guidance cut, as the company cut FY24 full-year sales guidance to around +1%, compared to +mid-single-digit in the previous guidance. 
• Shenzhou Intl Group Holdings (2313 HK) saw its stock drop by 8% the following day, given that Nike is Shenzhou’s most important customer, making up 30% of Shenzhou’s sales. 
• Nike’s inventory is down another 14% yoy, and down high-single-digit compared to the previous quarter 1QFY24. 

• Air China (H) (753 HK) is proposing a new share placement to raise Rmb6bn and HK$2bn. EPS dilution is manageable at 6% so we view the proposal positively.  
• The new equity will enhance book value by 11.5% and lower its gearing by 103pp to 399.8%. The full subscription by the parent is also a vote of confidence. 
• Recent share price weakness is due to the overall weakness in the Chinese equity market, but both macro and operating environments are improving. Selldown is unjustified.

• On 27 December, Kum Yang announced that its shares will be listed on the US stock market in the form of DRs, resulting in its shares rising by 11.7%.
• The listing of Kum Yang ADRs is likely to have a short-term positive impact on its share price as this is likely to reduce free float of local common shares.
• Nonetheless, over the next 6-12 months, we expect Kum Yang’s share price to trade much lower (30% or more) as its shares are highly overvalued. 

• On the 24 November, Silvercorp Metals (SVM CN) bumped its Scheme Offer for Orecorp Ltd (ORR AU) to A$0.19 in cash and 0.0967 new Silvercorp shares.
• At a 40.1% premium to undisturbed and key shareholder Tim Goyder (5.14%) supportive, this looked done. Then Perseus (PRU AU) built a 19.9% stake and said it would vote no.
• After postponing the Scheme meeting, Silvercorp and Orecorp have now agreed to an off-market takeover, on the same terms. The tendering threshold is 50.1%. 

• 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. 

• Overseas: SPX +0.1%; Stocks drift higher; 10Y Treasury yield at 3.8%; Biotech stocks surge
• Today: NKY Futs -0.5% v cash. JPY141.5; Daihatsu Motor could face over ¥100 billion in losses
• Markets: Japanese business leaders foresee 5% wage hikes in FY24, driving sustained growth.

• It was reported today that SK Pharmteco completed a 660 billion won in pre-IPO funding valuing the company at 4 trillion won.
• Prior to this investment, SK Inc owned a 100% stake in SK Pharmteco. After this investment, it is estimated that SK Inc will own about 83.5% stake in SK Pharmteco. 
• Our base case valuation of SK Inc is NAV of 19.0 trillion won (NAV per share of 258,967 won), representing a 47% upside from current levels.

• Silvercorp Metals (SVM US) has switched to an off-market takeover offer. The Orecorp Ltd (ORR AU) consideration remains unchanged at A$0.19 cash and 0.0967 SVM shares per ORR share.
• The takeover offer is conditional on a 50.1% minimum acceptance condition, achievable in the absence of a superior proposal. 
• The crucial question is whether Perseus Mining (PRU AU) is comfortable with SVM effectively controlling ORR. We think that there is a low probability of Perseus launching a competing proposal. 

• KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
• Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
• Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB). 

• 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.

• 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.

• 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.

• 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). 

• Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
• SBI already owns 8.8mm shares, and this would bring them close to 30.0%. 
• SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment. 

• 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
• STILL time to go long Hs vs As for the new year at 52wk wide discounts.

• Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
• Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
• This is too light for minorities, and even lighter for whole co, but it’s a done deal. 

• Dazheng (without Recco) has returned with a revised US$29.00 offer for Hollysys Automation Technologies (HOLI US), 9.4% higher than Ascendent Capital’s US$26.50 binding offer.
• While Dazheng’s proposal represents an all-time high, it would likely not be a superior proposal based on the Ascendent merger agreement due to the clauses on financing and due diligence.
• Nevertheless, to avoid the high risk that shareholders vote down the Ascendent offer and/or there are substantial dissenting shareholders, the Board will likely ask Ascendent to match Dazheng’s offer.  

• IJTT Co., Ltd. (7315 JP) has recommended Sparx Group (8739 JP)’s revised tender offer of JPY850, 4.7% premium to its previous JPY812 offer. The revised offer has been declared final.
• The Isuzu Motors (7202 JP) share repurchase price has risen 4.0% from JPY677 to JPY704. The tender closes on 15 January 2024. All other terms are unchanged.
• The shares are trading above the revised terms. A final offer and no competing bidder points to an unfavourable risk/reward profile – a 21% downside on a deal break. 

• After being granted due diligence, Newmont (NEM US) firmed an all-scrip Offer on the 15 May for Newcrest (NCM AU) at 0.400 new Newmont shares for each Newcrest share held. 
• The Offer, by way of a Scheme, permits Newcrest to pay a special franked dividend of up to $US1.10/share on top of the Offer terms. 
• The Scheme Booklet has now been lodged with ASIC. Newcrest shareholders vote on the transaction on the 13 October. The record date for the special dividend is the 19 October.

• IJTT Co., Ltd. (7315 JP) was perhaps one of the lower-priced parent takeovers (Isuzu remains central to the bidder post-buyout) at 0.46x book. Today, the last day, it got bumped.
• The new price is ¥850/share vs ¥812/share. +4.7% and a whopping 0.48x book now. ¥850 is where the stock traded just before the announcement. It immediately jumped to ¥875/share.
• It appears Isuzu is not getting any more money out of this, but they should be OK. They are buying back in at 0.48x book. With leverage. 

• 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.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

• 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). 

• Today after the close, SBI Holdings (8473 JP) made an announcement it would buy (up to) 3.0mm shares of Gumi Inc (3903 JP) shares between tomorrow and end-March 2024.
• SBI already owns 8.8mm shares, and this would bring them close to 30.0%. 
• SBI did not specifically say they would buy on market, but the next 400,000 shares would require a large shareholder filing amendment. 

• 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), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU), Volpara Health.
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group.

• Open House (3288 JP) took over Sanei Architecture Planning (3228 JP) this past autumn when banks forced the issue over the former CEO/owner’s mafia ties discovered in an investigation.
• Seedheiwa (1739 JP) now better known as Meldia DC, is ~60% held by Sanei Architecture Planning, and 3% by Mr Koike. It has debt. So it needs cleaning up too.
• This is too light for minorities, and even lighter for whole co, but it’s a done deal. 

• On the 1st November, cloud communication software outfit Symbio Holdings (SYM AU) backed Aussie Broadband Pty Ltd (ABB AU)‘s reduced cash/scrip Offer of A$2.99-$3.04/share, and entered into a Scheme agreement.
• Superloop Ltd (SLC AU), which had previously made two cash/scrip Offers for Symbio, promptly walked.
• Symbio’s Scheme Meeting has now been tabled for the 7 Feb, with implementation expected on the 28 February. The IE is supportive. This is done – and trading tight.

• The Irc Ltd (1029 HK) IFA opines that a mandatory conditional offer from Nikolai Levitskii (Chairman and 30.61% shareholder) at HK$0.118 per share is fair and reasonable. 
• The offer is open, with the first closing date of 12 January 2024. The offer is conditional on the offeror and concert parties representing more than 50% of voting rights. 
• While the offer is light, satisfying the minimum acceptance condition is possible. The risk/reward profile is favourable as the upside (25.5% spread) outweighs the downside (5.3% to the undistributed price). 

• There were 6 inclusions and 6 exclusions for the Nasdaq-100 Stock Index (NDX INDEX) at the annual December reconstitution. Then another ad hoc change was added on top of that.
• Impact on the inclusions ranges from 1-8 days of ADV to buy, while the impact on the deletions varies from 0.7-2.6 days of ADV to sell.
• Apart from the constituent changes, there are expected to be inflows in Tesla Motors and Broadcom and outflows from Apple, Microsoft, Amazon.com and NVIDIA.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

• 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 and NORTHBOUND flows were both sells, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 100+bp. Liquidation by overseas investors feels finished.
• STILL time to go long Hs vs As for the new year at 52wk wide discounts.

• Nike’s Q2 results lead to a 12% drop in its shares, affecting sector peers Onon, Skechers, and Asics with significant declines.
• Challenging trading conditions in China and Europe, coupled with a subdued digital traffic outlook from Nike, raise broader concerns for the sector.
• Asics stock declines 20% post-Nike’s fall, presenting an attractive buying opportunity with an estimated 20% upside, positioning Asics as a cost-effective play in the global performance running market.

• 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). 

• 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), Orecorp Ltd (ORR AU), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU), Volpara Health.
• Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), IJTT Co., Ltd. (7315 JP), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group.

• Overseas: SPX +0.2%; PCE 3.2% v 3.3% exp; Nike -12% on job cuts, tough macro
• Today: NKY Futs +0.3% v cash. JPY142; Japan approves fiscal budget; Nexon ADR steadies after China game rout
• Japan: Dalton’s Xmas greetings to management & three shareholder proposals: effective capital allocation, strong alignment of interest, and a board with high independence and diversity

• 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 – Nothing of note in a quiet week.
• Event-Driven developments – Benefit One Inc (2412 JP), JSR Corp (4185 JP), Weiqiao Textile Co (2698 HK), Adbri (ABC AU), Azure Minerals (AZS AU), Link Administration (LNK AU).

• Many companies had the goal of IPOs as a means to save taxes rather than growth, but it’s good to seriously consider go private for the sake of their shareholders.
• This is due to companies’ awareness of listing costs, such as demands from overseas investors for improved governance and requests from TSE for “management with awareness of the stock price.”
• Another issue that needs to be examined is the loss of growth and profitability for companies that are delisted and then relisted.

• Fast entry is now permissible for KOSDAQ 150. Within 15 trading days post-listing, the average daily total market cap must rank among the top 30 ordinary stocks on KOSDAQ.
• KOSDAQ 150 will also allow newly established entities in corporate spin-offs, following KOSPI 200’s model. Inclusion is granted if the subsidiary ranks within KOSDAQ 150’s top 160 (80%).
• The ₩1.5T cutoff for KOSDAQ 150 fast entry suggests potential candidates nearing this threshold, like Oasis, Kurly (and maybe Kakao Entertainment).

• There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) in December but there are a lot of float and capping changes.
• Taiwan Semiconductor (TSMC) – ADR (TSM US) is the biggest sell while NVIDIA Corp (NVDA US) is the biggest buy.
• Estimated one-way turnover is 6.6% resulting in a one-way trade of US$682m. Couple of stocks have greater than 0.2x ADV to trade.

• 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). 

• There are no constituent changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in December, but there are float and capping changes for some stocks.
• Estimated one-way turnover is 2.8% and that leads to a one-way trade of US$122m.
• There are 13 stocks with over US$5m to trade from passive trackers, though the impact is not very big on the stocks.

• A2 Milk Co Ltd (A2M AU), AMP Ltd (AMP AU) and Charter Hall (CHC AU) will be deleted from the MVIS Australia Equal Weight Index at the close 15 December.
• Constituent changes plus capping and float changes result in a one-way turnover of 5.05% and will result in a one-way trade of A$99m.
• There is a fair amount of short interest on the deletions and shorts could look to cover against the passive flow.

• There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
• Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
• Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

• 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.

• CEO Group JSC (CEO VN) will be added to the MarketVector Vietnam Local Index at the close on 15 December.
• Estimated one-way turnover is 5.24% and that results in a one-way trade of US$30m. There are a couple of stocks with more than 1x ADV to buy from passives.
• The largest passive inflows will be in Vingroup Jsc (VIC VN), Vietnam Dairy Products JSC (VNM VN), CEO Group JSC (CEO VN) and Vinhomes (VHM VN). 

• 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.

• As warned in Newcrest-Newmont Merger: Fancy Index Shenanigans in October, the merger construct meant flowfront, index flowback, then later index flowback.
• We are now between the second and third events. The data on the third is there, but it won’t be obvious to everyone. 
• There should be a large, not publicly announced, downweight on Newmont (NEM AU) in the March 2024 index review for the major local indices.

For our next Corporate Webinar we are glad to welcome Lendlease Global Commercial REIT’s CEO, Mr Kelvin Chow.

In the upcoming webinar, Kelvin will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. Angus will also be providing an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

In the spirit of the festive season, one of the attendees will also be awarded an Amazon Kindle as part of our lucky draw.

The Corporate Webinar will be hosted on Tuesday, 9 January 2024, 19:00 SGT.

About Lendlease Global Commercial REIT

Lendlease Global Commercial REIT’s portfolio comprises two leasehold properties in Singapore, Jem (office and retail property) and 313@somerset (retail property), and three freehold Grade A office buildings, Sky Complex, in Milan. It has a total net lettable area of approximately 2.1 million square feet, with an appraised value of S$3.65 billion. Other investments include a stake in Parkway Parade and the development of a multifunctional event space on a site adjacent to 313@somerset.

• Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
• The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
• Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

• This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
• After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
• For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• China has tightened restrictions on online games again driving significant falls in names such as Tencent and NetEase. 
• While the move may surprise some given prior moves to restart approvals in our view the overall trend of regulation is not especially surprising. 
• In particular, the tightened regulations appear to target the most important drivers of mobile gaming profitability and today’s large drops may actually be underreactions.

• KCE Electronics PCL (KCE TB) will replace Ngern Tid Lor (TIDLOR TB) in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) at the close on 29 December.
• Estimated one-way turnover is 0.55% and will result in a one-way trade of THB 455m. There is nearly zero funding flow on the other index members.
• Passive trackers will need to buy close to 1.2% of KCE Electronics PCL (KCE TB)‘s free float while selling around 1.6% of float in Ngern Tid Lor (TIDLOR TB). 

• Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
• Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
• That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

• 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.

• Taxi-Related services operator A2B Australia (A2B AU) has completed a large property sale and subsequently entered into a Scheme with Singapore’s ComfortDelGro Corp (CD SP).
• The property sale enabled a $0.60/share fully franked dividend. Separately, and in addition, ComfortDelGro is offering A$1.45/share. Or A$2.05/share all-in. Before franking credits, for those who can take advantage. 
• The special divi ex-date is the 12 January. It is not conditional on the Scheme. Implementation for the Scheme, assuming all approvals are met, is expected mid-April.

• Drugs maker/packager group Probiotec Ltd (PBP AU) has entered into a Scheme with Indonesia’s Pyridam Farma (PYFA IJ).
• Pyridam is offering Probiotec shareholders A$3.00/share (in cash, or a 19% premium to the undisturbed price). Interim and final  dividends up to A$0.035/share and A$0.04/share, respectively, may be added.
• It has not been declared final. The Offer has the board’s backing. A Scheme Meeting is expected to be held in May with possible completion in early June 2024.

• 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.

• 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.

• Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
• In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
• Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

• 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. 

• Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
• The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
• Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

• Japan’s merger arb is facing an unusual situation: six merger arb situations (>US$100 million market cap) where the shares have consistently traded through terms.
• We evaluate the bumpitrage potential of these six Japanese merger arb situations on qualitative and quantitative metrics.
• Based on our analysis, the ranking as measured by the highest bumpitrage potential in descending order are T&K Toka, IJTT, Taisho, Shidax, Benesse and Tokyo Rakutenchi.

• Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY2,123 per share, a 32.7% premium to M3 Inc (2413 JP)’s offer.
• The other terms are unchanged. The pre-conditions relate to board recommendation, Pasona Group (2168 JP) support, and the M3 offer not being completed. The tender offer starts in mid-January 2024.
• While M3 has extended its offer period to 17 January 2024, it will unlikely engage in a bidding war. Expect the Board and Pasona to support the Dai-ichi Life proposal.

• The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
• We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
• One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

• This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
• After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
• For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

• A double dose of StubWorld this week as Hanwha Corporation (000880 KS) comes up “cheap” on my monitor.
• Preceding my comments on Hanwha 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%.