Most Read

Back in February, Newmont Proposes Taking Newcrest Back Into The Fold. Newmont bumped, there was due dili, then Newcrest Backs Newmont’s US$19bn Offer in May.
More recently, we have Newcrest: Shareholder Vote On 13th Oct, with a prescribed schedule. That makes things fun.
There will be considerable movement of shares, and that will mean opportunity. Both up and down. I see US$3bn to buy, then A$1.5bn or more to sell a bit later.

Asian Dividend Gems: Giordano International

Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits.
Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%.
We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x.

Vinda (3331 HK): Tanoto Sees The Wood

On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September.

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

By Steve Zhou, CFA

According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again.
WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E. Since 2016, the company has had an average PE of 11x.
The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited.

Last Week In Event SPACE: Shinko Electric Industries, MGM China, Decente, Sankei Real Estate,

If Descente Ltd (8114 JP) earnings disappoints, buy the dip. Itochu Corp (8001 JP) is buying for the long-term.
MGM China Holdings (2282 HK) has gained market share in mass table market, VIP, and total revenue. Yet MGM’s FY24E EV/EBITDA is ~40% below its two-year forward average EV/EBITDA pre-Covid.
If you had a J-REIT portfolio, Sankei Real Estate (2972 JP) would go in and push something else out or smaller. I think one gets beta-plus, which is usually called alpha.

Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.

Japan – Increase in Shorts on Some Interesting** Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, Kurita Water Industries, GMO Payment Gateway, Keio Corp and NGK Insulators have underperformed the Nikkei225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

NWD 17 HK: FY23 Results Update, to Reset and Transform, and a Beta Play if Rate Expectation Peaks

By Jacob Cheng

In this insight, we summarized NWD’s FY2023 results. We think the gearing and balance sheet, the biggest concern that market has, has been clearly addressed
NWD has announced disposal of its stake in NWS, and will have more corporate actions to come. The dividend expectation is reset
We view most of the negatives are priced in at current valuation. NWD is much better than a Chinese developer, and should not be trading at 0.19x PB

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Lithium Power, Vinda, Origin Energy, Liontown, Kenedix REITs

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this week:Lithium Power International (LPI AU)‘s Scheme. Vinda International (3331 HK) and Shinko Electric Industries (6967 JP) are in the cross hairs.
Key updates took place for: Origin Energy (ORG AU), Liontown Resources (LTR AU), Golden Eagle Energy (SMMT IJ) and Kenedix REITs.

Ohayo Japan | Middle East Dominates; Japanese Companies Disposing Non-Core Real Estate

Overseas: SPX -1.3% , Nasdaq -1.5%; Broad-based equity decline with all sectors in the red as concerns over Israel-Hamas conflict grew; airline stocks under pressure
Today: NKY Futs -0.8% v cash. JPY 149.9; Core inflation at 13-month low; Signs that the property market overheating. Daiichi Sankyo big payday for cancer drugs
JapanX: Japanese companies boost P/B ratios by selling non-core real estate assets, transforming corporate governance and efficiency in response to the TSE’s call for improved performance

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Oct 22

Most Read: Bharat Electronics, Cheng Shin Rubber Ind Co., Ltd., Li Auto , Astra International, China Unicom Hong Kong, Wuhan Jingce Electronic Group, Japan Post Bank, Liontown Resources, Giordano International, Kurita Water Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd
Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
Liontown Resources (LTR AU): State of Play
Asian Dividend Gems: Giordano International
Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

NIFTY50 Index Rebalance Preview: Two’s Company; Three’s A Crowd

There should be two changes for the NIFTY Index (NIFTY INDEX) in March. That could increase to three, but that would take some big price moves from now to January.
Impact on the potential changes is pretty large at over 6 days of ADV to trade from passive trackers. The impact is over 11 days of delivery volume.
Inclusion of Avenue Supermarts Ltd (DMART IN) in the F&O segment before January could lead to another change.

Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics

The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US).

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).

HSCEI Index Rebalance Preview: One Change; Capping Impact Increases

Zhongsheng Group (881 HK) is in deletion zone and could be deleted. China Unicom Hong Kong (762 HK) could be added to the index as the highest ranked non-index constituent.
Estimated one-way turnover at the rebalance is 2.14% resulting in a one-way trade of HK$1.38bn. Meituan (3690 HK), Alibaba Group (9988 HK) and Tencent (700 HK) will be capped higher.
China Unicom Hong Kong (762 HK) is supported on its 50/100 day moving averages and could move higher. Zhongsheng Group (881 HK) has been trading below its moving averages.

ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues

Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Given stock selection uses liquidity as a major input, the impact of passive trading will be much larger on the deletions as compared to the additions.
The potential adds have outperformed the potential deletes, but relative performance has been drifting lower over the last few months. There are stocks that will have flows from other indices.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Asian Dividend Gems: Giordano International

Giordano, one of the most recognizable apparel business in Asia, has been improving its operations materially with solid growth in sales and profits.
Giordano provides very high dividend yield and payout. The consensus expects DPS of HKD 0.28 for Giordano in 2023, which would suggest a dividend yield of 12.8%.
We like the company’s high dividend yield, loyal customer base, and attractive valuations. It is trading at EV/EBITDA of 3.6x and P/B of 1.5x.

Index Rebalance & ETF Flow Recap: NKY, ASX, Liontown, J&T Express, JP/IN Positioning, IndusInd Bank

Light & Wonder (LNW US)/ Light & Wonder (LNW AU) replaced United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) last week.
Newcrest Mining (NCM AU) stops trading this week and should be replaced by Newmont Mining (NEM US) CDIs in the ASX indices.
Another week of ETF outflows for China with the largest outflows from trackers benchmarked to the CSI 1000 Index.

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Oct 21

Most Read: DISCO Corp, Shinko Electric Industries, Prudential , Eugene Technology, Liontown Resources, Kolmar Korea , Vinda International, WH Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
Shinko Electric (6967) Update – MitCorp In The Mix?
APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out
Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Liontown Resources (LTR AU): State of Play
Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin
A Merger Share Swap Between Kolmar Korea and Yonwoo
Vinda (3331 HK): Tanoto Sees The Wood
WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

APAC Insurers Series (#3): Initial Theses At Different Stages of Being Played Out

By Alec Tseung

PICC P&C’s thesis has materialized and played out well this year, with the stock being HK’s best-performing Chinese insurer.
Samsung Life’s share price recovered slightly since our last update as LT Korean government bond yields further increased.
Prudential’s thesis is slowly being played out, with its P/BV discount to AIA having narrowed; but still a long way to go.

Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal

For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

Overseas: SPX -0.8% , Nasdaq -0.8%; Fed Chair still concerned about inflation; jobs data shows ongoing econ strength; Tesla -9%
Today: NKY Futs -0.5% v cash. JPY 149.8/$; Calbee to test biogas production; Disco expects weakness in demand to continue; Softbank to build data center in Hokkaido
JapanX: The accelerated phase-out of F-gases, though aiming to make heat pumps cleaner, may hinder the shift from fossil fuels. Daikin and the industry face challenges and need swift adaptation.

A Merger Share Swap Between Kolmar Korea and Yonwoo

On 19 October, Kolmar Korea announced that it will conduct a merger share swap with Yonwoo early next year to make it into a 100% wholly owned subsidiary.
We believe the merger share swap agreement between Kolmar Korea and Yonwoo is likely to have positive impact on both Kolmar Korea and Yonwoo.
After this share swap is completed, Yonwoo will be delisted. This merger is aimed at improving the inefficient governance structure caused by duplicate listings and improve management efficiency.

Vinda (3331 HK): Tanoto Sees The Wood

On the 27 April, Vinda (3331 HK) announced its controlling shareholder Essity (ESSITYB SS) would commence a strategic review of its 51.59% ownership. See Essity Mulls Holding In Vinda (3331 HK).
That shook a variety of suitors out of the woodwork (so to speak) including (reportedly) Brazil’s Suzano, the world’s largest hardwood pulp producer, Bain Capital, CVC Capital, and DCP Capital.
The latest (alleged) interested party is the Tanoto family, currently holding a 7.03% stake, having first cleared 5% on the 26 September.

WH Group (288 HK): Potential US Listing Of Smithfield Foods Could Be A Catalyst

By Steve Zhou, CFA

According to public news yesterday, WH Group (288 HK) plans to list its US pork business Smithfield Foods, the largest US pork producer, back in the US again.
WH Group currently trades at 5x 2024E PE, assuming earnings return to the 2022 level in 2024E. Since 2016, the company has had an average PE of 11x.
The stock is a buy with a fairly strong catalyst in the potential US listing of the Smithfield Foods business, while downside is limited.

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Oct 20

Most Read: Zomato, Indusind Bank, Liontown Resources, Kenedix Office Investment Co, Eugene Technology, Sankei Real Estate, Golden Eagle Energy, ZJLD Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

India – Free Float Changes to Drive Passive Inflows
IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold
Liontown Resources Placement – While Discount Is Wide, It Is at a Premium to Its Pre-Takeover Price
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal
Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan
Golden Eagle Energy: Share Sale Done. MTO Price Bumped
ZJLD Lock-Up – KKR’s US$680m Stake to Be Unlocked, Although the PE Could Opt to Wait
Liontown Resources (LTR AU): State of Play
Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

India – Free Float Changes to Drive Passive Inflows

Over the last few weeks, companies in India have been disclosing their shareholding pattern as of end-September. There are a few companies with significant float changes from end-March and/or end-June.
The changes in free float could be reflected in domestic and global indices over the next couple of months resulting in action from passive trackers.
We find 9 stocks where there could be inflows with passive trackers needing to buy over 1 day of ADV on most stocks.

IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.

Liontown Resources Placement – While Discount Is Wide, It Is at a Premium to Its Pre-Takeover Price

By Clarence Chu

Liontown Resources (LTR AU) is looking to raise A$365m (US$230m) for capital expenditure and to plug its funding gap for the Kathleen Valley Lithium (KVL) project.
Together, the combined A$1.14bn equity/debt raising comes after Albemarle abandoned its A$6.6bn (US$4.2bn) acquisition bid for Liontown Resources earlier in the week.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

Another Hidden Passive Flow Trading Opportunity Is Captured in Korea: SOL Semicon ETF December Rebal

For the impending December rebalancing, the effective date is set for December 18th, while the ETF rebalancing trading will take place on December 15th.
Jusung Engineering and Eugene Technology are likely to be added, while Lake Materials and SFA Semicon are expected to exit the index.
Aside from constituent changes, Hansol Chemical is anticipated to significantly benefit from the passive impact as the primary beneficiary of the ceiling reversion.

Sponsor of Sankei Real Estate (2972) To Buy More Units in Revival Plan

On 16 October, the Asset Management Co of Sankei Real Estate (2972 JP) announced earnings, the execution of a Revival Plan, and said the sponsor, Sankei Building would buy more.
They’ll buy for up to 220 days starting sometime before Feb-end. Presumably after the Revival Plan transactions have been executed.
The REIT is cheap to peers. It is small to peers. It needs some reviving. But when a sponsor promises to buy, it pays to take a look.

Golden Eagle Energy: Share Sale Done. MTO Price Bumped

This transaction just keeps on giving. First, you received an additional dividend. Now the Offer price has been increased.
On the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a 58.65% stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
Geo shareholders approved the purchase on the October 13 and the acquisition was completed on the 18 October. This triggered an MTO, which has been revised upward to IDR 1,305.50.

ZJLD Lock-Up – KKR’s US$680m Stake to Be Unlocked, Although the PE Could Opt to Wait

By Clarence Chu

ZJLD Group (6979 HK) raised US$676m in its Hong Kong IPO in April 2023. Its six-month lockup will expire on 26th Oct 2023.
ZJLD is a Chinese liquor company producing baijiu. As per F&S, the firm ranked third among all baijiu companies with three or more aroma types in terms of FY21 sales.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Liontown Resources (LTR AU): State of Play

Liontown Resources (LTR AU) resumes trading today after announcing a raise of up to A$1.18bn to fully fund the Kathleen Valley Lithium Project to first production and beyond.
The equity component is up to A$421m and the placement price of A$1.8/share is a 35.5% discount to the last close.
The placement price is higher than the stock price prior to the Albemarle Corp (ALB US) offer and during a period when its peers have performed poorly.

Ohayo Japan | Rate Fears; Phase-Out of F-Gases for Heat Pumps Negative for Daikin

Overseas: SPX -0.8% , Nasdaq -0.8%; Fed Chair still concerned about inflation; jobs data shows ongoing econ strength; Tesla -9%
Today: NKY Futs -0.5% v cash. JPY 149.8/$; Calbee to test biogas production; Disco expects weakness in demand to continue; Softbank to build data center in Hokkaido
JapanX: The accelerated phase-out of F-gases, though aiming to make heat pumps cleaner, may hinder the shift from fossil fuels. Daikin and the industry face challenges and need swift adaptation.

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Oct 19

Most Read: DISCO Corp, Shinko Electric Industries, Qbe Insurance, Liontown Resources, Descente Ltd, Lithium Power International, Us Masters Residential Property Fund, Kenedix Office Investment Co, Indusind Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
Shinko Electric (6967) Update – MitCorp In The Mix?
Newcrest/Newmont & Potential S&P/ASX Changes
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
ANTA Sports Investor Day Targets DESCENTE (8114) For Growth
Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake
Lithium Power (LPI AU): Cedelco’s Offer
US Masters (URF AU): Almost Too Good To Be True
Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)
IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

Shinko Electric (6967) Update – MitCorp In The Mix?

Yesterday about 5 minutes before the close, Shinko Electric Industries (6967 JP) went into kehai, rising 8.6%, then falling back to end + 3% on the day.
This morning, the stock opened down 2%, rose 4%, fell 4%, then rose 4%. All in the first 45 minutes. Then it fell back 4% and ended down 2% today.
The proximate cause of all of this was a Reuters article out 5mins before the close yesterday suggesting Mitsubishi Corp (8058 JP) is considering bidding for Shinko Electric.

Newcrest/Newmont & Potential S&P/ASX Changes

Newcrest Mining (NCM AU) shares stop trading after the close on 26 October and Newmont Mining (NEM US) CDIs will start trading from the open on 27 October.
Newmont Mining (NEM US) CDIs should replace Newcrest Mining (NCM AU) in the S&P/ASX indices from 27 October. But there could be index changes at the subsequent rebalances.
Based on the case of Block (SQ2 AU), we could see Newmont Mining (NEM US) CDIs deleted from the ASX20 Index in December and from the ASX50 Index in March/June.

Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update

Liontown Resources‘ Suspension from Quotation “pending the release of an announcement regarding the finalisation of funding arrangements associated with the Kathleen Valley Project” could last till the open 20 October.
Short interest continued to increase prior to the trading halt and passive selling will be higher following Hancock increasing its stake to 19.9%.
The immediate funding for Liontown Resources (LTR AU) could come from debt sources with an equity raise coming later this year or early next year.

ANTA Sports Investor Day Targets DESCENTE (8114) For Growth

Yesterday, Anta Sports Products (2020 HK) held its Investor Day in Beijing. They talked about Descente Ltd (8114 JP) and their plans.
The presentation made by the Descente China Chairman talked about the evolution of performance and the target for 2026, suggesting higher profit now and growth going forward than market expectations.
None of this changes my outlook for why Itochu Corp (8001 JP) is buying Descente shares in the market. And the stock is going up.

Shinko Electric (6967 JP): Bidders Circle for Fujitsu’s Stake

Reuters reported that Mitsubishi Corp (8058 JP) is considering a joint bid for Fujitsu Ltd (6702 JP)’s 50% stake in Shinko Electric Industries (6967 JP).
Fujitsu first flagged a potential stake sale in its 1HFY22 results last October. Previously rumoured suitors include Apollo Global Management, Bain Capital, Dai Nippon Printing, JIC and KKR.
Shinko’s shares are up 73% YTD, which is not excessive compared to Ibiden Co Ltd (4062 JP) (up 63.2% YTD). The valuation is undemanding, which facilitates a potential offer.

Lithium Power (LPI AU): Cedelco’s Offer

Lithium Power International (LPI AU) has announced it has entered into a Scheme Implementation Deed with Chilean state miner Codelco, the world’s largest copper producer.
Codelco is offering LPI shareholders A$0.57/share, a whopping 119% premium to last close. LPI’s major shareholder, Minera Salar Blanco SpA with 28.25%, is supportive. As is LPI’s board.
The Scheme Meeting is expected to be held on the 23 January with implementation on the 8 February. Clean deal.

US Masters (URF AU): Almost Too Good To Be True

US Masters Residential Property Fund (URF AU), an ASX-listed real estate trust investing in single-family homes in gentrifying New York metropolitan neighbourhoods – what could go wrong?
Quite a lot, apparently. Shares are down bigly from the 2011 listing; the responsible entity faced ASIC-backed court proceedings for misleading clients; plus dissent emerged over appointing a new RE.
URF is gradually offloading its entire portfolio, and buying back shares, which are trading at 0.49x price-to-book. So, where’s the rub?

Kenedix J-REIT Family Merger – Still Room (But Less Time) To Move (Redux-Ish)

A month ago I wrote there was still time, and room, to move on the Kenedix Merger.
Now there’s less time, but the situation and relationships are better understood.
Tracking Excess Volume during the period since the announcement is interesting. And it may tell you less than you think.

IndusInd Bank (IIB IN): Passive Buying Coming Up as Foreign Room Crosses Key Threshold

Foreign investors sold ~5.7m shares of Indusind Bank (IIB IN) from July to September. That selling has pushed foreign room above the key 15% threshold.
With foreign room crossing 15%, passive trackers will need to buy a chunk of Indusind Bank (IIB IN) stock at the end of November.
There will be positioning on Indusind Bank (IIB IN) though it appears some of that was taken off in the last couple of days.

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Oct 18

Most Read: DISCO Corp, Suzlon Energy, Ryoyo Electro, Taiwan Cement, Pan Ocean, Qbe Insurance, Golden Eagle Energy, Liontown Resources, J&T Global Express and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
India – Positioning on Some Interesting* Names
Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge
Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged
Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM
Newcrest/Newmont & Potential S&P/ASX Changes
Golden Eagle Energy: Last Day To Buy Cum-Divvie
Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update
J&T Global Express IPO: Peer Comparison and Valuation
Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

India – Positioning on Some Interesting* Names

Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

Ryoyo (8068) – Ryosan (8140): Recent and Former Activist Targets To Merge

Today post-close, Ryoyo Electro (8068 JP) and larger equity affiliate (20.1%) Ryosan Co Ltd (8140 JP) announced their final Management Integration Plan (merger by holdco) after signalling a deal May23.
Activist-Ish-Y Silchester sold their stake in Ryosan to Ryoyo in February at a 20% premium. Activist Murakami-san had a top10 Ryosan stake end-March, went substantial 27 June, now owns 10%.
Both low-margin/ROE electronics traders have been subject to activist campaigns over the years. Both “survived”. Now they are banding together to be a bigger independent low-margin electronics trader.

Taiwan Cement GDS – Momentum Hasn’t Been the Greatest, Although It Is Very Well Flagged

By Clarence Chu

Taiwan Cement (1101 TT) is looking to raise US$395m in its global depository share (GDSs) issuance. Included in the offering is a concurrent US$420m convertible bond issuance.
The deal is a relatively large one to process at 19.5 days of three months ADV. Recent momentum on the stock hasn’t been the greatest as well.
That being said, the deal is very well flagged, and short interest remains elevated as well.

Pan Ocean To Sell 5.8% Stake in Hanjin Kal To Secure Funds to Acquire HMM

On 17 October, Pan Ocean (028670 KS) announced that it will sell its 3.9 million shares (5.85% stake) in Hanjin KAL Corp (180640 KS) for about 163 billion won.
The main purpose of this stake sale is to secure more funds for Pan Ocean to potentially acquire HMM Co., Ltd. (011200 KS).
As evidenced by the recent increase in Baltic Dry Index, the potential expansion of the war in Israel could benefit major bulk shipping companies such as Pan Ocean.

Newcrest/Newmont & Potential S&P/ASX Changes

Newcrest Mining (NCM AU) shares stop trading after the close on 26 October and Newmont Mining (NEM US) CDIs will start trading from the open on 27 October.
Newmont Mining (NEM US) CDIs should replace Newcrest Mining (NCM AU) in the S&P/ASX indices from 27 October. But there could be index changes at the subsequent rebalances.
Based on the case of Block (SQ2 AU), we could see Newmont Mining (NEM US) CDIs deleted from the ASX20 Index in December and from the ASX50 Index in March/June.

Golden Eagle Energy: Last Day To Buy Cum-Divvie

Back on the 26 July, Geo Energy Resources (GERL SP) announced an intention to acquire a majority stake in coal miner Golden Eagle Energy (SMMT IJ) (GEE).
GEO shareholders have now approved the purchase of a 58.7% stake in Golden Eagle from Indonesian conglomerate Rajawali Group, triggering an MTO at IDR1,255/share, which is subject to Indonesia’s OJK.
In addition, GEE announced a special/additional dividend, with a cum-entitlement today, the 17th of October.

Liontown Resources (LTR AU): Trading Halt Extended; Passive Selling Update

By Shifara Samsudeen, ACMA, CGMA

Liontown Resources‘ Suspension from Quotation “pending the release of an announcement regarding the finalisation of funding arrangements associated with the Kathleen Valley Project” could last till the open 20 October.
Short interest continued to increase prior to the trading halt and passive selling will be higher following Hancock increasing its stake to 19.9%.
The immediate funding for Liontown Resources (LTR AU) could come from debt sources with an equity raise coming later this year or early next year.

J&T Global Express IPO: Peer Comparison and Valuation

J&T Global Express (1519 HK) has announced the terms for its IPO. The company plans to issue 327m shares at HK$12 per share, which should raise proceeds of around US$501m.
Though profitability of the company’s China business has improved, SEA margins continue to decline, hence our analysis suggests that J&T may not be able to generate profits in the near-term.
Our SOTP valuation offers per share value of HK$9.48 per share which is at a 21% discount to the indicative IPO price suggesting J&T’s IPO is overvalued.

Ohayo Japan | More US Tech Restrictions on China; Nidec & The Future of Urban Air Mobility

Overseas: SPX flat , Nasdaq -0.3%; Treasury yields resumed rise on stronger-than-expected retail sales
Today: NKY Futs +0.3% v cash. JPY 249.8; Keisei Electric Rail attracts activist interest; SONY/Honda unveil new EV
JapanX: Nidec Powering the Future of Urban Air Mobility; perhaps a new growth driver to think about

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Oct 17

Most Read: CyberAgent Inc, Eoflow , Suzlon Energy, J&T Global Express, Hana Microelectronics, Hanwha Ocean, DISCO Corp, Astra International and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan – Increase in Shorts on Some Interesting* Stocks
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
India – Positioning on Some Interesting* Names
J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines
Hana Microelectronics Placement – Stock Has Been Doing Well, Unclear if Deal Is Well Flagged
Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation
J&T Global Express IPO – Team Effort for Some Heavy Lifting
Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes
WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

India – Positioning on Some Interesting* Names

Polycab India, Macrotech Developers, Paytm, Tata Communications, Tata Motors DVR, Apl Apollo Tubes, Persistent Systems and Suzlon Energy have run up over the recent past and have heightened investor attention.
The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

J&T Global Express (1519 HK): Index Inclusion Possibility & Timelines

J&T Global Express (1936374D CH) is looking to raise HK$3.92bn (US$501m) in its IPO by selling 326.55m shares at HK$12/share, valuing the company at HK$105.75bn (US$13.52bn).
J&T Global Express (1936374D CH) will not get Fast Entry to any indices but should be added to the HSCI in March. Inclusion to Southbound Stock Connect will take longer.
Inclusion in other indices will take longer with the highest probability of index inclusion in September 2024.

Hana Microelectronics Placement – Stock Has Been Doing Well, Unclear if Deal Is Well Flagged

By Sumeet Singh

Hana Microelectronics (HANA TB) aims to raise up to US$105m to finance expansion of Hana’s silicon carbide strategy including PMS (Power Master Semiconductor).
The deal scores well on our framework given the company’s strong recent performance and decent long term track record
In this note, we will talk about the deal dynamics.

Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading

First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading.
If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free.
We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.

J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation

By Daniel Hellberg

In this insight we consider what it would take to pull our valuation up closer to US$13 bn
Such a valuation would require solid revenue growth (+17-18% Y/Y or better), plus sustained progress on raising China and ‘Other’ EBITDA margins, which are currently negative
Even with these optimistic assumptions, J&T would trade at 20x EV/2025 Adj EBITDA & at historical EV/Revenue multiples far above more profitable Chinese express names

J&T Global Express IPO – Team Effort for Some Heavy Lifting

By Sumeet Singh

J&T Global Express, a global logistics service provider, is looking to raise about US$500m in its Hong Kong IPO.
As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 22.5% market share as per 2022 parcel volume.
We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we talk about valuations.

Nikkei 225 Index Rebalance Preview (Mar 2024): Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passive trackers will need to buy between 6-28x ADV (11-50% of real float) on the inclusions and sell between 2.8-44x ADV on the deletions.
Fast Retailing (9983 JP) could be capped at 11% of the index weight and there will be buying in Nitori Holdings (9843 JP) due to the stepwise addition.

WisdomTree Oct ’23 Rebalance: Estimated Flows for All Adds and Deletes in DEM, XSOE & DGS

By Charlotte van Tiddens, CFA

HDFC Bank (HDFCB IN) is the largest buy (XSOE) – estimated flow $44m. Grupo Financiero Banorte SAB d (GFNORTEO MF) is the 2nd largest buy – estimated flow $40m.
Wistron Corp (3231 TT) is the largest sell – estimated flow $68m. POSCO Holdings (005490 KS) is the 2nd largest sell – estimated flow $59m.
Our estimate for the total value of new constituent buys is $1.38bn. We expect deletions to the value of $1.41bn to be sold down across the 3 funds.

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Oct 16

Most Read: Liontown Resources, Allkem Ltd, CyberAgent Inc, Japan Post Bank, Eoflow , Tsi Holdings, Boss Resources, Light & Wonder and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Liontown Resources (LTR AU): Passive Selling on Lower Float
Liontown Warms To Albemarle’s Bump
Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
Japan – Increase in Shorts on Some Interesting* Stocks
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown
Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy
EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Liontown Warms To Albemarle’s Bump

Back on the 28 March, Liontown Resources (LTR AU) rejected the third proposal of $2.50/share from Albemarle (ALB US), the world’s largest lithium producer, citing terms were opportunistic.
Then everything went quiet. There appeared to be an interested party building a stake ~$2.75/share, but nothing concrete emerged.
Now Albemarle has returned with a revised indicative proposal of $3.00/share – best and final. Due diligence has been granted. The board is supportive if terms are firmed.

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

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.

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy

Should the nominated directors, to be voted on by EOFlow (294090 KS)‘s shareholders at the November EGM, include Medtronic Plc (MDT US) executives, then game on.
Fast Retailing (9983 JP) STILL has a Nikkei 225 problem, which means it probably has to underperform Nikkei 225 slightly between now and the Base Date (31 July 2024).
JMDC (4483 JP) has been one of the more annoying partial tenders out there. Even post-facto, it is tough to know what the disposition was. This is extraordinarily vexing.

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors

In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one.
They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

Light & Wonder (LNW AU) will replace United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
Invocare Ltd (IVC AU) is expected to stop trading after the close on 3 November and Boss Resources (BOE AU) is best placed to be the replacement.
There are stocks that are close on the heels of Boss Resources (BOE AU) and will compete for a place. Two of those could be added at the December rebalance.

Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
This is a possibly deceptive index add. I’d be quite careful.

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Oct 15

Most Read: Li Auto , China Unicom Hong Kong, China Galaxy Securities (H), Astra International, Wuhan Jingce Electronic Group, Nws Holdings, HDFC Bank, Light & Wonder , Allkem Ltd, Japan Post Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December
HSCEI Index Rebalance Preview: One Change; Capping Impact Increases
WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues
NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains
WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade
S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG
Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye
Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

HSTECH Index Rebalance Preview: Round-Trip Trade of US$556m in December

With no stocks in inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in December.
Capping changes will result in a one-way turnover of 2.16% and that will result in a round-trip trade of US$556m.
The impact of capping changes has doubled over the last month and there will be more changes from now till the official capping is done on 28 November.

HSCEI Index Rebalance Preview: One Change; Capping Impact Increases

Zhongsheng Group (881 HK) is in deletion zone and could be deleted. China Unicom Hong Kong (762 HK) could be added to the index as the highest ranked non-index constituent.
Estimated one-way turnover at the rebalance is 2.14% resulting in a one-way trade of HK$1.38bn. Meituan (3690 HK), Alibaba Group (9988 HK) and Tencent (700 HK) will be capped higher.
China Unicom Hong Kong (762 HK) is supported on its 50/100 day moving averages and could move higher. Zhongsheng Group (881 HK) has been trading below its moving averages.

WisdomTree Emerging Markets SmallCap Dividend Index Rebalance: 45% Turnover & US$2.5bn to Trade

The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
The October rebalance will result in a one-way turnover of ~45% and in a one-way trade of US$1.24bn. There are ~300 stocks with over 1 day of ADV to trade.
With only 4 trading days to implementation, there could be large moves on stocks with large flows and impact over the next few days.

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).

ChiNext/ChiNext50 Index Rebalance Preview: Sector Rotation Continues

Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in December.
Given stock selection uses liquidity as a major input, the impact of passive trading will be much larger on the deletions as compared to the additions.
The potential adds have outperformed the potential deletes, but relative performance has been drifting lower over the last few months. There are stocks that will have flows from other indices.

NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains

Accelerating the Offer timetable for NWS (659 HK) such that it closes before the dividend ex-date appeared stingy. But why pay dividends to shareholders that won’t hold the shares anymore?
Those concerns have been put to rest with the despatch of NWS’ Composite Doc and New World (17 HK)‘s Circular, guaranteeing all shareholders the dividend, no matter the Offer outcome.
The key risk now is NWD’s independent shareholder vote. On balance, this should get up.

WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade

The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG

Shareholders have approved United Malt Group Ltd (UMG AU)‘s acquisition by Malteries Soufflet and UMG is expected to stop trading after the close on 17 October.
United Malt Group Ltd (UMG AU) will be replaced by Light & Wonder (LNW AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
This is a surprise and there is unlikely to be a lot of pre-positioning on Light & Wonder (LNW AU). Buy Light & Wonder (LNW US) during US hours.

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

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.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

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Oct 14

Most Read: Shinko Electric Industries, Fast Retailing, Astra International, Eoflow , Nws Holdings, HDFC Bank, EcoPro Materials, Light & Wonder , Seven & I Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Shinko Electric (6967) – Waiting for a Package
Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem
WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week
What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It
NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains
WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade
Major Revisions of the Corporate Governance Report Guidelines in Korea: To Reduce “Korea Discount”
Ecopro Materials: Reduces IPO Price Range
S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG
Seven & I: Unimpressive Results & Potential Investor Exodus Amidst Superstore Transformation

Shinko Electric (6967) – Waiting for a Package

Shinko Electric Industries (6967 JP) has been on the block. 2nd Round Bids were apparently due last month, but with “Economic Security” considerations, one wonders if that stretches a bit.
The stock is now at the low end of its range vs Ibiden, and the timing is right for a deal which could give it a pop.
A “split price” takeover seems reasonable as a structure. I expect upside. Still.

Fast Retailing (9983) Beats Guidance, Stronger Forecasts, STILL Has a Nikkei 225 Problem

Fast Retailing (9983 JP) today announced better than guided results, and 10% revenue growth, 18% OP growth to August 2024. NP is light, but still well higher than street consensus.
At 10.37% Nikkei 225 weight, it is still above the target for 31 July 2024. If it does not underperform Nikkei 225 between now and then, US$2bn to sell end-Sep24.
If people like the growthiness, that can be absorbed. But if the stock were to go up 10% vs Nikkei, there’d be US$2bn, then maybe another US$2bn to sell.

WisdomTree Emerging Markets High Dividend Index Rebalance: Huge Turnover & Trade Next Week

The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of high dividend yield stocks within emerging markets.
The October rebalance will result in a one-way turnover of ~37% and in a one-way trade of US$926m. There are 92 stocks with over 1 day of ADV to trade.
In Asia, the largest buy flows are expected on Astra International (ASII IJ) and the largest sell flows on POSCO Holdings (005490 KS).

What EOflow Insiders Are Saying on the Current Situation & An Objective Interpretation of It

They said that EOflow has made a strategic decision not to raise any objections to the court’s injunction to temporarily suspend the sale and marketing activities of EOPATCH.
They stated their commitment to making efforts to actively prove that they are not subject to KRX’s substantive delisting examination. Hence, they aim to resume trading from November 1st.
They subtly hinted at a degree of caution, suggesting that the final agreement with Medtronic might undergo slight modifications to align with the outcome of this preliminary injunction.

NWS (659 HK): Final Divvie Assured. NWD Vote Risk Remains

Accelerating the Offer timetable for NWS (659 HK) such that it closes before the dividend ex-date appeared stingy. But why pay dividends to shareholders that won’t hold the shares anymore?
Those concerns have been put to rest with the despatch of NWS’ Composite Doc and New World (17 HK)‘s Circular, guaranteeing all shareholders the dividend, no matter the Offer outcome.
The key risk now is NWD’s independent shareholder vote. On balance, this should get up.

WisdomTree Emerging Markets Ex-State-Owned Enterprises Index Rebalance: 16% Turnover, US$660m Trade

The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

Major Revisions of the Corporate Governance Report Guidelines in Korea: To Reduce “Korea Discount”

On 12 October, the Financial Services Commission (FSC) announced major Revisions of the Corporate Governance Report Guidelines, including improvement of dividend procedures and revisions of governance principles.
The major revisions of the Corporate Governance Report Guidelines in Korea should be catalysts for reducing “Korea Discount.”
These new Corporate Governance Report will recommend the KOSPI listed companies with assets of more than 500 billion won to comply with the new guidelines effective 2024.

Ecopro Materials: Reduces IPO Price Range

Ecopro Materials reduced the upper end of the IPO price range from 46,000 won to 44,000 won.
The bankers reduced the IPO discount, EV/EBITDA valuation multiple, and outstanding shares.
We maintain our Bearish view of the Ecopro Materials IPO. Our base case valuation of 37,436 won per share is towards to lower end of the IPO price range.

S&P/ASX 200 Index Adhoc Change: Light & Wonder (LNW) To Replace UMG