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• The SBI Holdings (8473 JP) takeout of SBI Shinsei Bank (8303 JP) was opportunistic – done at a price SBI Shinsei’s Board considered not reasonable. Until it changed its mind.
• I had thought appraisal rights a great trade. I also thought it a good trade to own the back end, but that involved one holder putting ¥55bn on the table. 
• Activist Murakami-san’s S Grant Corporation has done that. It will own one share of 8 post-consolidation on Monday. They are now equal shareholders with the govt entities.  Wow.

• In a surprise development, UnionBank of the Philippines (UBP PM) will be deleted from the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and replaced with Nickel Asia (NIKL PM). 
• There will be a BIG impact on both stocks as a result of the change with passive trackers need to trade in excess of 30 days ADV.
• Expect both stocks to move today and then continue that move for the next few days till the changes are implemented.

• The Delta Electronics Thai (DELTA TB) / Delta Electronics (2308 TT) spread peaked earlier this year and has been trending lower for the last few months (but it is volatile!).
• Delta Electronics Thai (DELTA TB) dropped 20% on Friday following Delta Electronics (2308 TT)‘s placement of 0.72% of shares outstanding. The stock last closed 12.7% below the placement price.
• Delta Electronics (2308 TT) still owns over 63% of Delta Electronics Thai (DELTA TB) and there could be more downside for the Thailand line over the near term.

• On the 24 August, Kuala Lumpur Kepong (KLK MK) entered an agreement with Boustead Holdings (BHB), Boustead Plantations (BPLANT MK)‘s largest shareholder, to acquire a 33% plus 1 share stake.
• Upon the completion of the agreement, KLK – together with BHB and LTAT – would make a Mandatory Offer for BPlant. The Offer Price would be RM1.55/share, a lifetime high
• It all looked pretty straightforward. However the BHB/LTAT agreement has twice been delayed. This may still get done. But there remain a number of political kinks to be ironed out. 

• Boustead Plantations (BPLANT MK) shares are down 16%, resulting in proprietary day trading and intraday short selling being suspended. The transaction is mired in political debate. 
• The bull case is that Kuala Lumpur Kepong (KLK MK) continues on-market purchases and the opposition will compromise, paving the way for deal completion. Timing is the key risk. 
• The bear case is a deal break. The downside is limited as the government will need another buyer, the shares trade below the undisturbed price, and the undemanding valuation. 

• Using data from the close on 28 September, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
• There will also be capping and funding flows that will lead to a one-way turnover of 19.8% and a one-way trade of US$1.36bn.
• There are 15 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

• In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in August and September 2023.
• We provide a list of 18 stocks in the Korean stock market that have announced share buyback programs in August and September 2023.
• The top three market cap stocks that have announced share repurchases include Celltrion Inc (068270 KS), Celltrion Healthcare (091990 KS), and KT&G Corporation (033780 KS). 

• 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 – Keiyo Co Ltd (8168 JP), 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), IMAX China Holding (1970 HK), JSR Corp (4185 JP). 
• Lowest spreads  Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), Pact Group Holdings (PGH AU), T&K Toka Co Ltd (4636 JP), Celltrion Healthcare (091990 KS), Seiko Pmc Corp (4963 JP). 

• The Hollysys Automation Technologies (HOLI US) Board succumbs to shareholder pressure by announcing the formation of a special committee to conduct a formal sale process.
• Hollysys has received non-binding proposals from six parties since December 2020. The most recent is a non-binding proposal from the Recco consortium at US$25.00 per share.
• The Board’s change of heart should encourage previous bidders to re-engage. Recco’s offer, while attractive, is not a knockout bid, suggesting a possible bidding war. 

• We reviewed our PDD investment thesis trying to incorporate and make sense of various channel checks and sell-side’s research which are often inconsistent and even conflicting.
• While there are many unknowns and ambiguities, we are convinced the street still significantly underestimates PDD’s growth outlook for 2H23, and fails to see a slowdown in FY24.
• Our price target remain unchanged as lower target P/E multiple (to reflect slowdown prospect) is offset by higher FY23 earnings which flow to outer years.  

• The SBI Holdings (8473 JP) takeout of SBI Shinsei Bank (8303 JP) was opportunistic – done at a price SBI Shinsei’s Board considered not reasonable. Until it changed its mind.
• I had thought appraisal rights a great trade. I also thought it a good trade to own the back end, but that involved one holder putting ¥55bn on the table. 
• Activist Murakami-san’s S Grant Corporation has done that. It will own one share of 8 post-consolidation on Monday. They are now equal shareholders with the govt entities.  Wow.

• Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP) 
• This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
• There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great. 

• The latest Mate 60 Kirin SOC is a major accomplishment for the Huawei, SMIC combo
• SMIC will likely continue to refine their N+2 node and develop a 5nm-like process within 2-3 years, even without the use of EUV
• SMIC’s accomplishment is not reflected in its share price which lies midways between 52 week highs & lows

• Kokusai Electric (6525 JP) is a speciality manufacturer of semiconductor production equipment. KKR & (KKR US) seeks to raise about US$750 million through listing Kokusai.
• In Kokusai Electric IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on a declining revenue trend, a challenging near-term growth target, high China revenue risk, margins on a downward trend, increasing inventory days and deteriorating FCF.

• Real estate consultant/developer/speculator Kasumigaseki Capital (3498 JP) announced Friday that it would move from TSE Growth to TSE Prime on 6 October. 
• The stock was on the list of top potential candidates in TOPIX Inclusions: Who Is Ready (Sep 2023) (and has been for nearly a year). It’s a good list.
• This event leads to a TOPIX inclusion on 29 November. Analysis below.

• The Delta Electronics Thai (DELTA TB) / Delta Electronics (2308 TT) spread peaked earlier this year and has been trending lower for the last few months (but it is volatile!).
• Delta Electronics Thai (DELTA TB) dropped 20% on Friday following Delta Electronics (2308 TT)‘s placement of 0.72% of shares outstanding. The stock last closed 12.7% below the placement price.
• Delta Electronics (2308 TT) still owns over 63% of Delta Electronics Thai (DELTA TB) and there could be more downside for the Thailand line over the near term.

• Our base case valuation for Ecopro Materials is implied price per share of 40,325 won per share, which is within the IPO price range of 36,200 won to 46,000 won.
• Given the lack of upside relative to the IPO price range, we have a negative view of this IPO. 
• Ecopro Materials is engaged in the business of manufacturing and selling high-nickel precursors, one of the key materials for high-nickel anode materials for secondary batteries.

• The introduction of float market cap is anticipated to apply not only to sector-based screening for the KOSPI 200 but also to special entry considerations.
• Cosmo AM&T emerges as a direct beneficiary of this change. It currently ranks 52nd within the KOSPI, maintaining a tight gap with the borderline (50th).
• Once it enters the KOSPI 200, it will also become a part of KOSPI 200 IT. As a result, the estimated flow size is approximately ₩230B, about 6x ADTV.

• OVERSEAS: The S&P 500 had a challenging September, closing down 5% for the month, marking its worst monthly performance since December 2022
• JAPAN: Euglena shifts focus to commercial biofuels, Welcia partners with AEON for increased food sales, and Hitachi Zosen revolutionizes artificial meat with a 90% cost reduction in synthetic protein
• JAPAN X: Growth in EV sales can only be sustained if charging demand is met by accessible and affordable infrastructure

• There were a few rebalances implemented last week, notably the Nikkei 225 (NKY INDEX) and the NIFTY family of indices. Plus an ad hoc Philippines Stock Exchange PCOMP INDEX rebalance.
• Nickel Asia (NIKL PM) will replace UnionBank of the Philippines (UBP PM) in the Philippines Stock Exchange PCOMP INDEX in a surprise move at the close on 3 October.
• There were outflows from iShares MSCI Japan ETF (EWJ US), Tracker Fund of Hong Kong (2800 HK) and iShares MSCI Emerging Markets (EEM US) during the week.

• The September 2023 Nikkei 225 Rebalance is tomorrow at the close. This will engender a lot of buying of three names, and a lot of selling of 3 names.  
• It will also engender a funding trade of nearly ¥460bn. 
• I am going to beat the dead horse and warn about certain issues with this rebalance.

• ICICI Securities Ltd (ISEC IN) Turbulent Journey: From a disappointing IPO to a challenging delisting attempt.
• Delisting Plan and Shareholder Discontent: ICICI Securities Ltd (ISEC IN)  seeks to become a wholly-owned subsidiary of ICICI Bank Ltd (ICICIBC IN), facing resistance from minority shareholders.
• Uncertain Future: The outcome of the delisting hinges on the decisions of institutional shareholders like Life Insurance of India (LICI IN)  and the board’s actions.

• In a surprise development, UnionBank of the Philippines (UBP PM) will be deleted from the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and replaced with Nickel Asia (NIKL PM). 
• There will be a BIG impact on both stocks as a result of the change with passive trackers need to trade in excess of 30 days ADV.
• Expect both stocks to move today and then continue that move for the next few days till the changes are implemented.

• The rebalance of the NIFTY, Nifty Next 50, NSE Nifty Bank, CPSE ETF (CPSEBE IN) and a bunch of other indices will be implemented at the close of trading today.
• Depending on the index, there are constituent changes, changes to the number of shares and free float, plus capping changes. Put together, there is a lot of flow and impact.
• The round-trip trade will be in excess of US$1bn. Add in the futures & options expiry and volumes will be extremely high in the last 30 minutes of trading.

• The SBI Holdings (8473 JP) takeout of SBI Shinsei Bank (8303 JP) was opportunistic – done at a price SBI Shinsei’s Board considered not reasonable. Until it changed its mind.
• I had thought appraisal rights a great trade. I also thought it a good trade to own the back end, but that involved one holder putting ¥55bn on the table. 
• Activist Murakami-san’s S Grant Corporation has done that. It will own one share of 8 post-consolidation on Monday. They are now equal shareholders with the govt entities.  Wow.

• Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP) 
• This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
• There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great. 

• Nike (NKE US) reported better than expected 1Q24 results this morning, with the stock up 8% in after market trading. 
• Nike’s inventories declined by 10% yoy during the quarter, which bodes well for Shenzhou Intl Group Holdings (2313 HK), as sales to Nike made up 30% of Shenzhou’s sales.
• Shenzhou is trading at 15x 2024E PE, compared to an average of 21x forward PE over the last decade. 

• Real estate consultant/developer/speculator Kasumigaseki Capital (3498 JP) announced Friday that it would move from TSE Growth to TSE Prime on 6 October. 
• The stock was on the list of top potential candidates in TOPIX Inclusions: Who Is Ready (Sep 2023) (and has been for nearly a year). It’s a good list.
• This event leads to a TOPIX inclusion on 29 November. Analysis below.

• Ecoeye is getting ready to complete its IPO on the KOSDAQ exchange in November. Ecoeye specializes in carbon emission rights related businesses. 
• The IPO price range is from 28,500 won to 34,800 won per share. The IPO offering amount is from 59.3 billion won to 72.1 billion won. 
• Established in 2005, Ecoeye makes money through carbon emissions trading and brokerage, carbon reduction business, carbon emissions trading system, and operation consulting. 

• Absolute value of index-linked assets is the ultimate measure of market share, but it misses an important aspect of the ESG-related indexing market – i.e., relative market share growth.
• A category of ESG index providers that leads vis-à-vis relative growth is exchange-owned ESG index providers, a group which currently accounts for US$46.3 billion in indexed assets.
• Asian exchange-owned ESG indexers are the clear leaders in that subcategory, with Singapore Exchange (SGX SP) and Korea Exchange leading that cohort with double-digit growth.

• The September 2023 Nikkei 225 Rebalance is tomorrow at the close. This will engender a lot of buying of three names, and a lot of selling of 3 names.  
• It will also engender a funding trade of nearly ¥460bn. 
• I am going to beat the dead horse and warn about certain issues with this rebalance.

• There could be two changes for the SET50 INDEX with JMT Network Services (JMT TB) and I-TAIL (ITC TB) replacing Srisawad Power (SAWAD TB) and Ngern Tid Lor (TIDLOR TB). 
• With no further inclusions on the Market Surveillance Measure list, Delta Electronics Thai (DELTA TB) should be safe at the December rebalance.
• There are a couple of stocks that are close to passing/failing the liquidity tests and that could result in further changes to the index.

• In a surprise development, UnionBank of the Philippines (UBP PM) will be deleted from the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and replaced with Nickel Asia (NIKL PM). 
• There will be a BIG impact on both stocks as a result of the change with passive trackers need to trade in excess of 30 days ADV.
• Expect both stocks to move today and then continue that move for the next few days till the changes are implemented.

• Last week on 20 Sep I published Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule and Sunday, The Biggish Sep 2023 “Wednesday-Thursday Trade” With Added Monday/Friday Flavour. 
• They were based on an expectation the TSE would announce the initial selldown for Sep-end as they normally would. Unbeknownst to me, on 22 Sep they announced end-Oct.
• The initial TOPIX selldown is 30 Oct, not 28 Sep. This affects expected reverse funding today.

• We believe that Warren Buffett’s investments in Japanese trading companies have also positively impacted several Korean trading companies in the past three years. 
• We highlighted seven Korean trading companies three years ago including Posco International and their share prices are up more than 76% on average in this period. 
• Despite their outstanding share price performance in the past three years, there could be some significant headwinds ahead, as evidenced by the steep inverted yield curve.

• Hengan International Group (1044 HK) and Vinda International (3331 HK) are both market leaders in China’s personal care industry.
• Hengan’s operations have greater exposure to sanitary napkins and diapers; whereas tissues account for 83% of Vinda’s revenue. Both companies have been impacted by an increase in wood pulp prices.
• Hengan is trading cheap; but Vinda’s bottom line is forecast to return to its glory days. Plus rumours of a possible takeover of Vinda continue to do the rounds. 

• Cainiao Smart Logistics, Alibaba Group Holding (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In this note, we talk about the not-so-positive aspects of the deal.

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

• Vedanta Resources

• Today after the close, DCM Holdings (3050 JP) announced it would launch a friendly takeover by Tender Offer for Keiyo Co Ltd (8168 JP) 
• This is totally not a surprise. They signed a Business and Capital Alliance in 2017. DCM bought more at a premium last autumn. This takeover was obvious in the long-term.
• There are enough friendly holders to get this done. Activism would be hard unless it was really cheap, which it does not seem to be, but process wasn’t great. 

• Lately, we’ve been quite outspoken regarding the imminent threat posed by the USD/Oil dynamics, which has the potential to unleash turmoil within the emerging markets sphere.
• While we typically don’t shy away from challenging prevailing opinions, it appears that, in this specific context, our perspective is slowly becoming the consensus view (which, I might add, is more lucrative than the opposite order).
• But perhaps it is worthwhile to question and assess the fundamental drivers behind the current predicament-  and ask what does it take to turn things around?

• The September 2023 Nikkei 225 Rebalance is tomorrow at the close. This will engender a lot of buying of three names, and a lot of selling of 3 names.  
• It will also engender a funding trade of nearly ¥460bn. 
• I am going to beat the dead horse and warn about certain issues with this rebalance.

• Cainiao Smart Logistics ,  Alibaba Group Holding (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In this note, we talk about the positive aspects of the deal.

• Last week on 20 Sep I published Toshiba Tender Offer Ends Today – Upcoming Index Selldown Schedule and Sunday, The Biggish Sep 2023 “Wednesday-Thursday Trade” With Added Monday/Friday Flavour. 
• They were based on an expectation the TSE would announce the initial selldown for Sep-end as they normally would. Unbeknownst to me, on 22 Sep they announced end-Oct.
• The initial TOPIX selldown is 30 Oct, not 28 Sep. This affects expected reverse funding today.

• Taiwan Cement (1101 TT) is looking to raise US$400m in its upcoming global depository receipts (GDRs) offering. Included is another planned raising of US$500m via convertible bonds.
• Similar to previous GDR listings, the deal is a long drawn out process with TC requiring multiple approvals, and thus providing ample time for investors to position for the raising. 
• As of last close, the amount of shares to be offered under the equity component is around 388m shares, or 19.5 days of three month ADV. 

• The rebalance of the NIFTY, Nifty Next 50, NSE Nifty Bank, CPSE ETF (CPSEBE IN) and a bunch of other indices will be implemented at the close of trading today.
• Depending on the index, there are constituent changes, changes to the number of shares and free float, plus capping changes. Put together, there is a lot of flow and impact.
• The round-trip trade will be in excess of US$1bn. Add in the futures & options expiry and volumes will be extremely high in the last 30 minutes of trading.

• Cainiao Smart Logistics (1437124D HK) ‘s March 2023 quarterly and full-year results can be found within Alibaba’s full-year earnings report, which was released on Thursday May 18
• In both the March quarter and its fiscal year, CaiNiao showed improved Adjusted EBITDA results, though in both periods the tech-centric logistics network still reported losses
• Revenue growth slowed to 18% Y/Y in the March quarter, and parent Alibaba (ADR) (BABA US) indicated CaiNiao will target an IPO in 2024, a bit later than some expected

• Hengan International Group (1044 HK) and Vinda International (3331 HK) are both market leaders in China’s personal care industry.
• Hengan’s operations have greater exposure to sanitary napkins and diapers; whereas tissues account for 83% of Vinda’s revenue. Both companies have been impacted by an increase in wood pulp prices.
• Hengan is trading cheap; but Vinda’s bottom line is forecast to return to its glory days. Plus rumours of a possible takeover of Vinda continue to do the rounds. 

• Ecopro Materials will benefit from passive flows generated by being a part of the battery-themed ETFs in the Korean local ETF market. And this will create noteworthy flow instances.
• There will be a total of six flow events occurring consecutively from March to June next year. For all except for K-New Deal, there is a high likelihood of inclusion
• In particular, it appears that we should target the rebalancing trading of the TIGER Secondary Cell ETF, which occurs on the second Thursday of April next year.

• OVERSEAS: US stocks +0.6% – its all macro at the moment – higher interest rates, oil price volatility; US 30y mortgage rates now at 7.3%; Nike earnings beat 
• JAPAN: NKY Futures +0.4% vs cash. Toyota Aug production +4%; EPCOs to lower residential electricity prices; Sony’s Game unit gets new interim boss. 
• JAPAN X: Daikin’s concerns about the UK Government backtracking on its climate pledge highlight our concerns over heat pump adoption

• EcoPro Materials (ECO123 KS) is looking to raise up to US$500m in its Korean IPO. 
• Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries. 
• Ecopro Materials’ revenue has grown by more than three times over the track record period.  However, its parent company Ecopro and sister company Ecopro BM have been mired in controversy.

• EcoPro Materials (ECO123 KS) was founded in 2017 and specializes in manufacturing cathode material precursors, a core material for lithium secondary cells.
• EcoPro Materials (ECO123 KS) could raise between US$387m-US$492m, valuing the company between US$1.9bn-US$2.42bn. Float will depend on voluntary lock-ups and allocation to strategic investors.
• Inclusion in global indices is likely to take place between February to June, while the highest probability of Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion is in December 2024.

• The official announcement from KRX regarding the KOSPI 200 rebalancing rule change is expected to be released shortly after the end of October.
• The rule change will take effect beginning with this year’s December rebalancing. An official from KRX has communicated that we can confidently regard this as confirmed.
• It is essential to be aware that during this December review, there exists a significant potential for generating substantial price fluctuations within a narrow timeframe.

• Haitong International Securities Group (665 HK) (HITSEC) is suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
• The rumour doing the rounds is that Haitong Securities Co Ltd (A) (600837 CH) (HSC) may take private its 73.4%-held Hong Kong-listed investment banking unit.
• HITSEC’s share performance since 1Q18 has been tragic. Financials have been dire since 2H20.  But expect a punchy premium if HTS does seek to take HITSEC private. 

• The stock is down more than 50% from its high 3yrs ago. The founder is 79. The CEO is 75. Employees and former directors own another 10%.
• This is an exit vs an MBO. And the Target Side negotiating the exit were rolled by Bain. This is NOT an expensive purchase. Bain’s equity check is 2.3x EBIT.
• But it probably gets done anyway unless someone gets noisy. For that, they’d have to buy a 10-15% stake I expect. 

• On 27 September, Maeil Business Daily reported that SK Square signed an MOU with Qoo10 to pursue a joint management of 11st. 
• It appears that Alibaba may have been reviewing this deal but it is no longer interested in pursuing 11st.
• A deal between Qoo10 and 11st could occur, but this is not certain, which means some of the cash proceeds to FI would need to be burdened by SK Square.

• Early last year there were articles suggesting that KKR would IPO Kokusai Electric at a valuation of about ¥700bn. 
• A year plus later the company is now set to IPO for something on the order of ¥436bn. 
• We are sure KKR is breathing a sigh of relief that they didn’t unload shares 60% higher and can now offer other investors some “value”.

• Should the stock conversion decision be reached this week, the new shares will be listed on the 15th of the upcoming month. So, they will officially debut on October 16th.
• On the day of the new share listing during the immediate previous case, the price dropped by 2.36%, and on the very next trading day, it declined by 3.72%.
• Given the present dilution rate of 30%, there is a higher probability of even more pronounced price movements in the same direction.

• Doosan Robotics (454910 KS) is principally engaged in the manufacture and sale of industrial robots.
• Doosan Robotics has raised KRW 421bn (US$311m) in its IPO, valuing the company at KRW 1,685bn (US$1.245bn). Float at listing will vary from 6%-21% depending on index provider.
• Inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and other global indices will take place between Feb (possibly May) and June next year.

• Cainiao Smart Logistics ,  Alibaba Group Holding (9988 HK)’s logistics linked arm, is planning to raise at least US$1bn in its Hong Kong IPO.
• Cainiao is the largest provider of cross-border e-commerce logistics services globally and a leader in China logistics services, according to CIC.
• In this note, we talk about the positive aspects of the deal.

• Alibaba (ADR) (BABA US)‘s logistics arm, Cainiao Smart Logistics (1437124D HK), filed for an IPO with HKEX yesterday, aiming to raise $1bn to $2bn.
• Although efficient, Cainiao may face business challenges, as the majority of logistics costs and revenues stem from services outsourced to logistics partners.
• Despite the proposed IPO, we believe that Cainiao will always operate in the shadow of Alibaba’s primary e-commerce business.

• Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
• But there may be ¥800bn+ to buy on one day into the close later this month (+ another ¥200-300bn on two other days). Then a ¥500bn sell two days later.
• Over the past ten years, the two day return on the March trade is great. In Sep, not so much. This year there are Extra Special Flows.

• On 28th Mar 2023, Alibaba (ADR) (BABA US) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
• Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
• In our previous note, we highlighted which division could list. In this note, we will look at Cainiao.

• Alibaba (ADR) (BABA US) aims to complete the IPO of Cainiao Smart Logistics (1437124D HK) in the next 12 to 18 months. Alibaba holds a 67% stake in Cainiao. 
• Cainiao’s revenue growth, while on a declining trend, remains in double digits. Encouragingly. narrowing losses set a path to profitability.
• On 30 March, Bloomberg reported that Cainiao is currently valued at more than US$20 billion. Our valuation analysis suggests that such a valuation is justifiable.

• Niche Japanese Semiconductor Production Equipment specialist Kokusai Electric (6525 JP) last Thursday announced the TSE approved its late October IPO (with indicative pricing, shares to be sold, and initial prospectus).
• This insight looks at initial shareholder structure, selling group, post-IPO shareholder structure with index inclusion timing, and follow-on flow possibilities. 
• At ¥435bn indicative market cap, it will be the largest IPO in Japan since pre-covid, despite coming in a cycle trough. I expect it will be hot. 

• On 31 August, I published Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks. It’s up 40.6% since the day after I wrote, reasons unclear.  
• TOPIX Banks Index is up 10.4% since then, with post-BOJ meeting price movements indicating a kind of momiai.
• For Rakuten Bank, while growth means it may not be “expensive” it is no longer dirt cheap. And I cannot identify the culprit, so time to take profits. 

• Leapmotor (9863 HK) (LM) raised around US$800m in its Hong Kong IPO. The stock was listed in Sep 2022, its lockup on pre-IPO investors will expire on 29th Sep 2023.
• LM is a smart EV company based in China, founded in 2015.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Last night Reuters teased a headline saying the Nintendo Family Office called YFO (and related entities) would raise its proposed takeover price for Toyo Construction to ¥1255/share.
• Recently, the company had agreed to start an investigation and YFO had dropped its demands for an EGM. In Q1, the company reporetd Revenues +18.6%yoy, reasonably in-line with original guidance.
• This new price comes at a 1% premium to previous close, and is meant to start discussions. The Board has indicated it will start deliberations tomorrow.

• EcoPro Materials (ECO123 KS) was founded in 2017 and specializes in manufacturing cathode material precursors, a core material for lithium secondary cells.
• EcoPro Materials (ECO123 KS) could raise between US$387m-US$492m, valuing the company between US$1.9bn-US$2.42bn. Float will depend on voluntary lock-ups and allocation to strategic investors.
• Inclusion in global indices is likely to take place between February to June, while the highest probability of Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusion is in December 2024.

• KKR is looking to raise around US$750m via selling a stake in Kokusai Electric (6525 JP) (KE) in its Japan IPO.
• KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
• In this note, we talk about the not-so-positive aspects of the deal.

• YFO has returned with a potential tender offer price of JPY1,255 per share for Toyo Construction (1890 JP), 25.5% above its previous offer of JPY1,000 per share.
• The offer is conditional on due diligence access to confirm the feasibility of the medium-term management plan and no material accounting, tax, or legal issues.
• The due diligence will take a month, with the offer expected to commence in late December. Expect due diligence access as the revised offer represents a 10-year high. 

• Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
• As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
• Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.

• Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
• But there may be ¥800bn+ to buy on one day into the close later this month (+ another ¥200-300bn on two other days). Then a ¥500bn sell two days later.
• Over the past ten years, the two day return on the March trade is great. In Sep, not so much. This year there are Extra Special Flows.

• Thai Beverage (THBEV SP) has trended lower over the last couple of years and the stock is trading very close to its lows.
• There has been a contraction in multiples and Thai Beverage (THBEV SP) trades cheaper than a lot of its Asia listed peers.
• A potential index inclusion could bring in significant passive inflows and result in a rerating of the stock.

• Golden Agri Resources (GGR SP) has traded lower over the last year and trades cheaper than some of its peers.
• Revenue, income and net profit margins have been moving higher over the last few years and EPS/DPS have increased sharply over the last two years.
• Potential passive buying could result in Golden Agri Resources (GGR SP) outperforming peers in the near term.

• We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
• Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).
• We add UMP Healthcare (722 HK) to our list of small/mid-cap names we track. The company has just recently declared its full-year results. 

• The immediate float rate on the listing date (October 5) has reached 19.25% as the institutional lockup volume is not as high as initially expected.
• Even with a low institutional lockup level, there seems to be a possibility of a certain IPO day pop.
• The first exit point we can look for in the short term would be the 1-month lockup release (1.44% of SO) one month after listing.

• KKR is looking to raise around US$750m via selling a stake in Kokusai Electric (6525 JP) (KE) in its Japan IPO.
• KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
• In this note, we talk about the positive aspects of the deal.

• Niche Japanese Semiconductor Production Equipment specialist Kokusai Electric (6525 JP) last Thursday announced the TSE approved its late October IPO (with indicative pricing, shares to be sold, and initial prospectus).
• This insight looks at initial shareholder structure, selling group, post-IPO shareholder structure with index inclusion timing, and follow-on flow possibilities. 
• At ¥435bn indicative market cap, it will be the largest IPO in Japan since pre-covid, despite coming in a cycle trough. I expect it will be hot. 

• The indicative price band is ₩36,200 to ₩46,000. Accordingly, the market capitalization implied by the price band is ₩2.68T to ₩3.40T.
• The concern arises as to whether Ecopro Materials can consistently deliver a level of profitability that justifies receiving an equivalent valuation multiple to that of Ecopro BM.
• The timing of this IPO coincides with the ongoing valuation correction in the local battery sector, making the valuation issue the most critical point to watch in this IPO.

• In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the December 2023 review.
• I currently see 5 ADDs and 4 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
• The estimate for one-way capping flow in December 2023 is US$1.2bn.

• Mercari (4385 JP), Lasertec (6920 JP) and Nitori (9843 JP) will replace Nippon Sheet Glass (5202 JP), Mitsui E&S (7003 JP) and Matsui Securities (8628 JP) in the Nikkei 225.
• As expected, Nitori Holdings (9843 JP) will be added at half the planned PAF since the trading value is low compared to the expected index weight.
• Passive trackers need to buy between 1-17 days of ADV on the adds while selling between 1.2-16.5 days of ADV on the deletes. There is a big funding trade too.

• Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
• But there may be ¥800bn+ to buy on one day into the close later this month (+ another ¥200-300bn on two other days). Then a ¥500bn sell two days later.
• Over the past ten years, the two day return on the March trade is great. In Sep, not so much. This year there are Extra Special Flows.

• Thai Beverage (THBEV SP) has trended lower over the last couple of years and the stock is trading very close to its lows.
• There has been a contraction in multiples and Thai Beverage (THBEV SP) trades cheaper than a lot of its Asia listed peers.
• A potential index inclusion could bring in significant passive inflows and result in a rerating of the stock.

• The coming week has the rebalance implementation for the NIFTY family of indices on Thursday and the Nikkei 225 (NKY INDEX) on Friday.
• The review period for the December rebalance of the Hang Seng Index, Hang Seng China Enterprises Index, Hang Seng TECH Index and the HSCI Index ends on Friday.
• Inflows to mainland China ETFs resumed following a pause as markets continue to trade weak.

• Korea Exchange is planning to change the criteria for rebalancing stocks in the KOSPI 200 index. 
• The purpose of this change is to prevent stocks that surge ahead of the actual KOSPI 200 inclusion but fall significantly after the inclusion announcement.
• We think there is a 70-80%+ probability that POSCO DX and L&F Co will be included in KOSPI 200 index in December 2023.

• This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables and charts and welcome feedback. This week saw HKD 14.5bn+ of net buying. That makes ten weeks of net inflows.

• The Newmont (NEM US) CDI selldown on 15 December will have to be bought by active shareholders, not passive; a relatively large reverse funding trade on the ASX rebal.
• Naspers (NPN SJ)/Prosus NV (PRX NA)‘s CEO steps down. However, operations/investments, and the ongoing tweaking of the organizational structure with respect to Tencent (700 HK), should continue unabated. 
• Activist shareholders and Toshiba Corp (6502 JP) stuck with each other for years. The takeover allows both sides to escape their mutual bearhug,

• The immediate float rate on the listing date (October 5) has reached 19.25% as the institutional lockup volume is not as high as initially expected.
• Even with a low institutional lockup level, there seems to be a possibility of a certain IPO day pop.
• The first exit point we can look for in the short term would be the 1-month lockup release (1.44% of SO) one month after listing.

• 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 – 111 Inc (YI US), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), JSR Corp (4185 JP), DDH1 (DDH AU), ENM Holdings (128 HK). 
• Lowest spreads – Toyo Construction (1890 JP), Healius (HLS AU), Yaizu Suisankagaku Industry (2812 JP), Allkem Ltd (AKE AU), Pact Group Holdings (PGH AU), Pacific Current (PAC AU). 

• The Brand-Spanking New (7 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it and brought it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 47 Trade Recommendations.
• The last 6 weeks (since the start of the new Monitor and Portfolio 7 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%.

• The Mirae Asset Tiger Top 10 ETF (292150 KS) tracks the FnGuide Top 10 Index and has an AUM of over US$1bn.
• We currently forecast one potential change at the next rebalance in December. There is another set of changes that could also take place.
• There has been a big increase in short interest on a couple of stocks while the rise has been more gradual on the other stocks.

• Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
• There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
• With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.

• Metro Pacific Investments Co (MPI PM) has announced that the public float of the stock will drop to 2.78% following the Tender Offer.
• Metro Pacific Investments Co (MPI PM) shares are expected to be suspended from 26 September. That could see Bloomberry Resorts (BLOOM PM) added to the PCOMP INDEX on 25 September.
• There will be large passive inflows to Bloomberry Resorts (BLOOM PM) as well as flows from active managers that track the PCOMP INDEX.

• The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
• Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
• We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

• Last week I wrote about NTT’s Partial Offer for Marketing Consultant Intage (4326) – (with a spurious hyphen at the end). 
• In the last couple of days, there have apparently been a few blocks printed on the tape. I have received questions about pricing and pro-ration. 
• So here I provide a set of 11 possible pro-ration cases, and suggest ways for traders and investors to think about the risks and possibilities.

• There have only been 7 new listings on the HKEX (388 HK) in the third quarter of the year so far.
• Of those stocks, only Keep Inc (3650 HK) has a chance of being added to the Hang Seng Composite Index in December and then into Southbound Stock Connect.
• Keep Inc (3650 HK) is the largest online fitness platform in China and the name recognition could bring in substantial flows via Southbound Stock Connect.

• Privatisations could lead to two/three S&P/ASX 200 (AS51 INDEX) constituents being delisted in October/November and that means ad hoc inclusions to maintain the number of constituents at 200.
• Then there could be one change for the S&P/ASX 20 Index and two changes for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in December.
• The impact on the potential adds/deletes for the S&P/ASX 200 (AS51 INDEX) is high at between 7.5-23 days of ADV to trade from passive trackers.

• Yesterday, M&A Research Institute (9552 JP) announced it would list on the TSE Prime section on 29 August, which means it will join TOPIX at the close of 28-Sep-2023.
• This is NOT a surprise. On 27 June, the company announced a secondary offering of 1.631mm shares (by the founder/CEO), and said it had applied for TSE Prime transfer. 
• I take a look at how this could play out. 

• In addition to full market cap and trading value, float-adjusted market cap will be added as a quantitative screening tool. 
• Regarding extreme price increases, KRX plans to utilize the deviation between the average daily market capitalizations for two, three, and six months leading up to the screening base date.
• We should consider designing trading setups that target stocks with relatively low free-float rates and high price volatility in recent months.

• Activist investors’ proposals were consistently based on increasing shareholder returns. The change in the environment, in which ％ of foreign shareholders increased while cross-held shares decreased, had a major impact.
• Regarding the selection of directors, discussion on contents of Skill Matrix should be more active, as it’s suspected that top management is selecting candidates who are aligned with their wishes.
• The voting standards of domestic institutional investors are iridescent and still dependent on public opinion for each proposal. The change in public opinion has only just begun.