Most Read

In March 2023, Japan Post Holdings (6178 JP) sold ¥1.1trln of shares in Japan Post Bank (7182 JP), lowering its stake considerably, raising float. There will be a TOPIX upweight.
In May, with earnings, they announced their intention to buy back ¥300bn of shares or up to 10% of shares out. Today, they announced the details. ¥300bn through March end.
In a ¥300bn ToSTNeT-3 tomorrow, the govt will sell back ¥105.7bn. That leaves a residual worth examining. So we examine.

‘Bidenomics’ Delays Recession, but USD Rebound & Fiscal Reins Are Tipping Points

By Prasenjit K. Basu

‘Bidenomics’ investment subsidies aided the 7.7%QoQsaar growth in business investment in Q2CY23, delaying the onset of recession. Policy rate to stay near 5.5% until Q2CY24, thereby restraining growth until then.
ECB and BoE face less pressure to raise rates amid easing headline inflation, so yield differentials will strengthen USD; the latter will be a drag on net exports in H2CY23.
The spending restraints agreed in May’23 kick in from Oct’23, and will be a drag on aggregate demand from Q4CY23, the quarter a mild recession is likely to begin.

Poly Culture (3636 HK): Trading Wide To Terms. Get Involved.

Back on the 27 June, art and culture play Poly Culture Group Corp H (3636 HK) announced a pre-conditional privatisation at HK$8.88 per H-share.
This Offer from SOE Poly Group is by way of a Merger by Absorption, incorporating a Scheme-like vote. There is no tendering condition.
The pre-cons have now been fulfilled. The Composite Document, including the H Share Class meeting/EGM date and IFA opinion, is expected to be despatched on or before the 30 September.

Australia: S&P/ASX, REMX, GDXJ, MVA, MVW & Other Index Flows on Friday

Changes to the S&P/ASX indices, REMX US, GDXJ US, MVA AU, MVW AU and other indices will be implemented at the close on Friday.
There is over +/-A$5m to trade or +/-3x ADV to trade on nearly 100 stocks and will be a huge volume day for the stocks at the close.
Use the volume on the buy and sell side to increase/reduce positions especially on the deletes where there will be liquidity to cover shorts on stocks that have dropped significantly.

FnGuide Top10 Index Rebalance Preview: Good Historical Performance; One Potential Change in December

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.

KOSDAQ150 Ad Hoc Index Rebalance: VATECH (043150 KS) Replaces Lutronic (085370 KS)

Value Added Technologies (043150 KS) will replace Lutronic Corp (085370 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 14 September.
Passive trackers will need to buy over 1.5x ADV on Value Added Technologies (043150 KS). The impact is higher on Lutronic Corp (085370 KS) but the arbs will provide liquidity.
Value Added Technologies (043150 KS) appears to trade cheaper than its peers on all valuation parameters and there could be a re-rating following the index inclusion.

Doosan Robotics: Strong Initial Book Building Results

By Douglas Kim

Chosun Business Daily mentioned today that initial results of Doosan Robotics book building have been very strong. The current IPO price range is from 21,000 won to 26,000 won.
There is a high probability that the IPO price will be set at 26,000 won or more and close to 30,000 won.
Our base case valuation per share of Doosan Robotics is 42,826 won, which is 65% higher than the high end of the IPO valuation range.

Innovent Biologics Placement (1801.HK) – There Is No Such Thing as a Free Lunch

By Xinyao (Criss) Wang

Innovent is actually not short of money, so the Placing this time looks “strange”.If Innovent is unable to deliver performance that matches expectations, investors would reconsider its future financing needs.
Innovent is undergoing important transition from quantitative change to qualitative change as turning losses into profits is within reach. So, the “concept validation” of Innovent’s business model has been completed.
Innovent decides to place the shares at this moment reflects that its stock price is already high. Based on our forecast, there could be limited upside room for share price.

Alibaba: Daniel Zhang Shown The Door, Jack Ma Back In The Game

By Oshadhi Kumarasiri

News broke yesterday that Daniel Zhang is no longer leading Alibaba (ADR) (BABA US)‘s Cloud Business unit.
The statement from Alibaba’s current chairman, in which he mentions that Zhang would “switch to a different approach and continue to fight alongside us at Alibaba” raises skepticism.
We also think that the $1.0bn Alibaba committed to a technology fund could be seen as a form of compensation to ensure Daniel Zhang’s silence.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$255m 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 a touch below 1% and that will result in a round-trip trade of US$255m.
The impact on the stocks is relatively small for now but that could increase till the end of November when the stocks will be capped.

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Sep 12

Most Read: JMDC , JFE Holdings, Evolution Mining, Eoflow , SK Square , Western Superconducting Techno, Youngpoong Paper Mfg, Innovent Biologics Inc, I-NE , Poly Culture Group Corp H and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness
MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew
KOSPI Size Indices – Changes in September & Implications
Innovent Biologics Placement – Has Ample Cash but the Discount Is Enticing
I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion
Poly Culture (3636 HK): Pre-Condition Fulfilled

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

JFE Holdings (5411) – Volume Patterns Indicate Possible Squeeziness

On 5 September, JFE Holdings (5411 JP) saw an article out of a capital raising. It was confirmed later in the day. Huge volumes traded. The stock fell sharply.
The offering supply/demand dynamics are…. complicated. The offering is to foreign instos. The net demand is probably mostly retail and index, and positioning is… also complicated.
The EPS dilution is already accounted for. The fall against Nippon Steel pretty much does it after considering the discount expected.

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact

There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

Merger Arb Mondays (11 Sep) – Eoflow, Mason, Liontown, Newcrest, United Malt, OreCorp, MPI

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), Costa Group Holdings (CGC AU), Eoflow (294090 KS), Symbio Holdings (SYM AU), Mason Group Holdings (273 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Yaizu Suisankagaku Industry (2812 JP), Liontown Resources (LTR AU), T&K Toka Co Ltd (4636 JP), Itochu Techno Solutions (4739 JP).

KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew

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.

KOSPI Size Indices – Changes in September & Implications

There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

Innovent Biologics Placement – Has Ample Cash but the Discount Is Enticing

Innovent Biologics Inc (1801 HK) (IB) aims to raise around US$313m for R&D and marketing.
The company has undertaken a number of deals in the past, with the overall results being mixed.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

I-Ne (4933) Offering Priced, Now to a TOPIX Inclusion

Skincare/Cosmetics company I-NE (4933 JP) on 31 August (¥2947) announced it would move to TSE Prime on 19 September, and announced a Secondary Offering by CEO Onishi-san to get there.
There was no greenshoe provided. The stock popped. Then drifted back to ¥3025 and the Offering priced today at ¥2,934/share.
75% went to Asian/European (non-US) offshore investors, and the rest to onshore institutions, which is unusual. But now we look to the TOPIX inclusion.

Poly Culture (3636 HK): Pre-Condition Fulfilled

The pre-condition relating to Poly Culture Group Corp H (3636 HK)’s privatisation offer from Poly Group at HK$8.88 per H Share has been fulfilled.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). No independent H Shareholder holds a blocking stake.
The offer’s 77.6% premium to the undisturbed price and no minimum acceptance condition will help completion. At the last close and for 1 November completion, the gross/annualised spread is 7.1%/64.3%.

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Sep 11

Most Read: JMDC , Zhejiang Huayou Cobalt , Evolution Mining, Vinhomes , Softbank Group, United Malt Group Ltd, Youngpoong Paper Mfg, SK Square and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover
MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
Weekly Deals Digest (10 Sep) – JMDC, Intage, Mason, Liontown, Newcrest, ARM, Integral, Doosan, VNG
MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes
ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel
United Malt: Shareholder Vote On 12th Oct
KOSPI Size Indices – Changes in September & Implications
KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated
Quiddity HK Connect SOUTHBOUND Flows (Week to 8Sep23) Banks, Brokers, Telcos, Energy, and Vanke

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover

There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact

There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

Weekly Deals Digest (10 Sep) – JMDC, Intage, Mason, Liontown, Newcrest, ARM, Integral, Doosan, VNG

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Doosan Robotics (454910 KS), ARM Holdings (1822695D US), VNG (VinaGame) (VNG US), Integral Corporation (5842 JP) IPOs and Aquila Acquisition Corporation (7836 HK) de-SPAC.
Event-Driven developments – JMDC (4483 JP), Intage Holdings (4326 JP), Mason Group Holdings (273 HK), Liontown Resources (LTR AU), Newcrest Mining (NCM AU), Orecorp Ltd (ORR AU).

MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes

There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.
Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.
After large creations for Market Vectors Vietnam ETF (VNM US) at the start of the year, there has not been a lot of follow-on activity as the market moves higher.

ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, things are getting busy again with multiple deals live across the region, whic his a refreshing change from the slow start in the first half.
There were only a few placement this week, but what the lacked in volume they made up for in size.

United Malt: Shareholder Vote On 12th Oct

Back on the 3 July, United Malt Group Ltd (UMG AU) and Malteries Soufflet entered into a binding agreement of A$5.00/share, by way of a Scheme.
The Scheme Booklet has now been lodged with ASIC. UMG shareholders vote on the transaction on the 12 October, with implementation on the 15 November.
The Offer remains subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

KOSPI Size Indices – Changes in September & Implications

There are 8 migrations from MidCap to LargeCap, 7 LargeCap to MidCap, 8 new additions to MidCap, 17 SmallCap to MidCap, 23 MidCap to SmallCap, 5 new additions to SmallCap.
The migrations from SmallCap to MidCap have outperformed the stocks migrating between other segments by a huge margin over the last few months.
Given the huge outperformance and looking at how the migrations have performed historically, we’d expect the stocks migrating to MidCap to underperform post implementation of the changes.

KRX Sector Index Series Rebalancing: Heavy Shorting on SK Square Is Anticipated

The most noteworthy developments include Samsung Electronics being newly added to the Semicon sector, while SK Square has been removed.
We must be mindful of the potential concentration of shorting flow on SK Square as most names expected to experience negative flows do not fall under the KS200/KQ150 membership.
Our strategic approach can take three directions: 1. aim at only those receiving positive flows, 2. heavy shorting SK Square, and 3. long-short the four with the most flow size.

Quiddity HK Connect SOUTHBOUND Flows (Week to 8Sep23) Banks, Brokers, Telcos, Energy, and Vanke

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. We welcome feedback on how to make it more useful going forward.

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Sep 10

Most Read: DearU, JMDC , Softbank Group, Taiwan Semiconductor (TSMC) – ADR, Abacus Group, Celltrion Inc, Evolution Mining, Computershare Ltd, Zhejiang Huayou Cobalt and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts
JMDC (4483 JP): Omron’s Partial Tender Offer
SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC
MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow
Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue
MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes
MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

JMDC (4483 JP): Omron’s Partial Tender Offer

JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.

SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment

By Victor Galliano

SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC

The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 15 September. There are no constituent changes, but there are float and capping changes.
The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.7bn.
Estimated one-way turnover is 5.9% resulting in a one-way trade of US$595m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow

As expected, Abacus Group (ABG AU) will be deleted from the MVIS Australia A-REIT Index at the close on 15 September.
Abacus Group (ABG AU) will also be deleted from the S&P/ASX 200 (AS51 INDEX) on the same day, so this increases the sell flow on the stock.
Estimated one-way turnover at the rebalance is 3.8% resulting in a one-way trade of A$23.8m. There are a few stocks with over 1x ADV to trade from passive trackers.

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue

By Douglas Kim

The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won.
Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+).

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact

There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes

There are no constituent changes for the MVIS Australia Equal Weight Index at the September rebalance. JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) have avoided deletion.
Float and capping changes will result in a one-way turnover of 3.5% and in a one-way trade of A$69m.
There is a lot of short interest on stocks that will have passive buy/sell flows, but there will not be enough volume traded for shorts to use to reduce positions.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover

There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

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Sep 09

Most Read: JFE Holdings, Intage Holdings, Metro Pacific Investments Co, Empyrean Technology , DearU, Japan Tobacco, Aquila Acquisition Corporation, Softbank Group, JMDC , Newcrest Mining and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
Metro Pacific’s Tender Offer Kicks Off
CSI300 Index Rebalance Preview: 14 Potential Changes in December
KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts
Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar
Aquila Acquisition Corp (7836 HK): ZG Group’s Punchy Valuation
SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment
JMDC (4483 JP): Omron’s Partial Tender Offer
Newcrest: Shareholder Vote On 13th Oct

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Metro Pacific’s Tender Offer Kicks Off

Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August.
The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

KRX BBIG K-New Deal Rebalancing: Official Results & Passive Flow Impacts

After results were transitioned to non-public information, it has been observed that results are reflected in prices significantly later, with substantial price impact occurring close to the rebalancing trading day.
Even though the AUMs have recently decreased, the passive impact size is quite substantial, considering a recent pattern of price impact concentrating within a maximum of about two trading days.
A heavy Long-Short setup on these pairs, DearU / Douzone Bizon and SK Biopharmaceuticals / SK Bioscience (302440 KS), is something we should very actively consider.

Japan Tobacco High Conviction Call: No Price Hikes This Year, But Profits Poised to Soar

By Oshadhi Kumarasiri

Combustible tobacco is declining globally, but Japan Tobacco (2914 JP) is defying the odds by outperforming the industry significantly through capturing market share from competitors.
Also in Heated Tobacco, Japan Tobacco is slowly but steadily capturing market share from IQOS and other heated tobacco makers.
There will be no price hikes this year, but we think that there’s enough spillover from the price hikes in the past 3-4 years to maintain JT’s OP growth momentum.

Aquila Acquisition Corp (7836 HK): ZG Group’s Punchy Valuation

Aquila Acquisition Corporation (7836 HK) agreed to a De-SPAC transaction with ZG Group (formerly Zhaogang.com), the world’s largest digital platform for third-party steel transactions.
ZG has a questionable business model, struggling to generate profits or underlying FCF. This dynamic suggests that ZG has not established a sustainable competitive advantage.
The negotiated value of ZG in the De-SPAC transaction is HK$10,004 million (US$1,277 million). Our valuation analysis suggests that this negotiated value is unrealistic.

SoftBank Group (9984 JP); Arm IPO, Priced for Disappointment

By Victor Galliano

SoftBank’s internal transaction acquiring the 25% Arm stake held by SVF1 valued Arm at USD64bn; the IPO valuation range is from USD48bn to USD52bn
This valuation range implies an Nvidia-like price to prospective 2024E sales multiple range of 22x-25x; the prospectus reveals risks with Arm China, and confirms its lacklustre revenue and earnings growth
Given SoftBank’s largely negative track record on the after-market performance of its investee companies IPOs and SPOs; we expect further downside to SoftBank’s share price

JMDC (4483 JP): Omron’s Partial Tender Offer

JMDC (4483 JP) announced a partial tender offer for Omron Corp (6645 JP), the largest shareholder. Omron aims to make JMDC a consolidated subsidiary.
The offer is for a minimum of 12.0m shares (18.52% ownership ratio) and a maximum of 15.0m shares (23.08%) at JPY5,700 per share, a 22.4% premium to the undisturbed price.
Irrevocables (Noritsu Koki (7744 JP)) represent a 13.63% ownership ratio. While the offer is light, it will likely succeed as the minimum acceptance condition requires a 7.1% minority acceptance rate.

Newcrest: Shareholder Vote On 13th Oct

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

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Sep 08

Most Read: JFE Holdings, Intage Holdings, Youngpoong Paper Mfg, Mirae Asset Tiger Top 10 ETF, Empyrean Technology , ARM Holdings, Aquila Acquisition Corporation, Oriental Watch, Hana Micron Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Single-Day ETF Flow Event Not to Be Missed in Korea in December
CSI300 Index Rebalance Preview: 14 Potential Changes in December
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
Arm IPO – Don’t Worry, It’ll Be Fine
Aquila Acquisition: The De-SPACed Arb
Oriental Watch: Addressing the Rolex Acquisition of Bucherer
Hana Micron’s Boost From Samsung/Nvidia Agreement

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

Arm IPO – Don’t Worry, It’ll Be Fine

By Mio Kato

So the terms are out for Softbank’s attempt to list Arm.
In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

Aquila Acquisition: The De-SPACed Arb

SPACs – remember them? US offerings in 2021 topped ~US$150bn, falling to US$13bn in 2022. Singapore joined the bandwagon in January 2022 and Hong Kong two months later.
That Hong Kong stock is Aquila Acquisition Corporation (7836 HK), and it recently announced a merger with ZG Group, a Chinese steel trading website.
That’s positive. Less positive is how de-SPACed shares tend to trade in the US.

Oriental Watch: Addressing the Rolex Acquisition of Bucherer

By Sameer Taneja

Rolex acquisition of Bucherer signals the company’s intention to own retail distribution and gain access to what its competitors are doing, with the battleground currently being Europe.
We believe it will take years for Rolex to digest this acquisition before foraying into other markets, but with a similar approach, potentially making Oriental Watch (398 HK) a target.
Trading at 6.9x PE with 50% of the market cap in cash and a ~15% dividend yield, the company presents a great investment opportunity.

Hana Micron’s Boost From Samsung/Nvidia Agreement

US graphics chip designer NVIDIA Corp (NVDA US) has, to date, sourced HBM3 chips exclusively from SK Hynix (000660 KS).
Shares in Samsung Electronics (005930 KS) promptly popped ~6% last Friday on news it had been added as a supplier to NVIDIA.
Hana Micron Inc (067310 KS), which boasts Samsung as its largest customer, similarly jumped, and is up 45% in the past week. Too much too quickly?

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Sep 07

Most Read: JFE Holdings, Boss Resources, Intage Holdings, ARM Holdings, Axiata Group, Empyrean Technology , Mirae Asset Tiger Top 10 ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Intage Holdings (4326 JP): NTT’s Partial Tender Offer
Arm IPO – Don’t Worry, It’ll Be Fine
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
StubWorld: Axiata Is Coming Up Cheap
CSI300 Index Rebalance Preview: 14 Potential Changes in December
Single-Day ETF Flow Event Not to Be Missed in Korea in December

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

By Clarence Chu

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Intage Holdings (4326 JP): NTT’s Partial Tender Offer

NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.

Arm IPO – Don’t Worry, It’ll Be Fine

By Mio Kato

So the terms are out for Softbank’s attempt to list Arm.
In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

StubWorld: Axiata Is Coming Up Cheap

Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November.
Preceding my comments on Axiata are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

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Sep 06

Most Read: Lasertec Corp, Mercari , ZOZO Inc, JFE Holdings, EcoPro Materials, Boss Resources, Golden Eagle Retail, Orora Ltd, ARM Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
JFE Holdings (5411) Stock+CB Offering
Korea’s Latest IPO Rule Change: Daily Differential Allocation
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
Golden Eagle (3308 HK): CCASS Movements Are Standard Fare
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive
ARM Holdings Pre-IPO – Thoughts on Valuations

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)

Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

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.

March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split

Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Korea’s Latest IPO Rule Change: Daily Differential Allocation

Korea FSS has provided guidelines to assign different weights to IPO orders from Day 1 to Day 5. Bookrunners should give higher weights to institutions that place their orders early.
The question of whether this will deter the rush to place bulk orders close to the deadline and lead to a higher weighting of essential pricing is generating significant interest.
The volume of orders and allocation by price range could serve as practical clues for assessing post-IPO pricing, making it a crucial factor in formulating post-IPO trading strategies.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

Golden Eagle (3308 HK): CCASS Movements Are Standard Fare

Back on the 28th May, PRC department store play Golden Eagle (3308 HK) announced a privatisation offer, by way of a Scheme, at $6.88/share, a 40.41% premium to last close.
The Offeror is the Wang family, who together with concert parties, held 80.29%. 7.18% of the 19.71% held by the disinterested stakeholders have given irrevocables in favour of the Scheme.
Ahead of the Scheme Meeting on September 15th, a significant amount of shares have moved out of CCASS. This is not something to concern investors.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

By Clarence Chu

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive

By Clarence Chu

Orora Ltd (ORA AU) is looking to raise A$1,345m (~US$870m) via a primary placement and an entitlement offer to partially fund its acquisition of Saverglass.
While the exact size/target of an acquisition wasn’t explicitly mentioned earlier, the firm had discussed its potential use of M&A to grow its North American/Europe regions.
Including the entitlement offer, the deal would represent 212 days of three month ADV and add 58.9% to the firm’s total shares outstanding.

ARM Holdings Pre-IPO – Thoughts on Valuations

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.

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Sep 05

Most Read: Ramelius Resources, Lasertec Corp, Mercari , Lunit , ZOZO Inc, Eoflow , Lake Resources Nl, ARM Holdings, Integral Corporation and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises
September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)
Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT
KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance
March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split
Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete
ARM Holdings Pre-IPO – Peer Comparison – The Smallest and One of the Slowest
Integral Corporation IPO: New Price Range Is Tempting
Ohayo Japan| Lack of Direction with US Closed; JAPAN X: JFE to Raise ¥200bn for Green Steel Drive

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises

There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

September Nikkei 225 Review – Lasertec, Mercari, Nitori IN, Expected DELETEs Out (Matsui the Biggie)

Today, somewhat earlier than expected), the Nikkei Index Team announced the changes to the Nikkei 225.
Lasertec Corp (6920 JP), Mercari (4385 JP), and Nitori Holdings (9843 JP) are added. Nippon Sheet Glass (5202 JP), Mitsui E&S Holdings (7003 JP), and Matsui Securities (8628 JP) removed.
That triggers flows of about ¥480bn a side, and some big, big changes. The announcement helps understand new process better.

Nikkei 225 Index Rebalance: Mercari, Lasertec, Nitori IN; Nippon Glass, Mitsui E&S, Matsui Sec OUT

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.

KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance

Over two-thirds of the way through the review period, we see 14 potential changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance.
There could be index changes even before the December rebalance if there are delistings and stocks migrate from the KOSDAQ Market to the KOSPI Market.
Momentum in Korea has been strong. The potential adds have outperformed the potential deletes over the last few months and there could be further outperformance.

March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split

Now that the September 2023 Nikkei 225 Rebal is announced, we look at the March 2024 rebal and its possibilities.
Socionext (6526 JP) is the only automatic ADD, but it might not be. ZOZO Inc (3092 JP) and Ryohin Keikaku (7453 JP) would be sector balance ADDs.
Fast Retailing (9983 JP) could get capped if it outperforms Nikkei 225 by ~10%+ to 31Jan2024. And Nitori Holdings (9843 JP) will see an add of ~14 days of ADV.

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

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 – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete

The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

ARM Holdings Pre-IPO – Peer Comparison – The Smallest and One of the Slowest

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings’ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our earlier note, we looked at Arm’s past performance. In this note, we undertake a peer comparison.

Integral Corporation IPO: New Price Range Is Tempting

Integral Corporation (5842 JP) has set its IPO price at JPY2,300-2,400 per share, 18%-29% lower than the IPO reference price range of JPY2,800-3,400 per share.
We previously discussed the IPO in Integral Corporation IPO: The Bull Case, Integral Corporation IPO: The Bear Case and Integral Corporation IPO: Valuation Insights.
Our analysis suggests that the revised IPO price range is attractive compared to peer multiples. The re-rating of peers since the release of the prospectus also makes the offer tempting.

Ohayo Japan| Lack of Direction with US Closed; JAPAN X: JFE to Raise ¥200bn for Green Steel Drive

By Mark Chadwick

OVERSEAS. US LABOR DAY HOLIDAY. With US out, No leaders in Global Equities; European shares closed flat on thin Volumes; China’s measures to support Property market taking hold.
JAPAN.US Markets Off. NKY Futs vs Cash -0.1%; USDJPY 146.5; Nikkei Rebal: Mercari, Lasertec, Nitori ADDED; Nippon Sheet Glass, Mitsui E&S, Matsui Sec OUT; JFE 200bn Equity/CB raising
JAPAN X: JFE Holdings Plans to Raise ¥200 Billion for Carbon Emissions Reduction Efforts. Still need clarity willingness of customers to accept “green pricing”. Watch Nippon Steel and Kobe Steel.

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Sep 04

Most Read: Seiko Pmc Corp, Ramelius Resources, Youngpoong Paper Mfg, Wisdom Marine Lines, Shanghai Friendess Electronic, Ferrari N.V., Lake Resources Nl, Eoflow , Lunit and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium
S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises
Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF
Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning
China ETFs: Inflows Continue to Support the Market
Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete
Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way
Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin
KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance

Carlyle Group Tender Offer for Seiko PMC (4963) At 89% Premium

Carlyle Group is buying Seiko Pmc Corp (4963 JP) from 54+% owner Dic Corp (4631 JP) and minorities in a Tender Offer with optical premium of 89%.
It looks good, takes advantage of tax code particularities, and the nature of the company disguises some value. Shareholder structure means this is basically a done deal before it starts.
With minimal foreign active investor ownership, and significant crossholder, ESOP, and director ownership, only a bit of retail actually needs to tender to make this successful.

S&P/ASX Index Rebalance (Sep 2023): Mostly Expected with a Few Surprises

There is 1 change for the S&P/ASX100 Index, 5 adds/ 6 deletes for the S&P/ASX 200 INDEX, and 10 adds/ 8 deletes for the S&P/ASX300 Index at the September rebalance.
There will be 4-14 days of ADV to trade on the S&P/ASX100 Index and S&P/ASX 200 INDEX adds while the impact on the deletions is between 3-12 days of ADV.
On average, the adds to the S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index have outperformed the deletes over the last few months.

Index Rebalance & ETF Flow Recap: STAR50, KOSPI200, Hang Seng, MVIS, AMFI, Jio, China ETF

The HSI, HSCEI, HSTECH and HSCI rebalances will take place at the close on 4 September since the market was closed on 1 September due to Typhoon Saola.
There will be a few announcements next week with Nikkei 225 early in the week and the MVIS series post close on Friday. Plus the STAR50 rebalances on Friday.
Another week of huge inflows into mainland China ETFs focused on the CSI 300 Index, STAR50 INDEX and CSI Smallcap 500 Index.

Yuanta ETFs Rebalance: AI-Frenzy Means Tech Replaces Industrials; Shorts Surge; Big Positioning

There are 4 changes to the Yuanta/P-Shares Taiwan Top 50 ETF and 1 deletion for the Yuanta/P-Shares Taiwan Dividend Plus ETF in September.
The impact on the inclusions is larger in terms of flow but smaller in terms of days to ADV to buy. Shorts are higher on the deletions.
There appears to be big positioning on a lot of the stocks. But the ETF adds could move higher in the short-term on short covering.

China ETFs: Inflows Continue to Support the Market

Money continues to flow into mainland China ETFs taking the total inflows since 18 July to over US$25bn. This has likely helped stabilise the market and prevent a bigger fall.
The inflows continue to be largest on ETFs tracking headline indices – CSI 300, STAR50, CSI1000, CSI 500, SSE50, ChiNext. Plus there are inflows on some sectoral and thematic ETFs.
The skew between stocks gaining 20%+ over the period vs those dropping -20% or more has improved significantly over the last week.

Quiddity ES50 Sep 23 Rebal: Ferrari/Vonovia Change Confirmed + Another US$2bn+ Flow Surprise!

By Janaghan Jeyakumar, CFA

The September 2023 index changes for the ES50 index was confirmed after the close on Friday 1st September 2023.
There will be two ADDs and two DELETEs. One set of changes was well anticipated by us. The other set comes as a major surprise to us.
Collectively, the two ADDs could see ~US$2.4bn index flows and the two DELs could see ~US$2.9bn index flows, with US$500mm of reverse funding flows.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: Review Period Complete

The review period for the MVIS Global Rare Earth/Strategic Metals Index ended 31 August. The changes will be announced on 8 September and implemented at the close on 15 September.
Coming in around the 85% cutoff, Rising Nonferrous Metals Share (600259 CH) is a potential inclusion. There are two stocks that are very close to the 98% deletion threshold.
Lake Resources Nl (LKE AU) is a deletion from the S&P/ASX 200 (AS51 INDEX) at the September rebalance and there could be more to sell if deleted from this index.

Quiddity TDIV/50/100 Sep 23 Rebal: ALL 15 Changes Expected; US$420mn One-Way

By Janaghan Jeyakumar, CFA

The September 2023 index changes for the TDIV, T50, and T100 Indices were confirmed after the close on Friday 1st September 2023.
In this insight, we take a look at our final flow expectations for these index changes and the capping flow expectations for the TDIV index.
There could US$420mn one-way flows across these three indices during this rebalance event.

Merger Arb Mondays (04 Sep) – Eoflow, JSR, Seiko PMC, ENM, NWS, Costa, Symbio, Origin

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 – Seiko Pmc Corp (4963 JP), 111 Inc (YI US), Costa Group Holdings (CGC AU), Symbio Holdings (SYM AU), Eoflow (294090 KS), Orecorp Ltd (ORR AU).
Lowest spreads – Healius (HLS AU), Toyo Construction (1890 JP), Pacific Current (PAC AU), T&K Toka Co Ltd (4636 JP), Allkem Ltd (AKE AU), Celltrion Healthcare (091990 KS).

KOSDAQ150 Index Rebalance Preview: Strong Momentum Leads to Outperformance