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As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI

Friday was the review cutoff for the September rebalance of the ASX family of indices. The September changes for the Hang Seng family of indices were also announced.
The September changes for the SSE STAR50 (STAR50 INDEX) will be announced after the close of trading on 25 August.
For a second week running, there were big inflows to mainland China ETFs and were spread across multiple index trackers. There were outflows from iShares Emerging Markets (EEM US).

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI

The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).

China Is Adding to World Liquidity, But At A Cost…

By Michael J. Howell

China’s economy is not anything like as ‘bad’ as being reported by the popular media. Yet, there are deep structural challenges which will hinder future economic growth
Monetary policy makers have recently been constrained by the weak Yuan (CNY)
Liquidity is now being re-injected aggressively. More liquidity boosts economic activity. The cost could be a CNY of RMB8/ US$

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

Doosan Robotics IPO: Valuation Insights

Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

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.

Last Week In Event SPACE: Vingroup/VinFast, Prosus/Naspers, STAR CM

Marginal float helped fuel the VinFast (VFS US) bubble. Then it popped.
The Prosus (PRX NA)/Naspers (NPN SJ) Circularity Detour and subsequent unwind created the B-Share construct which means they can maintain the voting control in South Africa without maintaining economic control.
The backlash against Star CM Holdings (6698 HK) calls into question the broader Chinese entertainment industry, and how it strikes a balance between viewership/profitability and ethical boundaries.

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Sep 02

Most Read: Lake Resources Nl, ZJLD Group , Ventia Services Group Pty , Rakuten Bank , Abacus Group, JB Hi-Fi Ltd, Vinfast, Celltrion Inc, Bank Rakyat Indonesia and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go
HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect
Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well
Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted
MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover
Vinfast: Stock Is in Free Fall; Still Expensive
(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent
Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns
Ventia Services Group Placement – Well Flagged and All past Deals Have Done Well

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: A Week to Go

The changes for the next rebalance will use closing prices from 31 August, will be announced after the close on 8 September with implementation at the close on 15 September.
One stock is very close to the 85% cumulative market cap inclusion threshold, while there are two stocks that are near the 98% cumulative market cap deletion threshold.
With one inclusion and capping changes, estimated one-way turnover at the rebalance will be 3.5% resulting in a one-way trade of US$20m. That could change over the next week.

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

Ventia Services Group Pty (VNT AU)’s two largest shareholders, Apollo Global Management and CIMIC Group, will come off their placement linked lockup soon.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the likely placement and past deal performance.

Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks

Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up.
Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

MVIS Australia Equal Weight Index Rebalance Preview: Potential Deletes & Capping Increase Turnover

By Shifara Samsudeen, ACMA, CGMA

JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
Short interest has been increasing on JB Hi-Fi Ltd (JBH AU), Charter Hall (CHC AU) and Lendlease Group (LLC AU) and could be partially driven by potential index deletions.

Vinfast: Stock Is in Free Fall; Still Expensive

Vietnamese automaker Vinfast (VFS US) made its public debut on 15th August via a SPAC deal which valued the company approx. US$23bn.
Shares opened US$22 per share and went up to $37.06 at the end of first-day. Share price hit a peak of $82.35, however, shares closed last at $34.71 per share.
Our forecasts and valuation for Vinfast suggest that the company’s shares are still overvalued even after falling more than 50% from its peak over the last few days.

(Mostly) Asia M&A, Aug 2023: Celltrion Inc/Healthcare, Itochu Techno, UMW, Boustead, SK Rent

For the month of August 2023, 11 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$29bn.
The average premium for the new deals announced (or first discussed) in August was 25%. The average YTD is 34%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Bank Rakyat Indonesia (BBRI IJ) – Steering Towards Higher Returns

By Angus Mackintosh

Bank Rakyat Indonesia (BBRI IJ) continues to be the key and unique proxy for micro and ultra-micro lending in Indonesia, with 1H2023 reflecting its increasingly strategic positioning in the space.
Microloans now account for 48% of loans and of this higher-yielding Kupedes microloans make up an increasingly larger portion, as it diversifies its KUR exposure.
The bank is set to see improving returns in 2H2023, with loan growth expected to pick-up and NIMs should also improve. 2.6x PBV with an ROE of 20.0% is attractive.

Ventia Services Group Placement – Well Flagged and All past Deals Have Done Well

Ventia Services Group Pty (VNT AU) (VSG)’s two largest shareholders, Apollo Global Management and CIMIC Group, aim to raise around US$214m via selling 14% of the company.
The two largest shareholders together owned nearly 30% of the company and have pared their stake twice this year.
In this note, we will talk about the deal dynamics.

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Sep 01

Most Read: Jio Financial Services, Digital Core REIT, Ichigo Inc, Rakuten Bank , Kakao Games , Daiwa House Reit Investment, Doosan Robotics, Auckland Intl Airport, Abacus Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP
Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge
Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023
Daiwa House REIT Placement – Sponsor Cutting Stake, Would Likely Need a Wider Correction
Doosan Robotics IPO – Thoughts on Valuation – A Punt at Best, a Crash at Worst
Auckland Airport Placement – Well Flagged, LO Support but Still a Bit Tricky
Doosan Robotics IPO: Valuation Insights
MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

REIT Pair Trade: Long DCREIT SP/ Short KDCREIT SP

After underperforming since listing, Digital Core REIT (DCREIT SP) has outperformed Keppel DC REIT (KDCREIT SP) over the last few months.
However, Digital Core REIT (DCREIT SP) still trades at cheaper valuations as compared to Keppel DC REIT (KDCREIT SP).
There could be relative outperformance over the next few weeks and any underperformance can be used to enter positions in the pair. There is an important catalyst.

Ichigo (2337) Buyback – History and Shareholder Structure Give an Edge

Today after the close, Ichigo Inc (2337 JP) announced a stock buyback to go through the next 6 months. It is ¥3bn, which is not huge, but not nothing.
It seems like a constant refrain, but shareholder structure matters.
Ichigo has a history of doing buybacks (10% of shares out are in treasury), and the historical patterns are interesting when comparing announced intention and actual result.

Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks

Four months ago, Rakuten Bank (5838 JP) was IPOed too low, then the price went up. It would appear foreign active ownership is relatively high.
Rakuten Bank stands out with high ROE and earnings growth. Banks stand out because, well, they’re going up.
Given expected 5yr earnings growth, Rakuten Bank at current price is probably “wrong.” But it has much less “bankness” than most banks, so you have to think about it differently.

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2023

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2023, among which 7 are in KOSPI and 42 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
Among these 49 stocks, top five market cap stocks include Kakao Games (293490 KS), SK Oceanplant (100090 KS), Korea Zinc (010130 KS), Fadu (440110 KS), and Vaxcell-Bio Therapeutics (323990 KS).

Daiwa House REIT Placement – Sponsor Cutting Stake, Would Likely Need a Wider Correction

By Clarence Chu

Daiwa House Industry (1925 JP) is looking to raise US$175m from trimming a portion of its stake in Daiwa House Reit Investment (8984 JP).
Given that a selldown in the REIT hadn’t been explicitly guided, we would thus argue that the deal here isn’t particularly well flagged.
Overall, the base deal would represent 4.09% of the REIT’s total outstanding shares, representing 20 days of three month ADV.

Doosan Robotics IPO – Thoughts on Valuation – A Punt at Best, a Crash at Worst

By Ethan Aw

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m in its Korean IPO.
Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module.
In our previous notes, we looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuation.

Auckland Airport Placement – Well Flagged, LO Support but Still a Bit Tricky

Auckland City Council plans to sell around 4.5% of Auckland Intl Airport (AIA NZ) to fund its budget requirements for 2023-24.
The deal is very well flagged with Auckland City Council having publicly stated their intention to sell 7% of the stock in Jun 2023.
In this note, we talk about the deal dynamics and run the deal through our ECM framework.

Doosan Robotics IPO: Valuation Insights

Doosan Robotics (454910 KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
We previously discussed the IPO in Doosan Robotics IPO: The Bull Case and Doosan Robotics IPO: The Bear Case.
In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

MVIS Australia A-REITs Index Rebalance Preview: Abacus Group Could Be Deleted

The review period for the September rebalance ended yesterday. There could be one deletion from the index and a bunch of capping changes.
The index changes will lead to a one-way turnover of 3.4% resulting in a one-way trade of A$21m. There are two stocks with over A$5m to trade.
Short interest has increased on a few REITs recently while decreasing on most of the other names.

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Aug 31

Most Read: Kenedix Office Investment Co, SBI Shinsei Bank, Prosus NV, Tcc Steel, East Buy Holding , Power Finance, Sinopharm Group Co Ltd H, Core Concept Technologies Inc, Star CM Holdings , Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kenedix Office/Resi/Commercial Three-Way Merger – Size Matters and Index Flows Do Too
SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle
Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion
STAR CM (6698 HK): Grave Accusations
Doosan Robotics IPO: The Bear Case

Kenedix Office/Resi/Commercial Three-Way Merger – Size Matters and Index Flows Do Too

Today after the close, Kenedix Office Investment Co (8972 JP), Kenedix Retail REIT (3453 JP), and Kenedix Residential Investment (3278 JP) announced a three-way merger for Nov 1.
Kenedix Office REIT (KDO) will be the surviving entity, and what is now three REITs of ¥150-250bn in size will become one diversified REIT of ¥630-650bn.
That will trigger a size uplift and should also trigger index inclusion.

SBI Shinsei Bank (8303) Calls Its EGM and Appraisal Rights Seekers Prepare for Battle

The SBI Holdings Tender Offer for SBI Shinsei Bank (8303 JP) was completed about four weeks ago, and in something of a surprise, only 3.7% of 26.98% minority holdings tendered.
The stock traded above terms every day during the Tender Offer Period. People accumulated in order to pursue their appraisal rights later. That is big.
This week, SBI Shinsei announced the schedule of dates relating to the squeezeout EGM. The record date was early. The reverse stock split announced is as expected, possibly game-able.

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!

Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

AMFI Stock Reclassification Preview (Dec 2023): Overlap Between Active & Passive Flows

We see 8 stocks moving from MidCap to LargeCap, 8 stocks moving from LargeCap to MidCap, 13 stocks from SmallCap to MidCap, and 13 stocks from MidCap to SmallCap.
The expected migrations from SmallCap to MidCap have outperformed the other potential migrations with all stocks moving higher over the last six month.
Active managers could continue to realign their portfolios. Some of the upward migrations will have passive flows in the next few days and over the next few months.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
The “reason” for the offering mentions a desire to move to TSE Prime in future.

STAR CM (6698 HK): Grave Accusations

STAR CM Holdings (6698 HK), a variety program intellectual property creator and operator, was listed last December and promptly gained 475% by early August. All good so far.
Shares cratered on the 18 August (-23.4%) and are currently 76% adrift from its recent high. The reason? A viral clip from late pop diva Coco Lee discussing unfair treatment.
The music competition show, in which Coco appeared, pushed back on any impropriety; however, its broadcaster has temporarily suspended the program. This is no easy fix.

Doosan Robotics IPO: The Bear Case

Doosan Robotics (DOOSANROBO KS) is a global industrial and collaborative robotics leader. It has opened the books on an up to US$318 million IPO.
In Doosan Robotics 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 business plan forecasts based on shaky assumptions, high cash burn, rising cash collection cycle and deteriorating balance sheet strength.

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Aug 30

Most Read: SSE STAR50, Jio Financial Services, Prosus NV, Tcc Steel, East Buy Holding , Sinopharm Group Co Ltd H, VNG (VinaGame), Posco Future M, Shougang Fushan Resources, Core Concept Technologies Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China: Huge ETF Inflows & Impact on Stocks
Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)
VNG Pre-IPO – The Positives – Vietnam’s Mini-Tencent
Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts
Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional
Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

China: Huge ETF Inflows & Impact on Stocks

Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

Prosus/Naspers – The ουροβóρος Is Dead! Long Live The Ouroboros!

Shareholders of Prosus NV (PRX NA) and Naspers (NPN SJ) approved AGM agenda items late last week to enable the two Capitalisation Issues and Naspers’ Share Consolidation to move forward.
What Will Happen: Prosus will issue new N shares to its shareholders and Naspers will reject them. Naspers will issue new shares to its shareholders, and Prosus will reject them.
Naspers will own ~42.9% of Prosus, Prosus will own 0.02% of Naspers. Sales of Tencent shares will continue. Share Buybacks too. But the ouroboros will have spit out its tail.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Final Hang Seng Index Flows for 1 Sep Rebal (AAC, EastBuy, BABA, Sinopharm, Trip.com)

The Hang Seng announces changes along with prospective flows 2wks before the actual change. Capping flows are calculated off the close three days before implementation. That was today.
There have been some minor movements in the rankings. Nothing major. There is still just over US$1bn to trade, one-way.
Enclosed are totals for each of the three major indices (Hang Seng, HSCEI, and HS Tech) and then netted flows. The biggest is US$470mm of BABA to sell. Spreadsheet attached.

HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Sep 2023)

The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
The largest passive inflows will be on East Buy (1797 HK), JD.com (9618 HK), Ping An (2318 HK), Sinopharm (1099 HK), BYD (1211 HK), Lenovo (992 HK) and Trip.com (9961).
The largest passive outflows will be on Alibaba (9988 HK), Li Auto (2015 HK), Meituan (3690 HK), AAC Technologies (2018 HK), Kuaishou (1024 HK), COGARD (2007) and CG Services (6098).

VNG Pre-IPO – The Positives – Vietnam’s Mini-Tencent

Vng (VNG US), Vietnam’s leading internet platform, aims to raise up to US$300m in its US IPO.
VNG is Vietnam’s leading homegrown digital ecosystem, as per the company, with diverse product offerings across games, communications and media, fintech and other opportunities
In this note, we talk about the positive aspects of the deal.

Korea’s First Sector Inverse ETF: Discussing Flow Trading Impacts

KB Asset Management has announced the release of an inverse ETF, containing the top 10 core stocks in the secondary battery sector.
Given the substantial fluctuations in SSF trading volume in Korea, the flow increase of this ETF might temporarily lead to an unusually high level of backwardation.
Also, we may observe a phenomenon known as ‘wag-the-dog’ as the flow of this inverse ETF could act as a triggering factor for a temporary spark.

Shougang Fushan Resources (639 HK): Partial Offer Is Unconditional

Shougang Fushan Resources (639 HK) shareholders approved the partial offer to acquire a maximum of 125.0 million shares (2.47% of outstanding shares) at HK$2.40 per share and the whitewash waiver.
The partial offer is now unconditional and will close on 12 September. Considering the irrevocables not to tender, a 100% minority participation rate implies a minimum proration of 2.98%.
If the partial offer’s acceptance rate mirrors today’s general meeting minorities participation rate of 63.6%, it would imply a minimum proration of 4.69%.

Core Concept Technologies (4371 JP) – A BIGLY 2ndary Offering (Re-IPO), and Eventual TOPIX Inclusion

Last week I wrote about another situation, noting Equity Offering Into TOPIX Inclusion is a standard construct. Here we have another.
DX and HR Support company Core Concept Technologies Inc (4371 JP) today announced a large (it ups Real World Float by 64%, and is 33 days of ADV) secondary offering.
The “reason” for the offering mentions a desire to move to TSE Prime in future.

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Aug 29

Most Read: SSE STAR50, Jio Financial Services, Piotech , HLB Inc, China Conch Venture Holdings, Tcc Steel, Vingroup Jsc, Seven & I Holdings, Doosan Robotics, Nikkei 225 and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

China: Huge ETF Inflows & Impact on Stocks
Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light
Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus
StubWorld: China Conch Plumbs New Lows
KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December
Vingroup: VinFast’s Valuation Makes No Sense
Seven & I: An Update on Investor Activism
Doosan Robotics IPO – The Positives – More than Doubled Its Revenue
EQD | Nikkei 225 (NKY) Rising but for How Long?

China: Huge ETF Inflows & Impact on Stocks

Nearly US$20bn has flowed into mainland China listed ETFs since 18 July and could be driven by the National Team supporting the market.
Most of the inflows have been focused on large cap indices including CSI 300, STAR50, CSI 500, SSE50, ChiNext and other sectoral and thematic ETFs.
The largest impact has been on the SSE STAR50 (STAR50 INDEX) constituents, but that has not stopped the slide in the stocks.

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light

As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

Positioning for the Timing of HLB, the Latest Target in the KOSDAQ Exodus

HLB’s process of selecting a lead underwriter for the KOSPI listing has been witnessed in Yeouido.
The price impact becomes most evident on the board approval date as the point at which this impact is most pronounced is substantially accelerated due to the market’s learning effect.
There is a strong likelihood that HLB will have its board decision by mid-September, necessitating our preparation for a position setup targeting this timing.

StubWorld: China Conch Plumbs New Lows

The China Conch Venture Holdings (586 HK)/ Anhui Conch Cement (600585 CH) ratio, and the implied stub, are now at all-time lows.
Preceding my comments on China Conch/Anhui 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%.

KOSPI200 Index Rebalance Preview: Increasing Number of Changes in December

Nearly two-thirds of the way through the review period, we see nine potential changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the December rebalance.
The potential adds are dominated by the Materials sector while the potential deletions are mainly from the Consumer Discretionary sector.
The impact on the potential inclusion ranges from 0.14-12 days of ADV while the impact on the potential deletions varies from 3.1-30 days of ADV.

Vingroup: VinFast’s Valuation Makes No Sense

VinFast (VFS US), the EV arm of Vietnamese conglomerate Vingroup Jsc (VIC VN), commenced trading on the 14 August. And promptly took off.
VinFast’s current market cap is ~4x General Motors (GM US)‘s, twice that of Mercedes-Benz (MBG GR)‘s, and the second-largest pure-play EV-maker after Tesla (TSLA US).
Vingroup’s holding in VinFast is worth 13x its market cap. This is not sustainable.

Seven & I: An Update on Investor Activism

By Oshadhi Kumarasiri

Sogo & Seibu’s labor union threatens strike if job protection talks stall. This emphasizes the number of considerations Seven & I Holdings (3382 JP) had to consider during changes.
Had ValueAct shown more patience, they might have worked with Seven & I to improve the struggling Eto Yokado supermarkets business.
Thus, ValueAct’s investor activism campaign seem unlikely to achieve a full restructuring of underperforming businesses at Seven & I.

Doosan Robotics IPO – The Positives – More than Doubled Its Revenue

By Ethan Aw

Doosan Robotics (DOOSANROBO KS) is looking to raise up to US$314m in its Korean IPO.
Doosan Robotics (DR) manufactures and sells collaborative robots (Cobots). The firm’s product portfolio primarily includes different series of robot arms as well as its coffee module
In this note, we will talk about the positive aspects of the deal.

EQD | Nikkei 225 (NKY) Rising but for How Long?

By Nico Rosti

Rebound on Nikkei 225 INDEX may not last for long, 2-3 weeks tops, it will encounter resistance no later than mid of September (most unfavorable month for stocks gains).
Resistance levels to watch vary, depending on number of weeks up. For this week and the next, a new pullback could start from 32476 and 32817.
If the index goes =>33000, it means it is rallying and will not correct into September, the rally then could last into October.

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Aug 28

Most Read: JSR Corp, Soulbrain, Accton Technology, Jio Financial Services, FP Partner, Great Wall Motor, Golden Eagle Retail, Piotech , Medical Data Vision and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea
Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI
Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing
FP Partner (7388 JP) Offering-To-Get-Float-To-Get-TOPIX-Inclusion
Quiddity A/H Premium Monitor 🦄 (As of 25 Aug 2023)
Weekly Deals Digest (27 Aug) – Golden Eagle, Costa, Boustead, UMW, ARM, Integral, S.F. Holding
STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light
Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity
Ohayo Japan|US Equities Gain Post Powell’s Speech; JAPAN X: JP Bank’s $7bn Boost for Local Startups

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally.
It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too.
FUD and Flows mean that it is likely to continue to trade wide for the near future.

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven’t yet established a learning effect.

Index Rebalance & ETF Flow Recap: HSCEI, HSI, HSTECH, Yuanta ETFs, China ETFs, REMX, KOSPI

The JPX Nikkei 400 index rebalance will take place on Wednesday, MSIC on Thursday and HSI, HSCEI, HSTECH and HSCI on Friday.
There are review cutoffs for the MVIS family of indices, and multiple announcements of changes to various indices during the week.
There were inflows to mainland China ETFs, iShares India ETF (INDA), Ishares India Small-Cap (SMIN) and iShares EmergingMarkets ex China (EMXC) while there were outflows for iShares Emerging Markets (EEM).

Jio Financial (JIOFIN IN): Upcoming Passive Selling & Timing

Jio Financial Services (JIOFIN IN) started trading on 21 August following its demerger from Reliance Industries (RIL IN). The stock was locked limit down on its first four trading days.
Passive NIFTY Index (NIFTY INDEX) and S&P BSE SENSEX Index (SENSEX INDEX) trackers hold Jio Financial Services (JIOFIN IN) stock and will need to sell over the next few days.
We estimate passive trackers will need to sell around 188m shares (US$487m) of Jio Financial Services (JIOFIN IN) next week and the stock could head lower in the short term.

FP Partner (7388 JP) Offering-To-Get-Float-To-Get-TOPIX-Inclusion

On 22 August, TSE Growth-listed insurance agent FP Partner (7388 JP) announced a special dividend, a secondary offering of 1.4mm shares, and a move to TSE Prime.
The equity offering is designed to raise tradable share percentage to meet the TSE Prime listing requirement. The move to Prime on 11 September means a TOPIX inclusion end October.
The pattern of “Offering To Get Float to Get TOPIX Inclusion” is well-trod. This one has some interesting dynamics.

Quiddity A/H Premium Monitor 🦄 (As of 25 Aug 2023)

This week it is changed from H/A Discount to A/H Premium, by popular demand. Some Northbound data is added. We kept the unicorn.
Last week saw a win/loss ratio of 21:13. Average recommended pair on the week earned 0.9% if Sunday recos executed Monday close, 1.35% if executed Monday VWAP.
6 Unwinds and 3 new trades recommended this week. As always, feedback desired to make this even better.

Weekly Deals Digest (27 Aug) – Golden Eagle, Costa, Boustead, UMW, ARM, Integral, S.F. Holding

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 – ARM Holdings (1822695D US), Integral Corporation (5842 JP) and S.F. Holding (002352 CH) IPOs.
Event-Driven developments – Boustead Plantations (BPLANT MK), UMW Holdings (UMWH MK), Eoflow (294090 KS), Golden Eagle Retail (3308 HK), Costa Group Holdings (CGC AU), Metro Pacific Investments Co (MPI PM).

STAR50 Index Rebalance: Two Changes; Pre-Positioning Appears Light

As expected, the index committee has used a 6-month minimum listing history and that results in two changes to the SSE STAR50 (STAR50 INDEX) in September.
Piotech (688072 CH) and Hwatsing Technology (688120 CH) will replace Suzhou Nanomicro Technology (688690 CH) and Zhuhai CosMX Battery (688772 CH) in the index.
One-Way turnover is estimated at 2.83% and will result in a one-way trade of CNY 3,562m. There does not appear to be a lot of pre-positioning on the stocks.

Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity

On Friday after the close, SBI Holdings (8473 JP) – which currently owns 24.63% of Medical Data Vision (3902 JP) – announced it would buy another 2,043,200 shares.
This market purchase would lift them to just under 30% by year-end.
There have been similar trades done by others in the past and they were worth looking at.

Ohayo Japan|US Equities Gain Post Powell’s Speech; JAPAN X: JP Bank’s $7bn Boost for Local Startups

By Mark Chadwick

OVERSEAS: US Equities rise for the first week in four; Jackson Hole: Powell leaves open possibility of further hikes/ECB’s Largarde strikes hawkish tone for EU; China’s Economic Pain to Continue
JAPAN: NKY Futures +0.7% Premium vs Cash; USDJPY 146.4; BOJ’s Ueda at Jackson Hole says Japan inflation below target; Kishida’s Approval rating improves; Japan to double EV Charging Stations.
JAPAN X: Japan Post Bank’s Trillion Yen Boost set to propel the Japan start up ecosystem to new highs – while creating a new revenue stream for the bank.

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Aug 27

Most Read: Sinopharm Group Co Ltd H, East Buy Holding , ZJLD Group , Trip.com Group , UMW Holdings, Soulbrain, Grab Holdings , iShares MSCI ACWI ETF, Medical Data Vision and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
Sime Darby/UMW: It’s All About Scale
Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea
Grab Holdings (GRAB US) – Growth with Scale from a Stable Platform
Jackson Hole Nugget: Who cares about shelter? Powell does
Key Supports Holding Strong; 10-Year Treasury Yield Below Key Resistance; Buys in Non-Defensives
Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity

Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted

Sinopharm Group Co Ltd H (1099 HK) will be added to the Hang Seng Index (HSI INDEX) on 1 September while Country Garden Holdings Co (2007 HK) will be deleted.
Both changes are a surprise, but the impact on Sinopharm Group Co Ltd H (1099 HK) will be much larger. Given the recent increase in shorts, there could be covering.
Estimated one-way turnover is 1.9% leading to a one-way trade of HK$3.65bn. Capping will result in selling on Alibaba Group Holding (9988 HK), Tencent (700 HK) and HSBC (5 HK).

HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks

As expected, East Buy Holding (1797 HK) replaces AAC Technologies Holdings (2018 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 1 September.
Estimated one-way turnover is 3.5% leading to a one-way trade of HK$3.4bn (US$435m). There are 4 stocks with over 1 day of ADV to trade.
Short interest is 15% of float on both stocks. Short covering could take East Buy Holding (1797 HK) higher while providing support for AAC Technologies (2018 HK) closer to deletion.

HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect

There are 22 adds and 27 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents down to 518.
We expect all 22 inclusions to the HSCI will be added to Stock Connect, while 24 of the 27 HSCI deletions will be removed from Southbound Stock Connect.
Since the end of June, shares held though Southbound Connect have increased on 20 of the 27 HSCI deletions and there could be some unwinding in the next two weeks.

HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)

As expected, Trip.com Group (9961 HK) replaces Country Garden Services (6098 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 1 September.
BeiGene (6160 HK) fails the Velocity Test and misses inclusion, while an increase in Zhongsheng Group (881 HK)‘s float keeps it in the index.
Using prices from the close on 18 August, estimated one-way turnover is 2.78% leading to a one-way trade of HK$1.73bn (US$221m).

Sime Darby/UMW: It’s All About Scale

In one of the largest M&A transactions in Malaysia, Sime Darby (SIME MK) intends to acquire a 61.2% stake in UMW Holdings (UMWH MK) from Permodalan Nasional Bhd for RM3.57bn.
Sime Darby is paying RM5/share, a token 9.9% premium to last close, but more like 25% when factoring in apparent news leakage.
Once the stake sale is completed, Sime Darby will launch an unconditional MGO for all remaining shares not held. This transaction is expected to be wrapped up in early 2024.

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven’t yet established a learning effect.

Grab Holdings (GRAB US) – Growth with Scale from a Stable Platform

By Angus Mackintosh

Grab Holdings (GRAB US) released another set of positive results but this time the balance between profitability and growth was well-struck, as it reduced incentives yet increased its market share.
Grab saw GMV growth in both deliveries more notably in mobility, with revenues growing at a faster pace and adjusted EBITDA surprising on the upside, bringing forward breakeven to 3Q2023.
Prospects for 2H2023 look even better with Grab’s affordability initiatives gaining traction and improving retention and profitability.

Jackson Hole Nugget: Who cares about shelter? Powell does

By Andreas Steno

Our short and sweet observations from the Jackson Hole opening remarks from Jay Powell.
To us, hopes of an explicit pause have been postponed further down the road after this speech.
A few highlights:1) Data dependency is still the name of the game – NO promises for further meetings, meaning that consensus does not exist 2) Shelter costs are highlighted, which to me can be seen as a sign that Powell needs an excuse to hike further 3) The Fed is attentive to the risk of the economy running above trend still and monitors the housing rebound closely 4) The lack of spill-overs from the slide in job openings to the unemployment rate puzzles the Fed and they want more data.

Key Supports Holding Strong; 10-Year Treasury Yield Below Key Resistance; Buys in Non-Defensives

By Joe Jasper

Last week (Aug. 18) we discussed the 10-year Treasury yield and DXY testing respective resistance (4.3%-4.35% and $103.50-$103.70).
As long as no decisive breakouts in the 10-year yield or DXY, we were buyers on the pullback to $93 on MSCI ACWI (ACWI-US).
Outside of our overweight countries (Japan, India, Taiwan, Greece), defensive Sectors continue to lag. We highlight buys in Technology, Services, Consumer Discretionary, Industrials, Materials/Energy, and Financials.

Medical Data Vision (3902) – SBI Upping Their Stake Means Opportunity

On Friday after the close, SBI Holdings (8473 JP) – which currently owns 24.63% of Medical Data Vision (3902 JP) – announced it would buy another 2,043,200 shares.
This market purchase would lift them to just under 30% by year-end.
There have been similar trades done by others in the past and they were worth looking at.

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Aug 26

Most Read: JSR Corp, Piotech , UMW Holdings, Soulbrain, Samsung Electronics, NVIDIA Corp, Hanwha Ocean, Boustead Plantations and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
STAR50 Index Rebalance Preview: Potential Changes Playing Catchup
Sime Darby/UMW: It’s All About Scale
Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea
Is Samsung M&A About to Happen?
Nvidia: Better than Dreamed
Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won
China Property Developers In Distress – Weekly News & Announcements Tracker | 18-24 August 2023
Boustead Plantations’ Lifetime High Offer Price
China Property: Policy Announcement Alert

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally.
It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too.
FUD and Flows mean that it is likely to continue to trade wide for the near future.

STAR50 Index Rebalance Preview: Potential Changes Playing Catchup

The review period for the September rebalance ends today. The changes could be announced on 25 August with the implementation taking place after the close on 8 September.
The upcoming launch of the STAR100 Index could result in the index committee continuing to use a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 2.3% resulting in a one-way trade of CNY 2,658m. The impact on the deletions will be much larger than that on the inclusions.

Sime Darby/UMW: It’s All About Scale

In one of the largest M&A transactions in Malaysia, Sime Darby (SIME MK) intends to acquire a 61.2% stake in UMW Holdings (UMWH MK) from Permodalan Nasional Bhd for RM3.57bn.
Sime Darby is paying RM5/share, a token 9.9% premium to last close, but more like 25% when factoring in apparent news leakage.
Once the stake sale is completed, Sime Darby will launch an unconditional MGO for all remaining shares not held. This transaction is expected to be wrapped up in early 2024.

Overlooked by the Market: A Compelling Long Short Opportunity in Newly-Listed ETF Rebal in Korea

In the inaugural constituent selection, FnGuide revealed a noteworthy pattern. Given the smaller market capitalization of the electrolyte suppliers, FnGuide has included only the largest among them in this ETF.
SoulBrain, categorized by FnGuide as an electrolyte supplier like Chunbo, has significantly outperformed Chunbo. As a result, there is a considerable likelihood that SoulBrain will replace Chunbo in December.
The price impact from ETF rebalancing trading has disappeared substantially in Korea. We should focus on the first rebalancing of newly listed ETFs that haven’t yet established a learning effect.

Is Samsung M&A About to Happen?

By Ken S. Kim

Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A

Nvidia: Better than Dreamed

By Douglas O’Laughlin

Nvidia, in characteristic fashion, murdered EPS estimates.
Revenue was $2 billion ahead of the guide, and the guide was another $4 billion ahead of consensus for the next quarter.
Going into the print, many people were concerned that positioning was bad, i.e., everyone was bullish and expectations were too high. Well, they did not disappoint.

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won

After the market close on 23 August, Hanwha Ocean (042660 KS) confirmed that it will conduct a massive rights offering of 2 trillion won.
The expected rights offering price is 22,350 won, which is 36% discount to current price.
We believe this rights offering is likely to dilute the existing shareholders and negatively impact Hanwha Ocean’s share price.

China Property Developers In Distress – Weekly News & Announcements Tracker | 18-24 August 2023

By Robert Ciemniak

A weekly curated selection of Chinese news articles and company announcements focused on developers in distress
We look for their deals, updates, specific project progress news (‘local signals’), as well as relevant local research commentaries about the market
We do not verify the underlying data or provide any opinion, we only select and summarize the information; see direct links to sources

Boustead Plantations’ Lifetime High Offer Price

Palm oil play Kuala Lumpur Kepong (KLK MK) has entered an agreement with Boustead Holdings, Boustead Plantations (BPLANT MK)‘s largest shareholder, to acquire a 33% plus 1 share stake.
Upon the completion of the agreement, KLK will make a Mandatory Offer for all shares not owned in BPlant. The Offer Price is RM1.55/share, a lifetime high.
The agreement conditions are rudimentary. The MGO has no minimum acceptance condition. This is done.

China Property: Policy Announcement Alert

By Robert Ciemniak

A new policy easing focused on homebuyers was released, building on July announcements, and now an option for all cities
More homebuyers will be able to get preferential terms for mortgages as first-time buyers
A joint notice from the Ministry of Housing and Urban-Rural Development, the People’s Bank of China, and the State Administration of Financial Supervision

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Aug 25

Most Read: Taiwan Semiconductor (TSMC) – ADR, Alibaba (ADR), Hanwha Ocean, M&A Research Institute, Shibaura Mechatronics, Doosan Robotics, Eoflow , Samsung Electronics, Intouch Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Taiwan Tech Weekly: Key Supply Chain Names to Watch for Nvidia’s Earnings Today
Alibaba: Navigating in Reverse
Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart
M&A Research Institute Holdings (9552) TOPIX Inclusion
Shibaura Mechatronics (6590) Secondary Offering & Buyback
Doosan Robotics IPO Preview
EOFLOW/Medtronic Tender: Irrational Exuberance
Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won
Is Samsung M&A About to Happen?
StubWorld: Intouch “Cheap” As Thaksin Returns

Taiwan Tech Weekly: Key Supply Chain Names to Watch for Nvidia’s Earnings Today

By Vincent Fernando, CFA

Nvidia will report its earnings today U.S.-time, we outline the key Taiwan AI supply chain names to watch around the earnings.
TSMC has maintained its full-year revenue guidance despite media reports questioning whether a further downgrade was coming.
Hon Hai produces over 50% of Nvidia’s AI hardware according to media reports.

Alibaba: Navigating in Reverse

By Oshadhi Kumarasiri

Alibaba (ADR) (BABA US)‘s New Retail strategy stumbled, prompting the company to revert to its e-commerce origins with a renewed emphasis on social commerce.
Creating a social media platform could be relatively simple, yet turning it into a prosperous venture amid established social media giants could be challenging.
Branching out from social media to e-commerce might be straightforward, but Alibaba Group Holding (9988 HK)‘s unprecedented reverse path could present unique challenges.

Korea – Positioning in Ecopro, JYP Entertainment, Hanwha Ocean, Hanmi Semi, CJ Corp, E-Mart

Ecopro (086520 KS), Jyp Entertainment (035900 KS), Hanwha Ocean (042660 KS), Hanmi Semiconductor (042700 KS), CJ Corp (001040 KS) and E Mart (139480 KS) have been on investors/traders radars recently.
There will be liquidity demand on the stocks in a week and there is pre-positioning on a lot of the stocks.
Since 10 August, retail investors have net bought Jyp Entertainment and E Mart, foreigners have net bought Ecopro, Hanwha Ocean and Hanmi Semiconductor, while local institutions have net bought CJ Corp.

M&A Research Institute Holdings (9552) TOPIX Inclusion

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.

Shibaura Mechatronics (6590) Secondary Offering & Buyback

Five plus years ago, Toshiba Corp (6502 JP) sold down a 26% stake in small cap Shibaura Mechatronics (6590 JP) to get to a consolidated 13%-ish stake.
This was discussed in Toshiba Selldown of Shibaura Mechatronics (6590) back then. Yesterday, we got news Toshiba would sell out its remaining stake. And there’s a buyback. Maybe.
The stock has reacted badly on Day 1, despite a lack of dilution. Shareholder structure matters.

Doosan Robotics IPO Preview

Doosan Robotics is getting ready to complete its IPO in Korea in September. The expected IPO price range is 21,000 won to 26,000 won.
The company estimates its sales to surge from 67 billion won in 2023 to 766.3 billion won in 2027, representing 83.9% CAGR from 2023 to 2027.
One of the major reasons why local investors will have a positive view of Doosan Robotics is due to Samsung’s investment in Rainbow Robotics whose share price increased 232% YTD.

EOFLOW/Medtronic Tender: Irrational Exuberance

Eoflow (294090 KS) shares were up 4.4% on the back of Medtronic Plc (MDT US)’s earnings call comment that it expects the acquisition to close at the end of 2023.
The bear view is that Medtronic’s messaging remained unchanged as it is still assessing Insulet Corp (PODD US) lawsuit and the potential impact on the timing and/or pricing.
The bull view is that Medtronic’s comment underscores its commitment to close the transaction. It’s tough to take a call on risk/reward profile – at best it’s a brave buy.

Hanwha Ocean: Big Shares Dilution from Rights Offering of 2 Trillion Won

After the market close on 23 August, Hanwha Ocean (042660 KS) confirmed that it will conduct a massive rights offering of 2 trillion won.
The expected rights offering price is 22,350 won, which is 36% discount to current price.
We believe this rights offering is likely to dilute the existing shareholders and negatively impact Hanwha Ocean’s share price.

Is Samsung M&A About to Happen?

By Ken S. Kim

Local press states that Samsung Electronics Pref Shares (005935 KS)sold shares as they look to invest in their future capex
The capex amount for 2023 will be around 40-50 trillion KRW and it doesn’t seem like W3 trillion is a needle mover
With a new 3 year shareholder return plan, I would think maybe cash is needed to secure ammunition for M&A

StubWorld: Intouch “Cheap” As Thaksin Returns