Most Read

On the 28th May, PRC department store play Golden Eagle Retail (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, Together with concert parties, they control 80.29%. 7.18% of the remaining 19.71% of the disinterested stakeholders have given an irrevocable.
The Scheme Doc was despatched this morning (23 August). The Scheme Meeting is September 15th with expected payment on (or before) the 17th of October. The Offer price is final.

KOSPI Size Indices – Plenty of Migrations to Attract Active Flows

The review period for the September rebalance of the KOSPI Size Indices started 1 June and will end 31 August. The changes will be implemented at the close 7 September.
We see 7 migrations from MidCap to LargeCap, 6 migrations from LargeCap to MidCap, 7 new adds to MidCap, and 17 migrations from SmallCap to MidCap.
Historically, stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote

Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk.
The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote.

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.

EOFlow/Medtronic: What Lawsuit?

On the 8th of August, Insulet Corp (PODD US) filed a lawsuit accusing Eoflow (294090 KS) of the misappropriation of trade secrets, patent infringement, and trademark dilution.
The filing was pretty heavy on accusations. EOFlow declined ~11% on the news.
Undeterred, Medtronic (MDT US) continues to preach all is peachy, suggesting the EOFlow merger is a go, and Medtronic will deal with the lawsuit, as and when.

TVS Supply Chain Solutions IPO Trading – Offered at a Premium with Underwhelming Subscription Rates

By Ethan Aw

TVS Supply Chain Solutions (TVSSCS IN) raised around US$108m in its India IPO, after downsizing from an earlier reported float of up to US$500m.
TVS SCS is an Indian supply chain logistics solution provider which also has global capabilities and network across the value chain with cross deployment abilities, according to RedSeer.
We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand and trading dynamics.

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.

Coforge Placement – US$900m Cleanup, Well Flagged but the Stock Is Toppish

Baring aims to raise around US$900m by selling its remaining 26.6% stake in Coforge (COFORGE IN) .
Baring has been paring down its stake since 2020 and hence, the selldown is somewhat well flagged.
In this note, we run the deal through our ECM framework and talk about the deal dynamics.

APA Group Placement – Well Flagged Deal, but Lacks in Accretion

By Clarence Chu

APA Group (APA AU) is looking to raise A$675m (US$430m) in its primary follow-on to partially fund its acquisition of the Alinta Energy assets in the Pilbara region.
The deal is a well flagged one with APA having been one of the last remaining bidders on the asset. Short interest has been on the rise as well.
However, the deal doesn’t seem accretive at our end, and the results reported today seemed to have missed analyst expectations.

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.

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Aug 23

Most Read: Zydus Lifesciences Ltd, Ping An Insurance (H), Accton Technology, S&P 500 INDEX, Hanwha Ocean, ARM Holdings, Integral Corporation, Kuaishou Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Zydus Lifesciences (ZYDUSLIF IN): Strong Start of FY24 Riding on US Formulation Business
Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?
Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover
Pause Continues But Oversold Bounce Likely; Buys in Energy, Construction/Engineering, Enrgy Shippers
Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It
Inflation Watch: Why EUR inflation will print below 2% before New Years
ARM Holdings Limited – The Positives – Pervasive Global Presence
Integral Corporation IPO: The Bear Case
KS (Kuaishou 1024 HK): 2Q23, First Net Profit Since IPO, Growth Accelerated, Buy
FX Nugget: What Policy Normalization? The BoJ Is as Interventionist as Ever….

Zydus Lifesciences (ZYDUSLIF IN): Strong Start of FY24 Riding on US Formulation Business

By Tina Banerjee

Zydus Lifesciences Ltd (ZYDUSLIF IN) recorded 30% YoY growth in revenue to INR51B in Q1FY24, driven by 57% YoY growth in US formulation business. India business revenue grew 6% YoY.
US business growth was driven by new product launches and improvement in base business. The company has launched four new products in the US during the quarter.
Zydus Lifesciences expects double-digit growth in India branded formulation business to continue and the U.S. business to grow on a formidable base of FY23 going forward.

Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?

The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover

There should be 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 potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

Pause Continues But Oversold Bounce Likely; Buys in Energy, Construction/Engineering, Enrgy Shippers

By Joe Jasper

Support levels discussed in our 8/8/23 Compass broke, leading to a change in character (from buy the dup to sell the rip) and a deeper pullback.
Supports we were watching included the 50-day MA and 4460-4475 on the S&P 500, $371.50 on $QQQ, and $190-193 on the $IWM; these are now resistance moving forward
Longer-Term support on the S&P 500 is at 4300-4325 (nearly hit on Friday) and 4200, and we will remain constructive as long as these supports hold.

Hanwha Ocean’s Massive Issuance: Clearly, This Is Test-The-Water and How to Approach It

Multiple local news outlets reported Hanwha Ocean is undergoing a 2.5 trillion won equity increase. The official disclosure regarding this matter is expected to be released within this month.
We have repeatedly observed a pattern of testing the waters through leaks to the local media. The case of Hanwha Ocean can also be seen in this light.
It’s challenging to envision this magnitude being absorbed seamlessly by the market. There is a considerable likelihood that both issuers and bankers will aggressively attract inflows of arbitrage-seeking hot money.

Inflation Watch: Why EUR inflation will print below 2% before New Years

By Andreas Steno

It’s Jackson Hole week and even if Wyoming is typically only full of cowboys (also when CBs gather), they are joined by a cowgirl from France this week for the conference.
The Fed and the ECB will enter the yearly conference with different macroeconomic backdrops as the US growth and inflation momentum seems stickier than Euro peers on our models.
And using leads/lags from the European PPI basket and the US HICP index, we intend on showing you that sub 2% inflation in Europe is a clear possibility in just 3 months from now.

ARM Holdings Limited – The Positives – Pervasive Global Presence

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 this note, we talk about the positive aspects of the deal.

Integral Corporation IPO: The Bear Case

Integral Corporation (5842 JP) is an independent Japanese private equity firm seeking to raise about US$175 million. The pricing is on 4 September, and the listing is on 20 September.
In Integral Corporation IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rest on the declining mix of fee-earning AUM, growth driven by volatile investment income and uninspiring 1HFY22 performance in fee-related revenue growth and margin.

KS (Kuaishou 1024 HK): 2Q23, First Net Profit Since IPO, Growth Accelerated, Buy

By Ming Lu

The total revenue growth rate accelerated significantly to 28% YoY in 2Q23.
The high-margin businesses grew more rapidly than the low margin business.
Gross Merchandise Value and Active user base still increased strongly.

FX Nugget: What Policy Normalization? The BoJ Is as Interventionist as Ever….

By Andreas Steno

Markets are stuck in a discussion on the JPY this morning as BoJ governor Ueda and PM Kishida held a meeting allegedly discussing FX developments.
Our models continue to signal weakness ahead for the JPY.
Even a move to 1% in the YCC-curve control has NOT allowed the BoJ to become less interventionist.

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Aug 22

Most Read: Tokyo Stock Exchange Tokyo Price Index Topix, East Buy Holding , E Guardian Inc, AAC Technologies Holdings, Accton Technology, Samsung Electronics Pref Shares, Trip.com Group , Ping An Insurance (H), SK Rent A Car, Ventia Services Group Pty and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Share Buybacks In Japan – A 2023 Primer
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
E-Guardian (6050) Partial Offer Update
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%
Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover
Market Information About Samsung Electronics’ Shareholder Return
HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way
Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?
SK Rent A Car: SK Networks’ Tender Offer
Ventia Services Group US$450m Placement Lockup Expiry – Past Deals Have Done Well

Share Buybacks In Japan – A 2023 Primer

The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

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.

E-Guardian (6050) Partial Offer Update

When this was launched, it traded more volume than expected on the first day, then again on the second day. Since then it has traded cheap vs initial estimates.
A week after the launch, two separate Large Shareholder Filings came out. Those bear scrutiny.
The back end trade is still an interesting one in my opinion.

Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%

The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

Yuanta ETFs Rebalance Preview: Changes Galore as Stocks Soar; Shorts Increase, Then Cover

There should be 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 potential adds are driven by the AI-frenzy that has swept the market for the last few months. Most potential deletions are shipping stocks that are way off their highs.
Short interest on the potential deletions is high in terms of days of ADV and free float. The rise in shorts on the potential adds is being rapidly covered.

Market Information About Samsung Electronics’ Shareholder Return

The local market is increasingly convinced that Samsung Electronics’ quarterly dividends for the latter half of this year will experience a reduction.
Samsung Electronics plans to apply the updated regulations from the 2024 1st quarter dividends, following the conclusion of the capital market law revision at the end of this year.
It might be prudent to refrain from trading that bets on a reduction in the 1P discount in the first half of this year.

HSCEI Sep23 Index Review/Flows – Trip.Com (9961) Added, CG Svcs (6098) Deleted; ~2.5% One Way

The HSCEI Review for Sep 2023 was announced on Friday 18 August. There is one ADD Trip.com Group (9961 HK) and one DELETE Country Garden Services (6098 HK).
Neither of these two are a surprise. Neither are hugely impactful.
There is about 2.5% one-way to trade. Alibaba (ADR) (BABA US) is a sell across all three major indices.

Ping An A/H Premium: Sell the A’s, Buy the H’s; National Team at Work?

The premium of Ping An Insurance Group of (601318 CH) to Ping An Insurance (H) (2318 HK) has jumped from 4% to 14% in the space of a week.
There has also been a jump in the Hang Seng Stock Connect China AH Premium Index and big inflows to mainland China ETF raising the possibility of National Team buying.
A stabilisation in onshore China markets could lead to the AH premium dropping back towards parity and we would gradually scale out of long A/ short H positions.

SK Rent A Car: SK Networks’ Tender Offer

Korean car rental play SK Rent A Car (068400 KS) has announced a Tender Offer from SK Networks (001740 KS), its largest shareholder with ~76%.
SK Rent shareholders have the option of receiving cash or SK Networks scrip. Appraisal rights are also afforded.
The shareholder vote is a lock. The current trade is the cash offer, which is trading tight to terms.

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.

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Aug 21

Most Read: Tokyo Stock Exchange Tokyo Price Index Topix, Sinopharm Group Co Ltd H, Joyful Honda, Trip.com Group , Eoflow , East Buy Holding , Brilliance China Automotive, Dali Foods Group, AAC Technologies Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Share Buybacks In Japan – A 2023 Primer
Hang Seng Index Rebalance: Sinopharm (1099 HK) Added, Country Garden (2007 HK) Deleted
Joyful Honda (3191) – Repeats Its ASR In Double the Size
HSCEI Index Rebalance: Trip.com (9961 HK) Replaces CG Services (6098 HK)
Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material
HSTECH Index Rebalance: East Buy (1797 HK) Replaces AAC Tech (2018 HK); Big Shorts on Both Stocks
Index Rebalance & ETF Flow Recap: ASX, NEXT50, MVMVA, MVMVW, Celltrion, Brilliance, KQ150, HSCI
Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote
HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off
Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%

Share Buybacks In Japan – A 2023 Primer

The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

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).

Joyful Honda (3191) – Repeats Its ASR In Double the Size

Last year, I wrote about Joyful Honda (3191 JP)‘s implementation of a ¥2.5bn ToSTNeT-3 into Accelerated Share Repurchase. It was the first such transaction I knew of in Japan.
This year, they have just announced another for nearly twice the size. It is worth looking at the details and comparing the stock vs Peers.
It is also worth understanding exactly what the incentives are for whom and how that impacts the path. And who might respond to it.

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).

Eoflow’s US Subsidiary (Nephria Bio)’s Technology in MXene Advanced Material

Eoflow (294090 KS)’s shares rose 2.7% to 27,000 won on 18 August with 1.4 million shares traded, which was 5.7x higher than the previous three days of trading.
The main reason for this was due to the local news flow on Eoflow’s US subsidiary’s (Nephria Bio) technology on the advanced material MXene.
This news flow on MXene is likely to put further positive boost to Eoflow’s share price closer to the tender offer price (or at least limit further downside risk).

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.

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).

Dali Foods (3799 HK): Widening Spread Ahead of the 23 August Vote

Dali Foods Group (3799 HK)‘s gross spread on the Founder’s (Mr Xu Shihui) HK$3.75 per share offer has sharply increased and stood at 5.3% at the last close.
The rising gross spread is due to the recent market selloff (the gross spread of all HKEx merger arbs we track increased this week) and vote risk.
The vote risk is due to no interim results, the high AGM minority participation rate and a modest offer. There is little evidence that these risks will derail the vote.

HSI Sep23 Index Review/Flows – Sinopharm (1099) IN, CoGard (2007) OUT; 100 Names a Loooong Way Off

On Friday, Hang Seng Indices announced the changes to the benchmark Hang Seng Index, the index in the family with the largest AUM.
Sinopharm Group Co Ltd H (1099 HK) is ADDED, Country Garden Holdings Co (2007 HK) – in no surprise, is deleted.
I see HK$4bn a side to trade, and the only “compelling” trade by ADV here is Sinopharm, but correlations with a Peer Basket are low.

Hang Seng TECH Sep23 Index Review – A Few BIGLY Events and One-Way Flow of 3.4%

The Sep 23 review results for the Hang Seng Tech Index were announced on Friday 18 August after the close.
East Buy Holding (1797 HK) (formerly Koolearn) was an ADD. AAC Technologies Holdings (2018 HK) is a DELETE.
AAC is a significant flow event, and worth looking at. There are a few odds and ends too.

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Aug 20

Most Read: Japan Post Holdings, Celltrion Inc, Trent Ltd, Celltrion Healthcare , ZJLD Group , SK Rent A Car, Tokyo Stock Exchange Tokyo Price Index Topix, Silicon Motion Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
Celltrion Merger: Index Implications
Celltrion Merger Swap: Conditions & Schedule
NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow
Celltrion Inc/Healthcare Merger. Pharm Is Next
Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)
HSCI Index Rebalance: 22 Adds, 27 Deletes & Changes to Southbound Stock Connect
Fully Disseting SK Rent A Car’s Hybrid Tender Offer Disclosure, Whose Cash Offer at a 5.7% Spread
Share Buybacks In Japan – A 2023 Primer
What’s Next for SiMo?

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins

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.

Celltrion Merger: Index Implications

Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.

Celltrion Merger Swap: Conditions & Schedule

The swap prices, ₩148,853 for Celltrion Inc and ₩66,874 for Celltrion Healthcare, specified below are not tentative prices but confirmed prices. So, the merger ratio has been determined as 1:0.4492620.
The key focus now is the appraisal rights exercise. Both offer attractive spreads. Yet, the ₩1T combined ceiling might seem restricted considering potential dissenting Celltrion Inc shareholders exceeding expectations.
Nonetheless, considering the strong determination of the company towards this merger, we should consider a strategy of approaching this spread aggressively while keeping the cancellation risk in mind.

NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.

Celltrion Inc/Healthcare Merger. Pharm Is Next

It’s finally happening: biopharmaceuticals developer and producer Celltrion Inc (068270 KS) will acquire Celltrion Healthcare (091990 KS).
Inc will issue 0.4492620 new shares for each share in Healthcare. The swap prices of ₩148,853 for Inc and ₩66,874 for Healthcare are firm.
Celltrion Pharm (068760 KS) is excluded from the original three-way merger plan, but is expected to be merged with the enlarged Inc/Healthcare entity around July 2024.

Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)

On 17 August, Celltrion Inc announced that it will merge with Celltrion Healthcare. The merger ratio is 0.449262 Celltrion Inc share for each share of Celltrion Healthcare.
There was a negative surprise which was that Celltrion Pharm will not be included as part of the three companies merger which has been promised in the past several years.
Overall, we believe that this merger will have a positive impact on Celltrion Inc and Celltrion Healthcare’s share prices.

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.

Fully Disseting SK Rent A Car’s Hybrid Tender Offer Disclosure, Whose Cash Offer at a 5.7% Spread

With just the SK Networks stake, both of these conditions are already satisfied. So, the key point will be how quickly the spread of the cash offer narrows next Monday.
We need to watch whether the spread for the exchange offer opens. As SK Networks is a K200 constituent, it’s subject to short selling, making a Long Short play possible.
Worth noting, among the 24% minority shareholders, NPS and KIT hold a combined 15%, potentially leading to limited market circulation volume. This is something we should also be mindful of.

Share Buybacks In Japan – A 2023 Primer

The TSE and Government are pressuring low-PBR companies to DO SOMETHING to raise their PBR to >1.0x. The easiest way to do that is raise ROE.
Raising R requires customers “agree” (buying more, paying a higher price, etc). Lowering E means buying back shares or paying big special dividends. That’s easier for a company.
So buybacks have been increasing in number, and breadth, and to some degree in size. This insight describes the mechanics/details of how buybacks work in Japan.

What’s Next for SiMo?

By Jim Handy

MaxLinear’s acquisition of Silicon Motion has been abandoned, with both sides threatening arbitration.
It is difficult to understand why the acquisition would have resulted in the synergies projected by management. The businesses are very different.
Assuming the companies go different ways, expect for SiMo to perform as it has in the past.

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Aug 19

Most Read: Li Auto , BeiGene , Renesas Electronics, Celltrion Inc, Trent Ltd, Celltrion Healthcare , Rakuten Securities and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?
HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough
Celltrion Merger: Index Implications
Celltrion Merger Swap: Conditions & Schedule
NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow
Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)
Celltrion Inc/Healthcare Merger. Pharm Is Next
Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)
Rakuten Securities IPO: Japan Optimism and Fractional Trading Boost Revenue Amid Stable Costs

Hang Seng Index Rebalance Preview: 80 Member Target Achieved; What Next?

We finally got to 80 Hang Seng Index constituents in June. Now comes the next step of moving up to 100 index constituents though there is no timeline for completion.
The conclusions of the market consultation on the inclusion of foreign stocks in the Hang Seng Index should be announced soon though implementation could start only in December.
We highlight 10 potential inclusions to the index with passive trading impact varying from 1.5-5.6 days of ADV. There are large shorts on some of the stocks.

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

Nikkei 225 Methodology Change. Again. This Time Better But Still Not Good Enough

The Nikkei Index Team has suggested a methodology change to the Nikkei 225 Average.
It involves capping stocks, creating a method for re-weighting once capped then stocks fall, and they recommend changing to a semi-annual Periodic Review – twice a year rather than once.
More interestingly, they also change the “High Liquidity” definition to be related to traded value not volume, which starts to favour higher-market cap stocks with more shares out.

Celltrion Merger: Index Implications

Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.

Celltrion Merger Swap: Conditions & Schedule

The swap prices, ₩148,853 for Celltrion Inc and ₩66,874 for Celltrion Healthcare, specified below are not tentative prices but confirmed prices. So, the merger ratio has been determined as 1:0.4492620.
The key focus now is the appraisal rights exercise. Both offer attractive spreads. Yet, the ₩1T combined ceiling might seem restricted considering potential dissenting Celltrion Inc shareholders exceeding expectations.
Nonetheless, considering the strong determination of the company towards this merger, we should consider a strategy of approaching this spread aggressively while keeping the cancellation risk in mind.

NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.

Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)

Celltrion Inc (068270 KS) will merger with Celltrion Healthcare (091990 KS). Celltrion Healthcare shareholders will receive 0.4492620 Celltrion shares per Celltrion Healthcare share.
The merger requires shareholder (approval by at least two-thirds of the votes of the shareholders present representing at least one-third of the outstanding shares) and Fair Trade Commission approval.
The merger ratio, based on regulations, is attractive compared to historical VWAP exchange ratios and multiples. At last close prices, Celltrion Healthcare shares are trading broadly at terms.

Celltrion Inc/Healthcare Merger. Pharm Is Next

It’s finally happening: biopharmaceuticals developer and producer Celltrion Inc (068270 KS) will acquire Celltrion Healthcare (091990 KS).
Inc will issue 0.4492620 new shares for each share in Healthcare. The swap prices of ₩148,853 for Inc and ₩66,874 for Healthcare are firm.
Celltrion Pharm (068760 KS) is excluded from the original three-way merger plan, but is expected to be merged with the enlarged Inc/Healthcare entity around July 2024.

Merger Between Celltrion Inc and Celltrion Healthcare (Phase I First)

On 17 August, Celltrion Inc announced that it will merge with Celltrion Healthcare. The merger ratio is 0.449262 Celltrion Inc share for each share of Celltrion Healthcare.
There was a negative surprise which was that Celltrion Pharm will not be included as part of the three companies merger which has been promised in the past several years.
Overall, we believe that this merger will have a positive impact on Celltrion Inc and Celltrion Healthcare’s share prices.

Rakuten Securities IPO: Japan Optimism and Fractional Trading Boost Revenue Amid Stable Costs

By Oshadhi Kumarasiri

Rakuten Group (4755 JP) announced last month that its consolidated subsidiary, Rakuten Securities (RAKUSEC JP), has applied for a listing on the Tokyo Stock Exchange.
In the last eight quarters, the Securities business has experienced more than 100% profit growth, thanks to linear revenue growth while costs remained relatively stable.
The previous private market valuation of ¥400bn implies a PE ratio of 15.0x, assuming the company maintains its current 2Q23 profitability level.

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Aug 18

Most Read: Ramelius Resources, Celltrion Inc, Celltrion Healthcare , Sanei Architecture Planning, Hwatsing Technology , T&K Toka Co Ltd, Amorepacific Group, Lotte Tour Development Co, Ltd., Trent Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
Celltrion Merger: Index Implications
Celltrion Merger Swap: Conditions & Schedule
Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)
Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner
Quiddity Leaderboard STAR 50 Dec 23: The Real Deal
Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share
Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence
Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point
NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed

We forecast 26 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
The review period ends tomorrow, so most changes are high probability. Though there are some changes that will be up to the discretion of the index committee.
There will be a lot of stock to trade on the changes to the ASX200 and indices higher up the hierarchy. But there will be a lot of pre-positioning too.

Celltrion Merger: Index Implications

Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) will merge later this year. Celltrion Pharm (068760 KS) has been left out for now; it could be merged next year.
For each share of Celltrion Healthcare (091990 KS) held, shareholders will receive 0.449262 shares of Celltrion Inc (068270 KS).
There will be implications for the Korea Stock Exchange Kospi Index (KOSPI INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) with funding flows and index replacements.

Celltrion Merger Swap: Conditions & Schedule

The swap prices, ₩148,853 for Celltrion Inc and ₩66,874 for Celltrion Healthcare, specified below are not tentative prices but confirmed prices. So, the merger ratio has been determined as 1:0.4492620.
The key focus now is the appraisal rights exercise. Both offer attractive spreads. Yet, the ₩1T combined ceiling might seem restricted considering potential dissenting Celltrion Inc shareholders exceeding expectations.
Nonetheless, considering the strong determination of the company towards this merger, we should consider a strategy of approaching this spread aggressively while keeping the cancellation risk in mind.

Celltrion (068270 KS) Merger with Celltrion Healthcare (091990 KS)

Celltrion Inc (068270 KS) will merger with Celltrion Healthcare (091990 KS). Celltrion Healthcare shareholders will receive 0.4492620 Celltrion shares per Celltrion Healthcare share.
The merger requires shareholder (approval by at least two-thirds of the votes of the shareholders present representing at least one-third of the outstanding shares) and Fair Trade Commission approval.
The merger ratio, based on regulations, is attractive compared to historical VWAP exchange ratios and multiples. At last close prices, Celltrion Healthcare shares are trading broadly at terms.

Sanei Architecture Planning (3228) Finds Saviour from Mafia-Linked Former Boss and Majority Owner

[cue Tom Hardy gif saying “That’s Bait”]. But yes, this story has a backstory to the Japanese underworld, and while the original sin may have been minor, it’s everything.
The firm was raided, the CEO resigned, a govt authority “recommended” Sanei get rid of Mr Koike’s influence, banks got antsy, employee morale dropped. Sanei needed a saviour.
Koike-San asked Open House (3288 JP) to buy his shares. They agreed to take over the company. It’s basically a done deal with a possible twist.

Quiddity Leaderboard STAR 50 Dec 23: The Real Deal

By Janaghan Jeyakumar, CFA

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
Recently, I discussed the historical price and volume performance of STAR 50 rebalance events in Quiddity Primer for STAR 50 Index Rebalance Events.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the December 2023 Rebalance event.

Second Go-Round Tender for T&K TOKA (4636) As Bain Wants It All At ¥1,400/Share

In January 2023, NAVF and Michael 1925 LLC – affiliates of Dalton Investments LLC – announced a hostile partial Tender Offer for T&K Toka Co Ltd (4636 JP).
It failed. They wanted to buy 21.72% at ¥1300 to get to 44% post-Tender. The Company objected. Dalton/etc didn’t get the shares. Shares fell afterward.
Today, Bain announced a deal to take over the company at ¥1,400/share. T&K TOKA has agreed. It may not be as easy as that. And there is a fulcrum investor.

Amorepacific Group: SoTP Valuation and Meaning of Min-Jung Suh Taking One Year Leave of Absence

About a week ago, it was announced that Chairman’s elder daughter Min-Jung Suh will take a long one year leave of absence.
Chairman Suh is very dissatisfied with the company’s results in the past three years and wants to shake up the company to improve its operations, in our view.
Our base case NAV valuation of Amorepacific Group (002790 KS) is 39,611 won, which is 29% higher than current price.

Addressing Misconceptions: Lotte Tour’s Short-Selling Entry Point

Lotte Tour has emerged as a prominent short-selling target in the Korean market, and there are efforts to use an ₩80B convertible bond (CB) to exploit its dilution/overhang risk.
Linden Capital and LMR, upon obtaining the CB, promptly borrowed 4.6M shares from Donghwa for short selling. Thus, the CB conversion incentive remains largely unaffected by stock price changes.
We should avoid synchronizing our entry point with CB conversion. Instead, we should target the likely rights issuance in the latter half of the year, anticipated in the market.

NIFTY NEXT50 Index Rebalance: Five Changes; Big Impact; Cross Index Flow

NSE Indices has continued to use the current index methodology to come up with the 5 adds/deletes. The proposed methodology seems to be put on ice for reasons unknown.
Punjab National Bank, Shriram Transport Finance, Trent, TVS Motor and Zydus Lifesciences will replace ACC, FSN E-Commerce Ventures, HDFC Asset Management, Indus Towers and Page Industries.
The adds, deletes, capping and funding changes will result in one-way turnover of 13% and in a one-way trade of INR 20.77bn. The impact on the adds/deletes is big.

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Aug 17

Most Read: Japan Post Holdings, Great Wall Motor, Brilliance China Automotive, BeiGene , Value Added Technologies, Sea , Tongcheng Travel Holdings , Ramelius Resources, Sanei Architecture Planning, Splitit Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)
Brilliance China (1114 HK): Driving Back Into Passive Portfolios
Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting
KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic
Sea Ltd 2Q23: Revenue Should Align with Consensus, Profitability a Puzzle
Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas
S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed
Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer
Splitit Pursues Split From The ASX

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins

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.

The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)

This is the Brand Spanking New and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see the relationships easily. We used to do it.
We decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations.
We hope this new version serves readers even better. Feedback is actively solicited to see if we can improve it from here.

Brilliance China (1114 HK): Driving Back Into Passive Portfolios

Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

Quiddity HSCEI Sep 23 Flow Expectations Update: US$367mn One-Way, Beigene Vs Peers Interesting

By Janaghan Jeyakumar, CFA

In three more weeks, the index changes and the indicative capping changes for the September 2023 rebalance will be officially announced.
We first looked at the potential HSCEI index changes and the resultant capping flows for September 2023 in Quiddity HSCEI Sep 23 Flow Expectations: Two Changes Likely, US$276mn One-Way
In this insight, we take a look at Quiddity’s updated flow expectations which account for the changes in prices in the last ~1.5 months.

KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic

Following the two tender offers, Han & Co now holds more than 90% of the common shares in Lutronic Corp (085370 KS) and is looking to buy the remaining shares.
Lutronic Corp (085370 KS) is a member of the KOSDAQ 150 Index and delisting would mean an index replacement. Value Added Technologies (043150 KS) is a potential inclusion.
Value Added Technologies (043150 KS) has underperformed its peers and trades cheaper on nearly all valuation parameters.

Sea Ltd 2Q23: Revenue Should Align with Consensus, Profitability a Puzzle

By Oshadhi Kumarasiri

We remain bearish on Sea (SE US) leading upto Q2 results on 15th August 2023.
Our analysis suggests Sea Ltd could hit around $3.25bn revenue in 2Q23, in line with consensus. However, profitability could fall short of consensus expectations.
Nonetheless, any downside stemming from a minor earnings shortfall could be rather limited given the existing low consensus and the lackluster price performance leading up to the Q2 earnings announcement.

Quiddity HSTECH Sep 23 Flow Expectations Update: Last Trade Sucessful; Some New Trade Ideas

By Janaghan Jeyakumar, CFA

In Quiddity HSTECH Sep 23 Flow Expectations: Two ADDs/DELs Possible, I discussed my initial flow expectations and potential index changes for the September 2023 Rebalance.
The suggested (previous insight) SHORT Ping An Healthcare and Technol (1833 HK) is down 10.6% vs the hedge JD Health International (6618 HK) in ~1.5 months.
In this insight, I have presented my updated flow expectations and some new trade ideas for the next few weeks.

S&P/ASX Index Rebalance Preview: Potential Adds Have Outperformed

We forecast 26 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
The review period ends tomorrow, so most changes are high probability. Though there are some changes that will be up to the discretion of the index committee.
There will be a lot of stock to trade on the changes to the ASX200 and indices higher up the hierarchy. But there will be a lot of pre-positioning too.

Sanei Architecture Planning (3228 JP): Open House’s JPY2,025 Tender Offer

Sanei Architecture Planning (3228 JP) has recommended Open House (3288 JP)’s tender offer of JPY2,025 per share, an 18.0% premium to the undisturbed price (15 August).
The transaction is required to facilitate the exit of Mr Koike, the largest shareholder, and satisfy Article 27 of the Tokyo Metropolitan Organized Crime Exclusion Ordinance.
Irrevocables represent a 64.21% ownership ratio, and the lower limit requires a 6.9% minority acceptance rate. The offer is a reasonable solution to the current predicament.

Splitit Pursues Split From The ASX

Splitit Ltd (SPT AU) will seek approval from shareholders to delist the Buy Now, Pay Later micro-play from the ASX and redomicile to the Cayman Islands.
Concurrent with the voluntary delisting proposal, PE outfit Motive Partners will pump in US$50mn in exchange for preference shares – assuming the delisting occurs and certain earnings targets are met.
This is not an Offer for shares. If delisted, Splitit shareholders will hold scrip in an unlisted private vehicle.

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✓ Company Analytics and News
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Aug 16

Most Read: BeiGene , Lasertec Corp, Japan Post Holdings, Japan Post Bank, InterGlobe Aviation Ltd, Brilliance China Automotive, BrainChip Holdings, Value Added Technologies, Tokyo Electron and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
Lasertec (6920) – The State of Things May Be Different Than You Think
Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
Japan Post Bank (7182) – The October TOPIX FFW Adjustment
Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨
Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m
Brilliance China (1114 HK): Driving Back Into Passive Portfolios
[Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade
KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic
Tokyo Electron (8035 JP): Saved from Disaster by China

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

Lasertec (6920) – The State of Things May Be Different Than You Think

Lasertec (6920) is a shoo-in for Nikkei 225 inclusion in September according to the quantitative analysis. The amount to buy is a small multiple of ADV, making the inclusion “unimpressive.”
It is probably worth looking at the details of ownership, of volume, and of relationship to other stocks in the same general sector.
It is also worth thinking about flow channels (stock up or down changes flows) and forward fundamental calculations.

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins

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.

Japan Post Bank (7182) – The October TOPIX FFW Adjustment

Japan Post Bank (7182 JP) was effectively re-IPOed in March when Japan Post Holdings (6178 JP) offered more than a BILLION shares against the 400mm shares then in float.
It was a huge offering. A huge increase in float. Lots of immediate liquidity. A PERFECT opportunity for the TSE to do an ad hoc FFW change. But they didn’t.
Then in June they lowered the FFW (on a technicality). That leaves a big upweight in October. In this insight we measure the opportunity.

Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨

The data for the Nikkei 225 Rebalance is cemented as of 31 July 2023. Lasertec Corp (6920 JP) looks like a shoo-in. The DELETEs are obvious too.
Fast Retailing (9983 JP) doesn’t get a cap (yet). But the other ADDs are a real question. It is a matter of interpreting the methodology and qualitative aspects. And FLOAT.
One way, Socionext (6526) and Mercari (4385) are ADDs. Another way, it looks like Nitori Holdings (9843) and ZOZO Inc (3092) or Ryohin Keikaku (7453). FLOAT IS A PROBLEM ANYWAY.

Interglobe Aviation (Indigo) Lockup – Time for Another Selldown, This Time Could Touch US$900m

InterGlobe Aviation Ltd (INDIGO IN)’s co-founder Rakesh Gangwal’s 29%+ stake was released from lock-up today.
He had earlier stated his intention to pare down his stake after a long drawn, and very public battle, with his co-founder Rahul Bhatia.
In this note, we will talk about the lockup dynamics and possible placement.

Brilliance China (1114 HK): Driving Back Into Passive Portfolios

Brilliance China Automotive (1114 HK) was deleted from local and global indices following its prolonged trading suspension from April 2021 to September 2022.
Following the resumption of trading, Brilliance China Automotive (1114 HK) was added to the HSCI in March and subsequently to Southbound Stock Connect.
The stock should be bought by global passive trackers over the next few months and there should be substantial passive inflows.

[Update] Tax-Loss Selling In Australia – Closing the Circle on the Rebound Trade

Originally, this was an analysis of tax-loss selling baskets over the years, and seasonal performance of baskets of stocks with certain attributes. On average, they fell vs index.
Of course, on average, they also rose vs index after the selling was done.
This insight puts a cap on the 2023 edition with results across the four baskets. The sell made 4.2% vs ASX200 in May, then is up

KOSDAQ150 Ad Hoc Index Rebalance Preview: VAT Could Replace Lutronic

Following the two tender offers, Han & Co now holds more than 90% of the common shares in Lutronic Corp (085370 KS) and is looking to buy the remaining shares.
Lutronic Corp (085370 KS) is a member of the KOSDAQ 150 Index and delisting would mean an index replacement. Value Added Technologies (043150 KS) is a potential inclusion.
Value Added Technologies (043150 KS) has underperformed its peers and trades cheaper on nearly all valuation parameters.

Tokyo Electron (8035 JP): Saved from Disaster by China

By Scott Foster

Thanks to strong demand from China, 1Q results at Tokyo Electron (TEL) were just bad, not horrible. Operating profit was down 30% YoY on a 17% decline in sales.
1H guidance implies that 2Q will also be weak. Full-year FY Mar-24 guidance implies an unlikely 50% sequential increase in net profit, putting the shares on 32x projected EPS.
A return to peak EPS next fiscal year would drop the P/E ratio to 21x, which used to be the top of TEL’s P/E range. Sell.

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✓ Unlimited Research Summaries
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✓ Company Analytics and News
✓ Events & Webinars

Aug 15

Most Read: Great Wall Motor, Lasertec Corp, Japan Post Bank, Japan Post Holdings, Kum Yang, Abacus Group, Charter Hall, Chindata Group, Brilliance China Automotive, Appier Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)
Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨
Japan Post Bank (7182) – The October TOPIX FFW Adjustment
Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins
Where & How to Check CFD Trading Data Starting Sept 1st
MVIS Australia A-REITs Index Rebalance Preview: One Delete, One Close Delete & Capping
MVIS Australia Equal Weight Index Rebalance Preview: Deletes, Close Deletes, Capping Changes
Chindata Backs Bain’s Revised Terms
Brilliance China (1114 HK): Driving Back Into Passive Portfolios
Appier (4180) | Be Happier

The Brand Spanking New Extra Spiffy 🦄H/A-Share Discount/Premium Weekly (As of 11 Aug 2023)

This is the Brand Spanking New and Extra Spiffy H/A-Share Discount/Premium Weekly designed to help investors see the relationships easily. We used to do it.
We decided to bring it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 19 Trade Recommendations.
We hope this new version serves readers even better. Feedback is actively solicited to see if we can improve it from here.

Sep 2023 Nikkei 225 Review – Not An Easy Rebal 🤨

The data for the Nikkei 225 Rebalance is cemented as of 31 July 2023. Lasertec Corp (6920 JP) looks like a shoo-in. The DELETEs are obvious too.
Fast Retailing (9983 JP) doesn’t get a cap (yet). But the other ADDs are a real question. It is a matter of interpreting the methodology and qualitative aspects. And FLOAT.
One way, Socionext (6526) and Mercari (4385) are ADDs. Another way, it looks like Nitori Holdings (9843) and ZOZO Inc (3092) or Ryohin Keikaku (7453). FLOAT IS A PROBLEM ANYWAY.

Japan Post Bank (7182) – The October TOPIX FFW Adjustment

Japan Post Bank (7182 JP) was effectively re-IPOed in March when Japan Post Holdings (6178 JP) offered more than a BILLION shares against the 400mm shares then in float.
It was a huge offering. A huge increase in float. Lots of immediate liquidity. A PERFECT opportunity for the TSE to do an ad hoc FFW change. But they didn’t.
Then in June they lowered the FFW (on a technicality). That leaves a big upweight in October. In this insight we measure the opportunity.

Japan Post Holdings (6178) Starts Its Bigly Buyback With a Sale from the MOF-Boffins

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.

Where & How to Check CFD Trading Data Starting Sept 1st

The CFD balance information (both overall and individual stock) will be provided by KOFIA and KOSCOM, starting from September 1st.
September 1st also marks the day when local brokerages that temporarily suspended CFD trading services will resume them.
With the disclosure of individual stock CFD balances starting from September 1st, there’s a high probability of another volatility turning point.

MVIS Australia A-REITs Index Rebalance Preview: One Delete, One Close Delete & Capping

There should be one deletion from the index in September. And there could be another deletion. And there will be capping changes for a few stocks.
The index changes will lead to a one-way turnover of 2.12% resulting in a one-way trade of A$13m. There is only one stock with over A$5m to trade.
Following the spinoff, Abacus Group (ABG AU) and Abacus Storage King (ASK AU) will be the lowest ranked index constituents and at risk of deletion from the index.

MVIS Australia Equal Weight Index Rebalance Preview: Deletes, Close Deletes, Capping Changes

There could be two deletes for the index in September. There are two other stocks that are close to the deletion threshold.
Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of around 2.7% and a one-way trade of A$51m.
Short interest has been increasing on Charter Hall (CHC AU) and JB Hi-Fi Ltd (JBH AU) and could be partially driven by potential index deletions.

Chindata Backs Bain’s Revised Terms

Back on the 7 June, Chindata Group (CD US) announced Bain Capital’s NBIO to buy all shares of the Chinese data center provider it does not already own for $8/ADS.
On the 13 July, Chindata announced that China Merchants Capital has made an NBIO at $9.20/ADS.
Now Bain has entered into a definitive agreement with Chindata at US$8.60/ADS. Bain holds more than 2/3s of Chindata to vote this through. And there is no PRC regulator approval.

Brilliance China (1114 HK): Driving Back Into Passive Portfolios