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• Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
• Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
• Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

• The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
• A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Alibaba (ADR) (BABA US)‘s restructuring news caused some exiciting in the IPO market this week, with Hong Kong filings picking up as well. 
• On the placements front, all eyes remain on Meituan (3690 HK) and whether Prosus (PRX NA) will do a placement.

• 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 – Rakuten Bank (5838 JP), Trial Holdings (5882 JP), PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) and Merdeka Battery Materials (2012725D IJ) IPOs.
• Event-Driven developments  Aag Energy Holdings (2686 HK), Toshiba Corp (6502 JP), Toyo Construction (1890 JP), Liontown Resources (LTR AU), Mincor Resources NL (MCR AU), Origin Energy (ORG AU). 

• Total short interest in Hong Kong is HK$435.1bn, marginally higher from end-December. Short notional has moved in line with the Hong Kong Hang Seng Index (HSI INDEX). 
• Total short notional of the KOSPI and KOSDAQ market has moved up since end-December and is in line with the move higher in the KOSPI2 INDEX and KOSDAQ 150 Index.
• Short notional in Taiwan is lower over the quarter even as the TWSE INDEX has moved higher over the period. There has been big short covering on some stocks.

• It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
• KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors. 
• The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Tyro Payments (TYR AU), Aag Energy Holdings (2686 HK), Toyo. 
• Lowest spreads  Healius (HLS AU), Liontown Resources (LTR AU), Golden Energy & Resources (GER SP), Mincor Resources NL (MCR AU), GK Goh Holdings (GKG SP), SHL Japan Ltd (4327 JP). 

• Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise up to $878m. Pricing is on 5 April and the listing is on 21 April. 
• We previously discussed the IPO in Rakuten Bank IPO: The Investment Case and Rakuten Bank Vs SBI Sumishin Net Bank. 
• In this note, we discuss valuation. Our analysis suggests that Rakuten Bank is fairly valued at the IPO price range of JPY1,630-1,960 per share. We would participate in the IPO.

• Burlington Stores is one of the major off-price retailer chains in the U.S.
• The company has strong fundamentals and has seen sizable, consecutive improvement in its sales trends in recent times.
• The management interprets this increase in traffic as a sign that the macro headwinds may be beginning to weaken.

• OVERSEAS. Strong close to SPX on Friday +1.4% on the Day; 3.5%WoW; +7.0%QTD; Light Macro calender this week with Job report Key; OPEC+ surprise cut; Tesla Misses 1Q
• JAPAN.  NKY Fut +0.7% vs Cash; USDJPY 132.9; At the start of the new fiscal year, strong tailwinds ahead for Japan: BOJ normalization; Shareholder AGMs; Shareholder returns improvements; Bullish !
• NUGGET. Labor Mobility Needed for Sustainable Wage Growth in Japan. This is essential to extend the gains made this year, or we risk reverting to the status quo.

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
• There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

• Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
• Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
• There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

• There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
• There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
• Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

• As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
• We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
• DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.

• Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
• The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
• Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.

• Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
• Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
• Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

• It was announced on 30 March that a local activist firm called KCGI has invested 7.05% stake in DB Hitek, spending 196.4 billion won on buying this amount.
• KCGI mentioned that DB Hitek’s corporate value is extremely undervalued that the company should cancel its treasury shares and establish independent Board of Directors. 
• The probability of DB Hitek being included in MSCI Korea Standard could rise materially if its market cap climbs to more than 4 trillion won in the coming weeks.

• Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise up to $878m. Pricing is on 5 April and the listing is on 21 April. 
• We previously discussed the IPO in Rakuten Bank IPO: The Investment Case and Rakuten Bank Vs SBI Sumishin Net Bank. 
• In this note, we discuss valuation. Our analysis suggests that Rakuten Bank is fairly valued at the IPO price range of JPY1,630-1,960 per share. We would participate in the IPO.

• The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
• A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
• There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

• One may presume that Prosus (PRX NA) moved their Meituan (3690 HK) shares received from their non-CCASS holdings of Tencent (700 HK). It does not tell us much else. 
• Allocation in the S.M.Entertainment Co (041510 KS) partial Offer was 44.14%. With shares trading ~₩95k, that was a pretty good outcome. 
• Toyo Construction (1890 JP) has asked the Japanese government to investigate YFO’s alleged breaches of FEFTA. Expect YFO to say they did no wrong. Expect Toyo to complain about it. 

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
• There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

• Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
• Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
• There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

• The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy. 
• The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps. 
• One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.

• Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
• Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
• Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

• Two days ago, media reported Alibaba Group (9988 HK) / Alibaba (ADR) (BABA US) would split and possibly list several businesses. Last night Cainiao was reported as starting listing preparations.
• Last night, JD.com Inc. (9618 HK) made two announcements it was proposing to spin off and list its JD Property and JD Industrial arms. This is NOT a spinoff war.
• JD raised Series A and B for both companies. These were always going to be spins, like Health, Digits, and Logistics. JD Properties will be biggish.

• The HSCEI 2023 dividend futures have dropped over the last week as results have trickled in and some of the larger dividend payers have cut their final dividends.
• Over 50% of the DIPS are confirmed now and that number will increase significantly over the next couple of days as the remaining companies announce their final dividends.
• From our estimates, just over 80% of the DIPS will be confirmed by tomorrow though over 66% of the total DIPS will have CNYHKD risk attached to it.

• Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
• RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
• In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we provide our thoughts on valuation.

• The valuation divergence between Delta Electronics Thai (DELTA TB) and its parent Delta Electronics (2308 TT) has hit a new extreme.
• Delta Thailand surged 9.3% Thursday on no news, even prompting the Thailand Stock Exchange to query the company.
• Delta Taiwan’s stake in Delta Thailand is now worth more than all of Delta Taiwan. The valuation divergence would seem unsustainable, however when things revert is uncertain.

• While all eyes are on Alibaba splitting its business into six mini-Babas, some were quick to conclude that Tencent could be the next candidate for a similar split.
• Unlike Alibaba (ADR) (BABA US) whose business units have clear divisions and stand on its own, Tencent (700 HK) ’s businesses are interconnected making a similar split very difficult.
• Having looked at Tencent’s business units and past regulatory probe on the company, it seems unlikely for the company to be the next candidate for an Alibaba style separation.

• Merdeka Battery Materials (2012725D IJ) is looking to raise around US$580m in its Indonesian IPO.
• It has the largest resource globally in terms of contained nickel at the Konawe Nickel Mine (the SCM Mine), according to Wood Mackenzie. 
• MBM aims to become a vertically integrated battery materials player. Through a series of acquisitions, it owns one of the world’s largest nickel mines. 

• An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%. 
• This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here. 
• Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.

• The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy. 
• The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps. 
• One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.

• Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
• Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
• Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

• Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
• Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
• Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

• SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
• Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
• Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.

• Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
• RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
• In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we provide our thoughts on valuation.

• Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M. 
• There have been some noises about cost-cutting, which could be key to an early return to profitability. 
• Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.

• Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
• Mincor delivers 100% of its ore to BHP.  It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance. 
• Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.

• Lee Seo-Hyun, via KEB Hana Bank, is looking to sell her entire stake in Samsung Sds (018260 KS) to raise US$132m.
• While a relatively large one to digest, the deal is very flagged.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.  
• Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
• The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale. 

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
• There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

• Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday. 
• That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim. 
• The data tells us some things. It does not tell us much else. Be careful of the details. 

• KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
• Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
• If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

• That was a quick turnaround. Two days after the pre-conditions were satisfied, the Scheme Document for Xinjiang Xintai (603393 CH)‘s privatisation of AAG Energy (2686 HK) has been dispatched.
• The EGM and Court Meeting will take place on the 27 April, with payment, assuming all resolutions get up, on (or before) the 1 June.
• The Independent Financial Adviser, Somerley, considers the terms of the Scheme “fair and reasonable.” However, their analysis clearly shows this is not the case. 

• Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
• RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
• In our earlier notes, we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

• DGB Financial Group’s market cap makes it virtually impossible to get deleted even with Kakao Pay’s GICS change in this June rebalancing.
• It’s unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn’t aggressive, possibly due to the combination of factors, including this.
• This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.

• The HSCEI 2023 dividend futures have dropped over the last week as results have trickled in and some of the larger dividend payers have cut their final dividends.
• Over 50% of the DIPS are confirmed now and that number will increase significantly over the next couple of days as the remaining companies announce their final dividends.
• From our estimates, just over 80% of the DIPS will be confirmed by tomorrow though over 66% of the total DIPS will have CNYHKD risk attached to it.

• Aag Energy Holdings (2686 HK) scheme document is out with the court meeting scheduled for 27 April. The IFA considers the HK$1.85 offer to be fair and reasonable.
• The IFA’s conclusion is dubious as the contents of the report could easily have come to the opposite conclusion. The quick despatch of the scheme document is worrying. 
• The weak IFA report will further annoy minorities and push more towards the NO camp. The vote is on a knife edge which is reflected in the current 13.5% spread. 

• Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
• Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
• Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

• Yesterday, Alibaba (ADR) (BABA US) announced its intention to divide its business into six distinct units, each with its own CEO and independent board of directors.
• Tying this with Jack Ma’s rare public appearance in China since the beginning of the tech crackdown, people are speculating that the tech crackdown is over.
• However, if you look at this news more objectively, this split indicates nothing but the tightening of the regulatory framework.

• Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS. 
• Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
• Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
• There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

• Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday. 
• That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim. 
• The data tells us some things. It does not tell us much else. Be careful of the details. 

• This morning, Reuters is reporting that Toyo Construction (1890 JP) has asked the Japanese government to investigate alleged breaches of the Foreign Exchange and Foreign Trade Act by YFO. 
• Why? The Very Japanese family office of Nintendo’s founding family used Cayman entities to purchase Toyo shares and Toyo was re-labeled as having businesses in “Core Sectors” in October 2021.
• Toyo has also repeated its complaint about changed “intentions” on large shareholder filings. That bit of the complaint is 10 months old. A closer look at the details within.

• Korea FSC will accept financial institutions’ LOC and LPs’ investment performance agreements as certifying documents for securing funds. This revision will be effective right from April 1 this year.
• The impact from a preemptive trading perspective is likely to be significant. Additional stake purchases through tender offers will increase more aggressively, particularly when purchasing shares from the majority shareholder.
• We should first pay attention to companies where private equity (PE) is the largest shareholder whose stake is relatively low (less than 50%): Hugel, Hana Tour Service, & Hanssem

• WCP (393890 KS) raised around US$314m via in its Korean IPO. The stock was listed on 30th Sep 2022, its six-month lockup will expire soon.
• WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares.
• We have spoken about the background of the deal in our earlier notes. In this note, we talk about the overnight updates.

• Back on the 17 February, AAG Energy Holdings (2686 HK) announced an underwhelming Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai (603393 CH).
• Yesterday, Xinjiang Xintai shareholders approved the proposal. This was expected – it’s a total bargain. 
• AAG shareholders will likely get to vote on the Scheme in early May. They should vote it down.

• KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
• Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
• If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

• Lithium play Liontown Resources (LTR AU) has now thrice rejected Albemarle Corp (ALB US)‘s proposals. 
• Liontown has labeled Albermarle’s third bid of A$2.50/share as opportunistic. 
• Albemarle has picked up 2.2% in Liontown. But that is dwarfed by Tim Goyder’s (chairman)’s 15% stake, who is not engaged at the current bid price. 

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
• We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
• Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
• There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

• Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS. 
• Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
• Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

• Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
• The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%. 
• At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view. 

• YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided. 
• Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
• Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

• Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April. 
• In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case. 
• SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.

• NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
• If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
• As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.

• The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
• There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
• Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

• In mid-January, things between activist Yoshiaki Murakami and Cosmo Energy Holdings (5021 JP) came to a head. Cosmo announced a large buyback and possible takeover defence measures.
• The buyback was a beefy chunk of the float because of the expected profit payout. On 9 February, Cosmo lowered its NP guidance by 40%. FY22 div stays at ¥150/share.
• Last Thursday, Cosmo presented its NEW Mid-Term Management Plan. ROE targets similar. Profit targets up. Minimum div goes up; payout ratio goes up. More comes if financial health targets met.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
• At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
• We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

• Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
• Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
• There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

• As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
• We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
• DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.

• Toshiba Corp (6502 JP)‘s Board is clearly giving this to shareholders and saying “We did our job. Now it’s up to you.”
• Toyota Industries (6201 JP) admits to falsifying some engine emission tests. But the market dinging the company ~20% is excessive. 
• US$16bn of Meituan (3690 HK) shares from Tencent (700 HK) got delivered on 24 March 2023. That’s a lot.

• There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
• There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
• Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

• YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided. 
• Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
• Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

• Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
• The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
• Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.

• Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April. 
• In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case. 
• SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.

• OVERSEAS.  SPX +0.6% on intraday bounce; Defensives led w/Utilities; Financials lag as Banking fears persist; Rates down on recession view WHILE Fed signals more hikes; MSFT-ATVI deal closer to approval
• JAPAN. NKY Futs -0.9% vs Cash; Weaker USDJPY 130.7 ;  Kishida Approval Rating Rises; Feb Inflation 3.1%;  ValueAct takes off gloves with 7&i; Shippers in focus with ex-div this week.
• NUGGET. 7&i: Activist ValueAct goes Full John Wick calling for removal of 4 Directors, including Chairman/CEO Isaka. 2023 could be the year of accelerated reforms.  Stock looks attractive post sell-off.

• Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
• Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder. 
• It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

• Invocare Ltd (IVC AU) has received an unsolicited, preliminary, non-binding indicative offer from TPG Global to acquire the company at A$12.65/share in cash.
• TPG has also acquired 17.8% of the shares in Invocare Ltd (IVC AU) via a combination of stock and derivatives.
• With the company now in play, there could be competing offers. Already owning 17.8% of the company, TPG is now invested in ensuring they gain control.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
• RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
• In our earlier notes, we have looked at the company’s past performance. In this note, we talk about the updates from its recent filings.

• Toyota Industries (6201 JP), one of the world’s leading forklift manufacturers, has admitted to fabricating the results of parts testing, forcing some forklift shipments to be halted.
• TICO has decided to suspend the shipping of three models of forklifts equipped with the suspect engines, which account for ~6% of total forklift sales (in terms of count). 
• Shares, quite rightly, have taken a hit. But this correction appears excessive.

• Global Liquidity is the key driver of asset markets. Global Liquidity bottomed in October. Expect a small rise in 2023
• Central Banks, led by the US Fed seem to be restarting a QE program and injecting more liquidity
• Watch the MOVE Index and the daily size of Reverse Repos (RRP) for clues about the direction of Global Liquidity

• As expected, DGB Financial Group (139130 KS) replaces Meritz Securities (008560 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 31 March.
• We estimate passive trackers will need to buy 5.15m shares (KRW 35.5bn; 12.1 days of ADV) of DGB Financial Group (139130 KS) at the close of trading on 31 March.
• DGB Financial Group (139130 KS) trades cheaper than its peers on forward PE and Price to Book. There could be relative outperformance over the next week.

• There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
• There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
• Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

• Estia Health (EHE AU) confirmed it has received a non-binding indicative proposal from Bain Capital at A$3.00 per share, a 28.2% premium to the undisturbed price (23 March).
• The offer is attractive in comparison to historical share prices and multiples and implies a premium to Regis Healthcare (REG AU)’s (the key peer) multiples.  
• However, the offer is light in comparison to precedent transactions multiples. The largest shareholder has also suggested the terms are light, which suggests a requirement for a bump.

• Japanese equities were marginally higher on the week as global markets continued to focus on problems in the banking system
• The Fed, The Bank of England and the Swiss National Bank continued to fight the war on inflation.
• In Japan, Recruit was the standout performer after the company announced a hefty cut to its workforce (in a bad news is good news kinda way)

• Just post-close, the Nikkei reported Toshiba’s Board had agreed a JIP deal at “around ¥2trln.” Toshiba confirmed HOURS later indicating language was still being hashed out. And the dividend cancelled.
• Toshiba “supports” the deal because it aligns a single shareholder with management goals. They cannot recommend to general shareholders because it is too low. But JIP was the only bidder. 
• It raises the question of whether activists will submit to “Toshiba Fatigue” at what the Board admits is too low a price, or whether there is still fight left.

• Toshiba Corp (6502 JP) announced a pre-conditional tender offer by Japan Industrial Partners (JIP), the preferred bidder at JPY4,620 per share, a 9.7% premium to the last close price.
• The special committee opines that the offer is the best price that can be expected today, which sounds like we are recommending the offer as it is the only one.
• The offer has several negatives: a 14% price reduction during the process, below the undisturbed price, below the mid-point IFA DCF range and no serious effort on Plan B. 

• Following Nanos Co Ltd (151910 KS)‘s designation as an Investment Attention Issue, the stock will be deleted from the KOSDAQ150 Index and replaced with Em Tech Co Ltd (091120 KS).
• Passive trackers are estimated to buy 1.3 days of ADV on Em Tech Co (091120 KS) while they will need to sell 1.1 days of ADV on Nanos (151910 KS).
• Em Tech Co Ltd (091120 KS) was up yesterday but the stock is still way off its highs. The stock should trade higher over the next few days.

• On 17 February, NSE Indices announced the results of the March index review for the Nifty Next 50 Index (NIFTYJR INDEX). There are 5 adds and 5 deletes. 
• Last evening, NSE Indices announced a change in the index methodology where the cumulative weight of non-F&O stocks in the index will be capped at 10% (down from 15% earlier).
• This changes the flows at the March rebalance that will be implemented at the close of trading on 29 March.

• Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published. 
• They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent. 
• In addition, the information regarding other bids and alternatives was a little surprising to us.

• In this insight, we take look at Quiddity’s estimations for index changes and capping flows for the Taiwan Div+ index for the June 2023 review.
• I currently see 3 ADDs and 3 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
• I also currently expect capping flows of US$705mn one-way with multiple names with more than five days to trade.

• Established in 2020, Rebellions is a leading AI based fabless startup in Korea. In February 2023, Rebellions launched a new artificial intelligence chip, challenging the global leader NVIDIA. 
• According to the company, its ATOM chip targets specific tasks, allowing the chip to consume only about 20% of the power of an Nvidia A100 chip on those tasks. 
• Since the company’s inception, Rebellions raised 122 billion won in funding including 30 billion won from KT. The company was last valued at 350 billion won in June 2022.

• It is virtually certain that KT’s foreign rooms will exceed 15% today or tomorrow. This month, foreign net sales of 200-300k are continuing almost every day.
• Assuming the Cutoff of the MSCI Korea Standard to be 2.7 trillion won and setting the float rate to 25%, KT beats the hurdles quite comfortably.
• If KT achieves re-inclusion with a 25% float rate, a passive inflow worth 140 billion won is expected to occur. This is a 3.55x ADTV.

• Toyota Industries (6201 JP), one of the world’s leading forklift manufacturers, has admitted to fabricating the results of parts testing, forcing some forklift shipments to be halted.
• TICO has decided to suspend the shipping of three models of forklifts equipped with the suspect engines, which account for ~6% of total forklift sales (in terms of count). 
• Shares, quite rightly, have taken a hit. But this correction appears excessive.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Andreas Steno as he gives us a detailed tour around forward looking inflation indicators for all major economies.

From touchpoints like how money growth is outright negative in the West, to trends being opposite in China/Japan, join us as we dive deeper into the topic with Andreas and Smartkarma’s Co-founder, Raghav Kapoor.

The webinar will be hosted on Wednesday, 5 April 2023, 17:00 SGT/HKT.

Andreas Steno is the founder and Head of Research of the European Power Research house “Steno Research.” Building on years of experience as Global Chief Strategist at Nordea Bank, he is one of the most quoted and sought-after macro analysts out there. Andreas’ expertise is the macro strategy, energy, real estate and equity spaces, but doesn’t shy away from hot takes on other topics if the underlying analysis is strong enough. Andreas anchors the weekly editorial ‘Steno Signals’ and other watch series from Steno Research.