In today’s briefing:
- The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
- JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)
- Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend
- HK Connect SOUTHBOUND Flows (To 22 Mar 2024); Strong Net Buying on Tencent and ETFs
- Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
- HKBN (1310 HK): Déjà Vu as Privatisation Rumours Resurface
- A/H Premium Tracker (To 22 Mar 2024): Liquid AH Premia Still At Wides
- Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM
The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
- Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
- But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn 2 days later.
- Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated.
JAPAN FLOW: Foreigners Vs Cross-Holding Unwinds Vs Buybacks Vs Pensions
- For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
- The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to One (relatively) Simple Indicator.
- Foreigners have a lot of ammunition left. But cross-holding unwinds are picking up, and buybacks are too, and dividend reinvestments are smaller than public pension selling. Which way next?
Rakuten Bank (5838 JP) – Introduces a Yutai Program to Goose the Mar24 Price, Mar25 EPS
- The Rakuten Bank offering in early December was a great time to buy the dip of you sold end-September. It should have been a good time to buy outright.
- Unfortunately, the stock priced at ¥2,470, then closed that day at ¥2,500. That was the high for the next ten weeks. Two weeks later it was 20% lower. Ouch.
- But it climbed out of the abyss, gained 35% in 8wks, then Thursday the Bank announced a new Shareholder Benefit program. Today the stock was +7%. Worth looking at details.
Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)
- Chilled & Frozen Logistics Holdings (9099 JP) last week announced its “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”.
- Today it announced AZ-Com Maruwa Holdings (9090 JP) had announced its intention to launch a Tender Offer on C&F Logistics without having contacted C&F first. A HOSTILE deal. Yum.
- The deal is proposed at a 50% premium, with the goal of getting to a minimum of 50.00%. This will be interesting.
Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan’s Big Dividend
- The trade of being short Fast Retailing (9983 JP) vs Nikkei 225 or Sector Basket is fundamentally slightly short Nikkei 225 froth.
- Giordano (709 HK)‘s SGM will likely pivot off how the shareholders under Halcyon Securities vote. Digging a little deeper as to who these shareholders are, provides some (not-altogether) surprising results.
- AZ-Com Maruwa Holdings (9090 JP) intends to launch a Tender Offer on Chilled & Frozen Logistics Holdings (9099 JP) without having contacted C&F first. A HOSTILE deal. Yum!
HK Connect SOUTHBOUND Flows (To 22 Mar 2024); Strong Net Buying on Tencent and ETFs
- A shares were down small on the week. Larger caps down more. H-shares down more after a hard Friday.
- Net SOUTHBOUND buying was +HK35.8bn after $21.4bn the week before. SOUTHBOUND has net bought every day since the end of Chinese New Year.
- The flavour of SOUTHBOUND buying has been high-div SOEs for months and months. That is starting to change slightly. Tencent was the top net buy this week.
Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
- ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
- All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others.
- Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.
HKBN (1310 HK): Déjà Vu as Privatisation Rumours Resurface
- On 21 March, Bloomberg reported that TPG and MBK had restarted a strategic review to reduce their HKBN Ltd (1310 HK) shareholdings. Previous privatisation rumours have fizzled out.
- The options include going private, attracting new investors, or raising cash through some of HKBN’s assets. Infrastructure-focused funds and one Chinese telco (likely China Mobile (941 HK)) were approached.
- The probability of an offer is low as TPG and MBK will need to accept a material discount on their cost per share and financing challenges due to high leverage.
A/H Premium Tracker (To 22 Mar 2024): Liquid AH Premia Still At Wides
- The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND a net buyer every day since the end of Chinese New Year. Still. NORTHBOUND a huge net seller this week, but net buyers in size (RMB +86bn) over 8wks.
- For the first time in a while, AH premia among liquid stocks fell convincingly. Narrow AH premia pairs saw Hs outperform more than wide AH premia Hs (vs As).
Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: APM Human Services Internation (APM AU), Chilled & Frozen Logistics Holdings (9099 JP), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Probiotec Ltd (PBP AU).
- Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Vinda International (3331 HK), Snow Peak Inc (7816 JP).
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