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Event-Driven and Index Rebalance

Jan 12
0

Weekly Top Ten Event-Driven and Index Rebalance – Jan 12, 2025

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Jiangsu Hengrui Pharma (600276 CH): Index Inclusion Post H-Share Listing

By Brian Freitas, Periscope Analytics

2. Tencent (700 HK): DoD Says Chinese Military Company; Not on NS-CMIC List Yet

By Brian Freitas, Periscope Analytics

  • The U.S. Department of Defense has designated Tencent (700 HK) as a Chinese Military Company. Tencent Holdings (ADR) (TCEHY US) shares were down nearly 8% overnight.
  • There is no change to the Non-SDN Chinese Military-Industrial Complex Companies List (NS-CMIC) yet. But the overlap between the DoD list and the NS-CMIC list is high.
  • If added to the NS-CMIC list, Tencent (700 HK) will be deleted from global indexes and there will be HUGE passive selling from these trackers.

3. 7&I (3382 JP) – Dippity Doo Dah – Irrational Fears, Earnings Vol, But Restructuring Proceeding Apace

By Travis Lundy, Quiddity Advisors

  • Recent news on the Seven & I Holdings (3382 JP) situation includes better-than-expected possible sale of the SST business, a little headline fear-mongering on national security, and earnings.
  • Earnings this year will be volatile vs expectations. Timing (and magnitude) of kitchen-sinking matters. But neither ACT nor you should be buying it based on trough earnings expectations.
  • The call transcript is worth listening to. The math on the takeover maths well. This is a buy on dip. Again. 

4. HSTECH Index Rebalance Preview: One Constituent Change & US$884m Trade

By Brian Freitas, Periscope Analytics

  • The review period for the March rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 31 December.
  • There could be one constituent change in March. With capping changes, that could lead to a one-way turnover of 2.6% resulting in a round-trip trade of HK$6.88bn (US$884m).
  • Horizon Robotics (9660 HK) is also a potential inclusion to the HSCI Index in March, though inclusion in Southbound Stock Connect will only come through in May.

5. Sigma Healthcare (SIG AU): Index Inclusions & Upweights Increase Passive Buying to A$2.7bn

By Brian Freitas, Periscope Analytics

  • SigmaHealthcare and ChemistWarehouse shareholders meet on 29 January. If the merger resolutions are approved, Second Court Hearing is on 3 February and the merger will be effective on 4 February.
  • Upward migration in one large global index could take place on 13 February while upweights and upward migrations in the S&P/ASX indices should be at the close on 21 March.
  • Upward migration in the other global index could take place in March or June. Total passive buying estimate is A$2.76bn. This will be offset by positioning and CWG shareholders selling.

6. S&P/​​​​​​​​​ASX Index Rebalance Preview: Lots of Change; Could Be More with Sigma/CWG Merger

By Brian Freitas, Periscope Analytics

  • Nearing the end of the review period, there could be 36 adds/deletes across the S&P/ASX family of indices in March.
  • Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
  • Completion of the merger with Chemist Warehouse in February will set off huge passive buying in Sigma Healthcare (SIG AU) over the February to June period.

7. HSCI Index Rebalance Preview and Stock Connect: Updated Potential Changes in March 2025

By Brian Freitas, Periscope Analytics

  • We see 38 potential and close adds and 51 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
  • There have been many new listings in the last weeks of December. Some of them are fairly large and will be added and that increases the number of potential deletions.
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

8. Fujitsu General (6755) – Long Sale Process Finally Over. Unexciting but Uncomplicated Deal.

By Travis Lundy, Quiddity Advisors

  • In December 2019, an article in slightly odd Japanese business magazine Sentaku (選択) suggested Fujitsu Ltd (6702 JP) would imminently seek to address dual listings of subs.
  • Some subs went early. The auction for Fujitsu General (6755 JP) started spring 2023, failed, started again, failed again, and the shares languished. 
  • Two years later we have a deal. Large privately-held company Paloma-Rheem Holdings is the buyer in a split-price deal which comes at a decent but not exorbitant premium.

9. Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Up to 5 Changes in March

By Brian Freitas, Periscope Analytics

  • The review cutoff date for the March rebalance of the HSIII was 31 December. The changes will be announced on 21 February and become effective after the close 7 March.
  • There could be 5 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
  • Horizon Robotics (9660 HK) is a potential inclusion to the HSCI and the Hang Seng TECH Index (HSTECH INDEX) in March.

10. NIFTY50 Index Rebalance Preview: Yuuge Flow & Impact; Positioning Mixed

By Brian Freitas, Periscope Analytics

Jan 05
0

Weekly Top Ten Event-Driven and Index Rebalance – Jan 5, 2025

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Tsuruha (3391) And Welcia (3141) To Move UP Merger to End-2025; Makes It TWO Trades in 18mos?

By Travis Lundy, Quiddity Advisors

  • In Feb-24, Aeon (8267) agreed with Oasis Management to buy its stake in Tsuruha Holdings (3391) and Tsuruha and Welcia Holdings (3141) would discuss a merger, details decided by end-2027.
  • On Saturday 27 December, a Jiji article said the two would look to integrate by end-2025, now that they no longer need SEC approval. That reason sounds wrong.
  • The language of the articles is odd but we have to take it at face value. That means we look to what might happen between here and there.

2. HSCEI Index Rebalance Preview: Increase in Velocity Could Lead to 3 Changes in March

By Brian Freitas, Periscope Analytics

3. ITC Hotels: Index Implications of Demerger from ITC Ltd (ITC IN)

By Brian Freitas, Periscope Analytics

  • ITC Ltd (ITC IN) will demerge its Hotels business with the ex-date set as 6 January and shareholders receiving 1 share of ITC Hotels for 10 shares of ITC Ltd.
  • ITC Ltd (ITC IN) shareholders will own 100% of ITC Hotels – 60% will be owned directly and 40% will be owned through their shareholding in ITC Ltd (ITC IN).
  • There will be a lot of selling in ITC Hotels within a few days of listing from different passive index trackers and that could provide buying opportunities for those interested.

4. Sun Art Retail (6808 HK): BABA Takes Massive Hit After Inking SPA @ HK$1.38

By David Blennerhassett, Quiddity Advisors

  • HK$1.38/Share. That’s the takeaway as Alibaba Group (9988 HK) enters an SPA to offload its 78.7% stake in Sun Art (6808 HK) at HK$1.38/share, a 44.4% discount to last close.
  • The buyer, Paragon Shine, an entity under Chinese PE outfit DCP Capital, is paying ~HK$12.3bn compared to BABA’s HK$28.1bn purchase of a 51% stake in October 2020.
  • Should the SPA complete, an unconditional MGO is triggered. Minorities tendering can receive up to HK$1.58/share. But the question is: why would BABA be cashing out at this price?

5. Australia: Six Stocks in Passive Selling Crosshairs for February

By Brian Freitas, Periscope Analytics

  • Up to six Aussie stocks could be deleted from global passive portfolios in February. The final list of deletions depends on stock performance over the next 2-3 weeks.
  • If deleted, passive trackers will need to sell between A$370m-A$500m in the stocks. Impact is high at between 7-24 days of ADV.
  • The potential deletions have underperformed the S&P/ASX 200 (AS51 INDEX) over every time period from 1 week to 3 months. Positioning is still low in a few stocks.

6. InnoScience (2577 HK): Prices at Low End & Lists Today; Index Inclusion Timeline

By Brian Freitas, Periscope Analytics

  • InnoScience Suzhou Technology (2577 HK) has priced its IPO at HK$30.86/share, the low end of the range. Over half the shares have been allotted to cornerstone investors.
  • InnoScience Suzhou Technology (2577 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect early March.
  • Inclusion in global indices will take place in 2026 and there will be supply in mid- and late-2025 following lock-up expiries.

7. Adani Green Energy (ADANIGR IN): Facing the Passive Boot; But Who Will Buy?

By Brian Freitas, Periscope Analytics

  • Passive global index trackers sold Adani Green Energy (ADANIGR IN) in November following a big drop in free float for the stock.
  • There could be more selling in Adani Green Energy in February as the stock is deleted from the same large global index due to failing free float market cap thresholds.
  • With the company at the center of the U.S indictment focused on bribery charges, active foreign and local investors will be wary of buying the stock.

8. NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms

By Brian Freitas, Periscope Analytics

9. Merger Arb Mondays (30 Dec) – ESR, Canvest, Vesync, GAPack, SDHS New Energy, CPMC, Makino, Arcadium

By Arun George, Global Equity Research Ltd

10. Canvest (1381 HK): Attractive Spread with Steady Progress in Precondition Satisfaction

By Arun George, Global Equity Research Ltd

  • Grandblue Environment Co A (600323 CH) continues to make steady progress in satisfying the precondition for its HK$4.90 privatisation offer for Canvest Environmental Protection Group (1381 HK). 
  • Two of the five preconditions are satisfied, and another will be satisfied by 20 January. The long stop date of 17 July provides ample time to satisfy the remaining two. 
  • Although the peers have materially re-rated, the offer implies a premium compared to peer multiples. Vote risk remains low, aided by selling by a shareholder with a blocking stake. 
Dec 29
0

Weekly Top Ten Event-Driven and Index Rebalance – Dec 29, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Japan: Potential Passive Selling in February

By Brian Freitas, Periscope Analytics

  • Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
  • There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.
  • Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.

2. Honda (7267 JP) – MAMMOTH New ¥1.1Trln Stock Buyback

By Travis Lundy, Quiddity Advisors

  • Today, along with the announcement of Memorandum of Understanding between Honda Motor (7267 JP), and Nissan Motor (7201 JP) to work towards negotiating a Joint Holding Company by June 2025… 
  • Honda cancelled their existing ¥100bn buyback, and initiated a truly mammoth NEW Buyback – up to 1.1 billion shares (23.7% of TSO), spending up to ¥1.1trln on market through Dec-2025.
  • Assuming the stock pops, it is probably “only” worth 15-18%, but that’s still a LOT. At that rate it boosts BVPS by 8+% on its own, and EPS by 17%.

3. KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

By Brian Freitas, Periscope Analytics

  • The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
  • A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
  • Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.

4. Korea: Potential Relegations from K League 1

By Brian Freitas, Periscope Analytics

  • There are quite a few stocks in Korea that have underperformed their peers and could be deleted from global passive portfolios in February.
  • There are still 3 weeks left for the stocks to redeem themselves and avoid relegation from the K League, so watch out for big price moves.
  • Based on our estimate of passive assets, trackers will need to trade between US$45m to US$114m of the stocks. Impact will vary between 2.6x-30x of ADV to trade.

5. LG CNS IPO: Limited Float Pushes Back Passive Buying

By Brian Freitas, Periscope Analytics

  • LG CNS (LGCNSZ KS) is looking to raise up to KRW 1,199bn (US$830m), valuing the company at KRW 6 trillion (US$4.15bn) at the top end of the IPO price range.
  • As a member of the IT sector, inclusion in the KOSPI200 Index will only take place via Fast Entry (near impossible) or as a large-scale company.
  • Inclusion in global indices could commence in September 2025 and will be easier if the identity of the pre-IPO minority shareholders is disclosed or if the strategic investors sell.

6. [Japan Activism] Exedy (7278) – Murakami-San Selling into the Buyback

By Travis Lundy, Quiddity Advisors

  • Exedy Corp (7278 JP) announced a big buyback. Murakami-san did not sell the first pop. The shares fell. Exedy started buying back and the shares went up. Now Murakami’s selling.
  • Today after the close, Murakami Group companies announced that City Index Elevens had started selling. They sold 1.25% of shares out in 6 trading days to 16 December. 
  • I expect they sold another 2% in the past week through today. Shares tanked today. This is not a good signal. And it comes earlier than I expected. 

7. Nidec Goes Hostile On Makino Milling at ¥11,000/Share

By Travis Lundy, Quiddity Advisors

8. NEC Networks (1973 JP) Next To Last Showdown – NEC Lowers Minimum, Bumps Tiny, Ignores Synergies

By Travis Lundy, Quiddity Advisors

  • On Friday, NEC Corp (6701 JP) raised the price for its Tender Offer on Nec Networks & System Integr (1973 JP) from ¥3,250 to ¥3,300. 
  • It also lowered the minimum to 10.153mm shares (6.82%). It had proposed to do so earlier but NESIC demanded a bump, and NEC didn’t want to. 
  • Now it’s bumped. That’s the “final price.” But it still does not include “a fair allocation of a portion of the value that cannot be realised without an acquisition.”

9. GA Pack (468 HK): The State of Play

By Arun George, Global Equity Research Ltd

  • On 20 December, Shandong Xinjufeng Technology Packaging (301296 CH) satisfied the precondition for its Greatview Aseptic Packaging (468 HK) offer. The offer document will be despatched by 27 December.
  • Analysing the EGM vote on 18 October suggests that the 50% minimum acceptance condition will be met if no competing management offer is made. 
  • Management will oppose the offer, but the last EGM protest votes suggest that many minorities will ignore management. At the last close, the gross/annualised spread was 2.3%/25.3%.

10. Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

By Arun George, Global Equity Research Ltd

  • Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January. 
  • The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders. 
  • Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.
Dec 22
0

Weekly Top Ten Event-Driven and Index Rebalance – Dec 22, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. How Has the Index Rebalance Strategy Performed in 2024?

By Brian Freitas, Periscope Analytics

  • It has been a decent year for the index rebalance strategy, though there have been some big hiccups along the way.
  • Forecasting the index changes and impacts has been important, but timing (especially momentum/value regime changes) and hedge selection have also been major factors affecting the returns of the strategy.
  • As passive AUM continues to increase, we expect focus on the strategy to continue in 2025 with market players taking different approaches to trading the potential and announced index changes.

2. TIP Customized Taiwan Select High Dividend Index Rebalance: US$3.2bn Trade with BIG Impact

By Brian Freitas, Periscope Analytics

  • There are 8 changes a side for the TIP Customized Taiwan Select High Dividend Index in December. The TIP Taiwan Select High Dividend ETF (00919TW) has an AUM of US$9.3bn.
  • Estimated one-way turnover is 17.2% and that will result in a round-trip trade of US$3.2bn. All adds and deletes have over 5x ADV to trade from passive trackers.
  • The rebalance will be implemented over 8 trading days and the ETF started trading some stocks late last week and the rest from 17 December.

3. HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March 2025

By Brian Freitas, Periscope Analytics

  • We see 32 potential and close adds and 44 potential and close deletes for the Hang Seng Composite Index in March. Some of the stocks are close on market cap/liquidity.
  • We expect 29 stocks to be added to Southbound Stock Connect following the rebalance while 31 stocks could be deleted from the trading link and become Sell-only.
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

4. PCOMP Index Rebalance Preview: Two Changes Likely in February

By Brian Freitas, Periscope Analytics

  • The review period for the February rebalance of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) ends in two weeks.
  • There could be two changes for the index with passive trackers needing to trade between 23-64x ADV in the stocks.
  • The passive buying is a lot larger than the passive selling, there will be funding outflows for the other index constituents; some stocks will have over 1x ADV to trade.

5. MV Global Junior Gold Miners Index Rebalance: Big Flow in Some Stocks

By Brian Freitas, Periscope Analytics

6. Sony To Buy 7+% Stake in Kadokawa (9468 JP) For ¥50bn, Ending Near-Term Hopes of Takeover

By Travis Lundy, Quiddity Advisors

  • Today, Kadokawa (9468 JP) announced it would sell ¥50bn of shares to Sony (6758 JP) in a 3rd Party Allotment to cement a Strategic/Capital Alliance. Sony will own 10% at ¥4,146/share.
  • 40% of proceeds is to “create and develop new IP”, 60% is to “enhance global IP distribution”; both over 5yrs. Given ¥108bn of net cash/securities, this is a garbage reason. 
  • Kadokawa shares have gained 44% in a month since Reuters carried an “Exclusive” article saying Sony was in talks to acquire Kadokawa. This is defensive entrenchment. The result will disappoint.

7. A Passive Flow Trading Event that Sparked Wild Price Action in Korea Is Happening Again

By Sanghyun Park, Clepsydra Capital

  • This event drew significant attention, causing unusual price action. From Sept 20 to Nov 29, corrections in the deletions far outpaced the KOSPI, with the trend holding across key checkpoints.
  • We’re watching 4 stocks: Kumho Petro, Lotte Chemical, Posco DX, and EcoPro Materials. SK Bioscience and Enchem are close, with small price moves likely pushing them out.
  • Based on past rebalancing patterns, proactive positions on these names could trigger strong price action. All except Enchem have listed futures and solid volume, making trading conditions favorable.

8. KRX Value-Up Index Rebalance Results and Estimated Passive Impact

By Sanghyun Park, Clepsydra Capital

  • KRX updated the Value-Up Index with five new names: KB Financial, Hana Financial, KT Corp, SK Telecom, and Hyundai Mobis, with Mobis replacing JB Financial, surprising the market.
  • This is the first rebalancing, packed into one day, so expect notable price action. Reverse moves could also follow Thursday as pre-positioned trades unwind, so monitor price action closely.
  • Even after Thursday’s rebalancing, half of the funds, especially from the National Pension Service, will flow into high-yield stocks, likely driving significant price moves through early next year.

9. 7&I (3382 JP) – Share Price Dipping Deeper Means Dipping Toes Deeper

By Travis Lundy, Quiddity Advisors

  • Seven & I Holdings (3382 JP) shares are in a lull here. Winter doldrums without news as the Ito consortium gets its ducks in a row and 7&i sells York.
  • Alimentation Couche-Tard (ATD CN) is waiting patiently. They have the ability to wait, and to fund, and pay up. 
  • An article/show is causing a dip today on top of last week’s weakness. This is a dip to buy.

10. SET50 Index Rebalance: Four Changes; Cal Comp🚀

By Brian Freitas, Periscope Analytics

Dec 15
0

Weekly Top Ten Event-Driven and Index Rebalance – Dec 15, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Thinking About Topcon (7732) And the New METI-Enabled Bad Cop-Good Cop Routine

By Travis Lundy, Quiddity Advisors

  • A Bloomberg article today said Topcon Corp (7732 JP) is weighing takeover bids received from KKR and EQT. ValueAct has been pressuring the company for 18mos (5+% in May23)
  • ValueAct has apparently been pushing the company to divest assets and concentrate on core ops, or go private (and have someone else do it). 
  • This is further evidence of the METI-enabled “Bad Cop-Good Cop Routine” which could expand M&A and governance activity dramatically. 

2. Merger Arb Mondays (09 Dec) – HKBN, ESR, Lifestyle China, GA Pack, Latin Res, De Grey, SG Fleet

By Arun George, Global Equity Research Ltd

3. Quiddity Leaderboard Mar25 Nikkei 225 Rebal: 2 IN, 2 OUT, $5.5bn+ Fastie to Sell, $7bn a Side

By Travis Lundy, Quiddity Advisors

  • The Sep24 Nikkei 225 Rebal was odd. They could have done 3. They did 2. For now, I still see 2 IN and 2 OUT for the Mar25 Nikkei225 Rebal.
  • There is also a DOUBLE-capping event for Fast Retailing which on 8% outperformance could become a TRIPLE-capping event. For now, the trade is shaping up to be US$7bn a side.
  • There is still a tech bent to potential ADDs. Some Consumer Goods stocks need stock splits to get in. Longer-term, the TOPIX Methodology Rejig is an interesting problem set.

4. NEC Networks (1973 JP) Final Showdown I – Extendy-Extendy, But Not Yet Bumpity Bumpity

By Travis Lundy, Quiddity Advisors

  • Two days before the close of its TOB on subsidiary Nec Networks & System Integr (1973 JP), NEC Corp (6701 JP) announced it had no plans to raise the price. 
  • The next day, the second largest shareholder reported a stake increase from 11.68% to 13.12%. That changes the dynamic further, and a change in terms was likely. 
  • Today post-close, NEC extended the Tender Offer by 10 days. It is worthwhile understanding the likely current disposition of shares. 

5. S&P/​​​​ASX Index Rebalance (Dec 2024): CAR, Clarity Pharma Added; Dexus, Spark Deleted

By Brian Freitas, Periscope Analytics

6. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance: 15 Changes, 44% Turnover, US$4.8bn Trade, BIG Impact

By Brian Freitas, Periscope Analytics

  • There are 8 adds and 7 deletes for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December. We had a 100% hit rate on our forecasts.
  • Estimated one-way turnover is 22.1% resulting in a one-way trade of TWD 78.8bn (US$2.4bn). There are 16 stocks with over 5 days of ADV to trade.
  • There has been a big increase in short interest on some of the deletions and there could be some short covering the stocks closer to implementation date.

7. Sanrio (8136 JP) Placement: Price Likely Determined Today; What Next?

By Brian Freitas, Periscope Analytics

  • The Sanrio (8136 JP) placement is likely to be priced today. With the stock 8.8% lower from undisturbed, expect a small discount to today’s close.
  • The stock has traded as expected over the last 9 trading days – a sharp drop followed by a strong upward move and then profit taking.
  • We expect there will be strong interest in the placement and oversubscription could lead to upside from here. Shorts have increased and will look to cover into the placement.

8. NIFTY200 Momentum30 Index Rebalance: 38 Changes; 65% Turnover; US$1.7bn Trade

By Brian Freitas, Periscope Analytics

  • There are 19 changes a side for the Nifty200 Momentum30 Index that will be implemented at the close on 30 December. All names are exactly in line with our forecast.
  • Estimated one-way turnover is 64.9% resulting in a one-way trade of INR 72.7bn (US$857m). There are 18 stocks with over 1x ADV to trade.
  • The adds have continued to outperform the deletes even after the end of the review period. There could be further upside heading into year-end and implementation of the changes.

9. Select Sector Indices and S&P Equal Weight Rebalance: US$16bn Trade; More Buying for APO and WDAY

By Brian Freitas, Periscope Analytics

  • Constituent changes to the S&P 500 INDEX and capping changes will result in a round-trip trade of US$15.9bn across the Select Sector indices and the S&P500 Equal Weight Index.
  • The Select Sector index trackers and S&P 500 Equal Weight trackers will need to buy Apollo Global Management and Workday, adding to the buying from S&P 500 INDEX trackers.
  • The flows will change over the next week as stock prices move around and final capping is done after the close on 13 December.

10. Fosun Tourism (1992 HK): Fosun Int’l’s Indirect Takeover

By David Blennerhassett, Quiddity Advisors

  • When Fosun Tourism (1992 HK), a leisure-focused integrated tourism group, was suspended pursuant to the Takeovers Code, the obvious Offeror, by way of a Scheme, was Fosun International (656 HK)
  • Not quite. We do have a Scheme, but it’s being enacted by way of a buyback. Fosun Int’l still abstains from voting, but will control 100% if the Scheme completes.
  • The Cancellation Price is $7.80/share (not declared final), a punchy 95% premium to undisturbed. I previously speculated a 100% premium was not out of the question.  Clean deal.
Dec 08
0

Weekly Top Ten Event-Driven and Index Rebalance – Dec 8, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. 7&I (3382 JP) – Ito-San MBO Plan Includes 7-Eleven US IPO… Which LeadsTo A Modest Proposal

By Travis Lundy, Quiddity Advisors

  • A Bloomberg article late in the trading session today said the Seven & I Holdings (3382 JP) MBO proposal by Ito family scion Ito Junro includes a US assets IPO.
  • The idea? IPO proceeds would help pay down MBO debt to Japanese banks. Seven & i would retain a stake. This is not dissimilar to Berkshire Hathaway buying a stake.
  • But more directly, this leads us back to 7&I (3382) – What If…  A Modest Proposal. Possible strategic mistake by Ito-san here. ACT should act on this.

2. Goodman Group (GMG AU) Placement: Limited Index Flows

By Brian Freitas, Periscope Analytics

  • China Investment Corp owns 7.84% of Goodman Group (GMG AU) and is looking to sell 50.4m shares (2.64% of shares out) at a price range of A$37.55-37.6/share, a tiny discount.
  • Goodman Group (GMG AU) has run away from its peers over the last couple of years and there could be a move lower in the stock following the placement.
  • There will be limited passive buying in the short-term coinciding with the placement. There will be some more passive buying in February.

3. Kioxia (285A) IPO: Index Entry Timeline & Overhang from Plans to Increase Float

By Brian Freitas, Periscope Analytics

  • Kioxia Holdings (285A JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 18 December.
  • At the mid-point of the IPO price range of JPY 1390-1520/share, Kioxia Holdings (285A JP) will be valued at JPY 784bn (US$5.24bn).
  • TOPIX inclusion will take place in January while inclusion in global indices is likely to take place in May and June. Selling stock to increase float will be an overhang.

4. Sanrio (8136 JP) – Kitty Behaving Badly

By Travis Lundy, Quiddity Advisors

  • Sanrio (8136 JP) announced a deal last week which I discussed in Sanrio (8136 JP) Large Secondary Offering – Don’t Say Hello Kitty! Too Soon.  Next day it fell sharply. 
  • There was shorting involved, and since then the stock has rallied 18% to clear the undisturbed price which itself was an all-time high, up 5% in the previous two days.
  • There is some LO buying, some HF covering, but a LOT of day-traders. In five days the stock has traded 903% of its Maximum Real World Float. That’s a lot.

5. TIP Customized Taiwan Select High Div Index Rebalance Preview: US$2.8bn Trade as Adds Outperform

By Brian Freitas, Periscope Analytics

  • The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 285bn (US$8.75bn).
  • We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 16% and a round-trip trade of around US$2.8bn.
  • An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since the start of July with most of the outperformance coming from September.

6. Breaking: Korea Drops Martial Law, Local Markets in Turmoil—What’s the Short-Term Trade Play Here?

By Sanghyun Park, Clepsydra Capital

  • Martial law has been declared 11 times since 1945, but this is the first since Korea’s post-‘90 democratization.
  • The Martial Law Command’s first proclamation blocks parliament, raising legal questions about its constitutionality and making any immediate attempt to end martial law uncertain.
  • Defense and telecom stocks could outperform short-term due to martial law, making them strong trading targets to watch.

7. HSI, HSCEI, HSTECH, HSIII Index Rebalance: US$3.4bn of Flows Post Capping (Dec 2024)

By Brian Freitas, Periscope Analytics

8. NIFTY200 Momentum30 Index Rebalance Preview: 65% One-Way Turnover and US$1.6bn Trade

By Brian Freitas, Periscope Analytics

  • There could be 19 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 30 December. There are some stocks from the new F&O inclusions.
  • If all changes are on expected lines, one-way turnover is estimated at 65.2% and that will result in a one-way trade of INR 71bn (US$837m).
  • The potential inclusions have outperformed the potential deletions since the start of July. The pace picked up over the last month as we neared the end of the review period.

9. Auckland Airport (AIA NZ) Placement: Potential Index Flows

By Brian Freitas, Periscope Analytics

  • Auckland City Council is looking to sell 163.23m shares of Auckland Intl Airport (AIA NZ) in a clean-up trade. This is big at NZ$1.3bn and 64 days of ADV.
  • The placement was expected by the market and the stock has run up despite that. The stock is in a trading halt and should open lower.
  • There will be passive buying at the time of settlement of the placement shares and that will mop up around 15% of the offering.

10. 7 & I (3382) – York Holdings Sale Process, Timeline, Nuances

By Travis Lundy, Quiddity Advisors

  • The sale process of Seven & I Holdings (3382 JP) “unit” York Holdings, with 31 sub-units, has started. 7+ bidders bid in Round 1. Due dili follows then Round 2.
  • I expect SST+support ops get sold, and the specialty stores get carved out. I expect the deal to get decided by end-Feb 2025. Noises about real estate enhancement are encouraging.
  • This is still all to the good, so I include a Gratuitous Chart Showing 7&i’s Up-And-To-The-Rightness
Dec 01
0

Weekly Top Ten Event-Driven and Index Rebalance – Dec 1, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. 7&I (3382 JP) – A York Holdings Deal And Warren Buffett?

By Travis Lundy, Quiddity Advisors

  • The Seven & I Holdings (3382 JP) to rid itself of control of the Ito-Yokado, York Benimaru, Akachan Hompo, and Denny’s Japan businesses in York Holdings proceeds apace.
  • The First Round of bids is due tomorrow, apparently, and all manner of bidders have assembled. 
  • This leads to the question of a deal for the rest of 7&i. If a TradingCo is a natural co-investor for the Ito family (or ACT), so is Berkshire Hathaway.

2. Sanrio (8136 JP) Placement: Potential Global Index Migration Leads to Interesting Dynamics

By Brian Freitas, Periscope Analytics

  • Overnight, Sanrio (8136 JP) announced a placement of 25.87m shares to unwind crossholdings and improve corporate value. There is an overallotment option for another 3.88m shares.
  • There will be limited passive buying in the short-term and the shares offered is a large percentage of real float of the stock.
  • However, Sanrio (8136 JP) is the highest ranked non-constituent stock in a global index universe and a drop in the stock price could be used to accumulate positions.

3. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Last-Second Changes to the Last-Minute Changes

By Brian Freitas, Periscope Analytics

  • There are now new changes forecast for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December for a total of 8 inclusions and 7 deletions.
  • Constituent changes along with capping changes will lead to a one-way turnover of 21.8% and in a one-way trade of TWD 75.8bn (US$2.33bn).
  • The potential changes had a big one-day move yesterday and we expect similar moves over the next couple of days.

4. Kansai Electric Power (9503 JP) – Huge Offering Is Smaller Now; Reward/Risk Skews Upwards

By Travis Lundy, Quiddity Advisors

  • On 13 November, Kansai Electric Power (9503 JP) announced an equity offering to raise capital for capex expenditures over the next several years. It is significantly dilutive.
  • The shares responded by falling 23% to 8-months lows of ¥1,850 last Thursday and Friday. That puts the stock at the same forward PER post-offering as it was pre-offering. 
  • That’s probably not an awful place to own now that the stock will have been slightly de-risked/de-levered. 

5. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: Big Shift in Divs Leads to Last Minute Changes

By Brian Freitas, Periscope Analytics

  • Using data from the close on 25 November, there could be 6 adds and 5 deletes for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
  • There will also be capping and funding flows that will lead to a one-way turnover of 17.3% and a one-way trade of TWD 60.6bn (US$1.86bn).
  • On average, the forecast adds have started to outperform the forecast deletes. Positioning should continue in stocks that have large flow/impact or have recently joined the list of forecast adds/deletes.

6. [JAPAN ACTIVISM] Keisei Elec (9009) – Murakami Stake Causes Pop But the Oppty Is Still Unconvincing

By Travis Lundy, Quiddity Advisors

  • 13mos ago, activist investor Palliser Capital spoke at a conference about the value offered by Keisei Electric Railway Co (9009 JP) due to its large stake in Oriental Land (4661). 
  • Keisei outperformed OLC by 30% over 3.5mos. Then it fell all the way back, and more, over the next five months. Asset sale, buyback, AGM proposals. Meh. 
  • Nov 25th, Toyo Keizai wrote activist Murakami-san had acquired stakes of <5% in Keikyu Corp (9006 JP) and <1% in Keisei Electric Railway Co (9009 JP). Shares in both jumped.

7. Taiwan Top 50 ETF Rebalance Preview: Double Inclusion for Yang Ming Marine (2609 TT)

By Brian Freitas, Periscope Analytics

8. HSTECH Index Rebalance: Midea (300 HK) Replaces Weibo (9898 HK); US$1.5bn Round-Trip Trade

By Brian Freitas, Periscope Analytics

9. NTT (9432 JP) And SBI Sumishin NetBank (7163 JP)? Maybe. Maybe Not. Seven Bank A Better Idea

By Travis Lundy, Quiddity Advisors

  • An article in Japanese weekly magazine Bunshun this morning sent shares inSBI Sumishin Net Bank (7163 JP) limit up +17% with a headline that NTT Docomo was interested to buy.
  • Without access to the article, I can’t go deep, but the base concept is that NTT Docomo is “worried” about KDDI (which has a bank, as does Softbank Corp)
  • It is not clear how serious it is, SBI Sumishin is super-expensive, and buying a bank isn’t the same as buying a company. Hmmm…

10. Seven & I Holdings (3382 JP): Implications from the YORK Holdings Stake Sale

By Arun George, Global Equity Research Ltd

  • NHK reports that Seven & I Holdings (3382 JP)‘s first bidding round for a YORK Holdings stake ends on 28 November. The sale provides a third-party valuation benchmark for the asset. 
  • It is an incremental positive for the founding family MBO as it supports the post-privatisation strategy and assists in securing bank financing.
  • This is an incremental negative for Alimentation Couche-Tard (ATD CN) as it shows that the Board believes the restructuring plan will increase shareholder corporate value.  
Nov 24
0

Weekly Top Ten Event-Driven and Index Rebalance – Nov 24, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. 7&I (3382) – What If…  A Modest Proposal

By Travis Lundy, Quiddity Advisors

  • A lot of the talk around the news that Ito family scion Ito Junro had proposed to Seven & I Holdings (3382 JP) an MBO was about thwarting Alimentation Couche-Tard.
  • Several mentioned that this bid – seemingly uncompetitive at the moment – would make ACT back down. I discussed the bid and its repercussions here. 
  • Here I suggest an alternate solution which might get everyone what they want.

2. 7&I (3382) Ito Family MBO – New Urgency for ACT

By Travis Lundy, Quiddity Advisors

  • Days ago we got a dramatic headline about Ito family scion ITO Junro and his family company Ito Kogyo making a bid for Seven & I Holdings (3382 JP). 
  • The stock popped, then fell. Details were not clear. Was the ¥9trln an EV number? A market cap? Was he serious? How would he get funding. Skepticism was rife. 
  • Today we get more headlines from NHK. who says the family wants to raise ¥8trln to take 7&i private by end-Feb 2025.

3. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: 6 Adds, 5 Deletes, Capping, US$3.5bn Trade

By Brian Freitas, Periscope Analytics

  • Using data from the close on 15 November, there could be 6 adds and 5 deletes for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
  • There will also be capping and funding flows that will lead to a one-way turnover of 16.9% and a one-way trade of TWD 57.5bn (US$1.77bn).
  • Short interest is at the highs in most forecast deletes, while the trend is mixed among the potential inclusions.

4. TIP Taiwan Value High Dividend Index Rebalance: A Lot to Trade This Week

By Brian Freitas, Periscope Analytics

  • There are 15 changes for the TIP Taiwan Value High Dividend Index in November. The Yuanta Taiwan Value High Dividend ETF (00940 TT) has an AUM of US$5bn.
  • Estimated one-way turnover is 26% and there are 16 stocks with over 4 days of ADV left to trade. The rebalance commenced yesterday and will end on Friday.
  • An equal weighted basket of inclusions has outperformed an equal weighted basket of deletions since July. That could continue over the week as the ETF continues to rebalance their portfolio.

5. TIP Customized Taiwan Select High Div Index Rebalance Preview: 32% T/O; US$2.75bn Trade; HUGE Impact

By Brian Freitas, Periscope Analytics

  • The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 284bn (US$8.7bn).
  • We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 15.8% and a round-trip trade of around US$2.75bn.
  • An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since beginning September with a pick-up in pace over the last 2-3 weeks.

6. SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide

By Brian Freitas, Periscope Analytics

  • The S.F. Holding (002352 CH) H-shares are being offered at a price range of HK$32.3-36.3/share, a discount of 20.2%-29% to the A-shares. The max raise (including oversubscription) is US$912m.
  • Unlike Midea Group (300 HK), the S.F. Holding (002352 CH) H-shares will not get Fast Entry to any indices. Southbound Stock Connect inclusion will take place on 23 December.
  • With no index inclusion in the short-term, the H-shares discount to the A-shares should remain wide. The H-shares could become short sell eligible in February.

7. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December

By Brian Freitas, Periscope Analytics

  • Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 December.
  • With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
  • Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.

8. Fuji Soft (9749): KKR To Launch at ¥9,451, Fuji Soft REJECTS Bain’s Bid – Governance in Shambles

By Travis Lundy, Quiddity Advisors

  • On Friday 15 November, KKR announced it would launch KKR Tender2 to buy the rest of FujiSoft not purchased in KKR Tender1. Their new price is ¥1 higher than Bain’s.
  • Fuji Soft Inc (9749 JP) announced (J) it supported the KKR2 Tender and rejected the Bain TOB Proposal. KKR1 shareholders are “made whole” at ¥9,451/share. Minimum is 53.22%.
  • The document, however, is a Governance Disaster – an absolute shambles, effectively gaslighting investors at every turn. And now investors can see it was problematic from the start.

9. Seven & I Holdings (3382 JP): Evaluating the Potential MBO

By Arun George, Global Equity Research Ltd

  • Seven & I Holdings (3382 JP) did not dispute the NHK article’s claims that the founding family aims to raise buyout funds by the end of the fiscal year.
  • Since 13 November, there have been conflicting press reports on the MBO offer price. The NHK article’s implied offer price of JPY3,082 seems the most credible. 
  • The MBO’s aggressive completion timeline pressures Alimentation Couche-Tard (ATD CN) to respond by either overbidding, working with the founding family at the back-end or walking away.

10. S&P/ASX Index Rebalance Preview (Dec 2024): Dexus and Spark NZ with Double Deletions

By Brian Freitas, Periscope Analytics

  • With the review period nearly complete, there could be one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) in December.
  • Both deletes are also deletions from a global index next week and there could be short-term buying/covering opportunities on a drop in the stock price.
  • There has been a buildup of cumulative excess volume in all stocks over the last few months. There has been no increase in positioning in CAR Group (CAR AU) recently.
Nov 17
0

Weekly Top Ten Event-Driven and Index Rebalance – Nov 17, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Meituan (3690 HK): Big Passive Selling in December

By Brian Freitas, Periscope Analytics

  • The announcement of the changes to the Hang Seng indices is on 22 November, the capping will use the close on 3 December and implemented at the close 6 December.
  • Meituan (3690 HK)‘s outperformance over the last couple of months will result in capping of the stock weight in all major indices and passives will sell stock.
  • We estimate passive trackers will need to sell 35m shares (US$866m; 0.64x ADV) of Meituan (3690 HK) and that number will change over the next 3 weeks depending on performance.

2. 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce

By Travis Lundy, Quiddity Advisors

  • Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
  • The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
  • There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.

3. KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering

By Brian Freitas, Periscope Analytics

  • Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
  • Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
  • There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.

4. Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value

By Arun George, Global Equity Research Ltd

  • In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
  • Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
  • The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.

5. Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

By Brian Freitas, Periscope Analytics

  • The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
  • Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.
  • Fast Retailing‘s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.

6. INDIA: Index Changes Due to the 45 New Additions to the F&O Segment

By Brian Freitas, Periscope Analytics

7. STAR Chip Index Rebalance Preview: 3 Potential Changes in December; US$450m Round-Trip Trade

By Brian Freitas, Periscope Analytics

  • There could be 3 constituent changes for the STAR Chip Index at the December rebalance. There will also be a couple of capping changes.
  • Estimated one-way turnover is 5.05% resulting in a one-way trade of CNY 1.6bn (US$225m). Passives need to trade between 0.6-1x ADV in the potential changes.
  • The forecast adds have underperformed the forecast deletes over the last month but there has been a marked improvement in performance in the last week. Watch out for more.

8. NASDAQ 100 Index Rebalance: Lovin’ It as AppLovin (APP) Replaces Dollar Tree (DLTR)

By Brian Freitas, Periscope Analytics

9. NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed

By Travis Lundy, Quiddity Advisors

  • On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
  • On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
  • The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.

10. CES China Semiconductor Chips Index Rebalance Preview: Three Changes in December

By Brian Freitas, Periscope Analytics

  • There could be three changes for the CES China Semiconductor Chips Index at the close of trading on 13 December.
  • Based on the assets tracking the index, passive trackers will need to trade between 0.1-0.3x ADV in the stocks.
  • There will be selling in Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) to cap the stock at 10% of the index weight.
Oct 20
0

Weekly Top Ten Event-Driven and Index Rebalance – Oct 20, 2024

By | Event-Driven and Index Rebalance
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿

By Travis Lundy, Quiddity Advisors

  • As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.  
  • There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up. 
  • There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got 🍿🍿🍿.

2. MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out

By Sanghyun Park, Clepsydra Capital

  • MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
  • MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
  • Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.

3. China ETF Inflows & Implications: YTD Inflows Nearing US$150bn

By Brian Freitas, Periscope Analytics

  • Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
  • 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
  • The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.

4. S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up

By Brian Freitas, Periscope Analytics

  • With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December. 
  • There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
  • Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.

5. Yuanta/​P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade

By Brian Freitas, Periscope Analytics

  • Using data from the close on 11 October, there could be 6 adds and 5 deletes for the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
  • There will also be capping and funding flows that will lead to a one-way turnover of 15% and a one-way trade of TWD 49bn (US$1.52bn)
  • Shorts have been building up in some of the forecast deletes and in a couple of the forecast adds as well.

6. China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025

By Brian Freitas, Periscope Analytics

  • China Resources Beverage (CRB HK) is offering 347.8m shares in its IPO at a price range of HK$13.5-14.5/share. With the overallotment option, the IPO could raise up to HK$5.8bn (US$474m).
  • Cornerstone investors will take up nearly half the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
  • Index inclusions will commence with the HSCI in March 2025 – that will also result in Stock Connect inclusion. The next index inclusion will take place in June.

7. Korea Value-Up ETFs: Latest Market Info on Initial AUM Setup & Resulting Passive Impacts

By Sanghyun Park, Clepsydra Capital

  • KRX will launch 12 ETFs tracking the Korea Value-Up Index on November 4—9 passive and 3 active—aiming for an initial AUM exceeding 1 trillion KRW.
  • KRX is pressuring ETF operators to reveal initial capital by November 4, with expectations to exceed 1 trillion KRW due to government pressure.
  • Early signs of position buildup are emerging, so it’s essential to monitor stocks with significant passive impact closely moving forward.

8. Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer

By Arun George, Global Equity Research Ltd

  • Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
  • The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation. 
  • KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.

9. Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium

By Arun George, Global Equity Research Ltd

10. Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun

By Janaghan Jeyakumar, CFA, Quiddity Advisors

  • The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
  • The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
  • In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.