In today’s briefing:
- Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- Weekly Deals Digest (12 Jan) – Henlius, GA Pack, Fujitsu General, Fuji Soft, Pressance, LG CNS
- HK Connect SOUTHBOUND Flows (To 10 Jan 2025); YUUUUGE Net Buying by SB, $4bn on Tencent
- Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
- China National Building Material (3323 HK): Buyback Getting Even More Convincing
- Poor Performance Before UK Lawmakers Is SHEIN’s Latest Stumble on Journey To London (Or HK?) IPO
- EQD | Tencent – Call Buyers Haven’t Lost That Loving Feeling
Merger Arb Mondays (13 Jan) – ESR, Henlius, Goldlion, Canvest, 7&I, Fujitsu General, Pressance
- 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: Smart Share Global (EM US), Pressance Corp (3254 JP), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK).
- Lowest spreads: Lifestyle China (2136 HK), Makino Milling Machine Co (6135 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Latin Resources (LRS AU).
Weekly Deals Digest (12 Jan) – Henlius, GA Pack, Fujitsu General, Fuji Soft, Pressance, LG CNS
- 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: LG CNS (LGCNSZ KS) seeks to raise up to US$837 million through a primary/secondary offering.
- Event-Driven developments: Shanghai Henlius Biotech (2696 HK), Greatview Aseptic Packaging (468 HK), Fujitsu General (6755 JP), Fuji Soft Inc (9749 JP), Pressance Corp (3254 JP), Smart Share Global (EM US).
HK Connect SOUTHBOUND Flows (To 10 Jan 2025); YUUUUGE Net Buying by SB, $4bn on Tencent
- SOUTHBOUND gross trading activity was not stronger per day than the previous two weeks. But SB Net Buying was HUGE. The biggest week since global index deletions in January 2021.
- The story was similar. On Tuesday in the US, Tencent was put on a DoD list leading to a possible CMC list appearance (which would lead to index deletions).
- Tencent saw US$4bn of SOUTHBOUND net buying. SMIC, Xiaomi, and China Mobile were another $1bn.
Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness
- Ahead of Shanghai Henlius Biotech (2696 HK)‘s EGM and Court Meeting on the 22 January, the focus has shifted to Loyal Valley Capital (LVC)’s continued buying in the market.
- After the close of market last Friday, LVC held 7.8295%, above the 7.826% blocking stake. That % was as at 9th January. I assume LVC are still buying.
- Yet if you analyse how LVC has traded in and out of Henlius, they are not in it to block. They’re in for the back-end scrip option.
STAR50/STAR100 Index Rebalance Preview: Migrations & Outright Changes Lead to Outperformance
- 95% of the way through the review period, there could be 3 changes for the SSE STAR50 (STAR50 INDEX) and 8 changes for the STAR100 Index.
- We estimate turnover of 4.1% for the STAR50 INDEX and 9.3% for the STAR100 Index. The net round-trip trade is CNY 14.1bn (US$1.9bn).
- The forecast adds to the STAR50 INDEX have outperformed the forecast deletes with steady outperformance over the last 3 months; the performance for the STAR100 Index is a lot better.
Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline
- Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.
- Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
- Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.
A/H Premium Tracker (To 10 Jan 2025): Super Wide Tech Spreads Best Over Holidays and into NY.
- AH Premia are lower over the last few weeks of holiday and this past week of heavy SOUTHBOUND buying on Tencent, telcos, and banks.
- Finance and Tech are seeing large buying, but the really big moves over the past few weeks have been on Industrial Names (CRRC), and Materials, and Tech
- The VERY WIDE Tech spreads such as SMIC (981), Shanghai Fudan Microelectric (1385), CHina Rail Signal (3969), and Flat Glass (6865) have been HUGE performers.
China National Building Material (3323 HK): Buyback Getting Even More Convincing
- The prices of the construction materials stocks collapsed recently, with China National Building Material (3323 HK) holding firm, thanks to the buyback proposal.
- A sustained drop in cement prices and continued weakness in fixed asset investment revealed the challenging demand environment, making CNBM’s offer attractive.
- The buyback price equals 25.7x and 10.8x PERs for FY24F and FY25F, representing a hefty premium over peers. We continue to believe this is a good exit opportunity.
Poor Performance Before UK Lawmakers Is SHEIN’s Latest Stumble on Journey To London (Or HK?) IPO
- SHEIN’s general counsel frustrated UK lawmakers by refusing to answer certain questions
- It’s the latest in a series of potential obstacles that could derail a planned London IPO
- Add growing concerns over cotton supply chain & new threat from Amazon to existing risks
EQD | Tencent – Call Buyers Haven’t Lost That Loving Feeling
- Investors haven’t lost their enthusiasm for Tencent. The put/call ratio is a long way from indicating panic.
- Implied vols have risen but are far from panic levels with 1M implied at it’s 39th percentile over the past year and 15th percentile since 2001.
- Skew has risen significantly for out-of-the-money Puts as spot has moved into a range where there is higher Put positioning vs Call positioning.
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