Daily Brief Energy/Materials: Aag Energy Holdings, Youlchon Chemical, Zhejiang Huafeng Spandex A, Tata Steel Ltd, Gold and more

• Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%. 
• The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp. 
• At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).  

• With 4 trading days left in the review period, we see three potential changes for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in June.
• Kum Yang (001570 KS), Cosmochemical (005420 KS) and Youlchon Chemical (008730 KS) could replace Dongwon Industries (006040 KS), Hwaseung Enterprise (241590 KS) and Hyundai Home Shopping Network (057050 KS). 
• If approved by shareholders, the Dongkuk Steel Mill (001230 KS) split increases the probability of Youlchon Chemical (008730 KS) inclusion and Hyundai Home Shopping Network (057050 KS) could avoid deletion.

• With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
• We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
• With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Tata Steel’s ESG as “Adequate”, in line with the “Adequate” Social and Governance pillars. The company has a “Strong” Environmental score. Controversies are “Immaterial” and Disclosure is “Adequate”.

• Don’t get fooled by the tight inventory narrative While many copper bulls continue to write about the low copper inventories I would like to inform you once again that there is simply no correlation between copper inventories and the price of the industrial metal.
• If you want to be precise – you could even make the case that excessive lows in the LME copper inventory data actually mark cyclical highs in the price of the brownish metal.
• US Leading Economic Index’s recession signal deepens in March, Conference Board reports: “The US LEI fell to its lowest level since November of 2020, consistent with worsening economic conditions ahead,” says CB’s senior manager for business cycle indicators.