In today’s briefing:
- Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (24 Nov)
- Iron Ore At 104 USD/Ton: Where To Now With Simandou Online? Still Like Fenix, Others Fairly Valued
- Chuangxin Industries (2788 HK): It Doesn’t Pay to Be Aggressive
- Chuangxin Industries IPO Trading: Good Insti Sub Rates but Peers Have Traded Down
- Stockpiling of Copper in the Comex: A One-Year Trade, Inventories Now at 25% of US Demand
- Axalta Through Deal Value: Market Pricing a Bump, Not a Spread
Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (24 Nov)
- Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
- Highlights: Currently twelve pair trade opportunities across three markets and five sectors persist.
- Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.
Iron Ore At 104 USD/Ton: Where To Now With Simandou Online? Still Like Fenix, Others Fairly Valued
- Iron ore prices have remained rock-solid at 104 USD/ton, but the fundamentals are on slightly shaky ground as Rio Tinto (RIO US) commenced shipments from its Simandou project.
- Chinese steel production and apparent demand in October tracked an extremely weak 12%/12.5% YoY, with annualized production rates now 864 million tons, and lending (TSF) was lacklustre at -42% YoY.
- We like Fenix Resources (FEX AU) despite the negative sentiment, due to its production growth profile from 4 million to 10 million tons over the next 3 years.
Chuangxin Industries (2788 HK): It Doesn’t Pay to Be Aggressive
- Despite an overwhelming response and a 26-30% surge in the grey market, at 8.3x FY26 PER, Chuangxin Industries (2788 HK)‘s IPO price does not generate much excitement for us.
- Heavy reliance on connected transactions with the controlling shareholder, pressure on margins in the future, and a highly leveraged balance sheet are concerns.
- We do not think it justifies trading at a premium to peers, hence, limited upside from now. The small free float, however, will increase the share price volatility.
Chuangxin Industries IPO Trading: Good Insti Sub Rates but Peers Have Traded Down
- Chuangxin Industries (CXI HK) raised around US$700m in its upcoming Hong Kong IPO.
- It is focused on alumina refining and aluminum smelting within the upstream of the aluminum industry chain.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
Stockpiling of Copper in the Comex: A One-Year Trade, Inventories Now at 25% of US Demand
- Copper inventory on the COMEX surpassed 400,000 tons on Friday, marking an increase of 330% from the beginning of the year, amidst speculation of a levy of tariffs.
- The Department of Commerce has issued a proclamation imposing a 15% tariff in 2027, with the rate increasing to 30% by 2028, implying a LME-Comex Spread of >3000 USD/ton.
- In addition to the sucking up of copper inventory into the US, we have supply shortages (see: Grasberg To Weigh On Copper Supply In The Medium-Term, March To 12k USD/Ton )
Axalta Through Deal Value: Market Pricing a Bump, Not a Spread
- The Akzo–Axalta merger provides strong industrial logic and substantial synergies, but value allocation favours Akzo via its large dividend and greater synergy share, driving emerging Axalta shareholder resistance.
- Axalta trades above adjusted deal value, implying a 2–3% bump. Artisan and Shapiro opposition increases pressure to improve terms, but current pricing already embeds bump expectations, making arbitrage unattractive.
- At €26.21, expected returns are negative across scenarios without a larger, near-certain bump. Break risk dominates, making the trade unattractive. Recommendation: avoid initiating AXTA-long/AKZO-short positions until spread materially widens.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
