In today’s briefing:
- CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- Melco (200 HK) Trading “Cheap” Into Rights Issue
- [Japan Buybacks] ShinEtsu Chem (4063) – How the FCSR Works
- Surge in ETF Trading Share on KOSPI: Spot Dislocation Opportunities from Leverage Trades
- Samsung Electronics’ Phase 2 Buyback Disposal Plan Virtually Finalized: Two Key Trading Implications
- Mayne Disagrees With Cosette On MAC
CATL (3750 HK): Reassessing Index Fast Entry; Need Overallotment Exercised by Tomorrow
- CATL (3750 HK) is trading at a 6.9% premium to Contemporary Amperex Technology (CATL) (300750 CH) – if that is due to expectations of Fast Entry, that premium could drop.
- CATL (3750 HK) has not announced the overallotment option as exercised and that puts Fast Entry at risk. An announcement prior to the close tomorrow could lead to Fast Entry.
- The earliest inclusion could be at the close on 30 May while the other global index inclusion looks likely in December.
Melco (200 HK) Trading “Cheap” Into Rights Issue
- In my stub monitor flagged in StubWorld: Toyota Industries/Motors, GMO Internet, I see Melco International Development (200 HK) is trading “cheap” to Melco Resorts & Entertainment (MLCO US).
- Last month, Melco proposed one new rights share for two existing shares at a subscription price of HK$1.0286/share, a 72.93% discount to undisturbed, and a 64.28% discount to the TERP.
- Lawrence Ho will backstop ~54% of the rights, if need be. Depending on the level of support for the rights, expect Lawrence to further chip away against minorities.
[Japan Buybacks] ShinEtsu Chem (4063) – How the FCSR Works
- Late April, Shin Etsu Chemical (4063 JP) announced a huge ¥500bn 200mm shares (10.2%) buyback. That was never ever going to happen. That needed a ¥2500 share price, not ¥4300+.
- But it was big, and started in late May. Today, they announced how. It is a “Japan ASR”, the Nomura version, this time with an interesting twist.
- In response to a couple of reader questions today, I provide a brief overview of how these things work.
Surge in ETF Trading Share on KOSPI: Spot Dislocation Opportunities from Leverage Trades
- ETF trading topped 50% of KOSPI turnover in April—a first outside the March 2020 COVID crash—rising nearly 14 percentage points month-to-month despite a sharp overall volume drop.
- Despite a 30% drop in KOSPI volume, leveraged and inverse ETFs surged 28% and 34%, led by ‘KODEX Leverage’ and ‘KODEX 200 Futures Inverse 2X’ hitting top ADV ranks.
- Some local traders see opportunities in spot market dislocations amid volatility, futures rollovers, and ETF-driven supply-demand imbalances likely to persist from last month’s surge.
Samsung Electronics’ Phase 2 Buyback Disposal Plan Virtually Finalized: Two Key Trading Implications
- If ₩500B comes from common shares, about 40M shares retire, raising Samsung Life and Fire stakes to 10.07%, requiring a ₩0.23T block sale to trim excess.
- Slightly smaller than last time but still notable, the insurers acted fast in February. Expect a ~0.07% block trade soon, though price impact was mild previously.
- Watch for preferred share outperformance as phase two buyback hits 0.66% common vs. 0.81% preferred (effective buyback assuming cancellation); similar dynamics may repeat in the larger ₩4T phase three buyback.
Mayne Disagrees With Cosette On MAC
- As widely speculated, Cosette asserted to Mayne Pharma (MYX AU) on the 17th May a Material Adverse Change (MAC) has occurred.
- Mayne disagrees, and views the pre-requisites for a MAC, as defined in the SID, have not been established.
- What now? The Scheme is not terminated. Both parties remain in consultation. If those talks are not satisfactory (say, a price reduction [my guess]), Cosette said it will walk.
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