In today’s briefing:
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
- JPX-Nikkei 400 Rebal 2023: End-Nov 2022
- StubWorld: Iljin Holdings – Discounts On Discounts
- Doosan Bobcat Block Deal Sale – Overhang Remains
- Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline
- Philip Morris/Swedish Match: Squeeze-Out
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (Dec 2022)
- The December rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
- The largest inflows will be on Alibaba Group, Haier Smart Home, Kuaishou Technology, Li Auto, PetroChina, Tencent, JD.com, China Resources Mixc Lifestyle Services and Tingyi Holding.
- The largest outflows will be on SMIC, NetEase, AIA Group, HSBC Holdings, China Construction Bank, Alibaba Health Information Technology, Innovent Biologics, China Mobile, Ping An Insurance and ICBC.
JPX-Nikkei 400 Rebal 2023: End-Nov 2022
- JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
- A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
- Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-November 2022.
StubWorld: Iljin Holdings – Discounts On Discounts
- Iljin Holdings (015860 KS)‘s implied stub is around levels just prior to the onset of Covid, despite strong subsequent deconsolidated earnings. 50.1%-held Iljin Diamond (081000 KS) is itself heavily discounted.
- Preceding my comments on Iljin are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
Doosan Bobcat Block Deal Sale – Overhang Remains
- Doosan Bobcat Inc (241560 KS) announced a block deal sale of 5 million shares. representing 5% of outstanding shares.
- There are three major reasons why we have a negative view of the block deal sale and on Doosan Bobcat.
- Two of these reasons include an overhang associated with remaining shares which could be sold as well as a potential downturn in construction markets in North America and Europe.
Sunshine Insurance (6963 HK) IPO – Index Inclusion Timeline
- Sunshine Insurance (SUN HK) is looking to raise between US$859m-US$950m by selling 1.15bn shares in its IPO. At the top end, the company will be valued at HK$74bn.
- All of the pre-IPO shares are Domestic Shares and there appear to be no immediate plans to convert them to H-shares. The only H-shares will be the IPO shares.
- MSCI China inclusion requires a higher stock price or conversion of Domestic Shares to H-shares; FTSE inclusion is likely in June; HSCI and Stock Connect inclusion is expected in March.
Philip Morris/Swedish Match: Squeeze-Out
- At the end of the further extended acceptance period, PMHH owns 93.11% of the shares of Swedish Match (obtained both through shares tendered and market purchases).
- PMHH intends to initiate compulsory redemption under the Swedish Companies Act to acquire all remaining shares in Swedish Match and request delisting from Nasdaq Stockholm. PMI wins again.
- Although the shares are still liquid, gross spread is 2 bps, and therefore there is no trade worth considering, in my view.
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