In today’s briefing:
- HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
- HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
- Fairfax India Holdings: Major Value Unlock Via BIAL IPO
- Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
- Weekly Deals Digest (20 Nov) – OZ Minerals, Pendal, Nearmap, Halcyon, Yashili, I-Tail, Lygend
- Lotte Chemical Offering Terms & Trading Angle Targeting K200 Inflow on Ex-Date
- SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)
- Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Warrego, Sumitomo Precision, Halcyon Agri, Nitro Software
- Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag
HSI Index Rebalance: Baby Steps; Double Inclusion for Haier Smart Home
- The inclusion of Tingyi Holding (322 HK), China Resources Mixc Lifestyle Services (1209 HK) and Haier Smart Home Co Ltd (6690 HK) gets us to 76 index constituents.
- Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 2.01% and will result in a one-way trade of HK$3,845m.
- Shorts on Haier Smart Home Co Ltd (6690 HK) and Tingyi Holding (322 HK) are around 5% of float and covering could take the stocks higher.
HSCEI Index Rebalance: Four Sets of Changes; And Some Close Calls
- There are 4 adds and 4 deletes for the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance. The only surprises are some non-adds and non-deletes.
- Using prices from the close on 18 November, estimated one-way turnover is 4.64% and will result in a one-way trade of HK$2,612m at the close on 2 December.
- Short interest is larger on the deletes than the adds. However, at 17 days of ADV to cover and 11.7% of float, short interest on Zhongsheng Group is huge.
Fairfax India Holdings: Major Value Unlock Via BIAL IPO
- Fairfax India Holdings (FIH/U CN), a holdco with investment activities exclusively in India, is edging closer to IPOing 49%-held Bangalore International Airport (BIAL).
- Reportedly FIH is seeking a value upward of C$3.7bn for BIAL, a 45% premium over the current fair value holding.
- Currently trading at a P/B of 0.6x compared to its five-year average of 0.8x, and the two-year average pre-Covid of 1.06x.
Index Rebalance & ETF Flow Recap: HSCI, S&P/ASX, HSI, HSCEI, KOSPI2, KOSDAQ150, Wharf, Meituan
- Plenty of index change announcements in the last week – Kospi 200 Index, KOSDAQ 150 Index, Hang Seng Index, HSCEI, HSTECH, S&P BSE SENSEX Index and FTSE AW/AC Index.
- There are a bunch of indices that have the end of their review periods in the coming week while announcements for China indices are expected post market close on Friday.
- There were outflows from ETFs for most Asian markets over the week with China and Hong Kong ETFs taking the biggest hits.
Weekly Deals Digest (20 Nov) – OZ Minerals, Pendal, Nearmap, Halcyon, Yashili, I-Tail, Lygend
- 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 – I-Tail (ITC TB) launches an up to US$593 million SET IPO, Lygend Resources & Technology (LR HK) set to launch an HKEx IPO to raise US$700-800 million.
- Event-Driven developments – OZ Minerals Ltd (OZL AU), Perpetual Ltd (PPT AU)/Pendal Group (PDL AU), Nearmap Ltd (NEA AU), Halcyon Agri (HACL SP), Yashili International Holdings (1230 HK).
Lotte Chemical Offering Terms & Trading Angle Targeting K200 Inflow on Ex-Date
- Lotte Chemical offers 8.5M new shares, which is ₩1.1T based on the provisional price of ₩130,000. This is a capital increase rate of 24.8%.
- This event has already been leaked in advance from early last week, so it isn’t easy to expect a significant return from the short-selling approach immediately after the announcement.
- Instead, we should pay attention to the KOSPI 200 passive inflow that occurs the day before the ex-date. It is estimated to be approximately 0.8x ADTV.
SENSEX Dec 22 Index Rebalance: Tata Motors (TTMT) To Replace Dr Reddy (DRRD)
- As forecast, Tata Motors Ltd (TTMT IN) will be added to the S&P BSE SENSEX Index (SENSEX INDEX) in December to replace Dr. Reddy’s Laboratories (DRRD IN).
- We estimate passive trackers will need to buy 2.3x ADV (7.2x delivery volume) on Tata Motors Ltd (TTMT) while selling 5x ADV (10.5x delivery volume) on Dr. Reddy’s Laboratories (DRRD).
- The HDFC Limited (HDFC IN) / HDFC Bank (HDFCB IN) merger should see Adani Enterprises (ADE IN) added to the S&P BSE SENSEX Index (SENSEX INDEX) prior to the June rebalance.
Last Week in Event SPACE: Tencent/Meituan, Halcyon Agri, Swire Pac, Perpetual/Pendal, OZ Minerals
- The in-specie distribution is basically a forward block sale of Meituan (3690 HK). You know it’s coming. You don’t know how large it is. It is not unlike a lockup situation.
- China Hainan Rubber Industry (601118 CH) will start with 36% in Halcyon Agri (HACL SP). Founders and friends have ~10%. Getting to 50%+ will be easy.
- The Swire Pacific (B) / Swire Pacific (A) ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks.
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Warrego, Sumitomo Precision, Halcyon Agri, Nitro Software
- There are 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
- Three new deals were discussed on Smartkarma: Beach Energy’s tilt for Warrego (WGO AU), Sumitomo’s offer for Sumitomo Precision (6355 JP), and Hainan Rubber’s offer for Halcyon (HACL SP).
- Key updates took place for: Perpetual Ltd (PPT AU) / Pendal Group (PDL AU), Nitro Software Ltd (NTO AU), and OZ Minerals Ltd (OZL AU).
Hong Kong CEO & Director Dealings (18 Nov): Cross Harbour, Grand Ming, Ganglong, Pharmaron, JL Mag
- The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
- Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute.
- These insights may flag those companies where shares have been pledged. Stocks mentioned include Cross Harbour (32 HK), Grand Ming (1271 HK), and Ganglong China Property (6968 HK)
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