In today’s briefing:
- TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- Yancoal Australia Placement – Cleanup Sale by Glencore Now the Ball Is in Yankuang Court
- TOPIX July Rebalance: Flows at the Close Today
- Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
- JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- VNET Draws the Interest of MBK Partners
- SK Telecom: MSCI Deletion Should Provide Entry Point Vs KT Corp
- Australian Unity Office: Crushed as Aliro Walks, But Actively Seeking Situations
- MACA: Thiess’s Friendly Cash Offer
TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close.
- There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
- The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.
Yancoal Australia Placement – Cleanup Sale by Glencore Now the Ball Is in Yankuang Court
- Glencore is looking to raise US$293m (A$422m) from selling its stake in Yancoal Australia (YAL AU). This would be a clean up sale.
- Glencore has been sitting on its stake for a while now, and the two have a JV in the Hunter Valley Operations, the latter which commenced in Jul 2017.
- The deal, while a large one to process at 135.6 days of three month ADV, represents just 5.6% of Yancoal Australia’s current mcap.
TOPIX July Rebalance: Flows at the Close Today
- FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
- There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
- The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.
Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
- Expectations are spreading in the market that the free-float rate of LG Energy will increase from 9% to 15% at the MSCI August QIR. However, this possibility is quite low.
- Only 1.57% will be reflected in this QIR, and 4.26% will be in November. So, the August IR will see 0.59x ADTV, and the November IR will welcome 2.93x ADTV.
- A conservative approach is still valid for flow trading on LG Energy for now, and a more aggressive approach is needed with long/short trading with LG Chem.
JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
- In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
- Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.
VNET Draws the Interest of MBK Partners
- Bloomberg reported that MBK Partners is in talks to team up with a partner on a joint offer for 21Vianet Group (VNET US). Considerations are at a preliminary stage.
- A potential bid would compete against The Hina Group and Industrial Bank’s $8.00 per ADS offer. The Board has not provided an update on its stance on this offer.
- Takeover interest is unsurprisingly due to VNET’s depressed share price, unchanged FY22 guidance and ongoing data centre M&A activity.
SK Telecom: MSCI Deletion Should Provide Entry Point Vs KT Corp
- SK Telecom (017670 KS) has continued to underperform KT Corp (030200 KS) even as foreign investors continue buying. Local institutions have been selling the stock.
- With foreign room currently at 1.68% and consistently below 3.75% recently, SK Telecom (017670 KS) should be deleted from the MSCI Korea Index at the August QIR.
- There will be more selling from FTSE trackers in September. With the SK Tel/KT Corp price ratio trading at the lows, the passive selling could provide a good entry point.
Australian Unity Office: Crushed as Aliro Walks, But Actively Seeking Situations
- Australian Unity Office Fund (AOF AU) was the subject of six successive bids by Starwood between 2018-2020 and a bid by Charter Hall (CHC AU) and Abacus Property (ABP AU).
- Large AOF shareholder Hume knocked back the ABP/CHC bid and Starwood never got to the final stages. But Aliro Group’s (CEO is ex-CHC) bid at A$2.45 got Hume’s support.
- Then on 25 July, Aliro walked. And the shares fell. From A$2.21 to A$1.80. Ouch.
MACA: Thiess’s Friendly Cash Offer
- MACA Ltd (MLD AU) recently announced a friendly off-market cash offer from fellow contractor Thiess, at A$1.025/share, a 28.1% premium to previous close.
- The Offer is subject to limited conditions, including FIRB , ACCC sign-off, no prescribed occurrences, no issue of convertible securities, derivatives, or other rights, and 90% minimum acceptances.
- The Offer has unanimous support from MACA’s board. Applications to FIRB and the ACCC have already been submitted. The announcement suggests MACA remains open to alternative approaches.
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