In today’s briefing:
- Merger Arb Mondays (16 Dec) – ESR, CPMC, Fosun Tourism, Seven & I, Fuji Soft, NEC Networks
- MV Australia A-REITs Index Rebalance: Only Float & Capping Changes
- Banking on Success: A Long-Short Strategy for Nifty Banks
- EQD / NSE NIFTY50 Vol Update / Markdown in Short-Dated IVs Overdone Given Upcoming FOMC Event Risk
Merger Arb Mondays (16 Dec) – ESR, CPMC, Fosun Tourism, Seven & I, Fuji Soft, NEC Networks
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Arcadium Lithium (LTM AU), Seven & I Holdings (3382 JP), Insignia Financial (IFL AU), Shanghai Henlius Biotech (2696 HK), Get Nice Financial Group Ltd (1469 HK).
- Lowest spreads: Renewable Japan (9522 JP), Lifestyle China (2136 HK), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP), Nishimoto (9260 JP).
MV Australia A-REITs Index Rebalance: Only Float & Capping Changes
- The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 20 December. There are no constituent changes, but there are float and capping changes.
- Estimated one-way turnover at the rebalance is 2.9% resulting in a one-way trade of A$17m. There is limited impact on the index constituents.
- The largest inflows are in Charter Hall, Gpt Group, Dexus Property and Region RE while the largest outflows will be from Goodman Group, Scentre Group and Vicinity Centres.
Banking on Success: A Long-Short Strategy for Nifty Banks
- A long-short strategy with HDFC Bank, ICICI Bank, and State Bank Of India outperformed the NSE Nifty Bank Index by 2.1% from 21 November to present.
- The trade is supported by strong fundamentals, institutional and systemic aspects, and favorable technical factors.
- The strategy is market-neutral with zero correlation to the Nifty Bank Index, enhanced by the yield pick-up from shorting the futures in a contango market.
EQD / NSE NIFTY50 Vol Update / Markdown in Short-Dated IVs Overdone Given Upcoming FOMC Event Risk
- IVs guided lower as Inflation data furthers expectations of easier monetary policy. Weekly IVs lower by -3.3 vols, Monthly IVs lower by -1.6 vols & Quarterly IVs remained unaffected.
- IV mark-down seems overdone given the heavy upcoming event-risk calendar. Weekly contracts capture the 18.12.2024 FOMC meeting.
- Strategic Implications: (1) Consider Long Gamma positioning given upcoming event risk & IV markdown (2) Retain Short Vega allocations while Monthly IVs still above 10.5%.
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