In today’s briefing:
- HK Merger Arb: Opportunities Amidst the Market Selloff
- Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- Talk of Deploying Korean Market Stabilization Fund Ramps Up Today
- Assura in the Crosshairs
- Quiddity Leaderboard SET50 Jun25: Four Changes Likely; Capping to Be Introduced
- Klarna IPO Preview: The Dominant BNPL Player in Europe, Trump’s Tariffs Are a Headwind
- FWD: An Ideal Acquisition Target for Korean Insurers?
- NSE NIFTY50/ Vol Update / Trade Tensions Prevail: Reduce Vol Harvesting & Position for +ve Vega.
- SBI RHEOS HIFUMI (165A JP): Coverage Initiation
- Chesnara plc (CSN): Showing good operational progress
HK Merger Arb: Opportunities Amidst the Market Selloff
- The gross spreads of large HK merger arb situations have increased due to the unfortunate fallout from Trump’s trade war. The HSI closed down 13.2%.
- We assess the widening spreads of HK’s merger arb situations based on offer structure, preconditions, conditions, and other factors.
- The deals, ranked in terms of increasing deal risk, are Tam Jai, Soundwill, Vesync, Goldlion, Canvest, ESR, OneConnect, HKBN, and ENN Energy.
Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- In Aussie Arbs: Trump Tariffs And MACs, I ran a ruler over the fifteen live deals Down Under, and how they may be affected by the Trump Tariffs.
- This insight canvasses the ongoing Hong Kong arbs and wording surrounding material adverse changes (MACs). Hong Kong MACs are typically less onerous, and lack specificity, versus Aussie arbs.
- Although the framework exists for an Offeror to enforce a MAC, I’m not aware of any evidence of this occurring under Hong Kong’s Takeovers Code.
Talk of Deploying Korean Market Stabilization Fund Ramps Up Today
- This afternoon, local media has been buzzing about the potential deployment of the ₩10T Market Stabilization Fund, with signs pointing to its first inflow into the market in five years.
- It’s likely to create a supply-demand imbalance, driving significant price action and requiring adjustments to our short-term outlook for the Korean market.
- Most of the money is expected to flow into KOSPI 200 ETFs, so we should watch for a major passive flow impact during KOSPI 200 rebalancing in June and December.
Assura in the Crosshairs
- KKR’s 49.4p all-cash offer, cum-dividend and matching EPRA NTA, provides a 31.9% premium and ~12.3% gross spread, creating an attractive short-term arbitrage opportunity for investors.
- PHP could increase its cash component by 1–2p without breaching investment-grade leverage, supported by strong rental income, refinancing flexibility, and post-merger synergies that enable a credible deleveraging path.
- The estimated 2–2.5 month timeline from firm offer to cash settlement positions this deal within a standard UK M&A framework, offering risk arbitrageurs visibility and duration-limited exposure.
Quiddity Leaderboard SET50 Jun25: Four Changes Likely; Capping to Be Introduced
- The SET50 index tracks the performance of the top 50 largest and most liquid names listed on the Stock Exchange of Thailand (SET).
- In this insight, we take a look at the potential ADDs/DELs for SET 50 during the index rebal event in June 2025.
- Currently, we expect four ADDs and four DELs. There are roughly two more months left in the reference period.
Klarna IPO Preview: The Dominant BNPL Player in Europe, Trump’s Tariffs Are a Headwind
- Klarna Group, a Swedish fintech company and BNPL provider, filed for an IPO and submitted a registration statement F-1 form with the SEC.
- The company believes that AI and product diversification will boost profitability in the coming years coupled with aggressive cost-cutting and better underwriting process.
- However, Klarna delayed its planned IPO due to extreme volatility and Trump’s tariffs, which are a headwind for BNPL players, including Affirm and Klarna.
FWD: An Ideal Acquisition Target for Korean Insurers?
- The saga of CK Hutchison’s Panama Canal Ports sale might also impact FWD due to tensions between China and the Li family.
- Despite minimal mainland China presence, FWD faces exposure through its significant HK and Macau operations; HK and Macau contributed 40% – 50% of the group’s VNB and operating profits.
- After FWD’s failed IPO attempts, PCG might consider a strategic sale for liquidity; FWD might offer a good strategic fit to Korean insurers looking to expand to Southeast Asia.
NSE NIFTY50/ Vol Update / Trade Tensions Prevail: Reduce Vol Harvesting & Position for +ve Vega.
- Nifty50 risk premia recovers from depressed levels due to Global trade tensions. Lags global equity Vol-spike. Monthly IVs: 11.0% -> 12.5%. Vol-Regime moves to “Low & Up” state.
- Term-Structure swings into Backwardation in the Front-End, but curve finally settled back in Contango by week’s end. Skew/ Smile characteristics held steady with slight compression in Strangle markups.
- Tactical Implications: (1) Continue reduced exposure to Risk-premia harvesting, (2) Long Vega structures recommended in “Low & Up” vol-state.
SBI RHEOS HIFUMI (165A JP): Coverage Initiation
- In FY03/24, AUM was JPY1.4tn (+19.6% YoY), operating revenue JPY10.3bn (+6.7% YoY), operating profit JPY1.8bn (+10.6% YoY), recurring profit JPY1.8bn (+10.6% YoY), and net income attributable to owners of the parent JPY1.3bn (+20.8% YoY).
- The company continued to expand its distribution partner network and product lineup.
- The Japanese equity market remained strong, and the rise in NAV per share drove up AUM to JPY1.4tn (+19.6% YoY).
Chesnara plc (CSN): Showing good operational progress
- Chesnara announced its 2024 results, which showed positive progress compared with 2023.
- The main features were positive market returns, offset by some mixed operational experience.
- Economic Value profit of £69.1m represented a 17% increase on the £59.1m in 2023.
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