In today’s briefing:
- Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- A/H Premium Tracker (To 7 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- Merger Arb Mondays (10 Mar) – Seven & I, Naigai, ESR, Soundwill, OneConnect, Goldlion, PointsBet
- British Land: Buy on Improving Industry Fundamentals
- Soundwill Holdings (878 HK): Founder’s Scheme At $8.50/Share
- The Week Ahead in Options – 10 March
- Nikkei Index Options Weekly (Mar 03–07): Implied Volatility Climbs as Market Extends Decline
- Halyk Bank (HSBK LI)
- Kospi Index Options Weekly (Mar 04 – 07): Market Stabilizes After Sharp Drop
Index Rebalance Strategy YTD Performance: Not Many Places to Hide in Asia
- We look at the performance of the index rebalance strategy over the year using weekly forecasts. In short, it has been a mixed bag for Asia.
- India and China have been among the worst performing markets in the region while Australia and Korea have been among the better performers.
- A lot of the outperformance appears to be front loaded, so getting the forecasts right early in the review period is of paramount importance.
A/H Premium Tracker (To 7 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion reverses again with wide premia trades seeing Hs perform the best vs their As.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile. Last week I recommended a HUGE trimming (30%) of the book.
- Hindsight is 20:20. I should have kept them, but the book still produced 51bp of alpha for the week on top of the 35bp of H/A beta.
Merger Arb Mondays (10 Mar) – Seven & I, Naigai, ESR, Soundwill, OneConnect, Goldlion, PointsBet
- 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: Naigai Trans Line (9384 JP), Soundwill Holdings (878 HK), Seven & I Holdings (3382 JP), OneConnect Financial Technology (OCFT US), Smart Share Global (EM US).
- Lowest spreads: Shibaura Electronics (6957 JP), Domain Holdings Australia (DHG AU), PointsBet Holdings (PBH AU), Makino Milling Machine Co (6135 JP), Proto Corp (4298 JP).
British Land: Buy on Improving Industry Fundamentals
- British Land is an office and retail landlord in UK. Around 60% of its assets are campus/offices, with all assets located in UK
- We think the underling retail and office market are showing solid recovery, which will support British Land key operating business
- British Land also sees capital recycling as an important pillar, including dividend, balance sheet management, and M&As to drive shareholders’ returns
Soundwill Holdings (878 HK): Founder’s Scheme At $8.50/Share
- After small-cap property developer Soundwill Holdings (878 HK) was suspended pursuant to the Takeovers Code, I expected an Offer by way of Scheme.
- And that is what unfolded. Grace Foo (ED) and her family, controlling 74.97% of shares out, are Offering $8.50/share, including a $1.00/share dividend, a 62.84% premium to undisturbed.
- That’s still a whopping 87.66% discount to the most recent NAV (30th June 2024). But what are the options for minorities (apart from the headcount test)? And terms are final.
The Week Ahead in Options – 10 March
- US steel and aluminum tariffs (effective 12 March US time) will take effect on March 13 across the Asia-Pacific region. Volatility can be expected in Japan, South Korea, India, China.
- Major quarterly derivatives expirations will occur on March 13 in Japan (Nikkei 225, TOPIX, Stocks), South Korea (KOSPI 200, KOSDAQ 150, Stocks), and India (BSE Stock Futures and Options).
- Earnings announcements for AIA Group (1299 HK) and Li Auto (2015 HK/LI US) are scheduled for March 14, while India’s markets will be closed that day for the Holi holiday.
Nikkei Index Options Weekly (Mar 03–07): Implied Volatility Climbs as Market Extends Decline
- Nikkei breaks lower, USD/JPY and trade tensions weighing on the market.
- Implied volatility rose as the market declined. We discuss implications of current spot levels that is dominated by Put open interest.
- Historic volatility continues to lag implied vol, we provide visuals on the extent of the lag.
Halyk Bank (HSBK LI)
- Kazakhstan is a landlocked country right between Russia and China. It’s wealthier than most realize, with a great amount of natural resources such as oil & gas and uranium.
- Thanks to resource extractions and favorable demographics, GDP per capita has grown rapidly.
- One of the biggest beneficiaries of that growth has been Halyk Bank – the country’s leading commercial bank.
Kospi Index Options Weekly (Mar 04 – 07): Market Stabilizes After Sharp Drop
- Kospi takes a breather this week after last Friday’s sell-off to trade in a narrow range.
- Short-Term volatility eases in trade shortened week pulling implied vol down.
- We highlight the dynamic between implied and historic volatility and discuss whether long or short volatility strategies have been the most effective this year.
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