In today’s briefing:
- MSCI Feb 2022 Index Rebalance Preview: Potential Changes as Review Period Starts
- BHP Unification – Trading and Spread Update
- Nippon Paint (4612) Secondary Pricing Approaches – Cheaper But…
- Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months
- Hitachi Construction Machinery Deal To Change “Parent” – There’s Not Much There There
- CSI300 Index Rebalance Preview (June 2022): Changes Near the Midway Mark
- AKM Industrial’s Privatisation Bid
- Liquid Universe of European Ordinary and Preferred Shares: January ’22 Report
MSCI Feb 2022 Index Rebalance Preview: Potential Changes as Review Period Starts
- With a day to go to the start of the review period, we see 14 inclusions and 6 deletions for Asia. Most of the adds are in China and Korea.
- There are quite a few adds that will require passive trackers to buy more than 5 days of ADV. Some of the stocks have rallied strongly year to date.
- We expect large buying on SK Square (402340 KS), JD Health (6618 HK) and Sea Ltd (SE US) at the February QIR due to an increase in the FIF.
BHP Unification – Trading and Spread Update
- The spread on the BHP PLC/Limited arbitrage has widened as stock borrow on the AU line has dried up ahead of the ex-date for the General Meeting
- An analysis of the shareholder register of BHP Group PLC suggests that BHP has mis-underestimated the passive ownership of PLC by a lot.
- All told, on a NET basis, the 28th of January is likely to be a US$40bn index event (two way, both names, both funding trades). Another $10-15bn rolls within index.
Nippon Paint (4612) Secondary Pricing Approaches – Cheaper But…
- Nippon Paint Holdings (4612 JP) is down nearly 25% in a week after the large non-dilutive Offering which nevertheless increases Foreign Real World Float by 70+%.
- The ratio of Forward PERe of Nippon Paint vs Peers is as low as it has been in many years, but EV/ForwardEBITDA remains high vs peers.
- Investors who buy this deal or the Pricing Dip will be getting long next to ¥140-150bn of their closest friends who didn’t own as much NPH one week ago.
Mercari (4385) Applying for TSE Prime Means TOPIX Inclusion in 4-5 Months
- Mercari was expected to announce at some point that it would attempt to transfer to TSE Prime. They have now announced.
- This will end up being a BIG TOPIX inclusion in May or June.
- And the changes to the TOPIX Free Float Weight Methodology will mean it is bigger than it would have been under the old regime (despite unchanged FFW).
Hitachi Construction Machinery Deal To Change “Parent” – There’s Not Much There There
- On Thursday we saw news of a Hitachi sale of half its stake in HCM. Friday the stock traded down hard. Friday night saw news that underwhelmed further.
- The deal is big, but it is basically a deal to get Hitachi out as parent. There is no Capital Alliance and there is no Strategic Alliance yet.
- There simply is not much there, there yet. And the stock is less liquid than it looks, and that won’t get better any time soon.
CSI300 Index Rebalance Preview (June 2022): Changes Near the Midway Mark
- Nearly midway through the review period for the June rebalance of the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX), we see 29 potential changes to the index.
- There are a lot of high and medium probability changes that could result in a one-way turnover of 4.2% and a one-way trade of CNY 10.17bn at the June rebalance.
- The potential inclusions have underperformed the potential deletions by c.15% over the last month and this provides a good entry point into a long short/trade.
AKM Industrial’s Privatisation Bid
- Akm Industrial (1639 HK) announced a privatisation offer from Alpha Luck and AKM Meadville at HK$1.82 per scheme share, a 14.47% premium to last full trading day price of HK$1.59.
- The key pre-condition is several regulatory approvals which be forthcoming as Alpha Luck is indirectly 100% owned by the SASAC.
- The key condition is the scheme approved by at least 75% disinterested shareholders (<10% disinterested shareholders rejection). We think the offer price is reasonable and the scheme will pass.
Liquid Universe of European Ordinary and Preferred Shares: January ’22 Report
- Spreads have generally tightened across our liquid universe, 450 bps in the case of Volkswagen.
- Recommendations Long ords / short prefs: Fuchs Petrolub, Henkel, Handelsbanken, Investor AB.
- Recommendations Long prefs / short ords: BMW, Roche, Schroders, Telecom Italia, Volkswagen.
Before it’s here, it’s on Smartkarma
