In today’s briefing:
- TSE Announces Market Structure Revisions: Still Much Ado About Nothing
- BHP Unification – ASX Upweight in One Shot
- TOPIX January 2022 FFW Rebalance – Much Nothing To Do
- TOPIX Inclusion: Net Protections (7383 JP)
- Ausnutria (1717 HK): MGO Imminent As NDRC Approval Obtained
- China Infrastructure & Logistics Group (1719 HK): Potential Unconditional MGO
- FTSE All-World/All-Cap Index Rebalance: Potential Liquidity Deletes in March
- Razer Inc (1337 HK): SAMR Done. Now For The Vote
- MergerTalk: Why Playing the Pending Discovery/WarnerMedia Merger Through AT&T Could Pay Dividends
TSE Announces Market Structure Revisions: Still Much Ado About Nothing
- Today the TSE announced its long-awaited segmentation of the 3,777 stocks listed on the five major venues, and where they will move on 4 April 2022.
- TSE1 represented just under 98% of Japan’s float market cap as of today’s close. As some TSE1 members will move to TSE Standard, TSE Prime will represent 97+%.
- There are tiny changes to TOPIX because of the moves – roughly 3bp of flow per quarter starting Oct 2022. The FFW Model Revision will be far more interesting.
BHP Unification – ASX Upweight in One Shot
- As expected, S&P DJI have announced that BHP Group (BHP AU)‘s weight in the S&P/ASX indices will be increased all at once at the close of trading on 28 January.
- We estimated passive S&P/ASX trackers will need to buy over A$4bn of BHP Group (BHP AU) leading to a funding sell of that size on the other index constituents.
- BHP Group (BHP AU) has risen 25% from its lows in November. We expect most UK shareholders have finished selling shares and the one-shot inclusion could take the stock higher.
TOPIX January 2022 FFW Rebalance – Much Nothing To Do
- The January 2022 FFW rebalance is not very large – about US$225mm a side.
- 30% of the interest is in two names – Net Protections (7383 JP) as an add because of its recent IPO and Oracle Corp Japan (4716 JP) as a sell.
- This event may get overshadowed by the TSE Market Structure revamp announced the same day.
TOPIX Inclusion: Net Protections (7383 JP)
- Japan-Based Buy-Now-Pay-Later (“BNPL”) service provider Net Protections (7383 JP) (“NPH”) was listed in the First Section of the Tokyo Stock Exchange (TSE) on 15th December 2021.
- When a company gets listed on the TSE First Section, it subsequently gets included in the TOPIX Index requiring TOPIX-tracking funds to purchase the stock during an Inclusion Event.
- Usually, this presents interesting trading opportunities to generate sharp market-neutral returns in the space of few trading days. Below is a look at the details for NPH’s Inclusion Event.
Ausnutria (1717 HK): MGO Imminent As NDRC Approval Obtained
- China’s NDRC approval, a key condition to the Share Purchase Agreement, has been obtained. SAMR clearance had previously been fulfilled, leaving MoC and SAFE approvals yet to be secured.
- The turnout at Ausnutria Dairy Corp (1717 HK)‘s recent EGM would suggest there is a sufficient number of shares for the MGO to turn unconditional.
- Provided the Offer becomes unconditional, trading at a gross/annualised spread of 4.4%/22.1%, assuming late 1Q22 completion.
China Infrastructure & Logistics Group (1719 HK): Potential Unconditional MGO
- After shares were halted midday on the 30 December pursuant to the Takeovers Code, China Infrastructure & Logistics Group (1719 HK) (“CILG”) has announced a possible MGO from Hubei Ports.
- Hubei Ports has entered into a SPA with co-chairman Yan Zhi to acquire his 74.81% stake in CILG. Upon completion, this will trigger an unconditional MGO. The price is HK$1.15/share.
- A key condition to the SPA is approval from SASAC of Wuhan, which is turn controls 82.8571% of Hubei Ports. This transaction is done.
FTSE All-World/All-Cap Index Rebalance: Potential Liquidity Deletes in March
- We see five stocks failing the Median Liquidity test at the March SAIR and expect them to be deleted from the FTSE AW/AC index at the close on 18 March.
- The stocks are Hap Seng Consolidated (HAP MK), IOI Properties Group (IOIPG MK), Sime Darby Property Bhd (SDPR MK), SM Investments (SM PM) and Sundaram Finance (SUF IN).
- Impact ranges from 34-82 days of ADV. The largest outflows will be seen on SM Investments and Sundaram Finance, while the flows on the other stocks are smaller.
Razer Inc (1337 HK): SAMR Done. Now For The Vote
- China’s State Administration for Market Supervision has unconditionally approved Razer Inc (1337 HK)‘s privatisation.
- Provided all other regulatory approvals are obtained, the key condition to the Scheme completing is the shareholder vote.
- Trading wide to terms on concerns retail investors could disrupt the headcount test.
MergerTalk: Why Playing the Pending Discovery/WarnerMedia Merger Through AT&T Could Pay Dividends
- The prospect of significant value creation for Discovery, Inc. (DISCK US) shareholders is much closer to realization with its merger with WarnerMedia merger on track to complete by for mid-2022.
- A conservative target share price target of $41 for WBD offers greater than 40% upside from the prevailing share prices of DISCA and DISCK.
- Purchasing AT&T shares at prevailing levels could effectively give investors a ~65% to 75% cheaper option to purchase WBD shares than currently through DISCK .
Before it’s here, it’s on Smartkarma
