Daily BriefsIndustrials

Industrials: Mitsui Osk Lines, HMM Co., Ltd., Asia High Yield Bond Index and more

In today’s briefing:

  • MSCI Japan Nov SAIR Preview: Pre-Positioning Begins as Potential Adds Rally & Deletes Drop
  • HMM, Another Massive CB Conversion (Share Dilution) Risk & Short Trading Opportunity
  • Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

MSCI Japan Nov SAIR Preview: Pre-Positioning Begins as Potential Adds Rally & Deletes Drop

By Brian Freitas

MSCI is scheduled to announce the results of the November 2021 Semi Annual Index Review (SAIR) on 12 November (Asia time) with the changes implemented after the close of trading on 30 November.

The review period for price cut-off will run from 18-29 October.

Based on the closing prices from 22 September, we see 6 potential inclusions and 8 exclusions for the MSCI Japan Index. Potential inclusions are Mitsui Osk Lines (9104 JP), Taiyo Yuden (6976 JP), Baycurrent Consulting (6532 JP), Benefit One Inc (2412 JP), Rakus Co Ltd (3923 JP) and Open House (3288 JP), while the potential deletions are Yamada Denki (9831 JP), Thk Co Ltd (6481 JP), Hisamitsu Pharmaceutical Co (4530 JP), Pigeon Corp (7956 JP), Tohoku Electric Power Co (9506 JP), NSK Ltd (6471 JP), Nh Foods Ltd (2282 JP) and Acom Co Ltd (8572 JP).

The largest impact of the MSCI buying will be on Taiyo Yuden (6976 JP) with passive funds needing to buy over 9% of the real float of the stock.

Among the potential inclusions, only Taiyo Yuden (6976 JP) has more than 4 days of ADV to cover, while Pigeon Corp (7956 JP) and Yamada Denki (9831 JP) have over 6 days of shorts to cover among the potential deletions.

The short interest data also shows a large fund putting on shorts on the potential deletions over the last couple of weeks of trading.


HMM, Another Massive CB Conversion (Share Dilution) Risk & Short Trading Opportunity

By Sanghyun Park

Currently, the largest shareholder of HMM is Korea Development Bank (KDB). And KDB and KOBC (Korea Ocean Business Corporation) jointly exercise the management rights of HMM.

ShareholdersShareholdingLast filedShares
Korea Development Bank (KDB)24.96%2021-07-16101,199,297
Korea Ocean Business Corporation (KOBC)3.44%2018-07-0513,943,850
Bae Jae-hoon & 21 others0.04%2021-07-30155,469
ESOP0.26%2018-06-291,038,396
Korea Credit Guarantee Fund (KoDIT)6.05%2019-07-2424,527,807
NPS5.25%2021-06-2221,299,846
Source: DART

However, KDB Chairman (Lee Dong-geul) recently said at a press conference on the 4th anniversary of his inauguration that KOBC alone will run HMM from next year. Chairman Lee declined to comment on the specific method of realizing this, but did say that it would be desirable for KDB to sell the remaining stake in HMM in stages.

In fact, KDB’s complete exit is not surprising. This is because the role of the KDB itself is a state-run creditor bank, and it cannot be in charge of the management of private companies forever. On the other hand, KOBC’s primary purpose is to manage a nationalized company rather than a creditor. Therefore, it is inevitable for KOBC to become the largest shareholder of HMM in the near future.

But the question is how.

In this connection, the KDB chairman had a nuance that KOBC would become the largest shareholder first and KDB would then sell the remaining stake.


Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers

By BondEvalue

Wall Street ended higher as both the Nasdaq and S&P closed ~1% higher despite a slightly hawkish Federal Reserve meeting with more details on tapering and half of the FOMC expecting a rate hike next year (scroll down for details). Most sectors rallied led by Energy, up 3.2% followed by Financials, IT and Consumer Discretionary, up 1.3-1.6%. European stocks also saw a solid rise – DAX, CAC and FTSE ended 1%, 1.3% and 1.5% higher. Brazil’s Bovespa gained 1.8%. In the Middle East, UAE’s ADX gained 0.4% while Saudi TASI slid 0.4%. Asia Pacific markets have started positively – Shanghai is up 0.6%, HSI is up 0.7% and Singapore’s STI is up 0.9% while Nikkei is down 0.7% respectively and. US 10Y Treasury yields fell 3bp to 1.30%. US IG and HY CDX spreads tightened 1.7bp and 7.7bp respectively. EU Main CDS spreads were 1.3bp tighter and Crossover CDS spreads tightened 5.9bp. Asia ex-Japan CDS spreads tightened 1.2bp.

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