In today’s briefing:
- SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
- CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
- Fujitsu General (6755) – Fujitsu’s Stake On The Block
- Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- (Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy
- Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO
- Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro
- Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”
- LG Energy Solution: Another MSCI Upweight Event Coming in May
SENSEX Index Rebalance Preview: Adani Enterprises Could Replace Wipro
- A third of the way through the review period of the June rebalance, we see one potential index change with Adani Enterprises (ADE IN) replacing Wipro Ltd (WPRO IN).
- Adani Enterprises (ADE IN) could move lower in the short-term due to the public issue of shares but should find support from passive buying from local and global index trackers.
- Wipro Ltd (WPRO IN) has underperformed most of its peers by a wide margin over the last year and the passive selling could provide an entry point.
CSI300 Index Rebalance Preview: Early Look at Potential Changes in June
- Two thirds of the way through the review period, we see 15 potential index changes at the June rebalance that will be implemented at the close on 9 June.
- We estimate a one-way turnover of 2.35% at the June rebalance leading to a one-way trade of CNY 5.57bn.
- The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) over the last six months, though there is some near-term deterioration.
KOSPI200 Index Rebalance: JB Financial (175330 KS) To Replace Meritz F&M (000060 KS)
- Jb Financial Group (175330 KS) will replace Meritz Fire & Marine Insurance (000060 KS) in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the close on 27 January.
- We estimate passive KOSPI2 INDEX trackers will need to buy 3.494m shares (KRW 36.34bn; 4.04 days of ADV) of Jb Financial Group (175330 KS) at the close on 27 January.
- DGB Financial Group (139130 KS) could be added to the KOSPI2 INDEX in April, replacing Meritz Securities (008560 KS) following its merger with Meritz Financial Group (138040 KS).
Fujitsu General (6755) – Fujitsu’s Stake On The Block
- 10 days ago I wrote Fujitsu (6702) Subsidiary Selldowns To Come after Bloomberg carried an article with the CEO. Not new news, but I was struck by the implications.
- Yesterday saw an article which pushed Fujitsu General (6755 JP) nearly 14% higher yesteday. Fujitsu Ltd (6702 JP) had launched an auction for its 42% stake. First round bids due imminently.
- This takes the urgency to a new level. People jumped into an already illiquid stock. How far can this go?
Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
- Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Relia, Kingston, Fengxiang, Jafco, Esso, Golden Energy
- There are 43 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- One new deal was discussed on Smartkarma in the past week: Mitsui & Co’s tilt for Relia Inc (4708 JP).
- Key updates took place for: Kingston Financial (1031 HK), Shandong Fengxiang (9977 HK), Jafco Co Ltd (8595 JP), Golden Energy & Resources (GER SP), and Esso Thailand (ESSO TB).
Last Week In SPACE: Bank of Kyoto, WM Motors, Japanese Banks, Hong Kong Aerospace, CP ALL/MAKRO
- Japanese banks are the hottest new thing but unless you think Bank of Kyoto is going to change its spots, it’s still best thought of as a range trade.
- WM Motors opts for a backdoor listing via merging with WE Solutions Limited (860 HK). There’s probably a good reason for doing so.
- You pay for the liquidity of Japanese banks by paying a higher PBR against not as much improvement in ROE. That’s life.
Merger Arb Mondays (23 Jan) – Origin Energy, Warrego, Golden Energy, Yashili, Kingston, O2Micro
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), Golden Energy & Resources (GER SP), Genesis Minerals (GMD AU), Origin Energy (ORG AU), 111 Inc (YI US).
- Lowest spreads – Essential Metals (ESS AU), Nitro Software Ltd (NTO AU), Norwest Energy NL (NWE AU), Chip Eng Seng Corp (CHIP SP), Conexio Corp (9422 JP), Nippon Steel Trading.
Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”
- OVERSEAS. SPX +1.9% to close on highs; Beta-driven rally as Tech rebounds; Dovish talk from 2 Fed Members; Google joins the fray slashing 12,000 staff; US Banks not far behind.
- JAPAN. NKY Futs +1.3% vs Cash; USDJPY 129.6; CORE Inflation hits 4%; Kishida: too early to discuss BOJ 2% policy exit; Japan courts global elite grads; Population declines in 2022
- DAILY NUGGET. Change of Direction with new BOJ Leadership? Ha, policy direction has already been decided, and whoever the Govt selects will just continue where Kuroda left off.
LG Energy Solution: Another MSCI Upweight Event Coming in May
- MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
- This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
- Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.
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