In today’s briefing:
- Alibaba (9988 HK): Dual Primary Listing Implications
- Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
- TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity
- Explaining ESOP Margin Call Situation for Kakao Bank & Krafton
- Yancoal Australia Placement – Cleanup Sale by Glencore Now the Ball Is in Yankuang Court
- Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert
- TOPIX July Rebalance: Flows at the Close Today
- JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
Alibaba (9988 HK): Dual Primary Listing Implications
- Alibaba Group (9988 HK) currently has a Secondary Listing in Hong Kong and is looking to become dual primary listed in Hong Kong and the U.S.
- The main change will be inclusion in the Southbound Stock Connect program where mainland investors will be able to buy the stock.
- Alibaba Group (9988 HK) is capped at 8% in the HSCEI INDEX and is close to 8% of the HSI INDEX, there will be negligible impact on the dividend futures.
Alibaba to Pursue Dual Primary Listing in HK – Impact on Stock Connect, Indices, Etc
- This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
- When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
- It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future.
TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close.
- There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
- The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.
Chinese GDRs on the SIX Exchange – More Names, Smaller Discounts, Smaller Size, Less Liquidity
- China started mulling an expansion of its Stock Connect relationships in late 2021 with plans to allow GDR issuance in Switzerland and eventually Germany.
- New GDR issuance rules came into effect in February and companies started planning to issue GDRs in Switzerland in March.
- The new SIX Listing Rules went into effect 25 July. Two companies priced GDRs on 22 July and two more yesterday. US$1.5bn so far. There are 6 more near-term.
Explaining ESOP Margin Call Situation for Kakao Bank & Krafton
- Many employees of both companies must have participated in the ESOP subscription with stock-backed loans.
- At the last close, the Kakao Bank ESOP must pay 14.34% of the initial total investment as additional withholdings. Krafton is much worse at 30.25%.
- It seems highly likely that this situation will lead to a short-term flow distortion, substantial enough for us to consider setting up a position aimed at this.
Yancoal Australia Placement – Cleanup Sale by Glencore Now the Ball Is in Yankuang Court
- Glencore is looking to raise US$293m (A$422m) from selling its stake in Yancoal Australia (YAL AU). This would be a clean up sale.
- Glencore has been sitting on its stake for a while now, and the two have a JV in the Hunter Valley Operations, the latter which commenced in Jul 2017.
- The deal, while a large one to process at 135.6 days of three month ADV, represents just 5.6% of Yancoal Australia’s current mcap.
Alibaba Dual-Primary-Listing: An Opportunity to Raise Money Without A Trouble Alert
- Alibaba Group (9988 HK) announced yesterday that it is seeking to change its listing status in Hong Kong to a primary listing before the end of 2022.
- With the risk of de-listing from the US, a dual-primary-listing in Hong Kong would allow Alibaba (ADR) (BABA US) to smoothly transition all its trading from the US to Hong Kong.
- In addition, the company could possibly use this opportunity to raise more money from capital markets as it is desperately seeking funding for its loss making ventures.
TOPIX July Rebalance: Flows at the Close Today
- FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
- There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
- The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.
JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
- In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
- Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.
Detailing Why LG Energy’s MSCI Index Up-Weight Is November, Not August
- Expectations are spreading in the market that the free-float rate of LG Energy will increase from 9% to 15% at the MSCI August QIR. However, this possibility is quite low.
- Only 1.57% will be reflected in this QIR, and 4.26% will be in November. So, the August IR will see 0.59x ADTV, and the November IR will welcome 2.93x ADTV.
- A conservative approach is still valid for flow trading on LG Energy for now, and a more aggressive approach is needed with long/short trading with LG Chem.
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