In today’s briefing:
- IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- WuXi AppTec (2359 HK) Placement: Strong Momentum & Index Flows
- China Citic Financial (2799 HK): Global Index Inclusion as Valuation Blows Out
- Petrindo Jaya Kreasi (CUAN IJ): Potential Global Index Inclusion & The Risks
- Ricoh (7752 JP): Potential Global Index Deletion in August
- [Japan M&A] Nihon Chouzai (3341 JP) Gets the Deal Done – Nice Process, Nice Price
- Joy City (207 HK): Minorities Should Take The Cash
- EA: Sticky Summer Inflation
- HEW: Atlantic Jobs Divide
- Samyang Comtech IPO Book Building Results Analysis
IDX30/LQ45/IDX80 Index Rebalance: Changes Across the Indices
- There are 2 constituent changes each for the IDX30 Index and the LQ45 Index, and 3 constituent changes for IDX80 Index to be implemented at the close on 31 July.
- The largest passive flows are expected in Bank Central Asia, Bank Rakyat Indonesia, PT Adaro Andalan Indonesia, Mitra Adiperkasa, XLSMART Telecom Sejahtera, Indo Tambangraya Megah and Bank Mandiri Persero.
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
WuXi AppTec (2359 HK) Placement: Strong Momentum & Index Flows
- WuXi AppTec (2359 HK) is looking to raise US$650m at a price range of HK$104.16-106.4/share, a 5-7% discount from last close.
- There will be passive buying from global index trackers around the time of settlement of the placement shares. Then there will be some Hang Seng Index buying in August.
- Short interest in WuXi AppTec (2359 HK) has spiked and some shorts could cover into the placement. The AH premium could move higher following the placement.
China Citic Financial (2799 HK): Global Index Inclusion as Valuation Blows Out
- A doubling of the stock price over the last 4 months could lead to China Huarong Asset Management (2799 HK)‘s inclusion in a global index in August.
- China Huarong Asset Management (2799 HK) has outperformed its closest peer and trades at a much higher price to book.
- China Huarong Asset Management (2799 HK) was added to Southbound Stock Connect in March and investors have been buying the stock via the link.
Petrindo Jaya Kreasi (CUAN IJ): Potential Global Index Inclusion & The Risks
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) could be added to a global index in August but there are multiple risks for the stock.
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) trades at significantly higher multiples compared to its peers and the recent price spike raises the risk of addition to the UMA list.
- PT Petrindo Jaya Kreasi Tbk (CUAN IJ) has outperformed its peers and positioning is big, raising the risk of the stock moving lower over the next few weeks.
Ricoh (7752 JP): Potential Global Index Deletion in August
- The slide in Ricoh Company Ltd (7752 JP)‘s stock price over the last few months could lead to the deletion of the stock from a global index in August.
- Ricoh Company Ltd (7752 JP) has underperformed its peers over the last couple of months and trades cheaper than the average of its peers.
- There are indications of positioning in the stock. However, positioning is likely smaller than the estimated passive selling and there could be more downside for the stock near-term.
[Japan M&A] Nihon Chouzai (3341 JP) Gets the Deal Done – Nice Process, Nice Price
- This family-owned dispensing pharmacy business saw the founding family decide to bail a year ago. So the company decided to set up a sales process.
- This process was a model for how this kind of sale process should be conducted. Multiple parties. Easy accommodation. Getting experts in.
- This should be a done deal because the family and cross-holders/insiders get them to the minimum.
Joy City (207 HK): Minorities Should Take The Cash
- Chinese property play Joy City (207 HK) has announced a Scheme buyback, with a price of $0.62/share (declared final), a 67.57% premium; but more like a 158% premium to undisturbed.
- Yes, this is a 70% discount to NAV. Yet Joy City has traded at P/B of 0.14x, on average, the past five years. Earnings have trended south in that timeframe.
- The IFA will likely cite liquidity and Joy City’s historical discount to NAV, and opine “reasonable”, and probably even “fair”. It is what it is for long-suffering shareholders.
EA: Sticky Summer Inflation
- The ECB’s victory party can continue for another month, as inflation proved surprisingly sticky at the target. But the hangover is disappointing, amid broad-based upside news.
- Two-thirds of national outcomes exceeded our expectations, with a slight skew higher, and pressures concentrated in services. Seasonal travel parts would be payback-prone.
- Another upside surprise to the ECB’s forecast makes the profile likely to shift higher in September. The news is the opposite of what is needed for another rate cut.
HEW: Atlantic Jobs Divide
- Depressing revisions to US payroll data clash with the resilience seen in other data, and compare poorly with the bullish revisions to the Euro area’s labour market.
- Jobs data challenge the Fed’s patient posture, while the Euro area’s sticky inflation and tighter labour markets should encourage it to keep rolling rate cuts later.
- Thursday’s BoE decision sets unemployment’s rise against inflation persistence, leaving the outcome uncertain, yet it is likely to yield another split vote for a rate cut.
Samyang Comtech IPO Book Building Results Analysis
- Samyang Comtech completed solid book building results. The IPO price has been finalized at 7,700 won per share, which was at the high end of the IPO price range.
- A 48.4% of the total IPO shares are under various lock-up periods lasting from 15 days to 6 months. This is a bullish signal.
- Our valuation analysis suggests target price of 13,187 won, which represents a 71% upside from IPO price. Given the excellent upside, we have a Positive view of this IPO.
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