In today’s briefing:
- The Japan March-End Rebal and Dividend Trade
- Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Sun Corp (6736) – Still Cheap
- Xiaomi (1810 HK)’s US$5bn Placement: Unfavourable Index Dynamics but Strong Momentum
- Korea’s FSC Just Dropped the Final Playbook on the Full Restart of Short Selling.
- Tokyu Corp (9005) To Lift Stake in Tokyu REIT (8957) Again – Bigger Than You Think It Is
- A/H Premium Tracker (To 21 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- Xiaomi US$5.3bn Placement – Relatively Small, Strong Momentum but Is Expensive
- Gold Road (GOR AU): Rejects an NBIO from Gold Fields (GFI US)
- [Quiddity Index Mar25] S&P500/600 Jun25 Rebal: Early Days But a Few Intrareview Changes Possible
The Japan March-End Rebal and Dividend Trade
- Every year it’s the same trade. But sometimes it is not. This year it is Thursday and Friday. Or not.
- The month-end and quarter-end bring big flows, or not, depending on how things have gone.
- Over the past 10 years or so, the two-day return on the March trade is pretty good. This year? Well read on!
Hang Seng Indexes: FAF Methodology Change for Secondary Listings; Over US$1bn to Buy in NetEase
- Hang Seng Indexes has announced a change in the FreeFloat-Adjusted Factor (FAF) methodology for Secondary Listings that will be implemented from the next rebalance in June.
- NetEase (9999 HK), Baidu (9888 HK), Trip.com (9961 HK), NIO (9866 HK), New Oriental Education & Techn (9901 HK) and Weibo (9898 HK) benefit; GDS Holdings (9698 HK) loses out.
- The FAF changes along with capping changes will result in a round-trip trade of HK$34.2bn (US$4.4bn) at the June rebalance with the largest turnover for the Hang Seng TECH Index.
Sun Corp (6736) – Still Cheap
- Eight months on from the Tender Offer which changed the shape of the shareholder register, Sun Corp (6736 JP) is as cheap to its main asset as it was before.
- Sun Corp is cheap to its holding in Cellebrite DI (CLBT US). How cheap depends on the form and structure of its eventual exit.
- Understanding what the options are (and the dynamics around hedging/exposure) is worthwhile.
Xiaomi (1810 HK)’s US$5bn Placement: Unfavourable Index Dynamics but Strong Momentum
- Xiaomi Corp (1810 HK) is looking to place 750m shares at a price range of HK$52.8-54.6/share, a 4.2-7.4% discount from last. That could raise up to HK$40.95bn (US$5.27bn).
- There will be limited passive buying near-term. There will be more passive buying at the end of May. Then there will be passive selling early June.
- Shorts will be hurting from the relentless move higher in the stock and there could be short covering if the stock moves lower from these levels.
Korea’s FSC Just Dropped the Final Playbook on the Full Restart of Short Selling.
- Today’s update clarifies which brokers are fully linked to NSDS, giving them an edge in short-selling speed and flexibility, while others face more execution constraints.
- This leads to a clear execution risk gap, requiring traders to factor in trade efficiency differences based on their broker.
- With lower short-selling restriction triggers, liquidity and short-covering dynamics will shift, requiring traders to reassess market impact and adjust strategies accordingly.
Tokyu Corp (9005) To Lift Stake in Tokyu REIT (8957) Again – Bigger Than You Think It Is
- Today, Tokyu Corp (9005 JP) announced it would increase its stake its family REIT, buying up to 48,880 units or 5.0% of units out over the next six months.
- This comes a couple of days after Hankyu Hanshin announced the same for its REIT, discussed here. Others have done so before. Tokyu has. Others will do so going forward.
- The main reason? Squeeze the ‘share’ price higher. Get the REIT to 1.0x PNAV then stuff it with sponsor-held properties. That’s not bad. The goal is a higher price.
A/H Premium Tracker (To 21 Mar 2025): AH Premia Still Falling; Expect Curve Torsion or AH Widening
- AH Premia continue to fall. Spread curve torsion was a barbell this week. Narrow and wide spreads see Hs outperform. Middling spreads outperform less.
- To me, warning signs are flashing on spreads. They are at their narrowest in 5yrs and they are volatile, though volatility is coming down.
- Lots of spreads see the HA premium less than 15%. That is historically tight.
Xiaomi US$5.3bn Placement – Relatively Small, Strong Momentum but Is Expensive
- Xiaomi Corp (1810 HK) is looking to raise around US$5.3bn via selling 3% additional shares.
- The shares have done exceedingly well this year and are now trading at their all time highs.
- In this note, we will talk about the placement and run the deal through our ECM framework.
Gold Road (GOR AU): Rejects an NBIO from Gold Fields (GFI US)
- Gold Road Resources (GOR AU) has rejected a non-binding proposal from Gold Fields (GFI US). The offer is A$2.27 plus value per share of Gold Road’s shareholding in De Grey.
- The Board has rejected the offer mainly due to opportunistic timing and no value attributed to the potential underground expansion of the Gruyere mine (Gold Road/Gold Fields are JV partners).
- The proposal is a logical consolidation to eliminate dis-synergies. The offer is reasonable compared to peer multiples, precedent transactions and historical trading ranges.
[Quiddity Index Mar25] S&P500/600 Jun25 Rebal: Early Days But a Few Intrareview Changes Possible
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the June 2025 index rebal event.
- We expect two regular changes in June 2025. There are also multiple live spin-off and M&A events which are likely to trigger intra-review index changes.
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