In today’s briefing:
- STAR50/STAR100 Index Rebalance Preview: Central Huijin’s ETF Creations Skew Performance
- Aussie Arbs: Trump Tariffs And MACs
- Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- 7&I (3382) – FY24 Better, FY25 OK, Surprisingly Large Buyback
- CK Hutch (1 HK): Back To Square One
- USTR Hearings on Section 301 China Maritime Dominance – Fees on Chinese Ships
- HKBN (1310 HK): China Mobile Agrees to Acquire TPG’s Stake
- Taiwan Dual-Listings Monitor: TSMC Spread Near Short Level; ASE & ChipMOS Spreads Good Short Levels
- June Value-Up Rebalance: Hype Fading, But Key Flags Remain
- China ETF Inflows & Implications: Central Huijin’s Huge Buying
STAR50/STAR100 Index Rebalance Preview: Central Huijin’s ETF Creations Skew Performance
- Nearing the end of the review period, we forecast 1 change for the SSE STAR50 (STAR50 INDEX) and 4 changes for the STAR100 Index in June.
- We estimate turnover of 1.9% for the SSE STAR50 (STAR50 INDEX) and 4.5% for the STAR100 Index. The estimated round-trip trade is CNY 7.5bn (US$1.02bn).
- Large ETF inflows could have led to the recent underperformance of a long add/ short delete trade. That could reverse once markets stabilize or when the passives trade the rebalance.
Aussie Arbs: Trump Tariffs And MACs
- Travis Lundy succinctly summarised the Trump Tariffs in Trump Team’s Weird Tariff Math – Not Meant to Be Negotiated. Do read his note.
- From an arb standpoint, most (all?) NBIOs will likely see a downward revision in pricing. Vote risk should also be reduced.
- Such tariffs on predominantly domestic businesses should not trigger material adverse changes (MACs) Down Under. But it is still a worthwhile project to dig a little deeper.
Hong Kong Arbs: (Largely) Immune From Trump Tariffs
- In Aussie Arbs: Trump Tariffs And MACs, I ran a ruler over the fifteen live deals Down Under, and how they may be affected by the Trump Tariffs.
- This insight canvasses the ongoing Hong Kong arbs and wording surrounding material adverse changes (MACs). Hong Kong MACs are typically less onerous, and lack specificity, versus Aussie arbs.
- Although the framework exists for an Offeror to enforce a MAC, I’m not aware of any evidence of this occurring under Hong Kong’s Takeovers Code.
7&I (3382) – FY24 Better, FY25 OK, Surprisingly Large Buyback
- Today, Seven & I Holdings (3382 JP) reported full-year earnings. The FY2025 guidance looks OK. Not overly exciting. Optically, it falls short, but 7&i guidance includes York only for H1.
- The basic outlines of strategy in the Presentation are unchanged from the 6 March strategy report. The company seems convinced an IPO of SEI is a good thing. I’m underwhelmed.
- The company also announced that it would bring forward ¥600bn of its planned 6-year ¥2trln buyback program, and execute it this year. That’s good.
CK Hutch (1 HK): Back To Square One
- The irony is that CKH (1 HK)‘s Panama-port sale was probably prompted, at least in part, by a desire to get out of a situation which was becoming increasingly political.
- Instead, it has thrust the company right into the heart of it. And the share price has now given up all of its initial gains. And then some.
- After Panama’s Attorney General recently determined CK Hutchison’s concessions were unconstitutional, the Comptroller-General has now announced that an audit had found “many breaches” of the concession.
USTR Hearings on Section 301 China Maritime Dominance – Fees on Chinese Ships
- The original issues were discussed in depth in The USTR’s New “Proposed Actions” For Section 301 Investigation on China’s Maritime/Shipping Sectors (now unpaywalled). Hearings took place 24-26 March 2025.
- The hearings were long, and comments were predictable. Those supporting the measures offered evidence which was simply incorrect. Those against tried. Post-hearing comments were due 2 April.
- We don’t yet know what will happen, but if they stay in place, starting 17 April, US exports of grain/pulses, coal, etc will suffer. Imports will see higher costs too.
HKBN (1310 HK): China Mobile Agrees to Acquire TPG’s Stake
- China Mobile (941 HK) has entered a share purchase agreement to acquire TPG’s HKBN Ltd (1310 HK) shares and vendor loan note conversion shares by 28 November.
- On completion, TPG will be released from its irrevocable, which has a competing offer clause. China Mobile’s agreement signals its expectation that I Squared will launch a competing proposal.
- The agreement will not change I Squared’s approach as it would not negatively impact regulatory approvals (a key risk) or prevent it from meeting a 50% minimum tendering condition.
Taiwan Dual-Listings Monitor: TSMC Spread Near Short Level; ASE & ChipMOS Spreads Good Short Levels
- TSMC: +18.9% Premium; Soon at a Good Level to Short the Spread
- ASE: +6.5% Premium; Good Level to Short the Spread Given Trading Range Breakdown
- ChipMOS: +6.6% Premium; 2% And Higher Good Level to Short the Spread
June Value-Up Rebalance: Hype Fading, But Key Flags Remain
- June rebalance drops mid-May, goes live post-KOSPI 200 expiry. Back to 100 names—net outflow setup with more deletes than adds. ETFs rebalance into June 12 close.
- KRX confirmed 10 special entries for June; results likely out in May with Value-Up rebalance. 12 protected names stay. Stocks over 10% weight, like Samsung and SK Hynix, remain.
- Value-Up disclosure isn’t mandatory yet—rule starts June 2026. But compliant firms get a screening boost. Around 76 spots remain, filled via quant screen after excluding 24 protected names.
China ETF Inflows & Implications: Central Huijin’s Huge Buying
- Nearly US$22bn has flowed into mainland China listed ETFs over the last 3 trading days, reversing outflows that started in mid February.
- Central Huijin has announced that it will be increasing its ETF holdings to maintain smooth operation of China’s capital markets. The rest of the National Team will be buying too.
- There are multiple implications of the huge ETF creations in a short time frame and a reversal of flows will lead to a reversion in a bunch of trades.
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