In today’s briefing:
- HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade
- GMO Internet (4784) Offering – This Is a GINORMOUS Re-IPO – AVOID LIKE THE PLAGUE
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June25
- CSI 500/1000 Index Rebalance Preview: Strong Near-Term Outperformance
- ChiNext/ChiNext50 Index Rebalance Preview: Whole Lotta Change
- Mayne Pharma (MYX AU): Firm Support From Cosette Would Be Welcome About Now
- [Japan M&A/Activism] Infroneer To Buy Out Activist Target Sumi Mits Construction (1821) Cheapish
- Jiangsu Hengrui Pharma A/H Listing – Low-End Is Probably Close to Fair Value
- A Practical Guide to Stub Arb Trade in the Korean Stock Market
- ESR Group (1821 HK): Precondition Satisfied
HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade
- The review period for the June rebalance of the HSTECH INDEX ended on 31 March, the changes will be announced on 16 May and implemented on 6 June.
- Following the launch of the God’s Eye ADAS, BYD (1211 HK) could become eligible for index inclusion after meeting the Autonomous theme and Innovation screening.
- The inclusion of BYD (1211 HK) in the index could result in China Literature (772 HK) being deleted from the index in June.
GMO Internet (4784) Offering – This Is a GINORMOUS Re-IPO – AVOID LIKE THE PLAGUE
- Last year, GMO injected its internet business into GMO Internet (4784 JP) and took shares as consideration. Somehow, GMO Internet got a TOPIX inclusion earlier this year.
- The company has 1.24% float of 3.4mm shares. GMO Internet Group – the parent – will now offload 91.7mm shares in an equity offering to meet TSE Continued Listing Requirements.
- That is about ¥279bn at current price against float of ¥10bn. Full market cap is ¥850bn. That’s 170x Dec25e Net Income. I expect the price will fall. You were warned.
Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June25
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 June.
- With no constituent changes, one-way turnover will be 1.9% with 3 stocks being capped and FAF changes for a few stocks due to a methodology change for Secondary Listings.
- We highlight 7 stocks that have a higher probability of being added to the index. Everything depends on the index committee, and we would not be surprised by zero changes.
CSI 500/1000 Index Rebalance Preview: Strong Near-Term Outperformance
- With the review period complete, there could be 50 changes for the CSI Smallcap 500 Index and 100 changes for the CSI 1000 Index in June.
- There are a lot of migrations expected between the two indices and the impacts for those stocks are lower with much of the flow cancelling out.
- The outright adds have outperformed the outright deletes over the last few months with the profit-taking in March giving way to renewed outperformance in April.
ChiNext/ChiNext50 Index Rebalance Preview: Whole Lotta Change
- With the review period complete, we forecast 10 changes for the ChiNext Index (SZ399006 INDEX EQUITY) and 5 changes for the ChiNext 50 Index in June.
- The largest flows will be in stocks that are adds/deletes for both indices – and there are a few of those. Plus there are some overlaps with other indices.
- While the forecast adds have outperformed the forecast deletes for both indices since January, near-term performance has not been great. That could change as we near the announcement date.
Mayne Pharma (MYX AU): Firm Support From Cosette Would Be Welcome About Now
- They say bad things come in threes. First, Mayne Pharma (MYX AU)announced TherapeuticsMD (TXMD US)‘s legal lawsuit. Then shares buckled in the wake of Trump’s executive order on pharma.
- The final straw was the FDA accusing Mayne of giving misleading impression of the risks of its oral birth control pill. Shares are now a whopping 29% adrift of terms.
- Mayne reckons the lawsuit and the FDA letter are not materially price sensitive; and it intends to move forward with the Scheme. A similar intention from Cosette would be welcome.
[Japan M&A/Activism] Infroneer To Buy Out Activist Target Sumi Mits Construction (1821) Cheapish
- Noted activist Yoshiaki MURAKAMI and associates owned ~12.5% in March 2024, perhaps a tad more. Now they own ~29%.
- Integrated Construction Co INFRONEER Holdings (5076 JP) – congenitally allergic to paying full price for acquisitions – is buying Sumitomo Mitsui Construction (1821 JP) well below FAs’ DCF range midpoints.
- But MURAKAMI-san has tossed his cards in, agreeing to tender. This looks like it gets done, but there are interesting angles.
Jiangsu Hengrui Pharma A/H Listing – Low-End Is Probably Close to Fair Value
- Jiangsu Hengrui Medicine (600276 CH), a China-based pharmaceutical company, aims to raise around US$1.3bn in its H-share listing.
- JHP Has been ranked as one of the global Top 50 pharmaceutical companies by Pharm Exec for six consecutive years since 2019.
- We have looked at the company’s past performance and other deal dynamics in our previous note. In this note, we talk about the IPO pricing.
A Practical Guide to Stub Arb Trade in the Korean Stock Market
- Due to NAV accuracy issues, locals favor sigma plays within ±2σ bands over classic stub trades, with aggressive traders rotating longs and shorts around ±1σ.
- Avoid trending divergence periods; these eight targets usually mean-revert well, but H1 this year showed unusually deep divergence—important to consider for current sigma plays.
- As of today, no 20-day MA sigmas trigger trades, but holding company strength drives price ratios—a trend likely lasting post-election—suggesting ±2σ sigma plays with longs in holdcos.
ESR Group (1821 HK): Precondition Satisfied
- The precondition for the consortium scheme offer for ESR Group (1821 HK) has been satisfied. The scheme document will be despatched by 22 May.
- The consortium has disclosed an additional irrevocable. Total irrevocables and letters of support represent 35.01% of outstanding shares (58.24% of disinterested shares).
- This is a done deal, helped by the material derating of peers. At the last close and for an early August payment, the gross/annualised spread is 4.3%/21.3%
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
