In today’s briefing:
- HSTECH Index Rebalance Preview: BYD (1211 HK) Could Replace China Literature (772 HK); Huge Trade
- Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June25
- FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again
- A Practical Guide to Stub Arb Trade in the Korean Stock Market
- CATL (3750 HK): Powered by the PetroDollar. HK Offer Overview and Valuations.
- [Japan M&A] TechnoPro Holdings (6028) May Be Up For Grabs
- LG Chem: To Issue Exchangeable Bond Worth US$1 Billion
- ESR (1821 HK): Pre-Cons Done. Scheme Doc By 22nd May
- OneConnect Financial (6638 HK/OCFT US): Ping An Firms Offer @ HK$2.068/Share
- Mayne Pharma’s Merger with Cosette Pharmaceuticals: Navigating FDA Concerns, Shareholder Approval, and Market Reactions
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.
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.
FXI Rebalance Preview: Pop Mart (9992 HK) Pops Up Again
- With two days left in the review period, Pop Mart International Group L (9992 HK) could replace China Railway Group Ltd H (390 HK) in the FXI ETF in June.
- The inclusion of Pop Mart International Group L (9992 HK) in the iShares China Large-Cap (FXI) (FXI US) will add to the potential inclusion of the stock in other indices.
- Short interest has been increasing in both stocks. Multiple index inclusions could result in short covering in Pop Mart while China Railway Group‘s stock price has been bouncing off its lows.
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.
CATL (3750 HK): Powered by the PetroDollar. HK Offer Overview and Valuations.
- Contemporary Amperex Technology (CATL) (300750 CH) has offered118 million shares in Hong Kong, priced at HKD263 per share, a modest discount to its A share price.
- More than half of the USD4 Billion Hong Kong share offering has already been subscribed by cornerstone investors.
- Middle Eastern sovereign wealth funds are amongst CATL’s key corner stone investors while the deal excluded US onshore investors given the mounting geopolitical tensions.
[Japan M&A] TechnoPro Holdings (6028) May Be Up For Grabs
- Technopro Holdings (6028 JP) is a temp/contract staffing platform which specialises in engineering staff (IT engineers far more than machinery, construction, chemicals). The company has been growing.
- Overnight, an article appeared in MergerMarket – a high-dollar M&A-related news service – saying the company was going through a sale process. The company confirmed it was one possibility.
- The stock went limit up. This quick writeup looks at the framework of the idea, and possibilities.
LG Chem: To Issue Exchangeable Bond Worth US$1 Billion
- On 15 May, LG Chem announced that it plans to issue foreign currency exchangeable bond worth US$1 billion using shares of its subsidiary LG Energy Solution as the underlying asset.
- The purpose of this EB issue is to repay the amount of EB issued two years ago.
- The exchange price premium was lowered from 130% in 2023 to 110-115% this time, and the maturity has been shortened from 7 years to 3 years.
ESR (1821 HK): Pre-Cons Done. Scheme Doc By 22nd May
- Back on the 4th December 204, Starwood/Warburg Pincus Consortium announced a firm pre-conditional Offer for ESR Group (1821 HK) at HK$13/share (best & final), by way of a Scheme.
- The list of pre-cons was extensive. Last night (15th May), ESR announced the satisfaction of all pre-cons.
- The Scheme Doc is now required to be dispatched by the 22nd May, suggesting payment around mid-July. Assuming no dispatch delays.
OneConnect Financial (6638 HK/OCFT US): Ping An Firms Offer @ HK$2.068/Share
- Back on 3rd March, dual-listed OneConnect Financial (6638 HK/OFT US), a digital retail banking/commercial banking/digital insurance play, announced a non-binding proposal from Ping An, OneConnect’s controlling shareholder with 32.12%.
- By way of a Scheme, Ping An offered HK$2.068/share, or US$7.98/ADS, a 72.33% premium to last close, and a 131.66% premium to the 30-day average. The price was final.
- SAMR has now signed off on the deal and terms are now firmed. M&G is supportive (1.98% of shares out, ~8% of disinterested shares). Perhaps mid-September completion.
Mayne Pharma’s Merger with Cosette Pharmaceuticals: Navigating FDA Concerns, Shareholder Approval, and Market Reactions
- Mayne Pharma’s acquisition by Cosette Pharmaceuticals at A$7.40/share faces a 14% spread, with closing expected in 1.5 months.
- The FDA issued an Untitled Letter to Mayne Pharma about Nexstellis promotional materials, but it is unlikely to trigger a material adverse effect.
- Shareholder approval for the merger appears likely, with key stakeholders supporting the deal and a vote scheduled for June 18.
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