In today’s briefing:
- BYD (1211 HK): God’s Eye & Potential HSTECH Index Inclusion
- Zomato/Eternal: Lower Foreign Ownership Limits & The BIG Passive Selling
- *NEW* USTR Section 301 Proposed Actions on China Maritime Dominance
- GMO Internet (4784) DropDown Holdco Gone Ballistic – Squeezed on Truly Tiny Float
- Merger Arb Mondays (21 Apr) – ENN Energy, Canvest, OneConnect, Makino, Shibaura, Welcia, Topcon
- CSI All Share Semiconductor Index Rebalance Preview: Multiple Index Flows for Some Stocks
- Sanrio (8136 JP): Global Index Inclusion in May
- Lee Jae-Myung’s Camp Just Dropped Their Latest Market Stimulus Play
- LQ45 Index Rebalance Preview (Apr 2025): Identifying Potential Index Changes
- Big Crypto Money Move in Korea – Impact on Key Listed Korean Companies
BYD (1211 HK): God’s Eye & Potential HSTECH Index Inclusion
- BYD (1211 HK) raised US$5.6bn in a secondary offering a few weeks ago and the stock is trading a lot higher than the placement price.
- Buying from global index trackers is done, but there will be more passive buying from Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) trackers later this month.
- With the release of the God’s Eye advanced driver-assistance system (ADAS), the stock could be added to the Hang Seng TECH Index (HSTECH INDEX) in June, bringing more passive inflows.
Zomato/Eternal: Lower Foreign Ownership Limits & The BIG Passive Selling
- Zomato (ZOMATO IN), now Eternal, listed in July 2021 with a Foreign Ownership Limit (FOL) of 100%. Since listing, foreign ownership has dropped from over 70% to just under 45%.
- Eternal is looking to cap foreign ownership at 49.5% to continue qualifying as an Indian-Owned-and-Controlled Company. That will give the company greater operational flexibility, especially for inventory ownership.
- The FOL decrease will result in selling from passive global index trackers. With the stock 23.5% off its highs and a steady increase in futures open interest, covering could ensue.
*NEW* USTR Section 301 Proposed Actions on China Maritime Dominance
- Biden’s USTR came out with a flawed Section 301 report on Chinese maritime “dominance” in January. It is not that China shipbuilding is not dominant, but the report was flawed.
- In February/March (flawed) measures were proposed. Then mostly minimally-insightful hearings were held. Then Trump came out with an Executive Order “Restoring America’s Maritime Dominance” (that requires looking back 80yrs).
- Now we have new USTR Proposed Measures which water down the old ones quite considerably.
GMO Internet (4784) DropDown Holdco Gone Ballistic – Squeezed on Truly Tiny Float
- Gmo Ad Partners (4784 JP) has become GMO Internet as of 1 January 2025. On that day, it merged with the “internet infrastructure business” of GMO Internet (9449 JP).
- It was a kind of reverse takeover – a backdoor listing – and it on 24-Dec-2024, it was announced GMO Internet would move from TSE Standard to TSE Prime end-Jan2025.
- The stock is +300% since then. Why? A squeeze. Share count increase? 15x. Float share increase? Zero. Resulting Real World Float? 1.24% of shares out and about to shrink.
Merger Arb Mondays (21 Apr) – ENN Energy, Canvest, OneConnect, Makino, Shibaura, Welcia, Topcon
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Insignia Financial (IFL AU), Oneconnect Financial Technology (6638 HK), ENN Energy (2688 HK), Seven & I Holdings (3382 JP), Smart Share Global (EM US), Domain Holdings.
- Lowest spreads: Makino Milling Machine Co (6135 JP), Sinarmas Land (SML SP), Shibaura Electronics (6957 JP), Tenma Corp (7958 JP), Aeon Delight (9787 JP), Naigai Trans Line (9384 JP).
CSI All Share Semiconductor Index Rebalance Preview: Multiple Index Flows for Some Stocks
- The review period for the June rebalance of the CSI All Share Semiconductor Index ends 30 April. The changes should be announced on 30 May and implemented on 13 June.
- We forecast 4/5 adds and 8 deletes for the index with a one-way turnover of 2.4% and a round-trip trade of CNY 990m (US$136m).
- There are many forecast adds and deletes that will have same side flows from trackers of the CES China Semiconductor Chips Index and the CNI Semiconductor Chips Index.
Sanrio (8136 JP): Global Index Inclusion in May
- Sanrio (8136 JP)‘s stock price dropped following the placement announcement in November. Then there was a rally in the stock amid increased volatility.
- The placement resulted in an increase in free float and the move higher in the stock could lead to Sanrio (8136 JP) being added to a global index in May.
- There is positioning in the stock but a lot of that appears to have been taken off in the last month. The stock could move higher depending on global cues.
Lee Jae-Myung’s Camp Just Dropped Their Latest Market Stimulus Play
- They’re making it easier to spot stocks benefiting from policy shifts. Lee Jae-myung’s camp is giving more detail upfront, with a focus on FuriosaAI and related listed stocks.
- If cumulative voting passes, expect a pop in stocks with governance issues, activist interest, or large NPS stakes, like Hyosung affiliates, Doosan, HL Mando, and POSCO Holdings.
- They also aim to give parent shareholders first crack at spun-off subsidiaries going public and require buyback cancellations, likely benefiting SK and LS Group affiliates, Samsung Electronics, and POSCO Holdings.
LQ45 Index Rebalance Preview (Apr 2025): Identifying Potential Index Changes
- The review period for the LQ45 Index April rebalance ended 31 March. The changes should be announced later this week, becoming effective after the close on 30 April.
- We highlight 4 potential inclusions and 3 potential exclusions for the index at the rebalance. The actual number of changes could be lower at 2-3 a side.
- All the potential changes have over 1x ADV to trade from passive trackers and some stocks will be impacted more than others.
Big Crypto Money Move in Korea – Impact on Key Listed Korean Companies
- There has been a big crypto money move in Korea. Market cap of crypto currencies held in crypto exchanges in Korea nearly doubled from October to November 2024.
- We discuss 8 major listed companies in Korea that are major beneficiaries (directly and indirectly) of this big move into crypto currencies in Korea.
- Some of the major beneficiaries include Kakao Corp, KT Corp, Hanwha Securities, Woori Technology Investment, and Vidente.
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