In today’s briefing:
- SSE50 Index Rebalance Preview: 4 Potential Changes in December
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Methodology Change Leads to US$1.25bn Trade
- Key Schedule for Korea’s Dividend Policy Momentum: This Thursday – Short‑term Target Group Screened
- Saint-Care (2374 JP): An Attractive MBO
- CSI300 Index Rebalance Preview: 12 Changes a Side as Trade Nears US$10bn
- Index Consultation on DATCos Means MORE Selling Likely, and Another Index Questionable
- Merger Arb Mondays (10 Nov) – Soft99, Digital Holding, Saint-Care, ANE, ENN Energy, Mayne, AUB
- Weekly Deals Digest (09 Nov) – Toyota Industries, Mandom, Pacific Industrial, Saint-Care, ANE, Mayne
- CSI Medical Service Index Rebalance Preview: Six Potential Changes in December
- Taiwan Dual-Listings Monitor: TSMC Premium Eases Down; UMC & CHT Opportunity Levels
SSE50 Index Rebalance Preview: 4 Potential Changes in December
- With the review period complete, there are 6 non-constituents in direct inclusion zone and 4 current constituents in direct deletion zone. However, as usual, there will be discretion used.
- 4 changes result in a one-way turnover of 4%, leading to a round-trip trade of CNY 17bn (US$2.4bn). Index arb balances will increase the impact on the stocks.
- The index committee has used discretion in selecting the index adds and deletes and that could continue to be the case at this review too.
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Methodology Change Leads to US$1.25bn Trade
- Following the methodology update for the HSIII Index, there could be up to 5 constituent changes in December.
- Estimated one-way turnover is 12.8% and that will result in a round-trip trade of HK$9.8bn (US$1.25bn).
- Xiaomi (1810 HK) is the biggest beneficiary of the new methodology while there will be large funding outflows for a lot of the current index constituents.
Key Schedule for Korea’s Dividend Policy Momentum: This Thursday – Short‑term Target Group Screened
- Dividend tax reform hits calendar: Assembly’s Strategy & Finance Committee starts hearings Nov 13; street buzzing as assembly headlines will push dividend theme.
- Ruling party resists 25% payout threshold; cutting that low kills dividend incentive, while keeping 40% pushes corporates in 20–40% band to hike payouts.
- From Thursday, dividend momentum likely drives locals into >4% yielders with >40% payout, so these names should be our near‑term targets.
Saint-Care (2374 JP): An Attractive MBO
- Saint-Care Holding (2374 JP) has recommended an MBO from the founding family at JPY1,220, a 48.8% premium to the last close price.
- The offer is attractive compared to historical trading ranges and is above the midpoint of the target IFA DCF valuation range.
- Due to the irrevocables, it is not onerous to meet the minimum acceptance condition. This is a done deal.
CSI300 Index Rebalance Preview: 12 Changes a Side as Trade Nears US$10bn
- There could be 12 changes at the December rebalance with the Information Technology sector gaining 2 index spots and a smaller number of changes in the other sectors.
- We estimate one-way turnover of 2.7% at the rebalance leading to a round-trip trade of CNY 69.8bn (US$9.8bn). There are 8 stocks with over 2x ADV to trade.
- The forecast adds have outperformed the CSI 300 Index over the last 5 months while the forecast deletes have underperformed the index.
Index Consultation on DATCos Means MORE Selling Likely, and Another Index Questionable
- In mid-September, global index provider M _ _ _ announced that they were conducting an index consultation on Digital Asset Treasury Cos. I wrote about it here.
- My recommended short at the time is down 30%, despite announcing a large buyback program. Others have lost significant premium vs underlying digital assets.
- The same index provider expanded their list of affected names on 29 Oct. And a DIFFERENT Index provider this week added DATCOs to a US Advisory Panel Meeting Agenda Wednesday.
Merger Arb Mondays (10 Nov) – Soft99, Digital Holding, Saint-Care, ANE, ENN Energy, Mayne, AUB
- I 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: Mayne Pharma (MYX AU), Saint-Care Holding (2374 JP), Smart Share Global (EM US), ENN Energy (2688 HK), Dongfeng Motor (489 HK), Digital Holdings Inc (2389 JP).
- Lowest spreads: Bright Smart Securities (1428 HK), Mandom Corp (4917 JP), Pacific Industrial (7250 JP), Toyota Industries (6201 JP), Seven West Media (SWM AU), Jinke Smart Services (9666 HK).
Weekly Deals Digest (09 Nov) – Toyota Industries, Mandom, Pacific Industrial, Saint-Care, ANE, Mayne
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: CNGR Advanced Material (300919 CH) is seeking to raise US$507 million through a H Share listing.
- Event-Driven developments: Toyota Industries (6201 JP), Japan Infrastructure Fund Investment Corporation (9287 JP), Mandom Corp (4917 JP), Pacific Industrial (7250 JP), Saint-Care Holding (2374 JP), ANE Cayman Inc (9956 HK).
CSI Medical Service Index Rebalance Preview: Six Potential Changes in December
- There could be up to 6 changes for the CSI Medical Service Index at the December rebalance with the number of changes mainly driven by the inclusions.
- Estimated one-way turnover is 6.9% and the round-trip trade is estimated at CNY 4.11bn (US$578m). There are 8 stocks with over 1x ADV to trade from passive trackers.
- The forecast adds have outperformed the forecast deletes since June but have underperformed in the short-term. With the review period complete and announcement in 3 weeks, positioning could resume.
Taiwan Dual-Listings Monitor: TSMC Premium Eases Down; UMC & CHT Opportunity Levels
- TSMC: +21.8% Premium; Wait for Lower Premium Before Fresh Long
- UMC: +2.2% Premium; Good Level to Short the ADR Premium
- CHT: -2.0% Discount; Near Level to Go Long the ADR Spread
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