In today’s briefing:
- HSCEI Index Rebalance Preview: Could Be A BIG One
- HSI Index Rebalance Preview: Small Step or Giant Leap?
- HSCI Index Rebalance and Stock Connect: Changes at the Margins
- KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
- Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
- Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)
- OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper
- Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?
- OZ Minerals (OZL AU)’s A$28.25 Non-Binding Offer from BHP
HSCEI Index Rebalance Preview: Could Be A BIG One
- There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
- If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
- There is large short interest on quite a lot of stocks and will play an important role in the rebalance.
HSI Index Rebalance Preview: Small Step or Giant Leap?
- Currently at 69 index members, we just could reach 80 constituents at the December rebalance. That would leave the index committee to plan the move to 100 constituents in 2023.
- We list 10 potential inclusions to the index in December. One-way turnover is just under 4% and inclusions of all stocks will increase index market cap coverage significantly.
- Shorts are more than 3% of free float on five of the potential inclusions and these stocks could see some short covering ahead of the announcement of the changes.
HSCI Index Rebalance and Stock Connect: Changes at the Margins
- We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
- Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
- Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.
KOSDAQ150 Index Rebalance: 11 Changes with a Couple of Surprises
- There are 11 inclusions and 11 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 8 December.
- We had forecast most of the changes (10 adds and 9 deletes), so there are a few surprises. The inclusion of SillaJen Inc (215600 KS) is the biggest one.
- The adds to the index become short sell eligible from the open of trading on 9 December while the deletions will not be short sell eligible from the same time.
Swire B Vs A – It Bounced Before, It Can Bounce Again – A 19 Year Low On the Ratio In Sight
- Swire Pacific has been buying back Swire Pacific (B) (87 HK) and Swire Pacific (A) (19 HK) shares since August. They are now 58+% done with their HK$4bn buyback program.
- The buyback so far has been 50% B shares and 50% A shares. This still seems odd to me but they are doing what they are doing.
- B/A ratio is near a 19-year low. The last time it dipped to 6% under its 3mo average, it bounced back in 4 weeks. Now 5% cheap to average.
OZ Minerals (OZL AU): BHP Ups Offer by 13%; This Should Get Done
- BHP Group has made a revised conditional, non-binding and indicative proposal to acquire all shares in OZ Minerals Ltd (OZL AU) at A$28.25/share, 13% higher than its earlier offer.
- The OZ Minerals Board has agreed to give BHP Group Ltd (BHP AU) exclusive due diligence access for 4 weeks and intends to unanimously recommend the revised proposal.
- Barring a competing proposal, this is BHP Group‘s best and final price – expect the stock to trade close to A$28/share today.
Nikkei 225 March 2023 Review Quiddity Leaderboard (Nov 2022)
- Early predictions for the March 2023 Nikkei rebalance (TBA early Feb) are little changed. One way turnover would still be about 1.4%. I see 3 ADDs and 3 DELETEs.
- The 3 ADDs should be Oriental Land (4661), Renesas Electronics (6723), and Japan Airlines (9201). The 3 DELETES Toho Zinc (5707), Toyobo (3101), and Nippon Light Metal (5703).
- Oriental Land is the one to watch in March. The Sep 2023 rebalance and subsequent ones are smaller in size but more interesting in impact.
OZ Minerals (OZL AU) And BHP Have a Deal – Investors Have an OTM Option on Copper
- After nearly 3 months of no talks and movement, then a flurry of both, BHP Group Ltd (BHP AU) and OZ Minerals Ltd (OZL AU) have an agreed Revised Proposal.
- OZ Minerals Board has agreed to support the Revised Proposal at A$28.25/share, a 13% bump, subject to due diligence provided on an exclusive basis for four weeks.
- A fully-franked dividend or capital return will be allowed (Scheme price to be adjusted). This will probably trade tight. One owns a call option on copper for probably 3-4 months.
Lotte Chemical – Ready to Announce Rights Offering Close to 2 Trillion Won?
- Numerous local media mentioned today that Lotte Chemical (011170 KS) is getting ready to announce a major rights offering to acquire Iljin Materials.
- The size of the rights offering has not been finalized but the range of the rights offering could be about 1 trillion won to 2 trillion won.
- There are additional concerns about Lotte Chem funding additional capital into Lotte E&C, which could face more financial difficulties in the local construction sector.
OZ Minerals (OZL AU)’s A$28.25 Non-Binding Offer from BHP
- OZ Minerals Ltd (OZL AU) has received a revised non-binding indicative offer from BHP Group Ltd (BHP AU) at A$28.25 per share, a 13.0% premium to the previously rejected offer.
- The Board has granted four weeks of due diligence and intends to recommend a binding offer at A$28.25 per share, in the absence of a superior proposal.
- While the offer is below the rumoured Board’s target of a A$30 offer, it is still attractive. At the last close, the gross spread to the offer is 3.3%.
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