In today’s briefing:
- Dongfeng Motor (489 HK): DFM’s Attractive Privatisation Offer
- [Quiddity Index] The Sony Financial Spinoff – What To Do?
- HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- HSCEI Index Rebalance: Pop Mart Pops Ahead of Double Index Inclusion
- [Japan M&A] YAGEO Upping the Stakes in the Game of 🐓 over Shibaura (6957 JP)
- HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- Merger Arb Mondays (25 Aug) – Dongfeng, ENN Energy, Shibaura, Santos, Lynch, Smart Share
- Hang Seng Internet & IT Index (HSIII) Rebalance: 3 Changes; Big FAF Increase for Horizon Robotics
- Shibaura Electronics (6957 JP): Method in the Madness as Yageo Bumps Twice in Two Days
- NIFTY50/NEXT50 Index Rebalance: Bunch Of (Mostly) Expected Changes; Positioning Increases
Dongfeng Motor (489 HK): DFM’s Attractive Privatisation Offer
- Dongfeng Motor (489 HK) disclosed a pre-conditional privatisation by merger by absorption by Dongfeng Motor Corporation, along with a proposed distribution and listing of VOYAH shares.
- The offer comprises HK$6.68 + 0.3552608 VOYAH H Shares per H Share, which is valued at HK$10.85 per H Share, a 81.7% premium to the last close price.
- The vote is low risk as the offer is attractive. It values the remaining business at a premium multiple, and the appraised value of HK$11.735 per VOYAH share is conservative.
[Quiddity Index] The Sony Financial Spinoff – What To Do?
- Sony Financial Group (perhaps 8729 JP) will be spun off from SONY on 29 September 2025. The nominal share price will be “low” – likely 4-6% of Sony’s price.
- Index treatment is largely known with the exception of a market cap trigger to stay in or get the boot from one major global index provider’s set of large-midcap indices.
- There is a buyback to come which will offset global active manager “I don’t want this” overhang. There are technical trades to do here too but overall I am positive.
HSTECH Index Rebalance: No Constituent Changes; Float/Capping Changes Lead to US$4bn Trade
- There are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in September. However, there are float and capping changes.
- Estimated one-way turnover is 6.3% leading to a round-trip trade of HK$31.1bn (US$4bn). There is plenty to buy in Horizon Robotics (9660 HK), BYD (1211 HK) and Meituan (3690 HK).
- Short interest is elevated in some of the stocks with large flows and shorts could be active in the stocks over the next couple of weeks.
HSCEI Index Rebalance: Pop Mart Pops Ahead of Double Index Inclusion
- As forecast, Pop Mart (9992 HK) will replace J&T Global Express (1519 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) at the close on 5 September.
- Estimated one-way turnover at the rebalance is 3% resulting in a round-trip trade of HK$4.8bn (US$612m). The final capping will use the close of trading on 2 September.
- Pop Mart is also being added to the Hang Seng Index (HSI INDEX) and that marks the end of inclusion in major indices for the stock.
[Japan M&A] YAGEO Upping the Stakes in the Game of 🐓 over Shibaura (6957 JP)
- On 14-Aug, Minebea Mitsumi (6479 JP) upped their TOB on Shibaura Electronics (6957 JP) from ¥5,500 to ¥6,200, but set the close before rival bidder YAGEO’s likely FEFTA approval date.
- On 21-Aug, YAGEO responded by upping the bid 7% to ¥6,635. Minebea responded by saying no raise, no extension. Minebea was playing chicken. Shares fell Friday.
- Very early Saturday, the Nikkei reported YAGEO would raise to the “¥7,100 range.” Reuters later reported YAGEO had raised to ¥7,130. Exactly 15% above Minebea. On YAGEO’s website.
HSCI Index Rebalance: 24 Adds, 22 Deletes, Changes to Southbound Stock Connect & BIG Outperformance
- There are 24 adds and 22 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 504.
- We expect 20 of the 24 HSCI inclusions to be Stock Connect adds from the open on 8 September. 19 of the 22 deletions could be removed from Stock Connect.
- On average, stocks that are expected to be added to Southbound Stock Connect have outperformed stocks that are expected to be removed from Southbound Stock Connect.
Merger Arb Mondays (25 Aug) – Dongfeng, ENN Energy, Shibaura, Santos, Lynch, Smart Share
- 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: Dongfeng Motor (489 HK), Mayne Pharma (MYX AU), Smart Share Global (EM US), ENN Energy (2688 HK), Santos Ltd (STO AU), Shibaura Electronics (6957 JP).
- Lowest spreads: Bright Smart Securities (1428 HK), Pacific Industrial (7250 JP), Humm Group (HUM AU), Ainsworth Game Technology (AGI AU), Ashimori Industry (3526 JP), PointsBet Holdings (PBH AU).
Hang Seng Internet & IT Index (HSIII) Rebalance: 3 Changes; Big FAF Increase for Horizon Robotics
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII Index) at the September rebalance.
- Estimated one-way turnover at the rebalance is 10.3% resulting in a round-trip trade of HK$6.4bn (US$818m). There are a bunch of stocks with over 0.5x ADV to trade.
- There is a huge FAF increase for Horizon Robotics and that will bring passive buying from the HSTECH trackers too. The stock is being added to a global index on Tuesday.
Shibaura Electronics (6957 JP): Method in the Madness as Yageo Bumps Twice in Two Days
- On 21 August, Yageo Corporation (2327 TT) increased its Shibaura Electronics (6957 JP) offer by 7.0% to JPY6,635. On 23 August, Yageo further increased its offer by 7.5% to JPY7,130.
- The offer is partially in reaction to Minebea’s recent comments around Yageo securing FEFTA approval. Crucially, Yageo finally provided an update suggesting that only a few issues remained.
- Yageo’s JPY7,130 offer is not over-the-top, as Minebea’s 10x EV/EBIT pricing guideline outlined on 18 August potentially justified a JPY7,300 offer. The likelihood of Minebea walking has increased.
NIFTY50/NEXT50 Index Rebalance: Bunch Of (Mostly) Expected Changes; Positioning Increases
- InterGlobe Aviation Ltd (INDIGO IN) and Max Healthcare Institute (MAXHEALT IN) replace Hero Motocorp (HMCL IN) and Indusind Bank (IIB IN) in the NIFTY Index (NIFTY INDEX) in September.
- There are 5 constituent changes to the Nifty 100 Index (NSE100 INDEX) leading to 4 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX).
- There will be global passive buying in Swiggy (SWIGGY IN) on Tuesday. Then there will be net selling in the stock at the close on 29 September.
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