In today’s briefing:
- HK Merger Arb: Opportunities Amidst the Market Selloff
- Aussie Arbs: Trump Tariffs And MACs
- Suzuki Motor Placement – Not the Best Time for a US$1.15bn Deal. It Will Be a Long Week.
- Treasury Wine Estates (TWE AU): Passive Selling Adds to Tariff Woes
- Suzuki Motor (7269 JP): A US$1.1 Billion Secondary Offering
- MitCorp (8058) BIG Buyback – Share Demand Will Help Weather The Storm
- US vs EU: Worse to Come
- Mazagon Dock Shipbuilders (MAZDOCKS IN): OFS & Potential Global Index Inclusion
- CSI 300 Index Outlook After Trump’s Threat of 50% Tariff on China
- Watch This Friday’s TIGER Top 10 Semicon Rebalance
HK Merger Arb: Opportunities Amidst the Market Selloff
- The gross spreads of large HK merger arb situations have increased due to the unfortunate fallout from Trump’s trade war. The HSI closed down 13.2%.
- We assess the widening spreads of HK’s merger arb situations based on offer structure, preconditions, conditions, and other factors.
- The deals, ranked in terms of increasing deal risk, are Tam Jai, Soundwill, Vesync, Goldlion, Canvest, ESR, OneConnect, HKBN, and ENN Energy.
Aussie Arbs: Trump Tariffs And MACs
- Travis Lundy succinctly summarised the Trump Tariffs in Trump Team’s Weird Tariff Math – Not Meant to Be Negotiated. Do read his note.
- From an arb standpoint, most (all?) NBIOs will likely see a downward revision in pricing. Vote risk should also be reduced.
- Such tariffs on predominantly domestic businesses should not trigger material adverse changes (MACs) Down Under. But it is still a worthwhile project to dig a little deeper.
Suzuki Motor Placement – Not the Best Time for a US$1.15bn Deal. It Will Be a Long Week.
- Tokio Marine Holdings (8766 JP) and Sompo Holdings (8630 JP) aim to raise around US1.15bn (including over-allotment) via selling around 5% of Suzuki Motor (7269 JP).
- While Suzuki doesn’t have much direct exposure to the US markets, its shares have still corrected in line with other auto players.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
Treasury Wine Estates (TWE AU): Passive Selling Adds to Tariff Woes
- Given its portfolio mix, Treasury Wine Estates (TWE AU) does not expect a material impact on its business from the blanket 10% tariff on all goods imported from Australia/New Zealand.
- However, there is a high probability that Treasury Wine Estates (TWE AU) will be deleted from a global index in May and that will lead to large selling from passives.
- There has been an increase in short interest and an increase in other positioning. Trading will be volatile but there could be a downward bias over the next few weeks.
Suzuki Motor (7269 JP): A US$1.1 Billion Secondary Offering
- Suzuki Motor (7269 JP) has announced a secondary offering of up to 95.7 million shares (110.1 million including overallotment), worth around US$1.1 billion (US$1.3 billion including overallotment).
- Suzuki’s goal with the secondary offering is (i) to reduce cross-shareholdings and (ii) to expand and diversify the shareholder base, which should further enhance liquidity.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 21 and 23 April (likely 21 April).
MitCorp (8058) BIG Buyback – Share Demand Will Help Weather The Storm
- On 3 April mid-day, Mitsubishi Corp (8058 JP) announced its FY25 earnings guidance and new “Shareholder Return Strategy”, a ¥1 trillion buyback, and its “Corporate Strategy 2027” Mid-Term Management Plan.
- The FY25 forecast is for a third consecutive decline in underlying operating cashflow, but a hike in dividend from ¥100 to ¥110 and a ¥1trln share buyback, including ¥230bn tender.
- The combination of dividend and buyback should be 15% of market cap over the next 12mos. And I expect Warren Buffett will consider buying dips.
US vs EU: Worse to Come
- Policymakers and investors are not fully recognizing the threat posed by the US in response to ‘Liberation Day’.
- The threat level has increased as ‘transactional Trump’ is replaced by a new president.
- The new president aims to return the US to a perceived golden era in his mission to ‘make America great again’.
Mazagon Dock Shipbuilders (MAZDOCKS IN): OFS & Potential Global Index Inclusion
- Mazagon Dock Shipbuilders (MAZDOCKS IN) has announced an Offer for Sale of 4.01% of the Government holding in the stock. That is INR 41bn (US$481m) at the last close.
- The increase in float brings the stock very close to inclusion in a global index at the May rebalance. However, that is dependent on how the stock performs from here.
- Inclusion in the index will bring around US$222m/ 2x ADV of passive inflows and could help support the stock.
CSI 300 Index Outlook After Trump’s Threat of 50% Tariff on China
- The Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX EQUITY) was less impacted than other indices by the global sell-off: on Monday it was down only -10% from the recent top.
- On Monday Donald Trump posted that if China does not withdraw immediately its +34% tariffs increase, the United States will impose ADDITIONAL Tariffs on China of +50%, effective April 9th!
- Although the CSI 300 Index is more insulated than other indices from global market volatility, it is not completely immune and remains vulnerable to the impact of US’s tariff threats.
Watch This Friday’s TIGER Top 10 Semicon Rebalance
- After the March avg daily market cap screen, Wonik IPS is swapped for Jusung Engineering. Big passive impact expected—Jusung gets 1x ADTV buy flow, Wonik faces 2.6x ADTV sell.
- Watch for passive flow timing—last rebalance (Oct 11), ISC Co Ltd got kicked, Wonik IPS called up. TIGER split Wonik’s rebalance over two trading days to minimize price impact.
- The long/short yield was 2.89% on Oct 11, 3.96% over two days. With bigger passive flow impact, TIGER may split the rebalance—enter near Thursday close, exit by Monday afternoon.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Analytics and News
- ✓ Events & Webinars
