In today’s briefing:
- Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- ESR Group (1821 HK): Offer Musings
- Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- FXI ETF: Potential Changes in the Year of the Snake
- Barito Renewables Energy (BREN IJ): Global Index Inclusion Likely This Month
- STAR50/STAR100 Index Rebalance Preview: One Is Meh; The Other Is👍
- KOSPI200 Index Rebalance Preview: 6 Potential Changes in June; LG CNS Listing Could Increase That
- Hexaware Technologies IPO: Delisted in 2020; Now Looking to Raise US$1bn
- NIFTY50 Index Rebalance Preview: Adds Secure; Tight Among the Deletes
- CNBM (3323 HK): A Closer Look At Proration
Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
- If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
- Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.
ESR Group (1821 HK): Offer Musings
- Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
- Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
- Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.
Sigma Healthcare (SIG AU): Shareholders Approve Merger; Passives Could Start Buying in Two Weeks
- Sigma Healthcare (SIG AU) and Chemist Warehouse (CWG) shareholders have approved the merger with 99.86% and 100% of the votes cast in favour.
- The Second Court Hearing is on 3 February and the merger will be implemented on 12 February, which is when the passive buying could commence.
- Sigma Healthcare has continued to trade higher on a record margin and sales expansion for CWG and expected passive buying that could top A$3bn over the next few months.
FXI ETF: Potential Changes in the Year of the Snake
- There could be 1/2 changes to the iShares China Large-Cap (FXI) (FXI US) in March. Then there will be more changes as large Chinese companies list H-shares on the HKEX.
- Fast Entries and regular inclusion of newly listed H-shares will change the characteristics of the FXI and there could be further deviations from the Hang Seng China Enterprises Index (HSCEI INDEX).
- That will provide opportunities for index rebalance traders as well as volatility traders that are active on the iShares China Large-Cap (FXI) (FXI US) options.
Barito Renewables Energy (BREN IJ): Global Index Inclusion Likely This Month
- Barito Renewables Energy (BREN IJ) stock has gone through a series of gyrations as index inclusion was announced and then retracted due to the concentrated holding of the stock.
- With pre-IPO PE/VC investors selling some stock, the increase in float could result in the inclusion of Barito Renewables Energy (BREN IJ) in a global index later this month.
- The inclusion of the stock in the index will require passive trackers to buy just over 400m shares of the stock. That is over 14x ADV and will be impactful.
STAR50/STAR100 Index Rebalance Preview: One Is Meh; The Other Is👍
- With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) and 8 changes for the STAR100 Index. There are a few migrations between the indices.
- We estimate turnover of 3.8% for the SSE STAR50 (STAR50 INDEX) and 9.9% for the STAR100 Index. The estimated net round-trip trade is CNY 13bn (US$1.8bn).
- The forecast adds to the STAR50 INDEX have underperformed the forecast deletes. For the STAR100 Index outright changes, the forecast adds have outperformed the forecast deletes by a lot.
KOSPI200 Index Rebalance Preview: 6 Potential Changes in June; LG CNS Listing Could Increase That
- Halfway through the review period, there could be 6 changes for the Korea Stock Exchange KOSPI200 (KOSPI2 INDEX) in June. The LG CNS (LGCNSZ KS) listing could increase that number.
- The impact on the potential inclusions ranges from 2.1-26 days of ADV while the impact on the potential deletions varies from 5-11 days of ADV.
- The forecast adds have outperformed the forecast deletes over the last few months and the performance gap is near its widest point.
Hexaware Technologies IPO: Delisted in 2020; Now Looking to Raise US$1bn
- In November 2020, HT Global IT Solutions acquired all the shares it did not own in Hexaware Technologies (HEXW IN) and delisted the stock from the NSE and BSE.
- Now, Carlyle Group is looking to raise INR 87.5bn by selling stock at a price range of INR 674-708/share, valuing Hexaware Technologies (HEXW IN) at US$4.8bn.
- The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in May and September, though the impact will be limited.
NIFTY50 Index Rebalance Preview: Adds Secure; Tight Among the Deletes
- Following their inclusion in the F&O segment in November, Zomato (ZOMATO IN) and Jio Financial Services (JIOFIN IN) appear to be sure-shot inclusions to the NIFTY Index in March.
- Bharat Petroleum Corp (BPCL IN) is a certain deletion from the index. Britannia Industries‘ average free-float market cap is less than 0.004% below Hero Motocorp‘s. It’s very close.
- Passive trackers need to trade between 3.7-11.8 days of ADV on the stocks. The impact increases significantly to between 8.4-21.8 days of delivery volume to trade on the stocks.
CNBM (3323 HK): A Closer Look At Proration
- Back on the 6th December, China National Building Material (3323 HK) (CNBM), China’s leading building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- As this elevates CNBM’s parent’s stake to 50.01% of total shares from 45.02% currently, independent H-shareholder will vote on a whitewash waiver on the 19th February.
- Minimum pro-ration is 19.24%. It is likely to be higher. The question is whether to buy, and/or borrow, and tender; or simply short outright.
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