In today’s briefing:
- Horizon Robotics (9660 HK): Southbound Stock Connect Inclusion Today & Upcoming Index Flows
- Zomato/Eternal: The BIG Passive Selling Starts
- Taiwan Top 50 ETF Rebalance Preview: Elite Material (2383 TT) Walking a Fine Line
- [Japan Activism/M&A] – Shareholders Approve Tsuruha/Welcia Merger – Now It’s Partial Offer+Synergies
- STAR Chip/ CES Chips/ CNI Chips Index Rebalance Preview: Multiple Stocks with Overlapping Flow
- [Japan Activism] The Upcoming Fuji Media AGM Stoush – Foreigners Vs Voting Right Limits
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Five Changes; US$5.2bn Trade; Other Index Flows
- Soundwill (878 HK): Thoughts On The Latest Scheme Fail
- CSI A500 Index Rebalance Preview: Many Changes Expected; US$1bn Trade
- Quiddity Leaderboard TDIV Jun25: Final Expectations; Trade Successful; New Sector-Neutral Idea
Horizon Robotics (9660 HK): Southbound Stock Connect Inclusion Today & Upcoming Index Flows
- Horizon Robotics (9660 HK) will be added to Southbound Stock Connect from the start of trading today. Then there will be passive buying at the close on 20 June.
- The lock up expiry in April will result in large buying from trackers of the Hang Seng TECH Index (HSTECH INDEX) and HSIII Index in September.
- The stock will also be added to another large global index, though the timing on inclusion is not certain at the moment.
Zomato/Eternal: The BIG Passive Selling Starts
- Following shareholder approval of the proposal to reduce the Foreign Ownership Limit from 100% to 49.5%, NSDL has updated the FOL. This starts the process of passive selling in Zomato.
- Passives will sell US$350m at the close on Tuesday. There is a low probability of more selling later in the week. There will be bigger selling in August.
- The size of the selling in August and beyond will depend on what foreign investors do in the stock till the end of June. Watch the red flag/ breach list.
Taiwan Top 50 ETF Rebalance Preview: Elite Material (2383 TT) Walking a Fine Line
- Elite Material (2383 TT)‘s stock price has soared recently and is forecast to be added to the Yuanta/P-Shares Taiwan Top 50 ETF in June, replacing Unimicron Technology (3037 TT).
- Passive trackers will have 1 day of ADV to buy in Elite Material (2383 TT) and over 1 day of ADV to sell in Unimicron Technology (3037 TT).
- However, Elite Material is at risk of deletion from another ETF where the impact of passive selling is a lot bigger. Tricky interplay between the two ETFs.
[Japan Activism/M&A] – Shareholders Approve Tsuruha/Welcia Merger – Now It’s Partial Offer+Synergies
- This morning the Nikkei reported shareholders of Welcia Holdings (3141 JP) and Tsuruha Holdings (3391 JP) approved their Merger. Activists opposed but it was going to be close at best.
- As expected, Welcia shares popped, and the spread converged to 2% with Tsuruha falling back to just below ¥11,400. Some of this is unwind of speculative interest in Tsuruha.
- The new yuhos are out, which shows roughly where we stand (as of end-Feb, and some updates). Now the trade is NEWCO vs Aeon’s interest and NEWCO vs World.
STAR Chip/ CES Chips/ CNI Chips Index Rebalance Preview: Multiple Stocks with Overlapping Flow
- There could be 1 change each for the STAR Chip Index and CNI Semiconductor Chips Index, and 3 changes for the CES China Semiconductor Chips Index in June.
- There are a few stocks that will have same-way flow from passive trackers of the STAR50 INDEX, STAR 100 Index, CSI 500 Index, CSI 1000 Index and CSI A500 Index.
- The round-trip trade across the indices is CNY 2.9bn (US$400m) and will add to the impact across the other China indices that rebalance on the same day.
[Japan Activism] The Upcoming Fuji Media AGM Stoush – Foreigners Vs Voting Right Limits
- Fuji Media Holdings (4676 JP) has for years been “undervalued” and owned by value-oriented actively-managed fund managers. Under-used real estate and IP assets. Lack of governance regarding capital.
- A Shukan Bunshun article in Dec-2024 reported a former boy band SMAP member and Fuji TV regular made a big payment to an unidentified woman after a June 2023 “incident.”
- Fuji TV hemmed and hawed about its involvement. Advertisers bolted. Activists activisted. The chairman resigned. Now Major Activist Dalton has a director slate for the AGM. What Next?
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Five Changes; US$5.2bn Trade; Other Index Flows
- There should be 5 changes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in June. Most changes are due to missing dividend forecasts for constituent stocks.
- Constituent changes along with capping changes will lead to a one-way turnover of 17.6% and in a round-trip trade of TWD 157bn (US$5.2bn).
- There are multiple stocks that have same-way or opposite flow from trackers of other Taiwan dividend yield weighted indices and presents some interesting trading opportunities.
Soundwill (878 HK): Thoughts On The Latest Scheme Fail
- After Goldlion (533 HK)‘s spectacular Scheme fail, Soundwill (878 HK) appeared destined to be the next failure as shares dipped hard ahead of the Scheme vote. And fail it did.
- Just like for Goldlion, Soundwill’s Offer was clearly light. The counter-argument was that terms were, arguably, as good as it gets. And no competing Offer would emerge. Minorities voiced otherwise.
- Hong Kong has been the proverbial graveyard for arb deals of late. However, in a positive sense, minorities in Goldlion and Soundwill simply rejected opportunistic Offers.
CSI A500 Index Rebalance Preview: Many Changes Expected; US$1bn Trade
- There could be 18 changes for the CSI A500 Index at the June rebalance. Turnover is estimated at 1.7% and the round-trip trade is around US$1bn.
- The index was launched in September 2024, and the passive trackers have taken in a chunk of money since then. The flows to the stocks add to other index flows.
- A long add/short deletes trade has been stable over the last few months. The forecast adds could outperform following announcement of the index changes on Friday.
Quiddity Leaderboard TDIV Jun25: Final Expectations; Trade Successful; New Sector-Neutral Idea
- The TDIV index tracks the top 50 names in the Taiwan Stock Exchange with the highest dividend yields. It is a yield-weighted index with unique capping rules.
- Today is the base date for the final ranks and we see five ADDs and five DELs.
- We estimate one-way flow to be around US$2.55bn with multiple expected ADDs having 10x ADV or more to trade.
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