In today’s briefing:
- HSTECH Index Rebalance Preview: Universe Expansion Could Lead to One Change
- Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- Minority Shareholders of Hanwha Corp Preferred Shares Demand Better Protection
- HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace J&T Global (1519 HK)
- NTT DC REIT IPO: Global Index Inclusions Later This Year + A Kicker
- FWD IPO Trading – Tepid Demand
- Korea’s Next Policy Trade: Locals’ Screens for Dividend Tax Reform Plays
- A/H Premium Tracker (To 4 July 2025): “Beautiful Skew” Continues as SB Buys Wide Spread Hs
- Dah Sing Financial (2356 HK): Discounts On Discounts
- A Tender Offer of Remaining Shares & Delisting of Tongyang Life Insurance by Woori Financial?
HSTECH Index Rebalance Preview: Universe Expansion Could Lead to One Change
- The review period for the September rebalance of the Hang Seng TECH Index ended on 30 June, the changes will be announced on 22 August and implemented on 5 September.
- No constituent changes will result in a one-way turnover of 4.1% and that will mean a round-trip trade of HK$15.2bn (US$1.94bn).
- An expansion of the index universe could lead to one constituent change and that increases the one-way turnover to 6.2% and the round-trip trade to HK$23.1bn (US$2.94bn).
Shin Kong/Taishin Merger Flows and Perhaps Unforeseen Problems
- A new factoid about the merger between the Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) merger of FHCs came to my notice last week.
- There is withholding tax on a portion of the Taishin shares to be received. The last day of trading will be 11 July 2025. Expect repercussions.
- This week will see multiple index events, combined with the risk arb events, and the WHT may affect how passive investors trade the events.
Minority Shareholders of Hanwha Corp Preferred Shares Demand Better Protection
- Minority shareholders of Hanwha Corp preferred shares are demanding better protection (such as converting preferred shares into common shares) and are criticizing the potential delisting of its shares.
- We provide four major scenarios that could occur for Hanwha Corp preferred shares (000885 KS) in the coming weeks.
- The fact that Hanwha Group companies are on such positive momentum, it would be in the best interest for Hanwha to improve shareholder value of the Hanwha Corp’s preferred shares.
HSCEI Index Rebalance Preview: Pop Mart (9992 HK) Could Replace J&T Global (1519 HK)
- The review period for the September rebalance of the HSCEI INDEX ended on 30 June, the results will be announced on 22 August and will be implemented on 5 September.
- Pop Mart International Group L (9992 HK) could be added to the index while J&T Global Express (1519 HK) could be deleted from the index.
- There is a possibility of Pop Mart International Group L (9992 HK) being added to the Hang Seng Index (HSI INDEX) as well.
NTT DC REIT IPO: Global Index Inclusions Later This Year + A Kicker
- NTT DC REIT (NTTDCR SP) could raise up to US$824m in its IPO if the overallotment option is exercised and the stock is expected to start trading on 14 July.
- Cornerstone investors will own 16.8% of shares out following the IPO but there is no lock-up on these shares. The sponsor will own 20%/25% depending on whether overallotment is exercised.
- NTT DC REIT (NTTDCR SP) should be added to the smallcap segment of global indices in November and December while inclusion in local indices will take a lot longer.
FWD IPO Trading – Tepid Demand
- FWD Group Holdings (1828 HK), a pan-Asian life insurer founded by Richard Li, raised around US$442m in its HK IPO.
- FWD is a pan-Asia life insurer operating in ten markets including Hong Kong (and Macau), Thailand (and Cambodia), Japan, the Philippines, Indonesia, Singapore, Vietnam and Malaysia.
- We looked at the company’s past performance and valuations in our previous notes. In this note we talk about the trading dynamics.
Korea’s Next Policy Trade: Locals’ Screens for Dividend Tax Reform Plays
- With the governance trade fading, local desks are rotating into dividend tax reform—bipartisan tailwinds and rising political chatter are driving early positioning ahead of potential rerating.
- Local desks are screening for names with 35%+ payout and 30%+ individual ownership, key thresholds tied to the ruling party’s dividend tax reform bill gaining traction in policy circles.
- The real trade is in names with individual top holders—direct beneficiaries of the tax reform—most exposed to theme flows and likely to lead on dividend hikes if the bill passes.
A/H Premium Tracker (To 4 July 2025): “Beautiful Skew” Continues as SB Buys Wide Spread Hs
- AH premia flat among liquid names but “beautiful skew” of wide premia converging more than narrow premia continues bigly. It has paid well to be long wide H discounts.
- Last week I said, “It has paid to be long the H on those H/A pairs with the biggest H discounts. I would continue to ride that trend.” Ride on.
- The data tables below update on a daily basis in the Tools section of Smartkarma. The SOUTHBOUND Flow Monitor and AH Monitor are both there free for SK readers. Technical issue delayed this week’s Monitor.
Dah Sing Financial (2356 HK): Discounts On Discounts
- In the setup/unwind tables highlighted in StubWorld: Haw Par Looking Stretched, I see Dah Sing Financial (440 HK) at trading “cheap” to 74.4%-held Dah Sing Banking (2356 HK).
- I see DSF at a 51% discount to NAV, around its one-year average. However the simple ratio (DSF/DSB) and implied stub are at multi-year lows.
- Separately, DSB is trading at a ~62% discount to NAV – applying its 13.2%-holding in Bank of Chongqing (1963 HK) – around a one-year high. This is, however, a weak stub.
A Tender Offer of Remaining Shares & Delisting of Tongyang Life Insurance by Woori Financial?
- It has been reported that Woori Financial Group is considering on acquiring all of the remaining shares (21.2%) of Tongyang Life Insurance and delist it, making it a 100% subsidiary.
- We believe that there is a high probability (70-80%+) that Woori Financial Group decides to acquire the remaining 21.2% stake in Tongyang Life Insurance held by minority shareholders.
- Between cash and stock, we think that Woori Financial is likely to use cash to complete this deal, although the exact amount of market premium remains uncertain.
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