In today’s briefing:
- Horizon Robotics (9660 HK): Southbound Stock Connect Inclusion Today & Upcoming Index Flows
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Five Changes; US$5.2bn Trade; Other Index Flows
- CSI A500 Index Rebalance Preview: Many Changes Expected; US$1bn Trade
- [Japan M&A] Makino Milling (6135) – MBK as White Knight Appears To Have Made a Binding Bid
- CSI All Share Real Estate Sector Index Rebalance Preview: Multiple Changes in June
- US vs EU: Crying ‘Wolf’?
- CSI Hong Kong Connect Internet Index Rebalance Preview: 6 Changes & US$700m Trade
- StubWorld: First Pacific (142 HK) Looking Stretched
- Makino Milling Machine (6135 JP): Relief as a White Knight Bidder Surfaces
- My Take on June KS200, KQ150 & Value-Up Index Rebal
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.
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.
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.
[Japan M&A] Makino Milling (6135) – MBK as White Knight Appears To Have Made a Binding Bid
- In December, Nidec Corp (6594 JP) made an unsolicited bid for Makino Milling Machine Co (6135 JP). Makino wanted more time. Nidec wanted to squeeze. Makino proposed a poison pill.
- Makino appeared to act slowly but white knight bidders were mooted in the media. Nidec launched, but apparently approvals may have been hard. They withdrew. Makino cancelled the poison pill.
- Shares fell sharply. Yesterday, they rose because it appears Effissimo owns 3%. Today, we got news post-close that MBK may be close to making an ¥11,000+ bid.
CSI All Share Real Estate Sector Index Rebalance Preview: Multiple Changes in June
- There could be up to 8 adds and 3 deletes for the CSI All Share Real Estate Sector Index in June.
- Estimated one-way turnover is 3.2% at the rebalance leading to a round-trip trade of CNY 456m. There are a few stocks with over 0.5x ADV to trade.
- The forecast adds and deletes have performed in line over the last few months, and the announcement of the changes could lead to short-term outperformance.
US vs EU: Crying ‘Wolf’?
- Ursula von der Leyen had a call with Donald Trump on 25 May.
- The call can be interpreted as a ‘win’ for Trump as he had threatened to impose 50% tariffs on the EU from 1 June.
- Another perspective could be that Trump’s reversion is a new manifestation of the TACO principle.
CSI Hong Kong Connect Internet Index Rebalance Preview: 6 Changes & US$700m Trade
- There could be 3 constituent changes for the CSI Hong Kong Connect Internet Index in June. Plus there are some fairly large capping changes for some stocks.
- Estimated one-way turnover is 4.9% and the round-trip trade is HK$5.4bn (US$694m). The impact on the deletes will be a lot larger than the impact on the adds.
- The forecast adds have outperformed the forecast deletes over the near-term, though the trade has been quite volatile over the medium term.
StubWorld: First Pacific (142 HK) Looking Stretched
- Via 49.9%-held MPIC, First Pacific Co (142 HK) is spinning off Maynilad, a provider of water and wastewater services in the Greater Manila Area, on the Philippine Stock Exchange
- Maynilad will tentatively have a market cap of US$2.7bn. Other key investors include DMCI Holdings (DMC PM) and Marubeni Corp (8002 JP). Listing is expected in July.
- I see First Pac’s discount to NAV at ~30%, around its narrowest level in a decade.
Makino Milling Machine (6135 JP): Relief as a White Knight Bidder Surfaces
- In response to a Nikkei article, Makino Milling Machine Co (6135 JP) confirmed it had received a legally binding acquisition proposal from MBK Partners.
- The price is expected to exceed Nidec Corp (6594 JP) JPY11,000 hostile offer. On 8 May, Nidec withdrew its offer due to the Board’s proposed countermeasures.
- My analysis suggests that MBK’s white knight bid could be JPY11,677 per share, 13.7% higher than the last close price of JPY10,270.
My Take on June KS200, KQ150 & Value-Up Index Rebal
- June rebal results are mostly in line, but Korea District Heating’s add and PI Advanced Materials’s drop surprised; Fadu missed KQ150 likely on KRX’s qual screen.
- As for Value-up Index, KRX avoided bold calls like cutting Samsung Electronics or Hanwha Aerospace, favoring stability over surprises—though this may further blur the Value-up Index’s purpose and spark criticism.
- June’s KRX rebalance flow looks muted amid macro noise and politics; expect punchier post-announcement trading but watch for momentum to fade about a week before June 13.
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