In today’s briefing:
- KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain
- Taiwan Div+ Index Basket Trade Review – Time To Swing The Other Direction
- Hitachi Metals (5486) Gets SAMR Clearance, Finally. So Now We Can Sell.
- Onewo IPO: Trade-Offs Vs Peers
- TIGER Battery ETF (WISE) Rebalancing in October
- EQD | HSI (HSI Index): Use Derivatives to Play Tactical Long and Relative Value Vol Trade Vs SPX
- Keda Industrial (600499 CH): Lithium Play Backed by Multi-Pronged Growth Strategies
- Keda Industrial Group: Concerns About Downturn in Ceramics Machinery Market & Uncompelling Valuation
- A Walkthrough of Hyundai Department Store Demerger Event
KOSPI200 Dec Index Rebalance Preview: Stocks Nearing the Inclusion Zone
- A third of the way through the review period, we see one potential change. There are four stocks that are close to inclusion zone and could lead to more changes.
- Currently, Miwon Specialty Chemical Co (268280 KS) is an add while Hyundai Home Shopping Network (057050 KS) is a delete.
- Samyang Foods (003230 KS), Lotte Confectionery (280360 KS), Unid Co Ltd (014830 KS) and Miwon Commercial (002840 KS) are close adds currently.
Socionext Pre-IPO – Could Expect a Further Bump in Profitability, Although Some Hidden Risks Remain
- Socionext (6526 JP) is looking to raise up to US$285m in its Japan IPO.
- Socionext is a fabless semiconductor provider in Japan. Sales and profitability has been on an overall uptrend, and design wins in earlier fiscal years should materialize in the coming periods.
- However, the firm has generated a substantial portion of revenue from a related party and is reliant on a particular foundry for its front-end manufacturing.
Taiwan Div+ Index Basket Trade Review – Time To Swing The Other Direction
- In August, Janaghan Jeyakumar, CFA published his leaderboard and flow estimates for the FTSE Taiwan Dividend+ Rebalance which starts today and runs through next Thursday.
- Late in August, I recommended a basket trade. Since then, the BUY basket has outperformed the SELL basket by 7.6%. Set & Forget it is up 7.2%.
- I provided timing in the basket trade. Now it is time to swing the other way.
Hitachi Metals (5486) Gets SAMR Clearance, Finally. So Now We Can Sell.
- Today before the open, China’s State Administration for Market Regulation (SAMR) finally announced the approval of the takeover of Hitachi Metals (5486 JP). This was what delayed things.
- The approval had actually been issued on 7 September, and the collected approvals in the week to the 12th were announced today. Some media outlets had the info yesterday.
- I expect it is likely that the Bain Tender Offer to buy Hitachi Metals will be announced today after the close, or at latest, early next week.
Onewo IPO: Trade-Offs Vs Peers
- Onewo Space-Tech (ONEWO HK), China Vanke (000002 CH)’s property management unit, has begun pre-marketing a US$2.0 billion HKEx IPO.
- We previously discussed the IPO in Onewo IPO: The Bull Case and Onewo IPO: The Bear Case.
- A comparison with large-cap peers suggests that Onewo offers large-scale with parentco stability at the cost of low growth runaway from undelivered GFA and gross margin.
TIGER Battery ETF (WISE) Rebalancing in October
- The rebalancing trading will be at the close on October 13. The AUM currently amounts to ₩1.32T with 28 constituents, implying that the passive impacts wouldn’t be insignificant.
- It will likely show a similar pattern to the last rebalancing. With no constituent change, weight adjustment by 10% cap of top stocks leads to weight adjustment of the rest.
- An important variable here is the entry of newly listed stocks. SungEel Hitech and Sebitchem, the two larger cap stocks, appear to have a reasonably high inclusion probability.
EQD | HSI (HSI Index): Use Derivatives to Play Tactical Long and Relative Value Vol Trade Vs SPX
- HSI INDEX is trading back down to recent lows and support levels. It looks oversold and there are potential catalysts for a bounce
- Implied vols are low and options offer a great way to play a tactical long
- We highlight a relative value vol trade vs the SPX
Keda Industrial (600499 CH): Lithium Play Backed by Multi-Pronged Growth Strategies
- Through its 43.58% ownership in lithium carbonate producer Lanke Lithium Industry, Keda Industrial Group (600499 CH) is well placed to benefit from the increase in lithium demand.
- Lanke’s capacity has recently been upgraded to 30,000 tonnes. Also, Keda is adding capacity to its own integrated anode materials factory in Fujian to capture the ever-rising demand.
- Overseas ceramic business will see solid growth from key markets in Africa as Keda raises capacity by 65% by FY23. The stock’s valuations are inexpensive relative to peers.
Keda Industrial Group: Concerns About Downturn in Ceramics Machinery Market & Uncompelling Valuation
- We are Negative on Keda Industrial over the next year due to a potential downturn in the ceramics machinery market, uncompelling valuations, and concerns about expansion into lithium battery materials.
- Keda Industrial Group is one of the world’s leading suppliers of building ceramic machinery and equipment.
- Its A-Shares listed on Shanghai Stock Exchange and it completed a private placement of GDRs listing the shares in SIX Swiss Exchange in July 2022.
A Walkthrough of Hyundai Department Store Demerger Event
- This is an equity spinoff where the existing shareholders receive shares in the spun-off company. But this creates two LISTED companies. In such a case, there won’t be appraisal rights.
- PASSIVE’s selling flow towards the trade suspension tends to be offset by ACTIVE’s buying flow aiming for value accretion. So, developing a timely entry/exit between these opposing flows is critical.
- Holdco’s 30% rule dynamic generally, in relative terms, leads to an increase in the value of Opco’s stake and a decline in the value of Holdco’s stake.
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