In today’s briefing:
- HSCI Index Rebalance Preview and Stock Connect (Sep 2025): Plenty of Recent IPOs Could Be Added
- Nikkei 225 Proposal for Dealing With Sony’s (6758) Sony Finl Spinoff – A Non-Event but TOPIX Isn’t
- [Japan Activism] Mitsui Matsushima (1518 JP) Buyback Tender – Surprising Results and Implications
- Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- Vishal Mega Mart (VMM IN): Increased Float & Global Index Inclusion
- Meitu (1357 HK): AI-Driven Global Index Inclusion
- SKT Foreign Room Heating Up — Time to Front-Run?
- [Japan M&A] Nikkei Reports Pacific Industrial (7250) To Go Private Via MBO at ¥110bn
- HEW: Trade Deals & Fiscal Slippage
HSCI Index Rebalance Preview and Stock Connect (Sep 2025): Plenty of Recent IPOs Could Be Added
- We see 28 potential and close adds and 34 potential and close deletes for the Hang Seng Composite Index in September. Some of the stocks are close on market cap/liquidity.
- A lot of the potential adds are very recently listed stocks that have a limited trading history. The low free float could lead to price spikes in the stocks.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
Nikkei 225 Proposal for Dealing With Sony’s (6758) Sony Finl Spinoff – A Non-Event but TOPIX Isn’t
- A couple of years ago, Sony Corp (6758 JP) announced they would spin off Sony Financial Holdings (8729 JP) (called Sony Financial Group Inc). That spinoff is due in Sep-2025.
- The extra capital required for a tech/industrial to hold the financial business is significant, but some of the other reasons Sony has offered are just management-speak hogwash.
- The problem? It creates a new event in the Nikkei 225 paradigm for which there was no rule. Now the Nikkei has proposed a rule. It isn’t perfect.
[Japan Activism] Mitsui Matsushima (1518 JP) Buyback Tender – Surprising Results and Implications
- Today, Mitsui Matsushima (1518 JP) announced the results of its Buyback Tender Offer to repurchase up to 3,999,999 shares (35.8% of shares out ex-Treasury) at ¥5,000/share.
- Murakami-San owned 42% of the voting rights at announcement, then bought more on the dip just below ¥5,000/share.
- The Tender Offer Buyback was “successful” in that it bought back 3.3mm shares. But the result was FAR more interesting than I expected. Surprising Results with Surprising Implications
Doosan Corp (000150 KS): Global Index Inclusion & A Relative Value Trade
- A doubling of the stock price over the last 3 months could lead to Doosan Corp (000150 KS) being included in a global index in August.
- Doosan Corp (000150 KS) has outperformed its peers over the last few months and now trades at a huge valuation premium to its peer group.
- The stock is 17% off its recent highs and that provides an opportunity for a relative value trade heading into the index inclusion event.
Netease Cloud Music (9899 HK): Stock Up; Short Interest Up; Global Index Inclusion
- Cloud Village (9899 HK)‘s stock price has doubled over the last quarter and the increased market cap should lead to global index inclusion in August.
- Short interest in Cloud Village (9899 HK) is at an all-time high and has increased in lockstep with the stock price.
- Cloud Village (9899 HK) has outperformed Tencent Music Entertainment Group (1698 HK) and now trades at much higher valuations. A pair trade looks attractive here.
Vishal Mega Mart (VMM IN): Increased Float & Global Index Inclusion
- An increase in the stock price and free float should result in Vishal Mega Mart (VMM IN)‘s inclusion in a global index in August.
- Estimated passive buying is 191m shares (US$312m; 5.8x ADV; 15.4x delivery volume) at the close of trading on 26 August.
- The index inclusion could take the stock higher in the short-term but buyers in the June placement could be looking for an exit.
Meitu (1357 HK): AI-Driven Global Index Inclusion
- Meitu Inc (1357 HK)‘s stock price has more than tripled over the last few months and the significantly higher market cap should lead to global index inclusion in August.
- Shorts covered a lot in 2024 and that has continued this year as the stock price has moved higher.
- Meitu Inc (1357 HK) has outperformed its peers significantly and there could be a pullback in the stock following index inclusion.
SKT Foreign Room Heating Up — Time to Front-Run?
- SKT’s foreign room jumped from 12% to 20% in two months; if the pace holds, 25% is in play by next review, with ongoing foreign outflows from the SIM leak.
- FOL shifts from foreign room swings have been a classic long-short play in Korea telcos — and the current setup looks similar, with most SIM leak risks already priced in.
- If SKT’s foreign room nears 25%, expect front-running and passive flow imbalances to kick in — a familiar long-short setup that’s historically moved the telco tape early.
[Japan M&A] Nikkei Reports Pacific Industrial (7250) To Go Private Via MBO at ¥110bn
- Overnight, the Nikkei carried an article saying Toyota valve supplier Pacific Industrial (7250 JP) would go private at a 40% premium in an MBO.
- The implied price would match its ATH, but would remain far below book value, which is disappointing for a company with a very strong customer base and market share.
- This is potentially blockable, but it would need to be activism from scratch I think. An activist or collection of them would need about 18-20% to block this deal.
HEW: Trade Deals & Fiscal Slippage
- Market narratives were driven by US trade pacts, critically with Japan, the ECB watching data from a good place, and further evidence of UK fiscal problems.
- Tariff uncertainty eased slightly, but it is still fierce ahead of the 1 August deadline. PMIs remained resilient, and UK retail sales rebounded into growth again for Q2.
- Next week brings Fed, BoC and BoJ meetings (broadly on hold), US and euro-area GDP growth for Q2, US payrolls, euro-area unemployment and slower flash HICP data.
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