Most Read: Japan Exchange Group, Sogou Inc, WuXi AppTec Co. Ltd., Chongqing Zhifei Biological Products, Toshiba Corp and more

In today’s briefing:

  • JPX Goes In to Nikkei 225 – Time To Sell
  • Sogou/Tencent: The Latest Chinese Internet Privatisation
  • Wuxi Apptec (药明康德) Placement: Well-Flagged Deal in the Hot Sector
  • FTSE China A50 Index Rebalance Preview – Changes Expected
  • Toshiba Vs. Effisimo – Much Ado About Nothing?

JPX Goes In to Nikkei 225 – Time To Sell

By Travis Lundy

When it was reported in the press and subsequently announced by Sony on the 19th of May part way through the day that Sony was going to launch a Tender Offer to take out minorities in Sony Financial Holdings (8729 JP) the immediate reaction of first order thinkers was to buy Sony Financial. The immediate reaction of second-order thinkers was to buy Japan Exchange Group (8697 JP) because taking out minorities in Sony Financial would cause it to be delisted, putting its place in the Nikkei 225 Average up for grabs. 

The moment the news came out the stock was ¥2,080 a share, and quickly jumped. 

The two-hourly chart below shows the evolution of Japan Exchange Group shares against TOPIX, setting the two at the “same” price at the time of the Sony Financial announcement. 

source:, Quiddity

JPX shares closed 3.7% higher that day at ¥2,166, then opened the following day at ¥2,223, traded up, then briefly lower than ¥2,223 a day later before marching higher. The shares are up 37.4% since the moment before the announcement while TOPIX is up 5.9% during the same period. 

The period since the Sony Financial announcement can be split into two parts. 

  1. The period where Japan Exchange was the favorite to replace Sony Financial in the Nikkei 225 Average, starting at the blue vertical line, and 
  2. The period since when the Nikkei confirmed after the close on 15 July that indeed Japan Exchange had been selected. 

During the period prior to the Sony Financial news, Japan Exchange Group announced earnings (April 30 – the E in the red circle at the bottom) and the shares dipped, rebounded, and net did nothing. The subsequent rise in the share price was NOT linked to earnings. Or volume traded in the market, or really anything other than speculation on its inclusion in the Nikkei 225 Average.

This insight carries a bit of analysis, and a trade recommendation. You can guess which way it tilts.

The trade is later today.

More below the fold…

For the precursor to this insight, please see Nikkei 225 – JPX IN, Sony Financial OUT

Sogou/Tencent: The Latest Chinese Internet Privatisation

By David Blennerhassett

Chinese search-engine Sogou Inc (SOGO US), majority-owned by Inc (SOHU US)  and Tencent Holdings (700 HK), has announced it has received a preliminary non-binding proposal from Tencent to acquire all of its outstanding ordinary shares that are not already owned by Tencent, for US$9.00 in cash per ordinary share or ADS.

The Offer price is a 57% premium to the undisturbed price and a two-year high.

Tencent owns ~39% of the total shares out in Sogou and 52.3% of the total voting power (on account of the super-voting rights of the Class B shares). Sohu holds 33.7%/43.9% respectively. Together, they control 96.4% of Sogou’s vote. 

Sogou closed at $8.49/share, up 48%. Sohu closed up 40%.
As Sogou is Cayman incorporated, this Offer only needs a two-thirds majority to get up. Provided Sohu is on board, this deal is rubber-stamped.
The only apparent risk is on timing. 
More below the fold.

Wuxi Apptec (药明康德) Placement: Well-Flagged Deal in the Hot Sector

By Ke Yan, CFA, FRM

Wuxi Apptec launched a USD 950 million placement after it obtained CSRC approval for its proposed A+H placement today after market close. We have discussed this placement in our earlier note in March (Wuxi Apptec (药明康德) Proposed USD1.7bn Placement: Liquidity Matters). In this note we will cover the details of the deal and recap our thoughts on the placement. 

FTSE China A50 Index Rebalance Preview – Changes Expected

By Brian Freitas

The FTSE China A50 Index (XIN9I INDEX) is designed to represent the performance of the 50 largest companies by full market capitalisation of the mainland Chinese market that is available to domestic and international investors via the QFII, RQFII and Stock Connect programs.

The next rebalance will be effective after the close of trading on 18 September and the changes will be announced on 2 September. The September review will use data from the close of trading on 24 August to determine the stocks to be included and excluded.

Toshiba Vs. Effisimo – Much Ado About Nothing?

By Mio Kato, CFA

As we approach the Friday showdown between Toshiba management and its more vocal shareholders, we question whether a change in board members would really have much impact on the company. The reason being, we see little that can be done to goose Toshiba’s operations and governance improvements, and Toshiba management has said they are committed to returning proceeds from the sale of Kioxia to shareholders.

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