In today’s briefing:
- Kioxia (285A JP): Toshiba Selling Leads to Passive Buying & Removes Overhang
- Tsuruha (3391 JP)/Welcia (3141 JP): Index Promotion & Passive Flows Likely Priced In
- Solactive Global Lithium Index Rebalance: Two Adds and Capping Changes
- Soft99 Corp (4464 JP): Precedent Set but Still a Fluid Outcome
- [Quiddity Index] S&P500/600 Dec25 Rebal: 2 Regular ADDs/DELs + Multiple Intra-Review Changes Coming
- Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (27 Oct)
- Shorting NOF (4403) Just Now Is Probably a Very Bad Idea
- Merger Arb Mondays (27 Oct) – Dongfeng, ENN, Joy City, Minmetals, Soft99, Ashimori, Pacific Ind
- Japan Activism Briefs: Yamaha Motor, Tamron, NPC
- Seres (9927 HK): Index Inclusion Timeline for a Max Offering of US$2.2bn; Big Discount to A-Shares
Kioxia (285A JP): Toshiba Selling Leads to Passive Buying & Removes Overhang
- Toshiba Corp (6502 JP) has sold over 5% of shares outstanding in Kioxia Holdings (285A JP) over the last month as the stock has run up.
- The increased market cap and higher float should result in index inclusion and passive buying for Kioxia Holdings (285A JP) in November. Then an upweight in another index in December.
- Toshiba Corp (6502 JP)‘s selling could also lead to Kioxia Holdings (285A JP) meeting JPX’s tradable share ratio and removes an overhang for the stock.
Tsuruha (3391 JP)/Welcia (3141 JP): Index Promotion & Passive Flows Likely Priced In
- Tsuruha Holdings (3391 JP) acquires Welcia Holdings (3141 JP) in just over 4 weeks. Aeon Co Ltd (8267 JP)‘s tender offer for Tsuruha Holdings (3391 JP) could commence in December/January.
- The enlarged Tsuruha Holdings (3391 JP) could migrate upward in the MGlobal Index and that will bring in large passive flows. But there is one thing to watch out for.
- Tsuruha Holdings (3391 JP) and Welcia Holdings (3141 JP) have outperformed peers over the last 6 months and now trade at a higher forward PE.
Solactive Global Lithium Index Rebalance: Two Adds and Capping Changes
- Solactive has announced the review results for the Global Lithium Index. There are two additions for the index and there will also be capping changes for some stocks.
- Estimated one-way turnover is 26.3% and will result in a round-trip trade of US$813m. There are some stocks with over 0.5x ADV to trade.
- The index has broken out of the secular downtrend, but investors continue to redeem units from the ETFs tracking the index.
Soft99 Corp (4464 JP): Precedent Set but Still a Fluid Outcome
- KeePer Technical Laboratory (6036 JP) has switched its allegiance from the Soft99 Corp (4464 JP) MBO by agreeing to accept the higher Effissimo offer.
- KeePer’s change of heart sets a huge precedent and signals that irrevocables are unenforceable and fiduciary duty outweighs a promise to tender.
- Nevertheless, the outcome is still not set in stone. Effissimo’s chances of success have increased, but the MBO still retains a long-shot chance of success.
[Quiddity Index] S&P500/600 Dec25 Rebal: 2 Regular ADDs/DELs + Multiple Intra-Review Changes Coming
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- In this insight, we take a look at the upcoming constituent changes in the run up to the December 2025 index rebal event.
- We now expect two regular changes in December 2025. There are also multiple live M&A and special situation events likely to trigger intra-review index changes.
Relative Value Opportunities in Asia-Pac, Pair Trade Roundup (27 Oct)
- Context: This Insight follows up on previously highlighted relative value opportunities, using a statistical methodology based on mean-reversion to identify opportunities in paired securities.
- Highlights: Currently nine pair trade opportunities across four markets and four sectors persist.
- Why read: Statistical analysis offers a unique perspective on relative value. Gain insights into actionable statistical pair trade opportunities and monitor performance of previously highlighted pairs.
Shorting NOF (4403) Just Now Is Probably a Very Bad Idea
- Japan’s defense budget may be set to surge by about 50%, making NOF’s ammunition business a hot theme.
- Be careful though. NOF’s munitions segment faces production limits and slow capacity expansion, capping near-term profit growth even with new defense spending.
- We think NOF is overvalued, even as we acknowledge consensus forecasts are probably too low. But shorting now would probably just be fighting the tape. Save this idea for later.
Merger Arb Mondays (27 Oct) – Dongfeng, ENN, Joy City, Minmetals, Soft99, Ashimori, Pacific Ind
- I summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Smart Share Global (EM US), Mayne Pharma (MYX AU), ENN Energy (2688 HK), Dongfeng Motor (489 HK), Changhong Jiahua Holdings (3991 HK), Joy City Property (207 HK).
- Lowest spreads: Bright Smart Securities (1428 HK), Mandom Corp (4917 JP), Humm Group (HUM AU), Larvotto Resources (LRV AU), Seven West Media (SWM AU), Jinke Smart Services (9666 HK).
Japan Activism Briefs: Yamaha Motor, Tamron, NPC
- Yamaha Motor (7272) | Silchester raised stake to 8.8%; shares down 20% despite core motorcycles/marine generating 20-30% ROIC, undermined by ¥62bn losses in RVs/Robotics.
- Tamron (7740) | Effissimo increased holding to 13%; company trades at 6x EBIT with 20%+ margins, expanding from camera lenses into automotive ADAS and industrial optics.
- NPC (6255) | LIM acquired 6% stake in solar equipment maker down 20% year-to-date, betting on perovskite cycle recovery despite withdrawn guidance and customer weakness.
Seres (9927 HK): Index Inclusion Timeline for a Max Offering of US$2.2bn; Big Discount to A-Shares
- Seres Group (601127 CH) could raise up to HK$17.4bn (US$2.24bn) in its H-share listing if the Offer Size Adjustment Option and the Overallotment Option are both exercised.
- There is a big allocation to cornerstone investors that is locked up for 6 months. That eliminates the already small possibility of Fast Entry inclusion to global indexes.
- Seres (9927 HK) should be added to Southbound Stock Connect from the open of trading on 1 December following the end of the Price Stabilisation period.
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