In today’s briefing:
- Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding
- Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
- Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- 3D Launches Partial Tender Offer on NTT UD REIT (8956)
- Indian Renewable Energy (IREDA IN) QIP: Index Implications
- DeepSeek and Market Over-Reaction. Nvidia, Broadcom, Marvell, TSMC, SK Hynix
- NTT UD REIT (8956 JP): 3D’s Unsolicited Partial Tender Offer
- WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- Solactive Global Uranium & Nuclear Components Index Rebalance: DeepSeek Led Selloff & 1 Delete
- Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding
- The review period for the Nikkei 225 Index March rebalance ends in 3 weeks. There could be one outright change and one or two others driven by sector balance.
- Shift Inc (3697 JP) will have a 15:1 stock split next week and that puts the stock in the list of potential inclusions over the next couple of rebalances.
- The recent drop in Fast Retailing (9983 JP)‘s stock price will lead to a single step drop in the PAF. That means less passive selling and a smaller funding buy.
Tsuruha (3391) – Welcia (3141) Future Merger Ratio – Pounding the Table
- In late December, a Jiji article said Tsuruha & Welcia would look to integrate by end-2025, now that they no longer need SEC approval. Odd language, but we’ll take it.
- That means we look to what might happen between here and there. The companies will hire Legal and Financial Advisors, wait until both report FY, then start negotiating.
- What has been the long-term trend and the trend of the last two years is different. It’s worthwhile looking at valuations and expectations to decide how to trade. It’s good.
Fast Retailing (9983) Capping Decision This Week – Single or Double Dose?
- Unless Fast Retailing (9983) underperforms Nikkei 225 by 10% by Friday close, there will be a capping exercise at the next Nikkei 225 Rebalance at the end of March 2025.
- The evolution of tech stock movement in Japan in the next day or three is important to watch. There will be effects.
- The setup very near-term could be pretty interesting, and worth watching.
3D Launches Partial Tender Offer on NTT UD REIT (8956)
- Seemingly out of the blue, Singapore-based activist investment fund 3D Investment Partners has launched a partial tender offer at a small premium on NTT UD REIT Investment Corporation (8956 JP).
- 3DIP currently owns 2.2% and at maximum, will own 15.00% of the REIT units outstanding less treasury units. It intends to own the units for “pure investment purposes.”
- “Shareholder” structure is different for J-REITs vs companies. And this J-REIT has an interesting future possibility. But…
Indian Renewable Energy (IREDA IN) QIP: Index Implications
- IREDA has announced a Qualified Institutional Placement (QIP) of a maximum of INR 50bn as long as the Government of India’s holding does not drop by more than 7%.
- There will be passive buying at the time of settlement of the QIP shares while the increase in float will bring the stock closer to inclusion in another global index.
- With the stock close to index inclusion level and down 37% from its peak, there could be positioning in the stock for passive inflows.
DeepSeek and Market Over-Reaction. Nvidia, Broadcom, Marvell, TSMC, SK Hynix
- This reports addresses the alarmist wrong conclusions over DeepSeek, especially over GPU usage and costs
- This said, DeepSeek shows that Foundational models are commoditizing. Applications will be more resilient and profitable, ie customized with attached services
- We are just at the beginning of the AI revolution with language models. Physical models are next and massive Application deployment.
NTT UD REIT (8956 JP): 3D’s Unsolicited Partial Tender Offer
- 3D has announced an unsolicited partial tender offer for NTT UD REIT Investment Corporation (8956 JP) at JPY131,890 per unit, a 10.0% premium to the undisturbed price.
- The minimum number of units to be purchased is 115,279 (7.80% ownership ratio), and the maximum number of units to be purchased is 189,128 (12.80% ownership ratio).
- The modest premium and an implied P/NAV <1x suggest a lightish offer. 3D will have to rethink terms as shares are trading through terms.
WH Group (288 HK) Is Stretched As Smithfield Mulls IPO Price Reduction
- On the 21st January 2025, WH Group (288 HK), the world’s largest pork producer, announced Smithfield had made a public filing of the “Preliminary Prospectus” with the SEC.
- A US$23-US$27/share indicative price range backed out a possible market cap for Smithfield of US$9.0bn-US$10.6bn, at the high end of my estimate, and more than twice its 2013 privatisation value.
- Reportedly, WHG are now guiding that Smithfield is likely to be priced at $20/share. Expect WHG to sell off here.
Solactive Global Uranium & Nuclear Components Index Rebalance: DeepSeek Led Selloff & 1 Delete
- Solactive has announced the constituent changes for the Global Uranium & Nuclear Components Index. There is only 1 delete with implementation at the close on 31 January.
- As expected, GoviEx Uranium (GXU CN) will be deleted from the index and there will be a bunch of capping changes, especially for non-pure play stocks.
- Estimated one-way turnover is 5.8% resulting in a round-trip trade of US$386m. There are many stocks with multiple days of ADV to trade.
Fast Retailing (9983 JP): Double Capping & The Reverse Funding Trade
- With 3 days left in the review period, Fast Retailing (9983 JP) has a 11.29% weight in the Nikkei 225 (NKY INDEX). That means double capping in March.
- If Fast Retailing (9983 JP) underperforms the other index stocks by 1.8% from now to the close on 31 January, there will only be a single level of capping.
- Double capping will result in big selling on Fast Retailing (9983 JP) and big inflows into the other index constituents. Smaller impact for single level capping.
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