In today’s briefing:
- Hang Seng Indexes: ADR Depositary Holding Changes; Round-Trip Trade Is US$5.1bn; NetEase Outperforms
- Errors in Local Street’s Projections for the KOSPI 200 Rebalancing
- KOSPI200 Index Rebalance Preview: 7 Changes a Side for June
- CSI300 Index Rebalance Preview: 8 Changes a Side in June; US$4.5bn Trade
- Nikkei 225 Sep25 Rebal: One ADD, One DELETE Still Probable, Kokusai a Question but $3bn+ a Side
- [JAPAN M&A] Shionogi (4507) Bids for Torii Pharma (4551) – Split Price Deal on Weak Transparency
- [Quiddity Index] MV Jr-Gold Miners Jun25 Leaderboard: Flow Expectations
- Laopu Gold (6181 HK): US$300m Primary Placement & Index Inclusion Green Light
- ZEEKR (ZK US): Geely Auto’s Light Non-Binding Offer at US$25.66 Per ADS
- NTT (9432) To Overpay To Take Over NTT Data (9613) Subsidiary?
Hang Seng Indexes: ADR Depositary Holding Changes; Round-Trip Trade Is US$5.1bn; NetEase Outperforms
- Most Secondary-listed companies have announced the number of shares that underlie ADRs and are held by the ADR depositaries as of end-March (or around that time).
- There are some significant increases in the number of shares held by the ADR depositaries. That changes the free float for the stocks and consequently the estimated flows.
- NetEase (9999 HK), Trip.com Group (9961 HK), Baidu (9888 HK) and Weibo (9898 HK) will have passives buying, while NIO (9866 HK) switches to a sell.
Errors in Local Street’s Projections for the KOSPI 200 Rebalancing
- One local desk misread the KOSPI 200 rules, thinking one screen was enough — but it’s a strict two-step filter, and that led to three wrong delete calls.
- KRX will drop the rebalance list post-close on May 21 or 22, and despite well-telegraphed outcomes, strong next-day price action has followed in past cycles.
- Consider a pre-announcement long/short basket trade, as this is the first rebalance post-short-selling resumption. NXT’s rising market share also creates opportunities in overnight-daytime price spreads.
KOSPI200 Index Rebalance Preview: 7 Changes a Side for June
- With the review period complete, there could be 7 changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in June.
- The impact on the potential inclusions ranges from 1.6-22 days of ADV while the impact on the potential deletions varies from 3.6-16.5 days of ADV.
- Han Kuk Carbon (017960 KS) appeared as a forecast add in the week starting 22 March and the stock is up 38% since then.
CSI300 Index Rebalance Preview: 8 Changes a Side in June; US$4.5bn Trade
- There could be 8 changes at the June rebalance with the Industrials and Information Technology sectors gaining 3 index spots each and the Materials sector losing 4 spots.
- Estimated one-way turnover is 1.44% at the rebalance leading to a round-trip trade of CNY 32.55bn (US$4.5bn). There are 13 stocks with over 2x ADV to trade.
- The forecast adds have outperformed the forecast deletes over the last 6 weeks even though there have been large ETF creations. There could be more outperformance coming up.
Nikkei 225 Sep25 Rebal: One ADD, One DELETE Still Probable, Kokusai a Question but $3bn+ a Side
- The March 2025 Nikkei 225 review came out with a sparse set of changes. That gives us hints for the September 2025 review.
- For the moment, that leads me to believe we get ONE ADD and ONE DELETE though up to three of each is possible.
- Even with only one name replacement, there are some big side trades and US$3.2bn a side to trade for now.
[JAPAN M&A] Shionogi (4507) Bids for Torii Pharma (4551) – Split Price Deal on Weak Transparency
- Today after the close, Shionogi & Co (4507 JP) and Torii Pharmaceutical (4551 JP) announced an agreed deal whereby Shionogi would launch a Tender Offer to take over Torii.
- Torii Pharmaceutical shares rallied sharply after earnings so the actual TOB Price of ¥6,350/share is not a particularly high premium vs undisturbed. Valuation transparency is limited. Synergies are not included.
- But the price is an ATH, the company is heavily de-levered (so a 23% premium to undisturbed is decent) and the minimum threshold is not high.
[Quiddity Index] MV Jr-Gold Miners Jun25 Leaderboard: Flow Expectations
- The MV Jr-Gold Miners index represents the performance of small-cap gold and silver mining companies listed around the world.
- This index is reviewed semiannually in March and September. We expect there will be no index changes for the June 2025 index rebal event but there will be capping flows.
- We expect one-way flows of US$122mm for the June 2025 rebal which translates to a turnover of 2%.
Laopu Gold (6181 HK): US$300m Primary Placement & Index Inclusion Green Light
- Full circulation implementation at the beginning of April derailed Laopu Gold (6181 HK)‘s chances of global index inclusion in May.
- The company has now launched a US$300m primary placement that will significantly improve chances of inclusion in the same global index in August.
- Laopu Gold (6181 HK) will also be added to another global index in September, so there are a few index inclusions likely for the stock this year.
ZEEKR (ZK US): Geely Auto’s Light Non-Binding Offer at US$25.66 Per ADS
- Geely Auto (175 HK), the controlling shareholder, disclosed a cash or scrip non-binding proposal for ZEEKR (ZK US) at US$25.66 per ADS or 12.3 newly issued Geely shares.
- While the offer is 22.2% above the IPO price, it is unattractive compared to historical trading ranges, peer multiples and average sell-side price targets.
- The shareholder vote is a formality as Geely and concert parties exceed the two-thirds voting threshold. The key risk is the timing of a binding proposal.
NTT (9432) To Overpay To Take Over NTT Data (9613) Subsidiary?
- This morning, the Nikkei says NTT (Nippon Telegraph & Telephone) (9432 JP) has decided, 5 years after taking Docomo private, to buy out minorities in NTT Data Corp (9613 JP).
- NTT owns 58%. The article suggests a “30-40% premium” (¥3,900-4,200) “is likely”, with the parent spending ¥2-3trln (¥3,380-5,060) on the deal. The numbers are a bit all over the place.
- It will go limit up today to ¥3,492. A deal should be announced today after the close when NTT Data reports earnings. There’s a cool index event too.
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