In today’s briefing:
- Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- Fujitsu General (6755) – Fujitsu’s Stake On The Block
- Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business
- LG Energy Solution: Another MSCI Upweight Event Coming in May
- Alibaba Group Holdings: Staying the Course
- Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix
- Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board
- Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”
- Good Morning Japan |THE SQUEEZE – Just Buy Tech; US Broker U/G to Semi Spurs Rally; Watch Copper
- Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE
Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
- Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
- Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.
Fujitsu General (6755) – Fujitsu’s Stake On The Block
- 10 days ago I wrote Fujitsu (6702) Subsidiary Selldowns To Come after Bloomberg carried an article with the CEO. Not new news, but I was struck by the implications.
- Yesterday saw an article which pushed Fujitsu General (6755 JP) nearly 14% higher yesteday. Fujitsu Ltd (6702 JP) had launched an auction for its 42% stake. First round bids due imminently.
- This takes the urgency to a new level. People jumped into an already illiquid stock. How far can this go?
Seven & I: Activist ValueAct Seeking a Spin-Off of The US Business
- New York-based hedge fund ValueAct has told Seven & I Holdings (3382 JP)’s shareholders to support them in their bid to spin off the 7-Eleven US convenience store business.
- Spinning off the only growth driver of the business does not seem like an idea that Seven & I or its shareholders are likely to entertain.
- We fear that ValueAct could be looking for reasons to call-off its investor-activism-campaign and perhaps is trying to squeeze out every last bit of gains as it exits its positions.
LG Energy Solution: Another MSCI Upweight Event Coming in May
- MSCI will likely reflect the ESOP selling in the upcoming rebalancing. Since MSCI’s rounding magnitude is 5%p, a similar passive impact as that of the previous IR may appear.
- This means that the remarkable price rally up to last November’s announcement date can be repeated this time closer to the announcement time in May.
- Conservatively assuming MSCI Korea’s tracking fund size to be ₩60T, LG Energy’s 5%p up-weight is expected to induce about ₩330B of passive inflow, which is 2.09x ADTV.
Alibaba Group Holdings: Staying the Course
- Average fund weights in Alibaba among 270 active EM funds fell from a peak of 6.3% in October 2020 to between 1.7% and 2.5% over the last 18 months.
- Significant switch from Growth to Value, with Value/Yield funds at record ownership levels whilst Aggressive Growth scale back holdings.
- Fund ownership trends are positive, with a growing number of managers making the move to overweight whilst index weights and prices remain at these levels.
Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix
- On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
- The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
- It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.
Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board
- Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.
- YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed.
- There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.
Good Morning Japan | The Doves Strike Back; Google Joins Layoff Parade; “Too Early for BOJ Exit”
- OVERSEAS. SPX +1.9% to close on highs; Beta-driven rally as Tech rebounds; Dovish talk from 2 Fed Members; Google joins the fray slashing 12,000 staff; US Banks not far behind.
- JAPAN. NKY Futs +1.3% vs Cash; USDJPY 129.6; CORE Inflation hits 4%; Kishida: too early to discuss BOJ 2% policy exit; Japan courts global elite grads; Population declines in 2022
- DAILY NUGGET. Change of Direction with new BOJ Leadership? Ha, policy direction has already been decided, and whoever the Govt selects will just continue where Kuroda left off.
Good Morning Japan |THE SQUEEZE – Just Buy Tech; US Broker U/G to Semi Spurs Rally; Watch Copper
- OVERSEAS. SPX +1.2% but all Action in Tech as SOX +5.5%; Barclay Sector upgrade spurs Semis; Fed Hikes in the rear view for now; Watch Copper – supply risks+China demand
- JAPAN. NKY Futs +0.9% vs Cash; USDJPY 130.65; Where US goes, Japan will follow: All about Tech; Kishida speech: Nuclear Power, Defense, Child support in focus; Wage hikes gather steam.
- DAILY NUGGET. Davos on board with the coming of the Metaverse. We highlight this and think there are near term challenges.
Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE
- In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
- They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
- Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.
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