In today’s briefing:
- Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
- A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
- GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
- Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
- Adani Enterprises – A Record Follow-On Public Offering May Be in the Works
- Australia REITs: Asset Deflation Bear Market
- Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale
- Skymark IPO – Ready For Takeoff
- Good Morning Japan | US Thanksgiving but Rally Continues in Europe
Nikkei 225 Index Rebalance Preview (March): Three Potential Changes & Large Funding Trade
- With just over two months left in the review period, we expect three changes to the Nikkei 225 (NKY INDEX) at the March rebalance.
- Lasertec Corp (6920 JP), Oriental Land (4661 JP) and Renesas Electronics (6723 JP) could replace Toyobo Co Ltd (3101 JP), Nippon Light Metal (5703 JP) and Toho Zinc (5707 JP).
- As with the last rebalance, there will be a large funding trade estimated at JPY 417bn. There are many stocks with over 0.5x ADV to sell.
FTSE China 50 Index Rebalance Preview: JD Health Could Replace Xpeng
- At the end of the review period for the December rebalance, we see JD Health (6618 HK) replacing XPeng (9868 HK) in the FTSE China 50 Index.
- There is a very slim possibility of Longfor Properties (960) being deleted; it could be replaced with either Yum China Holdings Inc (9987) or PICC Property & Casualty H (2328).
- Short interest has stayed rangebound on JD Health (6618 HK) this year, while shorts have gone parabolic on XPeng (9868 HK) over the last few months.
A Guide to Arb Trade in Rights Offer: Feat. HLB & Lotte Chemical
- This post will specifically examine arb trade opportunities during the subscription rights trading period, with the recent HLB and Lotte Chemical cases.
- HLB gave an arb yield of 8%. As for Lotte Chemical, the size (₩1.1T) is much bigger, and it carries single-stock futures, a powerful incentive for arb traders.
- Another thing for Lotte Chemical is that it is unclear whether the major shareholders will participate in the subscription, which can lead to a widening of our arb spread.
GoTo IPO Lockup Expiry – US$13bn Lockup Release or in Other Words, the Real IPO
- In Mar 2022, GoTo raised around US$1bn from what was essentially a domestic Indonesian IPO. Its pre-IPO shareholders will be released from their lockup soon.
- GoTo was formed in May 2021 as a result of a merger between two of Indonesia’s largest unicorns Gojek, leading player in ride hailing, and Tokopedia, leading e-commerce player.
- In this note, we will talk about the upcoming lockup expiry.
Meituan Index Flows Clarifications on the Tencent Distribution; Prosus Comments on Its Holdings
- Days after the Tencent (700 HK) announcement about its planned distribution of the bulk of the Meituan (3690 HK) shares it owns, the Hang Seng Index team clarified index treatment.
- It will be treated in HS Indices as a “listed non-cash distribution” for Tencent. There is theoretically wiggle room on the Meituan side, but it appears it will follow JD.com.
- That means Meituan selling on 4 January at the close, limbo for two months, then Meituan buying. Full model below.
Adani Enterprises – A Record Follow-On Public Offering May Be in the Works
- Adani Enterprises (ADE IN) (“ADL”) on Tuesday announced a Board Meeting for Friday to consider capital raising options. Multiple media sources suggest a record Indian Follow-on Public Offering of INR200bn.
- The company has bid for/bought multiple assets recently, and proposed investments plan of up to US$150bn in 10yrs in renewables, cement, airports, healthcare to aim at a US$1trln valuation.
- This will get complicated, interesting, and is not necessarily going to come out well.
Australia REITs: Asset Deflation Bear Market
- The S&P/ASX A-REIT 200 Index has returned -22% in FY22, underperforming the ASX 200 Index by ~17% basis points.
- REIT performance is typically negatively correlated with bond yield movements, however, long-dated government bond yields may be approaching their peak.
- The asset deflation bear market in FY22 has improved the REIT valuation. A basket of REITs is currently at 0.8x, versus the five-year average of 1.05x, and 1.1x pre-Covid.
Korea Zinc: Treasury Shares Swap with LG Chem & Hanwha Corp + Treasury Share Sale
- On 23 November, Korea Zinc announced that it will swap its treasury shares with LG Chem and Hanwha Corp and sell part of its treasury shares to other investors.
- Korea Zinc could gain additional dividend payments by exchanging part of its treasury shares with shares of LG Chem and Hanwha Corp.
- Potential separation of Young Poong and Korea Zinc between the Choi and Jang families is likely to be an on-going process, although it is difficult to tell the exact timing.
Skymark IPO – Ready For Takeoff
- Skymark will be re-listing following a successful turnaround under the guidance of ANA and Integral.
- Listing proceeds will mainly be directed towards improving the fuel efficiency of its fleet.
- Skymark offers an attractive play on reopening in Japan as it is geared into the simpler domestic market where elevated cargo rates and revenue per passenger are not downside risks.
Good Morning Japan | US Thanksgiving but Rally Continues in Europe
- Good Morning Japan: We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan. FOLLOW US to keep abreast!
- OVERSEAS: US Thanksgiving holidays; US out but rally continues: STOXX Europe 600 +0.46%; US Equity Futs +0.26%; China Covid #s hit record high ; Rare China covid protest; Twitter Amnesty
- JAPAN: NISA 2x expansion to ¥56trn targeted; START UPS: Govt tgts 100k start-ups/ ¥10trn investments; EV: Aisin Seiki expanding E-Axle production; NINTENDO: Pokemon hits 10m sales
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