In today’s briefing:
- Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
- CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions
- Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
- ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes
- Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea
- HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)
- Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
- BYD Company: Moves to Top Auto Holding in EM
- NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped
- JD Industrials Pre-IPO – Initial Thoughts on Valuation
Rakuten (4755) – TSE Neglects Its Ad Hoc Powers – Less Bigly Index But Biglier Non-Index
- The index announcements regarding the the changes to indices following the Rakuten (4755 JP) offering have been a bit weird.
- Some of that may have to do with timing. Some is just weird
- The result is that there is less to buy this week than I previously expected, and the buying gets dragged out longer.
CNI Semiconductor Chips Index Rebalance: Multiple Inflows for the Inclusions
- There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 9 June.
- The inclusions will also be added to other indices over the next couple of weeks and there will be inflows from multiple index trackers.
- The adds have outperformed and with 9 trading days to implementation of the changes and the inclusions also being added to other indices, there could be further outperformance near-term.
Relia (4708 JP) Tender Offer Launches – STILL at the Wrong Price for the Wrong Reasons
- In mid-January this year, Mitsui & Co Ltd (8031 JP) announced it would buy out minorities in Relia Inc (4708 JP) (longtime known as Moshi Moshi), a BPO/RPA/AI services company.
- I said the deal was too cheap, with 44% upside to the midpoint of Target Advisor’s DCF fair value range. Investors needed to exercise their cowbell to get more.
- Since then, TOPIX has returned ~15%, A peer basket 16%, H2 was possibly kitchen-sinked, but no Mar-2024 forecasts were provided. The Tender starts tomorrow. Noise is still warranted.
ChiNext/ChiNext 50 Index Rebalance: On Expected Lines as Adds Outperform Deletes
- There will be 10 changes for the Chinext Price Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 9 June.
- One-Way turnover for the Chinext Price Index is estimated at 3.17% while the one-way turnover for the ChiNext50 Index is 6.61%. The one-way trade across both indices is CNY 2.72bn.
- The adds have outperformed the deletes by a huge margin over the last 3 months and there could be profit taking into implementation.
Full Details & Trading Ramifications of Official Revisions to CFD Trade Rules in Korea
- It’s crucial to note that margin balances from CFDs will also be disclosed through each brokerage’s Home Trading System (HTS), providing insight into the risk of margin call-triggered covering trades.
- It has been challenging to discern which are being targeted for illegal trading operations using CFDs. The disclosure of CFD margin balances can be an indicator to address this issue.
- This may lead to a short-term selling spiral on suspected stocks, where illegal trading forces rush to liquidate their positions, and additional selling pressure targeting such activities exacerbates the situation.
HSI, HSCEI, HSTECH: Rebalance Flows Post Capping (June 2023)
- The June rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituent weights at 8%. This will lead to large flows.
- The largest inflows will be on Meituan (3690 HK), JD.com (9618 HK), Zijin Mining (2899 HK), Baidu (9888 HK), Trip.com (9961 HK) and JD Logistics (2618 HK).
- The largest outflows will be on HSBC Holdings (5 HK), Li Auto (2015 HK), Kuaishou Technology (1024 HK), China Construction Bank H (939 HK) and NetEase (9999 HK).
Medtronic’s M&A, Tender Offer, and Taking Private of Eoflow
- In this insight, we provide the details of Medtronic’s M&A and tender offer for Eoflow.
- Currently, Eoflow is trading at 28,050 won which is 6.5% lower than the tender offer price of 30,000 won.
- Eoflow’s share price is currently comfortably below 30,000 won and we believe this deal has 95-98%+ probability of getting completed within the current M&A framework.
BYD Company: Moves to Top Auto Holding in EM
- Investment levels in BYD Company Limited H Shares have reached record highs among active Emerging Market funds.
- On a fund level, between 10/31/2022 and 04/30/2023, 22 funds opened new positions in BYD, led by Vontobel MTX Sustainable (+2.4%) and Putnam Emerging Markets (+1.95%).
- BYD has risen up the ranks to become the most widely held and largest weight in the autos sector, surpassing Kia Corp and Mahindra & Mahindra over the last 2-years.
NIFTY NEXT 50 Index Market Consultation: Non-F&O Stocks Could Be Dropped
- NSE Indices have started a market consultation on dropping stocks that are not a part of the Futures & Options segment from the Nifty Next 50 Index (NIFTYJR INDEX).
- This will be done in two phases with a weight reduction for non-F&O stocks in June and deletion from the index in September.
- That will result in 11 inclusions to the Nifty Next 50 Index (NIFTYJR INDEX) in September and bring in a lot of flow to the stocks.
JD Industrials Pre-IPO – Initial Thoughts on Valuation
- JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
- JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
- We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.
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