In today’s briefing:
- Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- The Japan March-End Rebal and Dividend Trade
- ENN Energy (2688 HK): Third Party Offer?
- Nikkei 225 Index Rebalance: Positioning With a Few Days to Implementation
- HSCI Index Rebalance Preview: Three Hot Inclusions to Stock Connect in June
- ENN Energy (2688 HK): ENN Natural Gas’ Preconditional Cash/Scrip Offer
- Shinko Electric (6967) – Chicken and Logistics
- Shopify (SHOP US): Adds to Cart Nasdaq100, S&P500, R1000 and Krisp After US Listing & Filing Changes
- Changes to Hang Seng Methodology – Early Doors but $3bn a Side Across Major Indices
- UK: Low CPI As Seasonal Sales Extend
Rio Tinto (RIO AU/RIO LN): Unification Index Flows
- At the upcoming AGM, Rio Tinto Ltd and Rio Tinto PLC shareholders will vote on the company commencing a review on the benefits vs costs of Unification.
- Palliser Capital has been pushing for Unification while the Rio Tinto Board has recommended that shareholders vote against Resolution 21/24 citing tax costs among other reasons.
- If the Unification completes, S&P/ASX trackers will need to buy Rio Tinto Ltd (RIO AU) while UKX Index (UKX INDEX) trackers will sell Rio Tinto PLC (RIO LN). Net positive.
The Japan March-End Rebal and Dividend Trade
- Every year it’s the same trade. But sometimes it is not. This year it is Thursday and Friday. Or not.
- The month-end and quarter-end bring big flows, or not, depending on how things have gone.
- Over the past 10 years or so, the two-day return on the March trade is pretty good. This year? Well read on!
ENN Energy (2688 HK): Third Party Offer?
- ENN Energy (2688 HK), a major clean energy distributor based in China, is currently suspended pursuant to the Takeovers Code
- The largest shareholder is ENN Group (34.28% of shares out), an entity controlled by founder Wang Yusuo and his wife, Zhao Baoju.
- ENN Energy is a US$8.5bn market cap company. It’s possible ENN Group make an Offer. But more likely, I’d expect an Offer from a (larger) third party.
Nikkei 225 Index Rebalance: Positioning With a Few Days to Implementation
- BayCurrent Consulting (6532 JP) replaces Mitsubishi Logistics (9301 JP) in the Nikkei 225 (NKY INDEX) at the close of trading on 31 March.
- Since announcement, BayCurrent Consulting (6532 JP) stock is up with cumulative excess volume increasing, while Mitsubishi Logistics (9301 JP) is lower on a much bigger increase in cumulative excess volume.
- Some of the forecast adds and deletes have moved as one would expect, but positioning for the September rebalance could lead to reversals over the next few weeks and months.
HSCI Index Rebalance Preview: Three Hot Inclusions to Stock Connect in June
- There have been 14 new listings on the Main Board of the HKEX in Q1. One listing is a transfer from the GEM Board and one is a De-SPAC.
- Of the 14 stocks, we see Mixue Group (2097 HK), Guming Holdings (1364 HK) and Bloks Group (1850960D CH) as potential HSCI inclusions in June.
- There are no lock-up expiries in the stocks ahead of inclusion in Southbound Stock Connect and the low float could take the stocks higher ahead of the index inclusion announcement.
ENN Energy (2688 HK): ENN Natural Gas’ Preconditional Cash/Scrip Offer
- ENN Energy (2688 HK) announced a pre-conditional privatisation from ENN Natural Gas (600803 CH)/ENN-NG comprising HK$24.50 cash per share + 2.9427 ENN-NG H Shares per ENN share.
- The appraised offer value is HK$80.00 (HK$82.35, including the 2024 dividend), which is a tad optimistic. My calculations suggest a realistic offer value range of HK$71.47-76.32.
- The offer is final. The precondition satisfaction is low-risk. A high AGM minority participation is a risk, but the scheme vote should pass as the offer terms are reasonable.
Shinko Electric (6967) – Chicken and Logistics
- The Tender Offer closed end of last week. The bidder JICC-04 got 59.281mm shares. Most of what was left over – perhaps even more than 100%, was passive-owned.
- More than 100%? How does that work? It works because of how the logistics goes.
- And right now, the reason why the stock is trading well through terms is a matter of Chicken and Logistics.
Shopify (SHOP US): Adds to Cart Nasdaq100, S&P500, R1000 and Krisp After US Listing & Filing Changes
- Shopify (SHOP US) is eligible for Nasdaq100 following its listing transfer from NYSE to Nasdaq on 31 March. Inclusion is anticipated in December 2025 or earlier as a replacement.
- Shopify (SHOP US) is expected to be added to R1000 and Krisp Mega in June 2025 due to a new domestic 10-K filing which results in a US nationality assignment.
- The company can be considered for TMI and S&P500 only if it re-domiciles to US. New filings and US headquarters point towards that direction, but no plans have been announced.
Changes to Hang Seng Methodology – Early Doors but $3bn a Side Across Major Indices
- Janaghan Jeyakumar, CFA put out June rebal predictions on HSCEI, HSTECH, and Hang Seng Internet & Infotech on 17-Mar-25 (and 7 mainland indices 19-21 March) and…
- …the Quiddity team put out its regular predictions of all 7 major HS indices and 11 mainland indices, but on 21-March after the close, the Hang Seng team updated methodology.
- They changed the way float is calculated for Secondary Listings in Hang Seng indices. It affects only a few names, but this adds US$2.7bn of buying to three names.
UK: Low CPI As Seasonal Sales Extend
- UK CPI inflation slowed by 15bps to 2.84%, rounding slightly under expectations. The services rate was surprisingly resilient, and January’s upside news broadly persisted.
- Downside news from clothing and core goods prices occurred because January sales extended broadly and unusually. Postponed Spring lines should drive a March rebound.
- Headline inflation outcomes are benign enough not to threaten the BoE’s likely cut in May, but ongoing resilience still makes that the final move in our forecast.
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