In today’s briefing:
- SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next
- Last Week in Event SPACE: Mapletree, Alibaba, Australian Unity Office
- Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, Alibaba, SK Tel, Thai Life Insurance
- PCOMP Index Rebalance: Semirara Mining (SCC) Replaces Security Bank (SECB)
- Yashili’s Pre-Condition EGM Set for 16 August
- Meituan – Regulators Now Probing on Food Safety; Anti-Monopoly Crackdown Is Not Over Yet
- China – Policy Switches-Off
- The Cayman Islands to Remove the Headcount Test on 31 August
- Merger Arb Mondays (01 Aug) – Genex, Yashili, Link Admin, VNET, Ramsay, Alliance Aviation
- Weekly Deals Digest (31 Jul) – Ramsay, Genex, MACA, Yancoal, Yashili, Thai Life, Hongjiu Fruit, WCP
SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next
- SenseTime Group (20 HK) stock has been crushed following the lock-up expiry at the end of June with the stock now trading 40% below the IPO price.
- The company has recently bought back stock providing some support. More importantly, SenseTime Group (20 HK) was included in Southbound Stock Connect on 29 July.
- We expect a big increase in the free float adjustment factor (FAF) in the Hang Seng Indexes at the September rebalance that will provide some much needed passive inflows.
Last Week in Event SPACE: Mapletree, Alibaba, Australian Unity Office
- Given recent corporate events in S-REIT land, there could be some considerable money to be allocated to the sector near-term
- Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX. This will make BABA Southbound-eligible
- At 0.81x newly-lowered book value, Australian Unity Office Fund (AOF AU) is trading at a relatively low multiple.
Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, Alibaba, SK Tel, Thai Life Insurance
- Last Friday saw the end of the review period for the upcoming rebalance of the MSCI, NIFTY, NKY and STAR50 indices, among others.
- The coming week has the implementation of the Philippines Stock Exchange PSEi Index (PCOMP INDEX) and NIFTY100 Index rebalances at the close on 5 August.
- There were big inflows to the Tracker Fund of Hong Kong Ltd (2800 HK) last week with over US$500m flowing in.
PCOMP Index Rebalance: Semirara Mining (SCC) Replaces Security Bank (SECB)
- Semirara Mining And Power Corp (SCC PM) will replace Security Bank (SECB PM) in the Philippines Stock Exchange PSEi Index (PCOMP INDEX) at the close of trading on 5 August.
- Passive trackers will need to buy 5.5 days of ADV on Semirara Mining And Power Corp (SCC PM) and sell nearly 30 days of ADV on Security Bank (SECB PM).
- Historically, the adds have outperformed the deletes and there has been a pop/drop in the adds/deletes the day after announcement. Square off existing pre-positions by mid week.
Yashili’s Pre-Condition EGM Set for 16 August
- The approval by Yashili International Holdings (1230 HK) independent shareholders of the proposed transactions at the 16 August EGM is a pre-condition to the HK$1.20 per share privatisation proposal.
- Shareholders will pass the ordinary resolutions at the EGM so that they can vote on the attractive privatisation proposal. The key risk is timing around the satisfaction of the pre-conditions.
- China Mengniu Dairy Co (2319 HK)’s offer remains attractive in the context of multiples and historical share prices. At the last close, the gross spread to the offer is 10.1%.
Meituan – Regulators Now Probing on Food Safety; Anti-Monopoly Crackdown Is Not Over Yet
- Several news media outlets reported that Meituan (3690 HK) Ele.me and other food delivery platforms were summoned over food safety problems as well as price war among them.
- Food delivery platforms are ordered to strictly follow food safety management responsibilities and also prevent price wars that disrupt the market order.
- Though the anti-trust fine of RMB3.44bn was thought to be the end of an almost year long regulatory crackdown on Meituan, it seems that this is far from over.
China – Policy Switches-Off
- Chinese net capital outflows are again picking up to a US$600 billion annual clip. Chinese Yuan has also been under-pressure from the strong US dollar
- People’s Bank (PBoC) forced to tighten domestic monetary conditions to help Yuan, despite COVID-19 lockdowns
- Tighter Chinese Liquidity hurts World economy, reinforcing recession threat and hurting commodity markets
The Cayman Islands to Remove the Headcount Test on 31 August
- After a prolonged delay, the Cayman Islands legislative gazette was published on 29 July, which stated that the amended Cayman Islands Act would come into force on 31 August.
- The Act will remove the headcount test for schemes, eliminating a layer of uncertainty for controlling shareholders wishing to privatise listed Cayman-incorporated companies.
- In light of this development, we look at current active privatisations, past failed privatisations and rumoured transactions which stand to gain a new lease of life from this Act.
Merger Arb Mondays (01 Aug) – Genex, Yashili, Link Admin, VNET, Ramsay, Alliance Aviation
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
- The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Resapp Health (RAP AU), Ramsay Health Care (RHC AU), Yashili International Holdings (1230 HK), Link Admin.
- Lowest gross spreads are Hwa Hong Corp (HWAH SP), Excelpoint Technology (EXLP SP), Giordano International (709 HK), MyDeal.com.au Ltd (MYD AU), Cocoaland Holdings (COLA MK), MACA Ltd (MLD AU).
Weekly Deals Digest (31 Jul) – Ramsay, Genex, MACA, Yancoal, Yashili, Thai Life, Hongjiu Fruit, WCP
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments – Thai Life Insurance (TLI TB)‘s underwhelming debut, Chongqing Hongjiu Fruit (CHF HK) is pre-marketing a US$200-300m IPO, WCP (WCP KS) pushed back its US$692m IPO to mid-September.
- Event-Driven developments at Ramsay Health Care (RHC AU), Yancoal Australia (YAL AU), Genex Power Ltd (GNX AU), MACA Ltd (MLD AU), Yashili International Holdings (1230 HK), China Vast, Hwa Hong.
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