In today’s briefing:
- SenseTime (20 HK): Lock-Up Expiry Done; Stock Connect Done; Passive Inflows Next
- Index Rebalance & ETF Flow Recap: MSCI, S&P/ASX, Alibaba, SK Tel, Thai Life Insurance
- The Cayman Islands to Remove the Headcount Test on 31 August
- PCOMP Index Rebalance: Semirara Mining (SCC) Replaces Security Bank (SECB)
- Minebea Mitsumi Tender for Honda Tsushin Kogyo (6826)
- ECM Weekly (31st Jul 2022) – Soosan, WCP, GDRs, Yancoal, Country Garden, Legend Biotech, MEP, PSMC
- Cayman Islands: Headcount To Be Decapitated On 31 August
- Nikkei 225 Index Rebalance Preview: Consultation Conclusions & Potential Changes in Sep & March
- China Internet Weekly (1Aug2022): Tencent, Alibaba, Meituan, JD Logistics, MissFresh
- HS Holdings (8699 JP) – Huge Q1, Even Better Q2 Ahead, The 2nd To Last Asset Sale… And a Pawnshop?
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.
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.
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.
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.
Minebea Mitsumi Tender for Honda Tsushin Kogyo (6826)
- Electronics Parts and Devices manufacturer Minebea Mitsumi (6479 JP) has announced a 25% premium Tender Offer to take over connector-maker Honda Tsushin Kogyo (6826 JP).
- It is not an overwhelming bid, but is supported by Panasonic Corp (6752 JP) which owns an equity affiliate stake, and crossholders and friendly shareholders hold a lot.
- This looks like it will complete, despite being a little light on price.
ECM Weekly (31st Jul 2022) – Soosan, WCP, GDRs, Yancoal, Country Garden, Legend Biotech, MEP, PSMC
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- There were no major IPO launches during the week. Soosan will list early next week.
- There were a number of placements/blocks across the region, including GDR launches for Swiss listing.
Cayman Islands: Headcount To Be Decapitated On 31 August
- The Companies (Amendment) Act 2021 of the Cayman Islands (Amendment Act), which will come into force on 31 August 2022, will abolish the current ‘headcount test’.
- Those companies incorporated in the Cayman Islands, and subject to a members’ Scheme of Arrangement, were previously required to satisfy the headcount test under section 86 of the Companies Act.
- This development clarifies previous uncertainty/ambiguity which could arise, with ‘take private’ deals of Cayman-incorporated, Hong Kong-listed companies, where a Scheme is the favoured privatisation path.
Nikkei 225 Index Rebalance Preview: Consultation Conclusions & Potential Changes in Sep & March
- With the review period for the September rebalance of the Nikkei 225 (NKY INDEX) complete, we take a look at the potential inclusions and exclusions for the index.
- The conclusions of the market consultation have been announced and that will mean we switch to a semi-annual rebalance. So we take a look at potential changes in March 2023.
- The announcement of the changes for the next rebalance should be made in the first week of September and will be implemented at the close on 30 September.
China Internet Weekly (1Aug2022): Tencent, Alibaba, Meituan, JD Logistics, MissFresh
- Tencent and Huawei launched beta tests for car-hailing platform almost simultaneously.
- Alibaba begins to disconnect Ant Group to avoid implicating each other.
- Missfresh dismissed almost all employees in its headquarters in Beijing.
HS Holdings (8699 JP) – Huge Q1, Even Better Q2 Ahead, The 2nd To Last Asset Sale… And a Pawnshop?
- Thursday post-close, HS announced Q1 earnings, and Khan Bank Q2 earnings. Both magnificent. Book Value is up HUGE, and combined HS Q1-Khan Q2 is ¥7.7bn – 20% of mkt cap.
- On Friday 29 July, HS Holdings (8699 JP) announced it had sold HS Debt Collection Agency – the last “earning asset” except for the 55% stake in Khan Bank.
- This lifts shadow book value even higher… Deep value with a catalyst. BUT… in an otherwise unannounced postscript to Q1 earnings, HS announced it bought a stake in a… pawnshop?
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