In today’s briefing:
- Index Consultation on DATCos Means MORE Selling Likely, and Another Index Questionable
- FXI Rebalance Preview: New Listings, Potential Inclusions, H/A Premiums
- Taiwan Top 50 ETF Rebalance Preview: Plenty of Big Overlapping Flows Coming Up
- [Japan M&A] Taiyo Pacific Offers ¥2,210 for Star Micronics (7718) Completing the Shareholder Ripoff
- CSI Liquor/ Alcoholic Drink Index Rebalance Preview: One Delete & Some Big Capping Changes
- China A50 ETFs Rebalance Preview: Three Changes in December
- [Japan M&A] Senko Group (9069 JP) Bids for Maruwn (9067 JP) In Deal Which May Trigger Fireworks
- UK: Return To Residual H2 Gloom
- CNI Semiconductor Chips Index Rebalance Preview: One Set of Changes in December
- StubWorld: Zijin Mining (2899 HK) Is Still Out Of Whack
Index Consultation on DATCos Means MORE Selling Likely, and Another Index Questionable
- In mid-September, global index provider M _ _ _ announced that they were conducting an index consultation on Digital Asset Treasury Cos. I wrote about it here.
- My recommended short at the time is down 30%, despite announcing a large buyback program. Others have lost significant premium vs underlying digital assets.
- The same index provider expanded their list of affected names on 29 Oct. And a DIFFERENT Index provider this week added DATCOs to a US Advisory Panel Meeting Agenda Wednesday.
FXI Rebalance Preview: New Listings, Potential Inclusions, H/A Premiums
- There could be 3 constituent changes for the iShares China Large-Cap (FXI) (FXI US) ETF in December. That could easily increase to 4.
- Two of the forecast inclusions will also have inflows from the FGlobal Index at the same time, increasing the impact. The third is a potential HSCEI INDEX add in December.
- The HA premiums for CATL (3750 HK) and Jiangsu Hengrui (1276 HK) have dropped ahead of lock-up expiry and there could be premium expansion closer to index/ETF inclusion.
Taiwan Top 50 ETF Rebalance Preview: Plenty of Big Overlapping Flows Coming Up
- There could be 4 constituent changes for the Yuanta/P-Shares Taiwan Top 50 ETF in December as positioning for buying by one set of index trackers pushes stocks into other indices.
- There will be passive inflows in some of the forecast adds week after next and the flows from these index trackers will come a few weeks later.
- With large AUMs tracking the dividend indices, stocks that have moved up a lot now have low dividend yields and there could be opposite flows from those index trackers.
[Japan M&A] Taiyo Pacific Offers ¥2,210 for Star Micronics (7718) Completing the Shareholder Ripoff
- Today after the close, well-known Japan engagement fund Taiyo Pacific Partners announced a deal to buy Star Micronics (7718 JP) for ¥2,210/share. They’ve been involved small-big-small for 20yrs.
- The company launched a new capital plan and MTMP in February. Cash-rich, it needed no money to grow aggressively. So TPP proposed buying a third of the company. Board agreed.
- Despite ActionsToImplementManagementConsciousOfSharePriceAndCostOfCapital announced February, in April-November the Board decided to sell the entire company to TPP at <1x book. This is borderline outrageous. It deserves notice and complaint.
CSI Liquor/ Alcoholic Drink Index Rebalance Preview: One Delete & Some Big Capping Changes
- The review period ended on 31 October, the changes should be announced on 28 November and will be effective after the close of trading on 12 December.
- There could be one delete each for the CSI Liquor Index and the CSI Alcoholic Drink Index. Plus capping changes for a bunch of stocks.
- The entire sector has been under pressure over the last few years with every rally being sold into.
China A50 ETFs Rebalance Preview: Three Changes in December
- Nearing the end of the review period for the December rebalance, there could be three changes for the iShares A50 China (2823 HK) / CSOP China A50 (HKD) (2822 HK).
- Sungrow Power Supply, CMOC Group and China CSSC Holdings could replace S.F. Holding, China Everbright Bank and Bank of Jiangsu in the ETF at the close on 19 December.
- The forecast adds have outperformed the forecast deletes over the last 3 months and it is not even close as the gap has kept getting wider
[Japan M&A] Senko Group (9069 JP) Bids for Maruwn (9067 JP) In Deal Which May Trigger Fireworks
- Today, logistics company SENKO Group Holdings Co., Ltd. (9069 JP) announced a bid for logistics company Maruwn Corp (9067 JP) with help from 35% holder JX Advanced Metals (5016 JP).
- The TOB only needs 11+% to get to 50.1%. There are three holders who Senko clearly regard as not necessarily agreeable to the deal. They hold 28.0% between them.
- If someone wanted to thwart this deal, there are a number of ways to do it. This could get interesting.
UK: Return To Residual H2 Gloom
- UK GDP disappointed in Q3 at 0.1% q-o-q after the ONS revised away August’s surprise resilience and led it into a slight September fall, setting up for a soft Q4 too.
- Residual seasonality in service sector growth has reasserted itself on the average post-pandemic path. So statistical stories seem more plausible than fundamental ones.
- Weakness in labour market activity is more relevant. The hawkish half of the MPC probably needs disinflationary news to support a cut, but the Governor seems swayed.
CNI Semiconductor Chips Index Rebalance Preview: One Set of Changes in December
- There could be one change for the CNI Semiconductor Chips Index with Verisilicon Microelectronics S (688521 CH) replacing Tianshui Huatian Technology Co, Ltd. (002185 CH).
- Passive trackers will need to buy 0.5x ADV in Verisilicon Microelectronics S (688521 CH) and sell 0.4x ADV in Tianshui Huatian Technology Co, Ltd. (002185 CH).
- There will be large selling in Cambricon Technologies Lt (688256 CH) due to capping while there will be smaller inflows for the other index constituents.
StubWorld: Zijin Mining (2899 HK) Is Still Out Of Whack
- Zijin Gold (2259 HK) is up 101% on its 29th September listing. By my estimate, Zijin Mining (601899 CH)‘s average premium to NAV since Zijin Gold’s listing has been ~21%.
- Preceding further commentary on Zijin Mining/Gold are the current setup/unwind tables for Asia-Pacific Holdcos.
- These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.
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