In today’s briefing:
- Index Consultation on DATCos Means MORE Selling Likely, and Another Index Questionable
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Methodology Change Leads to US$1.25bn Trade
- CSI300 Index Rebalance Preview: 12 Changes a Side as Trade Nears US$10bn
- On Jardine Matheson’s Latest Buyback
- CVC Joins EQT In Pursuit Of AUB Group (AUB AU)
- ECM Weekly (10 November 2025) – Seres, Pony, WeRide, Joyson, DIY, Maynilad, Northsand, Softcare
- Square’s Level 2 Leverage Caps End Tomorrow — Fresh Near‑term Factor in the Square Vs Hynix Setup
- CSI500/1000 Index Rebalance Preview: Adds Outperform Deletes Early On, Then Hit a Wall
- [Japan M&A] KKR and Founder to Take Engineer Staffing Agency Forum Engineering (7088) Private
- LG Corp: NAV Analysis Suggests a 29% Upside, Likely to Catch Up to LG Chem
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.
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Methodology Change Leads to US$1.25bn Trade
- Following the methodology update for the HSIII Index, there could be up to 5 constituent changes in December.
- Estimated one-way turnover is 12.8% and that will result in a round-trip trade of HK$9.8bn (US$1.25bn).
- Xiaomi (1810 HK) is the biggest beneficiary of the new methodology while there will be large funding outflows for a lot of the current index constituents.
CSI300 Index Rebalance Preview: 12 Changes a Side as Trade Nears US$10bn
- There could be 12 changes at the December rebalance with the Information Technology sector gaining 2 index spots and a smaller number of changes in the other sectors.
- We estimate one-way turnover of 2.7% at the rebalance leading to a round-trip trade of CNY 69.8bn (US$9.8bn). There are 8 stocks with over 2x ADV to trade.
- The forecast adds have outperformed the CSI 300 Index over the last 5 months while the forecast deletes have underperformed the index.
On Jardine Matheson’s Latest Buyback
- On the 27th October, Jardine Matheson Holdings (JM SP) announced an Offer for 88.04%-held Mandarin Oriental International (MAND SP), after MAND concurrently announced the partial sale of OCB to Alibaba.
- MAND will pocket US$925mn from the sale. The privatisation will set Matheson back ~US$500mn. Alibaba is ostensibly funding MAND’s privatisation. And then some.
- Last week Matheson announced it will undertake a US$250mn buyback, which is expected to complete in 2026.
CVC Joins EQT In Pursuit Of AUB Group (AUB AU)
- On the 28th October 2025, AUB Group Limited (AUB AU), an insurance “matchmaker”, announced a NBIO, via a Scheme, from EQT at A$45/share, a ~40% premium to undisturbed.
- The share price has consistently traded wide to terms, not just because of the transactions’ indicative nature; but EQT’s track record on progressing from indicative to firm is not optimum.
- This morning AUB announced CVC was teaming up with EQT, at $45/share; and concurrently requested additional due diligence. This has been granted by AUB.
ECM Weekly (10 November 2025) – Seres, Pony, WeRide, Joyson, DIY, Maynilad, Northsand, Softcare
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, the deal flow continues unabated, although a lot of listing in Hong Kong didn’t do to well last week.
- On the placements front, there were a number of deals, with a few right at lockup expiry.
Square’s Level 2 Leverage Caps End Tomorrow — Fresh Near‑term Factor in the Square Vs Hynix Setup
- Square closed ₩290,000, missing all criteria; Level 2 removal effectively confirmed, with KRX disclosure expected ~8 p.m. Seoul, effective from tomorrow’s open.
- Square vs Hynix hinges on retail chase structurally, but near‑term Square’s underperformance worsened by asymmetric leverage shackles.
- Square’s Level 2 setup ends tomorrow; flows normalize, likely giving Square more juice vs Hynix. Key spot to watch from tomorrow’s open.
CSI500/1000 Index Rebalance Preview: Adds Outperform Deletes Early On, Then Hit a Wall
- With the review period complete, we forecast 50 changes for the CSI Smallcap 500 Index and 100 changes for the CSI 1000 Index at the December rebalance.
- We estimate a one-way turnover of 10.15% for the CSI Smallcap 500 Index and 10.22% for the CSI1000 Index. Gross round-trip trade across both indices is CNY 73.4bn (US$10.3bn).
- The outright forecast adds have outperformed the outright forecast deletes over the last 6 months with most of the outperformance coming between June and August.
[Japan M&A] KKR and Founder to Take Engineer Staffing Agency Forum Engineering (7088) Private
- Today after the close, KKR announced a deal whereby they and founder OKUBO Izumi-san would take Forum Engineering Inc (7088 JP) private in an LBO.
- The process of this deal ticks most all of the “bad process” boxes but the price is pretty good.
- 52% is locked in. Insiders and cross-holders appear to own another 15-18%. This looks like a done deal to me. Money comes 30 December.
LG Corp: NAV Analysis Suggests a 29% Upside, Likely to Catch Up to LG Chem
- Our updated NAV valuation of LG Corp suggests implied market cap of 17.2 trillion won or target price of 111,605 won per share, representing 29.3% higher than current levels.
- LG Corp’s investment stakes in LG Chem and LG Electronics are worth 15.7 trillion won representing 119% of LG Corp’s entire market cap.
- Lower taxes on dividends could accelerate the capital allocation to companies with higher dividend yields/payouts such as LG Corp.
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