In today’s briefing:
- STAR&CHINEXT 50 Index Rebalance: One Change in June Adds to Other (Larger) Index Flows
- [Japan Buyback] Leopalace (8848 JP) – A Giant Buyback To Get Fortress Partially Out
- SSE50/SSE180 Index Rebalance: Some Surprises Among the Adds; Deletes as Expected
- CSI Medical Service Index Rebalance: Six Changes with Decent Impact
- [Japan Buybacks] – Buybacks Announced 26-30 May 2025 And Company Buyback History
- CSI All Share IB & Brokerage Index Rebalance: Northeast Replaces Harbin Hatou
- KWEB Index Rebalance: HealthyWay In; East Buy Out
- Soul Patts & Brickworks: Index Impact of A$14bn Merger
- Merger Arb Mondays (02 June) – Seven & I, SBI Sumishin, Shibaura, Mayne, ENN Energy, HKBN, Zeekr
- CSI All Share Real Estate Sector Index Rebalance: Sector Reclassification Drives Changes
STAR&CHINEXT 50 Index Rebalance: One Change in June Adds to Other (Larger) Index Flows
- There is one constituent change for the STAR&CHINEXT 50 Index in June with AVIC Chengdu Aircraft Co (302132 CH) replacing Suzhou Maxwell Technologies (300751 CH).
- Passive trackers will need to buy 0.15x ADV in AVIC Chengdu Aircraft Co (302132 CH) and sell 0.4x ADV in Suzhou Maxwell Technologies (300751 CH).
- AVIC Chengdu Aircraft Co (302132 CH) is a CSI 500 Index to CSI 300 Index migration in June, so there will be more buying in the stock.
[Japan Buyback] Leopalace (8848 JP) – A Giant Buyback To Get Fortress Partially Out
- Leopalace21 Corp (8848 JP) had a giant oopsie in 2018-2021 where they lost ¥180bn over three years because of defective construction requiring repairs.
- Murakami and others got involved. Leopalace got financing from FIG (shares/SARs/loan), Murakami bailed. Eventually Hikari Tsushin got in. Leopalace got FIG out of their loan, doing a refi through Mizuho.
- Cash was up, cashflow is strong. Business is changed/revived. Now Leopalace is buying back SARs it sold to FIG. FIG will still own 26%. The future is potentially interesting. Still.
SSE50/SSE180 Index Rebalance: Some Surprises Among the Adds; Deletes as Expected
- There are 4 changes for the SSE50 Index (SSE50 INDEX) and 18 changes for the SSE180 Index that will be implemented at the close on 13 June.
- The SSE50 Index (SSE50 INDEX) deletes were in line with forecasts, and the index committee has used some discretion while picking the index inclusions.
- The SSE50 Index adds have outperformed the deletes over the last few months and there could be a further move higher in the ‘surprise’ adds to the index.
CSI Medical Service Index Rebalance: Six Changes with Decent Impact
- CSI announced the changes for the June rebalance after market close on 30 May and the changes will be effective after the close of trading on 13 June.
- There are 6 changes for the index and we estimate passive buying of 0.7-2.4x ADV in the adds and passive selling of between 1-4.7x ADV in the deletes.
- There will be capping inflows for Shenzhen Mindray Bio-Medical Electronics (300760 CH) and capping outflows for WuXi AppTec (603259 CH).
[Japan Buybacks] – Buybacks Announced 26-30 May 2025 And Company Buyback History
- Buybacks in Japan are becoming a much greater driver of shareholder return than in previous years. The total amount of buybacks announced just during the March-end earnings season cleared ¥7trln.
- Quiddity has developed a buyback tool which tracks Japanese buybacks and the buyback history for any given company. Isuzu Motors (7202 JP) announced a big post-Offering buyback this week.
- Want to see how Isuzu has executed buybacks the past decade? Daily data? % volume? You can check here for any of the 21 companies which announced buybacks this week.
CSI All Share IB & Brokerage Index Rebalance: Northeast Replaces Harbin Hatou
- The changes to the CSI All Share Investment Banking & Brokerage Index were announced after market close on 30 May and will be implemented at the close on 13 June.
- Northeast Securities (000686 CH) will be added to the index while Harbin Hatou Investment Co, Ltd. (600864 CH) will be deleted.
- There is over 2.5x ADV to trade in both stocks and much smaller impact of funding/capping flows on the other index constituents.
KWEB Index Rebalance: HealthyWay In; East Buy Out
- The June rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 13 June.
- HealthyWay (2587 HK) will be added to the ETF while East Buy Holding (1797 HK) will be deleted. The passive trading will offer an opportunity to exit positions.
- There is a huge lock-up expiry in HealthyWay (2587 HK) on 30 June and the stock could drop ahead of that. Then it could drop some more after lock-up expiry.
Soul Patts & Brickworks: Index Impact of A$14bn Merger
- Washington H. Soul Pattinson (SOL AU) and Brickworks Ltd (BKW AU) have executed a binding Combination Deed to implement an A$14bn merger that simplifies the company structure by eliminating crossholdings.
- The merger ratio is a good one for Brickworks Ltd (BKW AU) shareholders and the benefits to both sets of shareholders should see the merger approved.
- There will be large passive buying in Washington H. Soul Pattinson (SOL AU) from global and local index trackers and that could lead to short covering.
Merger Arb Mondays (02 June) – Seven & I, SBI Sumishin, Shibaura, Mayne, ENN Energy, HKBN, Zeekr
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Mayne Pharma (MYX AU), Insignia Financial (IFL AU), ENN Energy (2688 HK), Seven & I Holdings (3382 JP), Smartpay Holdings (SPY NZ), Smart Share Global (EM US).
- Lowest spreads: Bright Smart Securities And (1428 HK), Dada Nexus (DADA US), Spartan Resources (SPR AU), Nissin Corp (9066 JP), Torii Pharmaceutical (4551 JP), Nippon Road (1884 JP).
CSI All Share Real Estate Sector Index Rebalance: Sector Reclassification Drives Changes
- There are 3 adds and 4 deletes for the CSI All Share Real Estate Sector Index in June. There are changes driven by changes to the sector classification for stocks.
- Passive trackers will need to buy between 0.2-0.65x ADV in the adds and sell between 0.15-1.75x ADV in the deletes.
- The deletes have outperformed the adds over the last few months and some of that could dissipate over the next couple of weeks.
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