In today’s briefing:
- Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- Nikkei 225 Vs TOPIX Dynamics
- Korea: What Are Foreign Investors Buying & Selling?
- Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing
- Merger Arb Mondays (22 May) – HKBN, Newcrest, InvoCare, United Malt, Golden Energy, Penguin, Shinsei
- Taiwan Top 50 ETF Rebalance: One Change Expected in June
- Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals
- ECM Asia Takeaways from Hong Kong Investor Meetings – Rakuten, Growatt, JD Industrial and Others
- Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows
- SFC’s Consultation Paper On Proposed Amendments To The Takeovers Code
Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
- Yesterday (15 May 2023) just before EOD, an article ran suggesting a ¥300bn capital raise by Rakuten (4755 JP). The stock fell 10% in 10mins. Rakuten hemmed/hawed but didn’t deny.
- One day later, we have a deal. It is up to 546mm shares including greenshoe, which at the close was ¥333bn. 468mm shares to the public, 79mm to 3rd parties.
- This increases Real World Float by 95%. In that respect this is vaguely IPO-ish. Investors have to re-underwrite. Then Passive re-shrinks the float. Details matter.
Nikkei 225 Vs TOPIX Dynamics
- This past week saw dramatic moves in Japanese stock markets. TOPIX +3.1% N225 +4.8% – up the 6th week in a row – closing at their highest in 33 years.
- Flows were positive the week before, and I expect we’ll see next week they were positive this past week. But most striking was the interplay between Nikkei 225 and TOPIX.
- If foreign inflows increase, Nikkei is likely to outperform TOPIX both because of its existence and previous use, and its construction. And that means watching one’s trades, shorts, and executions.
Korea: What Are Foreign Investors Buying & Selling?
- Foreign investors have been buying stock in Korea. They now hold 32% of the KOSPI market cap and 18.5% of the KOSDAQ market cap.
- As a percentage of market cap, foreigners have been big buyers of Yg Entertainment, Hyundai Rotem and Meritz Financial Group. Selling has been on Ecopro Co and Posco Future M.
- Shorts have increased on Ecopro Co Ltd (086520 KS) and Posco Future M (003670 KS) while there has been covering on Kakao Pay (377300 KS) and POSCO Holdings (005490 KS).
Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing
- Meritz Financial confirmed the total number of treasury shares resulting from the mergers, amounting to 5.04% of SO. When combined with the largest shareholder’s stake, the float rate becomes 47.75%.
- We should focus on direct rebalancing flow through KS200 ETFs on T-1 effective rather than setting it up preemptively. The estimated total AUM of ETFs directly mirroring KS200 is ₩17T.
- Meritz Financial is expected to receive an inflow of around ₩43B, equivalent to 1.35x ADTV. This is a significant flow impact size as a single-day event.
Merger Arb Mondays (22 May) – HKBN, Newcrest, InvoCare, United Malt, Golden Energy, Penguin, Shinsei
- We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads – 111 Inc (YI US), Estia Health (EHE AU), HKBN Ltd (1310 HK), United Malt Group Ltd (UMG AU), Hailan Holdings (2278 HK), Aag Energy Holdings (2686 HK).
- Lowest spreads – Healius (HLS AU), Liontown Resources (LTR AU), Lian Beng (LBG SP), SBI Shinsei Bank (8303 JP), Allkem Ltd (AKE AU), Penguin International (PBS SP).
Taiwan Top 50 ETF Rebalance: One Change Expected in June
- Today was the review cutoff for the June rebalance of the Yuanta/P-Shares Taiwan Top 50 ETF. We see one potential change at the review.
- Passive trackers are estimated to buy nearly 6 days of ADV on Pegatron Corp (4938 TT) while selling around 1.7 days of ADV on Silergy Corp (6415 TT).
- Short interest on Pegatron Corp (4938 TT) has continued to drop as the stock has moved higher; Silergy Corp (6415 TT)‘s short interest has risen as the stock has dropped.
Rakuten US$2.4bn Placement – Recent Updates and Comparison to past Deals
- Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
- We have covered various aspects of the deal in our earlier notes, see here and here.
- In this note, we will talk about the updates since our last note, as well as the performance of some of the past large primary raises in Japan.
ECM Asia Takeaways from Hong Kong Investor Meetings – Rakuten, Growatt, JD Industrial and Others
- We spent the second half of last week meeting ECM focused clients in Hong Kong.
- Overall, the mood remains somewhat grim for Hong Kong/China and it will be up to a few upcoming deals to open up the market again.
- In this note, we talk about some of the feedback for the upcoming IPOs and placements.
Quiddity Leaderboard TDIV Jun 23: Five Changes and US$922mn One-Way Flows
- In this insight, we take a look at Quiddity’s flow expectations for the June 2023 index rebalance.
- I currently see 5 ADDs/DELs. Some of these names are different from the ones I specified in my previous insight.
- I have also discussed some long-short trading ideas involving names with significant flow implications.
SFC’s Consultation Paper On Proposed Amendments To The Takeovers Code
- On the 19 May, Hong Kong’s Securities and Futures Commission (SFC) released a 145-page consultation paper on proposed amendments to the Codes on Takeovers and Mergers and Share Buy-backs.
- The paper proposes amendments to various provisions of the Codes together with the reasons for such changes.
- The consultation will last for five weeks until 23 June 2023.
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