In today’s briefing:
- Nikkei 225 Vs TOPIX Dynamics
- Last Week in Event SPACE: Shinsei Bank, China Everbright, Rakuten, Sony Corp
- USD Breakout
- Merger Arb Mondays (22 May) – HKBN, Newcrest, InvoCare, United Malt, Golden Energy, Penguin, Shinsei
- ECM Weekly (21st May 2023) – Alibaba, Cainiao, Baba Cloud, Nexus, DXN, Growatt, Rakuten, JD Ind
- Korea: What Are Foreign Investors Buying & Selling?
- Meritz Financial: Main Target for Flow Trading in KS200 June Rebalancing
- Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay’s Sector Change Confirmed
- How the G7 Meeting Exposes the Risks for 2024
- Ohayo Japan |Stall in Debt Talks = Stall in SPX; NUGGET: Panasonic – Found Religion (Finally !)
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.
Last Week in Event SPACE: Shinsei Bank, China Everbright, Rakuten, Sony Corp
- Expect some upset on SBI Shinsei Bank (8303 JP)‘s Offer, the possibility of some activism, but it all plays out in the back end. Not the front end.
- Rakuten (4755 JP) is doing a large equity offering to get the monkey off its back with regard to over-leverage, near-term debt refinancing, and WC for Rakuten Mobile.
- Fund manager China Everbright (165 HK)‘s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH)) are at multi-year lows.
USD Breakout
- USD breakout of the DXY bull wedge (Euro bear wedge) is gaining traction and will find additional fuel in June when the SPX faces a weaker cycle.
- Euro turn at macro resistance has legs. USD/JPY bull call from 130 has macro implications on follow through strength and will bleed into Asia FX.
- USD vs SGD and IDR saw key macro turns. KRW and commodity currencies have led. USD/ZAR was out top pick in EM and is on fire.
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).
ECM Weekly (21st May 2023) – Alibaba, Cainiao, Baba Cloud, Nexus, DXN, Growatt, Rakuten, JD Ind
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, JD.com Inc (ADR) (JD US) and Alibaba (ADR) (BABA US)‘s spin-off’s continue to draw interest.
- The REIT were out in full force this week for placements as interest rates globally appear to be approaching their peak.
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.
Official Results of KOSPI 200 Sector Indices Rebalancing: Kakao Pay’s Sector Change Confirmed
- The fact that KS200 IT has a significantly higher AUM provides a flow trading opportunity. This is due to the change in GICS for Kakao Pay from IT to Financials.
- It has been observed that Kakao Pay’s DTV has recently decreased significantly. This may result in the flow size reaching up to 1.4 times DTV.
- It is advisable to design an outright short position for day trading purposes. Additionally, a more aggressive approach can be considered by combining a long position on Samsung SDS.
How the G7 Meeting Exposes the Risks for 2024
- The agenda of the G7 highlights the rising risk of a new Cold War 2.0 that decouples China from the West.
- Tensions are likely to rise in 2024 as U.S. electoral politics will encourage both sides to show how tough they are on China.
- Under such a scenario, the global economy would be split into a China bloc and a U.S. bloc that resolves in global stagflation
Ohayo Japan |Stall in Debt Talks = Stall in SPX; NUGGET: Panasonic – Found Religion (Finally !)
- OVERSEAS. SPX -0.1% fails to make it 3 in a row; Talks paused, now resumed but deal distant; Powell set to pause hikes in June; More worries in US Regionals
- JAPAN. NKY Futs flat vs Cash; Kishida hosts a successful G7 summit; April Core Inflation hits 4.1% – Gov Ueda says no early exit; More Japanese are job hopping=>+ve Wages
- NUGGET. Panasonic – Found Battery Religion (Finally!) – A more aggressive stance
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
