In today’s briefing:
- CSI Hong Kong Connect Internet Index Rebalance: Large Flows & Impact on Friday
- AU Small Finance Bank (AUBANK IN): Increased FOL & Large Passive Flows/ Impact
- More Detailed Insight into Hynix’s Internal Situation Regarding the ADR Issue
- Toyota Industries (6201 JP): Elliott Ramps up the Pressure
- Makino Milling Machine (6135 JP): Tender Offer Risk/Reward
- Strategy (MSTR US)’s Bitcoin Premium Evaporates. And Then Some
- Hynix & Square L2 Flags Set to Squeeze Spread Near Term
- Predictive (PDI AU) & Robex (RBX AU) Together Again
- Meilan Airport (357 HK)’s SPA (Finally) Done. Now For The HK$10.62/Share MGO
- Meilan Airport (357 HK): SPA Precondition Satisfied, Setting up an Unconditional MGO at HK$10.62
CSI Hong Kong Connect Internet Index Rebalance: Large Flows & Impact on Friday
- There are 2 constituent changes for the CSI Hong Kong Connect Internet Index in December. Plus there are large capping changes for some stocks.
- Estimated one-way turnover at the rebalance is 11.9% and the round-trip trade is HK$26.6bn (US$3.4bn). There are 16 stocks with more than 1x ADV to trade.
- The adds drifted lower vs the deletes in September and October but have started outperforming in December. There could be more outperformance following announcement of the index changes.
AU Small Finance Bank (AUBANK IN): Increased FOL & Large Passive Flows/ Impact
- AU Small Finance Bank Limited (AUBANK IN) has received approval from the Ministry of Finance to increase its Foreign Ownership Limit from 49% to 74% (the maximum permitted).
- The increased FOL will result in passive inflows from global index trackers in February and March. The inflows are multiple days of ADV.
- There has been little increase in positioning. The increased Foreign Ownership Limit and the passive flows to come could lead to the stock moving higher over the next few weeks.
More Detailed Insight into Hynix’s Internal Situation Regarding the ADR Issue
- They’re maxing out M15X ahead of schedule, facing a fab gap until ’27, and now need more capex than their KRW 28tn cash pile comfortably covers.
- SK doesn’t want an Hynix ADR; they’re focused on tapping the KRW 150tn Growth Fund to fill the capex gap while avoiding dilution and protecting their already-fragile control stack.
- ADR noise spiked because Hynix’s near-term capex needs exceed Growth Fund capacity, pushing them toward a 2.4% treasury dump—but I still don’t see SK pulling the ADR trigger.
Toyota Industries (6201 JP): Elliott Ramps up the Pressure
- Elliott has filed a substantial shareholder notice reporting a Toyota Industries (6201 JP) ownership of 16.3 million or 5.01% of outstanding shares.
- The disclosure is likely a tactic to pressure Toyota Fudosan (offeror) and also a useful signalling tactic to other minorities that Elliott is committed to securing a bump.
- A potential bump could reach JPY19,000. While this would require an additional US$4 billion, financing should not be an issue as the book value (understated) is close to JPY18,000.
Makino Milling Machine (6135 JP): Tender Offer Risk/Reward
- Makino Milling Machine Co (6135 JP)’s pre-conditional tender offer from MBK Partners is at JPY11,751 per share. The gross spread has increased to 9.9% due to several concerns.
- The wide gross spread reflects the risk in satisfying the precondition, the fallout from the Homeplus saga and breaching the long stop date (16 January 2026).
- While these concerns have merit, there are mitigating factors. The risk/reward is favourable as the upside (9.9% spread) exceeds the downside (6.3% to my estimated deal break price).
Strategy (MSTR US)’s Bitcoin Premium Evaporates. And Then Some
- Strategy (MSTR US)‘s market cap has for near-on five years, traded at a premium to its bitcoin holdings.
- The backbone of Strategy’s levered strategy is issue new shares or debt, acquire more bitcoins, which in turn, boost the share price. Rinse and repeat. Until the music stops.
- That market cap is now at its widest discount in five years. And chairman Michael Saylor scandalously mooted the company may sell some bitcoins IF the discount persists.
Hynix & Square L2 Flags Set to Squeeze Spread Near Term
- SK Hynix and SK Square hit L2 flags; cash-only until Dec 24. Margin off, >40% two-day rip triggers halt. L2 lifts if below T-5/+45%, T-15/+75%, and 15-day high.
- L2’s usually a non-event, but this time the margin freeze probably smacks Hynix harder. Key trigger is staying below the 15-day high: Hynix ₩587,000, Square ₩324,000.
- Govt set to roll out AI-semiconductor holdco deregulation this week, boosting AI holdcos like Square and juicing a near-term Square-over-Hynix trade opportunity.
Predictive (PDI AU) & Robex (RBX AU) Together Again
- After Perseus Mining (PRU AU) fielded a scrip option for 17.8%-held Predictive Discovery (PDI AU), I questioned whether Robex Resources (RXR AU) would exercise its matching rights. I was wrong.
- Robex has “lifted its bid“, now 7.862 PDI for every Robex share. Under the revised Offer Robex will own 46.5% of the combined entity, down from 49%.
- PDI considers the new terms to be superior to Perseus’ tilt. Apparently, so do several of PDI’s largest shareholders. Perseus has now terminated its binding proposal. Out of the picture?
Meilan Airport (357 HK)’s SPA (Finally) Done. Now For The HK$10.62/Share MGO
- Given the change of control into Meilan Airport (357 HK), was, in effect, a re-arrangement of Meilan Airport shares under the same ultimate parent, the regulatory approval process curiously dragged.
- Yesterday Meilan Airport announced all SPA conditions have now been satisfied, and that the SPA should complete in 20 business days. A Composite Doc will then be issued.
- Trading almost at terms. This is a back-end proposition play. My peer basket is up 11%, on average, since the Offer was first announced. Asian peers are up 15%.
Meilan Airport (357 HK): SPA Precondition Satisfied, Setting up an Unconditional MGO at HK$10.62
- On 30 April, Haikou Meilan International Airport entered a SPA with Hainan Airport Infrastructure (600515 CH) to sell its Hainan Meilan International Airport (357 HK) 50.19% stake at RMB9.85 (HK$10.62).
- The SPA precondition is satisfied, and the SPA will be completed within 20 business days. Completion will trigger an unconditional MGO at HK$10.62.
- Tendering is likely to be low as the offer is unattractive. At the last close and for a mid-February 2026 payment, the gross/annualised spread is 0.2%/1.1%.
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