In today’s briefing:
- Zhejiang Sanhua Intelligent Controls (2050 HK): Big Raise Supported by Cornerstones
- Nikkei 225 Index Rebalance: Rohm (6963) To Replace NTT Data Group (9613)
- [Quiddity Index] Nikkei 225 Boots NTT Data (9613) Early, Rohm (6963) IN 3 July; $3.8bn a Side
- Curator’s Cut: Building Materials Moves, Benchmarking Gold Miners & Semaglutide in India and Japan
- [Quiddity Index] Nikkei 225 Sep25 Rebal: One ADD/DEL, Less Certain Than Before
- Merger Arb Mondays (23 June) – ENN Energy, Dickson, HKBN, Mayne, Insignia, Santos, Smartpay
- Hygon/Sugon Merger: BIG Index Flows on Completion
- Korea Holdco Rerating Pullback Risk: No Retroactive Treasury Cancellation
- Last Week in Event SPACE: Shin Kong/Taishin, Santos, NTT Data, ENN Energy, Mitsui Matsushima
- Sanhua Intelligent Controls H Share Listing (2050 HK): Trading Debut
Zhejiang Sanhua Intelligent Controls (2050 HK): Big Raise Supported by Cornerstones
- Zhejiang Sanhua Intellignt Controls Co. (002050 CH)‘s global offering opens today and the raise could reach up to US$1.4bn if the offer-size adjustment option and the overallotment option are exercised.
- There is a large allocation to cornerstone investors. The discount of around 22.7% to the A-shares is attractive given the recent trend for Midea (300 HK) and CATL (3750 HK).
- The H-shares should be added to Southbound Stock Connect in July, to the HSCI in September, and to a global index in December.
Nikkei 225 Index Rebalance: Rohm (6963) To Replace NTT Data Group (9613)
- Following the results of NTT (9432 JP)‘s tender offer for NTT Data Corp (9613 JP), NTT Data will be deleted from the Nikkei 225 (NKY INDEX).
- ROHM Co Ltd (6963 JP) will be added to the Nikkei 225 (NKY INDEX) at the close on 3 July. The stock is up a fair bit from its lows.
- Nearly all the NTT Data Corp shares not tendered will be held by passives and there will be selling in the stock as index providers move the float lower/delete.
[Quiddity Index] Nikkei 225 Boots NTT Data (9613) Early, Rohm (6963) IN 3 July; $3.8bn a Side
- Today the results of the NTT Data Corp (9613 JP) Tender Offer came out. NTT has 81.75%. I warned of lack of liquidity at that level yesterday here.
- Yesterday I proposed that ROHM Co Ltd (6963 JP) would replace NTT Data in the Nikkei 225 and that the likely timing was the last couple of days of August.
- Today, the Nikkei used the June 2020 rule change to announce NTT Data’s near-term deletion. Rohm goes in 3 July. 7.5x ADV to buy. $3.8bn a side to trade.
Curator’s Cut: Building Materials Moves, Benchmarking Gold Miners & Semaglutide in India and Japan
- Welcome to Curator’s Cut, a fortnightly roundup of standout themes from the 1,000+ insights published over the past two weeks on Smartkarma
- In this cut, we spotlight building materials corporate actions, gold miners’ benchmark shifts, and semaglutide’s prospects in India and Japan
- Want to dig deeper? Comment or message on the themes you think should be highlighted next
[Quiddity Index] Nikkei 225 Sep25 Rebal: One ADD/DEL, Less Certain Than Before
- I published a Sep25 Nikkei 225 prediction list last Wednesday. By Friday, we had a new paradigm due to an ad hoc change. That new paradigm informs the September selection.
- As it is, I expect one (1) ADD (Shift Inc (3697 JP)) and one (1) DELETE (Tokuyama Corp (4043 JP)) – a prediction which change on a corporate announcement.
- My confidence on the ADD is a little lower due to the implications of the choice of Rohm. And the interesting ECM trade for September remains Sony Financial.
Merger Arb Mondays (23 June) – ENN Energy, Dickson, HKBN, Mayne, Insignia, Santos, Smartpay
- 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), Smartpay Holdings (SPY NZ), Seven & I Holdings (3382 JP), Santos Ltd (STO AU).
- Lowest spreads: Bright Smart Securities And (1428 HK), Ascentech KK (3565 JP), Brickworks Ltd (BKW AU), Toyota Industries (6201 JP), Avjennings Ltd (AVJ AU), Hainan Meilan International Airport (357 HK).
Hygon/Sugon Merger: BIG Index Flows on Completion
- On 26 May, Hygon Information Technology (688041 CH) and Dawning Information Industry (603019 CH) announced a merger in a sign of consolidation in China’s chipmaking industry.
- For each share of Dawning held, shareholders will receive 0.5525 shares of Hygon. With uncertainty on the timeline for merger completion, Dawning is trading at a 10% discount.
- On completion of the merger, passive trackers will need to buy over US$1.1bn of Hygon Information Technology C (688041 CH) with nearly of that from local index trackers.
Korea Holdco Rerating Pullback Risk: No Retroactive Treasury Cancellation
- Mandatory treasury cancellation isn’t in the current bill, but FSC and MOJ have started internal reviews; enforcement decree could drop as early as Q4.
- An internal policy paper suggests mandatory cancellation will apply only to newly acquired treasury shares, with tight limits on existing ones to curb owner control abuse.
- Lack of retroactive cancellation weakens the bull case, and while holdco sentiment stays upbeat, momentum may fade, opening the door to a tactical pullback.
Last Week in Event SPACE: Shin Kong/Taishin, Santos, NTT Data, ENN Energy, Mitsui Matsushima
- Taishin Financial (2887 TT) is cheap to peers. Shin Kong Financial (2888 TT) is cheap vs Taishin. Long Shin Kong. Long Taishin vs Peers. Long Shin Kong vs Taishin Peers.
- Abu Dhabi makes a big, bold bet on Santos Ltd (STO AU). However FIRB will have the last word on whether the deal goes through.
- If the results show NTT owns >80% of NTT Data (9613 JP), buy a lot for a potential squeeze. If the results show NTT owns 68-70%, you can probably ignore.
Sanhua Intelligent Controls H Share Listing (2050 HK): Trading Debut
- Zhejiang Sanhua Intelligent Controls (2050 HK) priced its H Share at HK$22.53 to raise HK$9,336 million (US$1.2 billion) in gross proceeds. The H Share will be listed tomorrow.
- I discussed the H Share listing in Sanhua Intelligent Controls H Share Listing: The Investment Case.
- Sanhua had the highest international oversubscription rates among recent large AH listings. Despite the weak price momentum, the AH discount is attractive.
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