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• S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
• We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
• There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.

• The FTSE TWSE Taiwan indices get rebalanced in line with the standard FTSE Global indices – on the third Friday of September. 
• The most interesting one is the probably the least famous. It has only one change but it has massive re-weightings because of the way the index is constructed. 
• Historical patterns suggest a right-way long-short basket, reversed on the event, is a good trade.

• The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
• If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
• We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

• Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly. 
• Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
• Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.

• Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
• The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
• But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support. 

• Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
• Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging. 
• We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we provide our earnings estimates and thoughts on valuation.

• US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
• RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
• NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.

• Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme. 
• Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer. 
• Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

• We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Sep 9th based on HKEx daily reports.
• In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Xiaomi (1810 HK).
• In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Ck Asset (1113 HK).

• The correlation and sensitivity between passive flow and price impact have been significantly high for adds/deletes. So, we need a basket-trade setup focusing on potential adds/deletes.
• We will see 12 changes for Semicon and 6 for Autos. Bank won’t present any change.
• SK Square and Iljin Hysolus are the most prominent names to join the KRX Sector Indices this time. They will have a passive impact of 2.03x and 3.97x ADTVs, respectively.

• There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
• If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
• There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

• It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
• Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
• With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.

• Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
• Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
• Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU). 

• The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
• Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
• Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

• The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
• If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
• We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

• Link Administration (LNK AU) has announced the Australian Competition and Consumer Commission will not oppose Dye & Durham’s proposed acquisition.
• The next step is the rescheduled second court hearing on the 15 September.
• The key outstanding condition concerns the “Woodford Matters”, and whether D&D potentially waives this condition, or digs in its heels.  

• Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK). 
• As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
• In this note, we provide our earnings estimates and thoughts on valuation.

• Dye & Durham/DND’s proposed acquisition of Link Administration (LNK AU) at A$4.81 per share has received approvals from the ACCC and the Central Bank of Ireland.
• Key conditions precedent remaining are FIRB, UK FCA and Luxembourg approvals. The second court hearing date has been adjourned to 15 September.
• The transaction is in the home stretch and will likely complete. At the last close, the gross and annualised spread for a 27 September payment is 4.8% and 151%, respectively.

• Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend. 
• The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
• But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support. 

• There could be up to 6 changes to the Hang Seng China Enterprises Index (HSCEI INDEX) at the December rebalance, mainly driven by the deletions.
• If there are six changes to the index, estimated one-way turnover is 6.47% and will result in a one-way trade of HK$4,124m.
• There is large short interest on quite a lot of stocks and will play an important role in the rebalance.

• Pan Shiyi and Pan Zhangxin – Chairman and CEO respectively of SOHO China (410 HK) – have tendered their resignations, with immediate effect. 
• Both are resigning “to focus on supporting the arts and philanthropic pursuits“.
• That sounds like a “donation” is on the cards. And the Pans selling their stake in SOHO China would nicely fund that donation.

• The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN. 
• That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%. 
• The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.

• Sierra Rutile Holdings (SRX AU) is a high probability delete from the index, while Australian Strategic Materials (ASM AU) is close to the deletion threshold.
• Sayona Mining (SYA AU) is the highest ranked non-constituent while Tianqi Lithium (9696 HK) only makes inclusion at the entire IPO raise.
• Deletion from the index will require passive trackers to sell over 5 days of ADV on Australian Strategic Materials (ASM AU). 

• It was reported yesterday that Sea Ltd (SE US)‘s e-commerce arm “Shopee” has begun rescinding job offers.
• Having burnt around $2.0bn during the first six months of 2022 pursuing e-commerce and fintech growth aspirations, this seems like an extreme measure to ensure the company’s survival.
• With the gaming profitability fading, we are starting to think that even the extreme cost-cutting could be insufficient to overturn Sea’s e-commerce and fintech cash burn.

• Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly. 
• Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
• Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.

• The KRX announced the changes to the KRX New Deal indices post market close on Friday. But the changes were not made public and are only available to subscribers.
• Intellian Technologies (189300) and Seojin System (178320) replace Danal (064260) and Kcp (060250) in the Internet Index, while KMW Co Ltd (032500 KS) replaces AfreecaTV (067160 KS) in BBIG.
• Since we published our last forecast on 21 July, KMW Co Ltd (032500 KS) is up 12% while AfreecaTV (067160 KS) has dropped 17%.

• KMW replaces AfreecaTV in BBIG. There is no constituent change for Battery and Bio. Seojin and Intellion replace NHN KCP and Danal in Internet. Nexon Games replaces Devsisters in Game.
• The effective date has been postponed to the 13th, and the ETF operators will conduct the rebalancing trading at the close tomorrow, the 8th.
• Regarding relative passive impact, KMW and AfreecaTV should receive the most attention, and this pattern is already appearing today.

• The Bangkok Post reports that the Thai regulator (NBTC) will propose ten remedial measures to approve the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
• The NBTC board is not expected to issue a final decision as it waits for an interpretation by the Council of State if it can approve or reject the merger.
• The current share price ratio is 9.511x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 9.2% and 10.7%, respectively.

• In February 2022, Noritsu Koki (7744 JP) – longtime holder of JMDC Inc (4483 JP) – sold 2/3 of its holdings to Omron (6645). Omron made a US$1bn new bet.  
• Shares fell after Q1 results, and then fell another 7% in 2 days after the company announced a primary offering for ¥22bn to international investors, ¥11bn to Omron. 
• High PER but Fundamental Forecasts are up-and-to-the-right, and there is a surprising amount of flow mitigation from passive investor activity the next 3 months.

• The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
• Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP). 
• Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.

• The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
• Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
• The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company. 

• JMDC Inc (4483 JP) aims to raise around US$235m, US$150m coming via an international offering and the rest via issuing shares to its largest shareholder, Omron Corp (6645 JP) . 
• The company plans to use the proceeds to repay some of its debt that was taken on earlier to acquire other companies.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
• Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
• I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.

• Late last night, Giordano International (709 HK) announced the Offeror – the Cheng Family – had 44.98% in the bag after 20.41% of shares out had been tendered.
• The Offer has been extended for one week, until the 13 September. 
• Whether investors receive the Offer consideration AND the interim divided is still up for debate.

• The Sep 2022 Nikkei 225 Annual Review has been announced. This was discussed in Nikkei 225 Review Results: Nidec, SMC, Hoya IN. 
• That means we can make early predictions for the March 2023 rebalance to be announced in six months. One way turnover would be about 1.4%. 
• The top three adds are Oriental Land, Renesas, and JAL. The top 3 sells would be Toyobo, Toho Zinc, and Nippon Sheet Glass. There are some dark horses here too.

• Porsche is getting ready for an IPO to be completed by the end of this year. However, the final decision on the IPO is still subject to market conditions.
• The expected valuation of the Porsche IPO is 60 billion to 85 billion euros ($60 billion to $85 billion).
• Qatar Investment Authority has already committed to a 4.99% stake in the Porsche IPO. 

• CALB (CALBLZ CH), a leading EV battery manufacturer, is seeking to raise US$2.0 billion through an HKEx IPO, according to press reports.
• According to Frost & Sullivan, in terms of installed capacity in 2021, CALB ranked seventh globally among EV battery companies with a 3.2% market share.
• The key elements of the bull case rest on a large and growing market, rising market share, explosive top-line growth and ambitious capacity expansion plans.

• Discounts to NAV of covered holdcos have mainly widened or stayed at the same level during August/beginning of September, in line with the loses in the main indexes.
• Discounts to NAV (5 September): Alba, 46.1%; GBL, 34.1%; Heineken Holdings 21.3%; Industrivärden C, 10.1%; Investor B, 18.9%; Porsche Automobile Holding 29.4%. The spread of Rio Tinto DLC tightened to 14.5%.
• Spreads tend to widen in bear markets but short-term recoveries provide opportunities on tightening discounts. Recommended trades are: Industrivärden C vs. listed assets, Porsche, Rio Tinto (DLC).

• Over the past year, we’ve seen the stock price of Kintor fluctuate largely, which was mainly driven by its COVID-19 drug proxalutamide. However, we are not optimistic about its outlook.
• There are big concerns about the credibility of management. The suspicion caused by mistrust leads us to suggest that investors directly enter the “show me the result” mode.
• Shares plunged after the announcement of the Placing. Obviously, Kintor Pharmaceutical (9939 HK) is short of money. Considering the potential risks behind, we are bearish on Kintor. 

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• The Nikkei 225 (NKY INDEX) September rebalance will be done in three parts due to the delisting of Shizuoka Bank (8355 JP) and the relisting of Shizuoka Financial Group (5831).
• Nidec Corp (6594 JP), SMC Corp (6273 JP) and Hoya Corp (7741 JP) replace Unitika Ltd (3103 JP), Oki Electric Industry (6703 JP) and Maruha Nichiro (1333 JP). 
• Passive trackers need to buy over 10 days ADV on the adds and there is a large impact of the funding trade given the add/delete size difference.

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• The Nikkei Index Team announced the Nikkei 225 Annual Review today, days earlier than I expected. Nidec Corp (6594 JP), SMC Corp (6273 JP), Hoya Corp (7741 JP) are IN.
• Unitika Ltd (3103 JP), Maruha Nichiro (1333 JP), and Oki Electric Industry (6703 JP) are OUT. They did not go for my subjective choices to improve sector balance. Next time.
• The inclusion/exclusion events are staggered over 3 days out of four because of the deletion and re-inclusion of Shizuoka Bank (8355 JP) due to its formation of a holding company. 

• In early May 2022, Yamada Denki (9831 JP) launched a GINORMOUS buyback program. I wrote about it suggesting the company meant business. The stock popped outright and vs Peers.
• Then it fell back, and has only recently started moving back up. Surprising given buyback dynamics but it may have been overhang. If so, that overhang should be gone now.
• And the stock is cheap, a chunk of the register is sticky, so this could get squeezier now.

• On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
• The stated purpose in the Tender Offer Announcement is “Stability of Management Rights.” This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.
• The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).

• The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
• The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
• We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.

• The offeror and acceptances reached 44.98%, just short of the 50% minimum acceptance condition. The closing date has been extended to 13 September. 
• If the offer is declared unconditional on or before 8 September, Giordano International (709 HK) shareholders who accept the offer will get HK$1.88 but not the dividend of HK$0.085.
• The offeror likely remains confident that it will hit the 50% threshold. At the last close, the gross and annualised spread for 17 Sep payment is 1.1% and 37.2%, respectively.

• The results are pretty much in line with the predictions, except for Hanwha Aerospace which made it to LARGE instead of Hyundai Marine & Fire Insurance.
• Assuming that ten names, including Hyundai Marine, were traded in a LONG/SHORT basket with equal weight, the yield from August 17 to the last close would have been 4.6%.
• I would still approach with an equal-weighted basket trading until this Thursday. This flow trading usually loses its effect rapidly after rebalancing. So, I wouldn’t carry it beyond this Thursday.

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• On Friday morning, Sk Discovery (006120 KS), current owner/controller of 36.56% of Sk Chemicals Co Ltd/New (285130 KS) announced an opportunistic Partial Offer to buy 5.22% more at KRW 108,800/share.
• The stated purpose in the Tender Offer Announcement is “Stability of Management Rights.” This will get SK Discovery to 41.77%, permitting consolidation of SK Chemicals.
• The real reason?SK Chemicals shares are trading at less than one-third the value of the SK Bioscience (302440 KS) shares they hold (with net cash and others free).

• This is a cash offer. So, there is no stock swap arbitrage here. To participate in this tender, we must buy SK Chemicals shares by the 19th.
• We have proration risk. Discovery will buy on a pro-rata basis if exceeding the target volume. So, we could be at a loss.
• This is an over-the-counter transaction. So both STT and CGT apply. The STT rate is 0.43% of the tendered amount and we have a 22% CGT rate for the profit.

• In early May 2022, Yamada Denki (9831 JP) launched a GINORMOUS buyback program. I wrote about it suggesting the company meant business. The stock popped outright and vs Peers.
• Then it fell back, and has only recently started moving back up. Surprising given buyback dynamics but it may have been overhang. If so, that overhang should be gone now.
• And the stock is cheap, a chunk of the register is sticky, so this could get squeezier now.

• Although not many, there are strong candidates for a safe play aimed at constituent change. Inclusion: Lotte Confectionery & Exclusion: Samyang Holdings
• Lotte Confectionery’s average daily market cap must fall by more than 30% to be pushed out of the borderline. Samyang Holdings’s market cap gap to the second-lowest one is 17%.
• The trading volume of these two is so small that a significant passive impact (relative to DTV) will likely occur. We should consider a little more aggressive approach, timing-wise.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand and Chinese ADRs.
• Highest spreads – 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Infomedia Ltd (IFM AU), Link Administration (LNK AU), True Corp Pcl (TRUE TB).
• Lowest spreads – MyDeal.com.au Ltd (MYD AU), MACA Ltd (MLD AU), Nearmap Ltd (NEA AU), Dongzheng Automotive Finance (2718 HK), Link Net (LINK IJ), Tassal (TGR AU), Frasers Hospitality Trust.

• It is hard to see how Kyocera can avoid a significant slowdown in sales and earnings growth given the weakness in electronics markets and the overall economy.
• R&D and capital spending continue to rise, putting pressure on margins and offsetting gains from the weak yen.
• Valuations are not compelling. Watch out as the share price drops back from its recent high.

• The Korea FSC finalized the additional investor protection measures: 1. stricter disclosure rules, 2. tighter listing requirements, and 3. mandatory appraisal rights.
• The retroactive application period is five years. Companies that have been split off five years ago from the effective date are also subject to these new rules.
• We can play LONG/SHORT aimed at staggered spreads, considering that the pricing period is 2M VWAP and that a downward price revision intensifies towards the announcement with mandatory appraisal rights.

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

Asian Sea (ASIAN TB) announced its plans to list the pet food business currently held in the 100% subsidiary Asian Alliance International (AAI), subject to regulatory approvals.  Asian Sea will hold a majority stake (not less than 70%) in the spun-off subsidiary post listing. This could potentially help unlock value for Asian Sea assuming the high growth pet food subsidiary could attract greater investor interest and superior valuation, post listing. Currently Asian Sea (ASIAN TB)  trades at low double digit P/E in line with other Thailand based sea food processing companies.

In this insight, we discuss likely value upside to Asian Sea (ASIAN TB)  based on Asian Alliance’s possible valuations upon listing (based on its reported financials).

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• China MeiDong Auto (1268 HK) presents an excellent investment opportunity, trading at 13.3x/8.1x FY22/23e, post street estimate revisions downwards with a dividend yield of 6.0%/10% (assuming an 80% payout). 
• China MeiDong Auto (1268 HK) ‘s integration of Starchase is progressing better than we expected, with metrics on inventory dramatically improving. We believe the management will focus on aftersales now. 
• The company will join the EV bandwagon by collaborating on aftersales with players having operational (not financial) difficulties performing this service, presenting a good opportunity for the company. 

• MHI has a roadmap for becoming carbon neutral by 2040.  The transition to a decarbonized society will be funded by green/transition bonds
• MHI has issued its first green/transition bond amounting to 10 billion yen
• We remain bullish on MHI and believe it is a key beneficiary of decarbonization trends in Japan

• There were a bunch of rebalance announcements last week from FTSE and Nifty, and implementation of changes to the MSCI, JPXNK400 and Hang Seng indexes.
• The changes to the Nikkei 225 (NKY INDEX) should be announced early in the coming week and the changes to the SSE STAR50 (STAR50 INDEX) will be implemented on Friday.
• There were large inflows to China and Hong Kong focused ETFs during the week.

• Although not many, there are strong candidates for a safe play aimed at constituent change. Inclusion: Lotte Confectionery & Exclusion: Samyang Holdings
• Lotte Confectionery’s average daily market cap must fall by more than 30% to be pushed out of the borderline. Samyang Holdings’s market cap gap to the second-lowest one is 17%.
• The trading volume of these two is so small that a significant passive impact (relative to DTV) will likely occur. We should consider a little more aggressive approach, timing-wise.

• The Nikkei 225 rebalance will likely be announced this week. I continue to be slightly off-kilter, expecting Nidec, SMC, and Oriental Land to replace Unitika, Oki Electric, and Toho Zinc.
• Others would expect Hoya to replace Maruha Nichiro instead of Oriental Land replacing Toho Zinc, but I think it Nikkei Sector balance may matter. It could go either way.
• Tactically speaking, cumulative volumes and Real World Float tell you how you might trade this. 

• There are 4 trading days to go in the review period for the September rebalance of the S&P/ASX indices. Announcement is on 2 September with implementation on 16 September.
• There could be 6 changes to the S&P/ASX 200 (AS51 INDEX), increasing to 8 if AVZ Minerals (AVZ AU) continues to be halted and if Link Administration (LNK) is privatised.
• The potential adds have outperformed the potential deletes over the last month. Short interest has increased on a few potential deletes. There will be pre-positions built up.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
• We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
• Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher. 

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

• Yesterday FTSE Russell announced two Asian additions to its FTSE EPRA Nareit Global Developed Index – Sekisui House (1928 JP) and Healthcare & Medical Investment Corporation (3455 JP). 
• Sekisui House is larger cap, and will see big dollars added. H&M IC is much smaller and will see less, but has had a huge run-up, outright and relative.
• Trading impact will be significant on both tickers in terms of days of ADV.

• Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
• Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
• There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

• As expected, SinoPac Holdings (2890 TT) will replace Powerchip Semiconductor Manufacturing Corp (6770 TT) in the FTSE TWSE Taiwan 50 Index at the close on 16 September.
• Elan Microelectronics (2458 TT) will be deleted from the Mid-Cap 100 Index and will consequently be deleted from the Dividend+ Index. The Div+ selling will be spread over 16-22 September.
• Passives need to buy over 6 days ADV on SinoPac Holdings and sell over 12 days ADV on Elan Microelectronics, while there will be net inflows on Powerchip Semiconductor Manufacturing Corp.

• The index changes for the FTSE UK Indices for the September 2022 Rebalance were announced yesterday. There will be 3 changes for FTSE 100 and 8 changes for FTSE 250.
• These index changes are mostly in line with our expectations in FTSE UK Quiddity Leaderboard Sep 2022: Avast, Meggitt, Brewin, and a Busy Rebalance Month. 
• However, there a couple of surprises. In this insight, we take a closer look at our expectations for index flows and potential trading ideas

• ARM is suing Qualcomm for breach of license and trademark infringement for its acquisition of (fellow ARM licensee) Nuvia last year
• This is surprising on a number of levels as having Qualcomm inside the tent is better for sales, market share and its neutral-player reputation
• ARM’s valuation benefits from perceptions of an expanding addressable market so this is not a good look.  Meanwhile, Softbank’s discount to NAV is widening again as tech valuations fall

• There is one change for the S&P/ASX 100 Index, eight changes to the S&P/ASX 200 (AS51 INDEX), while there are 16 adds and 12 deletes for the S&P/ASX 300 Index.
• Passive trackers need to buy/sell a lot of stock for the ASX100 and ASX200 names. There appears to be large pre-positioning on the deletes.
• Link Administration (LNK AU)‘s privatisation may require an ad hoc inclusion prior to the implementation of the September rebalance – ACCC approval is key. 

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
• In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
• Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.

• Yesterday FTSE Russell announced two Asian additions to its FTSE EPRA Nareit Global Developed Index – Sekisui House (1928 JP) and Healthcare & Medical Investment Corporation (3455 JP). 
• Sekisui House is larger cap, and will see big dollars added. H&M IC is much smaller and will see less, but has had a huge run-up, outright and relative.
• Trading impact will be significant on both tickers in terms of days of ADV.

• Hang Lung (10 HK) recently announced it had acquired 1.3% in Hang Lung Properties (101 HK) over a one-year period, increasing its holding to 59.5%.
• HLG currently trades at a 62% discount to NAV, a level last seen around the Covid lows in May 2020.
• HLG is the most basic of Holdco structures – there is almost a 100% overlap in the stub ops with HLP’s property investments. 

• Emperador (EMI SP) will replace Comfortdelgro Corp (CD SP) in the FTSE Straits Times Index (STI) (STI INDEX) at the close of trading on 16 September.
• Though the changes were expected, there is over 4 days of ADV to trade on both stocks and we do not feel there are a lot of pre-positions built up.
• There are some risks in the stocks, and we would look to close out positions prior to the implementation of the changes.

• Kadokawa announced yesterday that subsidiary From Software would conduct a third-party allocation of shares to Sony and Tencent. 
• The allotment values From Software at about ¥120bn with Tencent acquiring 16.25% and Sony acquiring 14.09% of the company. 
• This creates opportunities for both Sony and Tencent and likely puts Kadokawa on track to eventually be acquired though timing may be somewhat later than we had anticipated.

• Leapmotor (LM) aims to raise around US$1.5bn in its Hong Kong IPO. LM is a smart EV company based in China, founded in 2015.
• As of end Jun 22, it had delivered a total of 104,829 cars with most of its sales coming from its mini units, T03.
• In our previous note, we spoke about the company’s past performance,  PHIP updates and undertook a peer comparison. In this note, we will talk about valuations.

• Adani Total Gas (ATGL IN), Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), IRCTC (IRCTC IN), Mphasis (MPHL IN), Samvardhana Motherson (MSS IN) and Shree Cement (SRCM IN) are adds.
• Adani Enterprises (ADE IN), Jubilant Foodworks (JUBI IN), Lupin (LPC IN), Mindtree (MTCL IN), Punjab National Bank (PNB), Steel Authority of India (SAIL) and Zydus Lifesciences (ZYDUSLIF IN) are deletes.
• There is significant impact on a lot of the stocks in terms of days of delivery volume to trade. Given the index is overlooked, there could be significant price movements. 

• Adani Enterprises (ADE IN) will replace Shree Cement (SRCM IN) in the NIFTY Index (NIFTY INDEX) at the close of trading on 29 September.
• We had forecast the change in April and Adani Enterprises (ADE IN) is up over 60% since then while Shree Cement (SRCM IN) is down a bit.
• Passive NIFTY Index (NIFTY INDEX) trackers will need to buy over 7% of the real float on Adani Enterprises (ADE IN). The stock could continue to move higher. 

• The September rebalance of the HSI, HSCEI and HSTECH indices will use today’s closing prices to cap the index constituents at 8%. This will lead to large flows.
• The largest inflows will be on Baidu (9888 HK), SenseTime Group (20 HK), China Shenhua Energy (1088 HK), Tencent (700 HK), Kuaishou Technology (1024 HK) and Anta Sports (2020 HK).
• The largest outflows will be on Meituan (3690 HK), AIA Group (1299 HK), Sunny Optical (2382 HK), SMIC (981 HK), China Pacific Insurance (2601 HK) and China Construction Bank (939).

• Healthcare & Medical Investment Corporation (3455 JP) and Sekisui House (1928 JP) have been announced as inclusions to the FTSE EPRA Nareit Developed Asia Index.
• Healthcare & Medical Investment Corporation (3455 JP) is also an inclusion to the FTSE All Cap Index at the September rebalance and the EPRA Nareit inclusion will increase passive inflows.
• Sekisui House (1928 JP) has been rangebound over the last few months and the index inclusion could take the stock higher relative to its peers in the short-term.

• The Cheng-family Offer for Giordano International (709 HK) became open to tendering after the Composite Doc was issued on the 15 August.
• With the first close less than a week away, acceptances are minimal – ~3.6%.
• Separately, David Webb, who definitely will not be tendering, has increased his stake to 5.79%.

• Leapmotor (2007699D HK) is said to be looking to raise between US$1bn-US$1.5bn by selling 290.9m shares in its IPO. At the top end, the company will be valued at HK$53bn.
• The performance of its peers over the last year leaves a lot to be desired and could lead to lower demand in the IPO.
• Leapmotor (2007699D HK) should be added to the HSCI and the Hang Seng Tech Index, though timing depends on when the stock lists on the HKEX (388 HK). 

• Kazuo Inamori (稲盛和夫), founder of Kyocera Corp (6971 JP) and KDDI Corp (9433 JP) precursor company DDI (Dai Ni Den Den), and former chairman of JAL overseeing restructuring, has passed.
• In his own name, he owns 10.212mm shares of Kyocera, and likely other assets. Inheritance tax would be due 10 months from now. 
• Kyocera is not blowing out the lights compared to peers, but it is relatively inexpensive to its history and peers. If the shares are sold, Kyocera can buy them.

• BYD (1211 HK)’s shares declined by -8% on disclosure that Berkshire Hathaway Inc Cl B (BRK/B US) trimmed its stake from 20.04% to 19.92% of outstanding H Shares. 
• Berkshire will likely follow its PetroChina (857 HK) playbook and materially sell down over the next few months. Buffet stated that the PetroChina exit was “a decision based on valuation.”
• Berkshire will apply the same investment discipline to the BYD stake. While the shares are trading at a discount to historical multiples, the Berkshire stake is an overhang.

• EVE Energy (300014 CH), PetroChina (601857 CH) and Shaanxi Coal (601225 CH) replace Anhui Conch (600585 CH), CPIC (601601 CH) and Zhangzhou Pientzehuang (600436 CH) at the close 16 September.
• Estimated one-way index turnover at the rebalance is 3.1% and will result in a one-way trade of CNY 1,678m.
• PetroChina (601857 CH) is also an inclusion to the FTSE All-World Index while China Pacific Insurance (2601 HK) is a delete from the Hang Seng China Enterprises Index (HSCEI INDEX). 

• Yankuang Energy Group (1171 HK) will replace Shenzhou Intl Group Holdings (2313 HK) in the FTSE China 50 Index at the close on 16 September.
• Passive trackers will need to buy over 1 day of ADV on Yankuang Energy Group (1171 HK) while selling over 1 days ADV on Shenzhou Intl Group Holdings (2313 HK).
• Short interest on Yankuang Energy Group (1171 HK) is over 10 days of ADV to cover and around 10% of float. That could help the stock move higher.

• The deal size amounts to ₩572B at a volume of 28.54M shares. The per-share disposal price is ₩20,050, a 7.6% discount from the previous day’s closing price, ₩21,700.
• Enerbility can be a timely LONG target of pension-driven flow in the context where the NPS is seen actively doing portfolio rebalancing lately.
• The volume digested by wall crossing seems quite small, as suggested by yesterday’s short selling volume, the flow volatility range is highly likely to be concentrated in one direction.

• For the month of August, 10 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$8.5bn.
• The average premium for the new deals announced (or first discussed) in August was ~41%, and a year-to-date average of 38%.
• This compares to the average premium for all deals in 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 33%, 31%, and 31.5% respectively.