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• Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
• Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
• There will be passive selling once the buyback is complete, but the stocks should run up prior to that.

Pre-open today, a day after the FTSE/JSE announced its expected capping rule for Naspers (NPN SJ) and Prosus NV (PRX SJ) in the September FTSE/JSE index rebalances (the cap at 6% of index for each of the stocks is only valid for the FTSE/JSE Capped SWIX All Share and Capped SWIX Top 40 indices), and a week after the Exchange Offer closed…

…Prosus (PRX NA) has announced a US$5.0bn buyback.

The buyback starts today and goes for a year. 

What kind of impact are we looking at?   It’s interesting.

• AEM reported stellar 1H22 results beating street estimates as well as far outpacing their own guidance. CHIPS act in USA will benefit company in FY23.
• Stock reaction (+6%) muted despite great outlook and management optimism. Despite record results and strong outlook, stock is down YTD. 
• AEM is cheap trading at only +/-10x FY22 EPS, too low given the growth and consistent margins profile. Fair Value remains 8 SGD.

• The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
• The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

• In February 2022, I discussed why Appier Group (4180 JP) could be an interesting TOPIX Inclusion Candidate in TOPIX Inclusion Pre-Event: Appier Group (4180 JP) 
• Earlier this month, I reiterated my view in TOPIX Inclusions: Who Is Ready (Aug 2022) identifying Appier Group as the best pick among all current TOPIX Inclusion candidates.
• Since my last insight, the share price has risen sharply and that has important implications for the company’s Prime market ambitions.

• SenseTime Group (20 HK)‘s Free-Float Adjustment Factor (FAF) increases from 3% to 40% following lock-up expiry and the stock will replace China Pacific Insurance (2601 HK) in the HSCEI INDEX. 
• Using prices from the close on 19 August, estimated one-way turnover is 3.82% and will result in a one-way trade of HK$2,751m at the close on 2 September.
• Increase in the FAF on a couple of stocks saves them from index deletion in September but is probably not enough to save them from index deletion in December.

• The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
• There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.

• There are 24 adds and 14 deletes for the Hang Seng Composite Index (HSCI) at the September rebalance to take the number of index constituents up to 518.
• 19 of the 24 HSCI inclusions will be added to Southbound Stock Connect, while 12 of the 14 HSCI deletions will be removed from Southbound Stock Connect.
• Five of the HSCI constituents could be removed from Southbound Stock Connect only since the average market cap over the last year is less than HK$5bn.

• There are no changes to the index names, but FAF and capping changes will lead to a one-way turnover of 4.5% and one-way flow of HK$3,287m.
• An increase in the FAF from 3% to 40% will result in passive inflows of HK$1.18bn for SenseTime Group (20 HK) – that is over 5 days of ADV.
• There are large shorts on some of the stocks that will have passive outflows and some of these positions could be covered on implementation day.

• BA Airport Leasehold REIT (BAREIT TB) (BAREIT) is looking to raise about US$290m in its Thailand IPO. 
• BA Airport Leasehold REIT (BAREIT), sponsored by Bangkok Airways, is Thailand’s first airport REIT.
• It aims to utilise the IPO proceeds, combined with a debt issuance to lease a number of properties located in Samui Airport. 

• The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
• The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

• LX Semicon (108320 KS) is looking to transfer from the KOSDAQ market to the KOSPI market. Shareholder meeting is 23 September and the transfer will happen soon after if approved.
• LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index on the suspension date. There is zero chance of the stock being included in the Kospi 200 Index.
• Nextin (348210 KS) is a high probability inclusion to the KOSDAQ 150 Index in December but could be an early inclusion in  September to replace LX Semicon (108320 KS).

• MACA Ltd (MLD AU) has indicated that NRW Holdings (NWH AU)‘s A$1.085/share Offer is inferior to Thiess’ conditional A$1.025/share takeover offer.
• The reasons for the rejection are expected to be fleshed out at MACA’s full years results briefing.
• NRW’s Offer is higher, has a lower shareholder approval, and provides MACA shareholders the option of cash, scrip or a combination of both. But is subject to scaling.

• The ACCC has raised concerns about Qantas Airways (QAN AU) proposed acquisition of Alliance Aviation Services (AQZ AU). The ACCC’s final decision is on 17 November.
• Qantas knew a lengthy ACCC approval process was highly likely and committed to an additional special dividend in the SID to reflect this risk. 
• Qantas has its work cut out to address the ACCC concerns. Nevertheless, due to the selloff, the current price offers almost a free option on Qantas securing ACCC approval.

For our next Webinar, we have the pleasure of welcoming back Analyst Nicolas Van Broekhoven, who will go through his latest picks in the Singapore market, highlighting key stocks and names to watch out for in the Lion City.

The webinar will be hosted on Wednesday, 24 August 2022, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buy-side for 15 years, and worked most recently at a medium-sized boutique asset management firm. He grew up in Europe, went to university in the US and has been living in Singapore for the last seven years, which has given him a broad scope on the world and investing in general. He considers himself a generalist investor with a preference for small and mid-cap companies and special situations. However, a large-cap that has gone temporarily out of favour might also pique his interest.

• Canon Inc (7751 JP) announced a buyback on 5 August. That was its 17th ¥50bn buyback in 15 years. And its first “second buyback within a single year” since 2014.
• History suggests outperformance of Peers until the end of the buyback (and it has done well here), then underperformance post-buyback.
• Consensus forward EPS and EBIT ratios vs Peers suggest Canon shares have more to catch up, but some of that would involve reclaiming historical “quality premium.”

• A little long in the tooth but the Scheme Doc for Frasers Hospitality Trust (FHT SP) was released this morning. 
• It is the standard multi-hundred page document (in this case 502 pages). And it does little other than tell the same weak story as the announcement did.
• But the price is unchanged and the Scheme Meeting is 10 September 2022. This looks like it will be a done deal. 

• It seems clear that Kakao Bank’s situation is not good as the block deal risk exposure has increased. Additional disposable volume is 15% owned by the non-strategic institutional shareholders.
• The factor that will reverse this, flow-wise, is MSCI’s float adjustment. But chances are low. So, we’d better maintain a short position betting on Kakao Bank’s further correction.
• Nevertheless, if that happens, Kakao Bank will welcome additional passive flows equal to the amount of passive money currently parked, which is a major event causing a significant passive impact.

• Ptb Group Ltd (PTB AU) entered a scheme implementation deed (SID) with Precision Aviation Group (PAG). The offer comprises A$1.595 + dividend up to A$0.03 per share (total of A$1.625).
• The offer price is attractive. The key conditions are shareholder approvals and FIRB approval. The scheme meeting is on 16 November. 
• This is a done deal. At last close and for the 2 December payment, the gross and annualised spread to the offer + div is 3.8% and 13.5%, respectively.

• The inclusion of China Shenhua Energy Co H (1088 HK), Chow Tai Fook Jewellery (1929 HK), Hansoh Pharmaceutical (3692 HK) and Baidu (9888 HK) takes us to 73 index constituents.
• Changes to the stocks, number of shares, float and capping result in an estimated one-way turnover of 5.09% and will result in a one-way trade of HK$10,562m.
• There are large shorts on Chow Tai Fook Jewellery (1929 HK) and Hansoh Pharmaceutical (3692 HK) and there could be some short covering from now to implementation.

• Sunac China Holdings (1918 HK) is still suspended from trading and could be deleted from the index in July and replaced by SenseTime Group (20 HK) or PetroChina (857 HK). 
• SenseTime (20 HK) or PetroChina (857 HK), Great Wall (2333 HK) and Zhongsheng (881 HK) could replace Haidilao (6862 HK), CPIC (2601 HK) and Alibaba Health (241 HK) in September.
• There will be buying on SenseTime Group (20 HK) from HSCEI INDEX and HSTECH INDEX trackers. But there is also a big lock-up expiry on 29 June.

• Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
• There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others. 
• A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

• Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
• Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
• Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS). 

• LX Semicon (108320 KS) is looking to transfer from the KOSDAQ market to the KOSPI market. Shareholder meeting is 23 September and the transfer will happen soon after if approved.
• LX Semicon (108320 KS) will be deleted from the KOSDAQ 150 Index on the suspension date. There is zero chance of the stock being included in the Kospi 200 Index.
• Nextin (348210 KS) is a high probability inclusion to the KOSDAQ 150 Index in December but could be an early inclusion in  September to replace LX Semicon (108320 KS).

• LX Semicon announced that its board approved KOSPI migration on August 17. This migration requires shareholder approval, and a shareholder meeting will be scheduled for September 23.
• The outflow of KOSDAQ 150 is estimated to be -1.37x ADTV. A passive impact of this magnitude should cause a price movement of at least 3%p.
• But LX Semicon’s GICS sector won’t change after the KOSPI migration. We should refrain from trading with expectations for the possibility of KOSPI 200 inclusion at this point.

• Giordano International (709 HK) has announced 1H22 net profit of HK$97mn compared to  HK$60mn in 1H21.
• Of interest is the declaration of an interim dividend of HK$0.085/share.
• The ex-dividend date is the 20 September. Whether you get the dividend plus the Offer Price depends when the Offer closes (or is extended), and/or whether the Offer turns Unconditional.

• The Ping An AH premium has moved from 1-2% to near 10% over the last month while the HSAHP Index has stayed around the same level.
• The Ping AH premium is now nearing the level from where reversals take place. Interim results on 23 August could be a trigger for a reversal.
• Northbound Stock Connect holdings on the A-shares have been decreasing, while Southbound Stock Connect holdings on the H-shares have been increasing over the last month.

• Japan Excellent (8987 JP) has been the worst-performing Office J-REIT amongst the existing crop since the end of 2019.
• Today, we got news of a possible flow event – a buyer.
• There is room here for Japan Excellent to outperform over the next several months.

• ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
• The institutional part of the entitlement offer saw a strong take up and the retail take up was within our expectations as well.
• In this note, we will talk about the retail shortfall bookbuild and other updates since our last note.

• Giordano International (709 HK)’s 1H22 net profit of HK$97 million was within the HK$91-101 million positive profit range. The IFA noted that interims do not change its advice.
• The Board surprisingly declared an interim dividend of HK$0.085 per share. As the ex-div falls after the final closing date, shareholders who accept the offer will not receive the dividend. 
• The incrementally positive outlook and dividend highlight Giordano’s value. The results have pushed our deal break/intrinsic value to align with the VGO price. 

• Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
• There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others. 
• A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

• Past the midway mark in the review period, we see 18 potential changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the December rebalance.
• We estimate a one-way turnover of 3.32% at the December rebalance leading to a one-way trade of CNY 8.55bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index over the last few months, with the outperformance widening over the last few weeks.

• In June-July I warned of a reinvestment trade into S-REITs due to the S$2.0-3.0bn cash-out by investors in Mapletree North Asia Commercial Trust and sellers into the SPHREIT Chain Offer.
• Many investors who would need to re-allocate. The trade was to buy major S-REITs. From my last insight, a basket is up 5.3%. MCT has already topped out vs peers.
• The question is…. is there still a trade left to run?

• In February 2022, I discussed why Appier Group (4180 JP) could be an interesting TOPIX Inclusion Candidate in TOPIX Inclusion Pre-Event: Appier Group (4180 JP) 
• Earlier this month, I reiterated my view in TOPIX Inclusions: Who Is Ready (Aug 2022) identifying Appier Group as the best pick among all current TOPIX Inclusion candidates.
• Since my last insight, the share price has risen sharply and that has important implications for the company’s Prime market ambitions.

• Vidente (121800 KS) has not submitted its semiannual reports and has been labeled as an ‘Administrative Issue’. This means deletion from the KOSDAQ 150 Index (KOSDQ150 INDEX) on 19 August.
• Hancom Inc (030520 KS) was the highest ranked stock to not be included in the index at the June rebalance. It will now be included in the index.
• Passive funds will need to buy KRW 8.8bn of Hancom Inc (030520 KS) while selling KRW 11.2bn of Vidente (121800 KS). 

• June 27 call to sell strength in line and showing increasing downside pressure below the 185 support (now resistance).
• Dual top at 210 induced a turn well under trendline resistance. Break of bear wedge support confirmed the macro sell signal.
• Below 166 targets 140 where a stall in the decline/bounce is due (resistance near 160-66) but expected to give way for a test on the 110 low zone.

• NEC is geared into two mega-trends that will drive 9% CAGR in EBITDA through 2025 
• NEC is a beneficiary of DX (digital transformation) in Japan and global 5G, which are both just starting to take off 
• NEC Investment Day may be short-term catalyst, but it is the undervaluation relative to the long-term opportunity that is mispriced 

• MSCI Korea’s August QIR features one deletion: SK Telecom. But Woori Financial, HYBE, and LG Energy will also present a notable impact as they face float rate changes.
• We should consider executing flow trading on these names, even SKT, towards the effective date as much as possible, as the flow magnitude wouldn’t be enough to act proactively.
• It’s been witnessed that SK Telecom’s recall and liquidation of short positions have been made preemptively this time, minimizing the risk of price distortion on the effective date.

• Bain Capital Private Equity launched a deal for Net Marketing (6175 JP) at a 63% premium. 
• That should be enough to get it done on its own, despite coming below the IPO price of 5yrs ago. 
• In any case, Shareholder Structure makes this a completely done deal.

• Over 80% of the way through the review period for the December rebalance, we see 7 stocks in inclusion/exclusion zone. However, there can be a maximum of 5 changes.
• We estimate a one-way turnover of 3.9% at the December rebalance leading to a one-way trade of CNY 2.85bn.
• The potential adds have outperformed the potential deletes and the SSE50 Index (SSE50 INDEX) by a wide margin over the last few months.

• Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
• The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
• I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.

• 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.

• Reuters this afternoon carried an article that Tencent (700 HK) was seeking to divest “US$24bn” (17%) of $78bn market cap delivery company Meituan (3690 HK) by year-end to mollify domestic regulators.
• Tencent would seek to launch a share sale within 2022 “if market conditions are favourable.” Meituan shares tanked 9%, immediately.
• The article suggests disposal via block sale (faster than negotiating with a private buyer), odd given Tencent’s Q1 2022 experience with the JD.com unwind. But it leads to BIG flows.

• Entities related to noted Japanese activist Murakami Yoshiaki have bought 11.5-15% of Jafco Co Ltd (8595 JP) in recent weeks; JAFCO has gotten upset and announced defensive measures.
• Murakami wants JAFCO to sell its large stake in Nomura Research Institute Ltd (4307 JP) and buy back shares. JAFCO is saving that stake for a rainy day.
• The shares have popped. There is a poison pill EGM Record Date coming. It’s worth thinking through the implications.

• Yashili International Holdings (1230 HK) independent shareholders unanimously approved the proposed transactions at the 16 August EGM, a crucial step for China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
• The remaining pre-condition is the completion of the 25% Yashili acquisition. The completion conditions suggest that this pre-condition is low risk and will likely be completed soon.
• The value test is only applicable to the scheme. At last close and for a November completion, the gross and annualised spread to the offer is 8.1% and 29.6%, respectively.

• Tencent (700 HK)‘s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
• There are 10 listed companies where Tencent (700 HK)‘s holding is over US$1bn. Some stakes are more likely to be sold than others. 
• A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.

• Past the midway mark in the review period, we see 18 potential changes to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) at the December rebalance.
• We estimate a one-way turnover of 3.32% at the December rebalance leading to a one-way trade of CNY 8.55bn.
• The potential adds have outperformed the potential deletes and the Shanghai Shenzhen CSI 300 Index over the last few months, with the outperformance widening over the last few weeks.

• ANZ announced a US$2.4bn (A$3.5bn) raising via a renounceable entitlement offer to part fund the purchase of Suncorp Bank in Jul 2022.
• The institutional part of the entitlement offer saw a strong take up and the shares have held up well since the deal was announced.
• In this note, we will talk about the upcoming retail shortfall bookbuild and other updates since our last note.

• CTG Duty Free Group has filed for a HKEx listing and plans to raise net proceeds of US$1.98bn at the midpoint of the IPO price range of HK$143.5-165.5 per share.
• The company’s indicative IPO price range is at a 27-37% discount to the company’s last close of RMB194.75 per share.
• In this insight, we discuss our key concerns on CTG’s financials and our thoughts on the company’s valuation.

• Investors are overly pessimistic, but China may already be a contrarian ‘buy’ 
• Latest economic data show positive surprises. GDP momentum is rising but investor positioning data evidence another big cut in exposure to China
• Monetary policy stable and supportive. No sign of credit bust, or boom. Great potential for policy ‘pivot’ later in 2022

• Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn. 
• A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them. 
• The conclusions are surprising, and lead to one clear trading idea. 

• CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
• Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
• CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.

• MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
• There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
• Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

• Jardine Matheson Holdings (JM SP) (JMH) has shed ~8% since MSCI said it was cutting the conglomerate’s weighing in two indices.
• The reweighting follows the cancellation of the 59% shareholding in JMH held by Jardine Strategic Holdings (JS SP), which was privatised last year.
• I see the discount to NAV at ~40%, right at the 12-month -2 STD level. JMH bought back ~149mn shares in the 1Q22, paying ~US$59/share, 17% above the current price.

• On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK). 
• The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.  
• The Composite Document is now out with a first close on the 5 September.  The Offer Price has now been declared final. That’s a surprise.

• Express parcels increased by 8% YoY in China in July.
• TikTok was still the top non-game app in the world in July.
• Meituan raised its prices of bike sharing on August 10.

• At the indicated price range, or 24.8-28.6x PER for FY22F and 16.7-19.2x for FY23F, the H-share IPO of China Tourism Group Duty Free Corp (601888 CH) is not attractive enough. 
• 2Q22 net profit is worse than it appears. Recent Sanya lockdown has wiped off half of the summer peak season which may even negatively affect demand during Golden Week.
• Consensus forecasts are too optimistic and there may be another 15% downside. Given current macroenvironment, market volatility and earnings uncertainty, risk outweighs return even at the low-end of price range.

• This offering is a 100% stockholder allocation with forfeited shares going to the public. There will be 9.56M new shares at a capital increase of nearly 9%.
• We should note that the largest shareholder may again do the same trick. He may block-deal a 1% stake and use the proceeds to participate in this offering.
• A massive release volume and a 25% discount rate may cause a severe pricing distortion, leading to arb trading openings.

• As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly ‘smart’ vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
• This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it’s doing even better.
• This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.

• 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.

• As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
• Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
• All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

• China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$2.5bn in its H-share listing in Hong Kong.
• As per Frost & Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
• In this note, we talk about the deal pricing and run the deal through our ECM framework.

• Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn. 
• A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them. 
• The conclusions are surprising, and lead to one clear trading idea. 

• A news report has indicated that SEBI is looking to tighten criteria used for inclusion and continued availability of stocks in the Futures & Options (F&O) segment of the market.
• Our analysis shows 30 stocks could be deleted from the F&O segment while another 12 are close to deletion zone. If applied objectively, 22 stocks could be added to F&O.
• Deletion from the F&O segment could see two stocks dropped from the Nifty Next 50 Index while inclusion in F&O could see two stocks added to the NIFTY Index.

• MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
• There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
• Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

• CTG Duty Free (1880 HK) is looking to sell up to 118.176m shares to raise up to US$2.5bn. Pricing at HK$143.5-165.5/share is a 38.6%-29.2% discount to CTG Duty Free (601888).
• Between 32-37% of the total offer size is being taken by 9 cornerstone investors and they are locked in for 6 months from listing date (expected 25 August).
• CTG Duty Free (1880 HK) could be added to MSCI China in November, FTSE All-World and FTSE China 50 in March. Southbound Stock Connect could come online on 19 September.

• 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, China Tourism launched its US$2.5bn IPO. 
• There were no major placements this week and it likely to remain that way in the near future owing to it being earnings season.

• We analyse the changes of A/H premium on 142 stocks over the last week. The average A/H premium of 142 A/H stocks are 116.5%, increased by 3.0ppt over last week.
• The average A/H premium changed by 3.0ppt week on week, led by Real Estate, financials, and consumer discretionary sectors.
• We highlight A/H premium changes of Great Wall Motor, Guangzhou Auto, Hisense Home, Tianqi Lithium, Jiangxi Copper, Angang Steel, Maanshan Iron, BBMG, Alcoa, Zoomlion, Cansino, Holly Futures, and ABC. 

• With the Reference Period for the September 2022 Rebalance nearing its end, we take a final look at the potential index changes for ASX 300, 200, 100, 50, and 20.
• AVZ Minerals (AVZ AU) and Firefinch Ltd (FFX AU) are both members of the ASX Index family and are currently suspended from trading. There could be index consequences here.
• Based on current data, I expect 7 ADDs/DELs for the ASX 200 Index and 22 ADDs and 18 DELs for the ASX 300 Index.

• On the 23 June, the Cheng family made an underwhelming voluntary conditional Offer of $1.88/share for Giordano International (709 HK). 
• The Offer is conditional on the family getting to more than 50% via tendering, and the Cheng’s (and concert parties) control 24.57%.  
• The Composite Document is now out with a first close on the 5 September.  The Offer Price has now been declared final. That’s a surprise.

• Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true. 
• The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early. 
• This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications

• This morning – 26 July – Alibaba (ADR) (BABA US) / Alibaba Group (9988 HK) issued an announcement it would pursue a primary listing on the HKEX.
• When Alibaba listed in NY, it was on ADRs. When it listed in HK, it was the shares underlying the ADRs but it was a quickie secondary listing.
• It will now seek a dual primary listing as others have. This will make BABA Southbound-eligible and will slightly improve BABA’s HSI funding trade prospects in future. 

• As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
• Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
• All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

• 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 Holding Foreign Companies Accountable Act (HFCAA) could result in China ADRs being delisted in 2024. The Accelerated HFCAA, if passed, will bring that date ahead to 2023.
• FTSE has announced its implementation plan to migrate the China ADRs in its indices to the local listings using an accelerated schedule.
• Expect a lot more secondary listings/ dual primary listing in Hong Kong over the next few months. The increase free float market cap could keep a lid on prices.

• We still have the chance to become eligible. We will still receive the rights if we buy Posco International next Tuesday. But we will exercise them at ₩20,590, NOT ₩27,801.
• Given that there is little cancellation risk, we can capitalize on the price falling below the appraisal price by opening both Long and Short at the same price.
• We close Short if the price goes under ₩20,590 and fix the arb spread by exercising the rights with Long.

• This is now the third Int’l Compass/third week in a row where we are discussing an increasing number of country indexes experiencing bullish 3.5-9-month downtrend reversals.
• Importantly, all of the previously mentioned indexes are holding above their breakout levels (i.e., there has yet to be any failed breakouts).
• Now, the U.S. dollar (DXY) is starting to show early signs of topping. We continue to believe that global equities are going through a bottoming process.

• On 12 August, the South Korean government finally gave a presidential pardon to Samsung’s heir Lee Jae-Yong.
• With Lee Jae-Yong given the presidential pardon, there is an increasing likelihood that the Samsung Group could become more aggressive in making major global M&As in the next several years.
• Three major M&As that Samsung could make in the next several years include ARM, Infineon, and NXP Semiconductor. 

• MSCI announced the changes to its indices prior to market open on 12 August. Most changes were expected, while the non-inclusion of Gcl Poly Energy (3800 HK) was a surprise.
• There are a bunch of announcement on the coming Friday for the Hang Seng and FTSE indices. Plus the review cutoff for the S&P/ASX family of indices.
• Outflows from KraneShares CSI China Internet ETF (KWEB US) continued for yet another week, while there were inflows to iShares Core MSCI Pacific ETF (IPAC US).

• Mayne Pharma (MYX AU) is selling its U.S.-based CDMO business, Metrics Contract Services for $475 million. The transaction is expected to close by the end of 2022.
• Allowing for reinvestment needs, the net proceeds from the sale will be used to repay the syndicated debt facility and return surplus capital to shareholders.
• Combined oral contraceptive Nextstellis remains the company’s most significant commercial opportunity. While Nextstellis was launched in the U.S. in June 2021, Mayne has launched Nextstellis in Australia in July 2022.  

• As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
• Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
• All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

• Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.  
• Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers. 
• The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.

• Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
• Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
• There will be passive selling once the buyback is complete, but the stocks should run up prior to that.

• China Tourism Group Duty Free Corporation Limited (CDF) now aims to raise US$2-3bn in its H-share listing in Hong Kong.
• As per Frost & Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
• In this note, we will talk about the recent updates from its revised filings and revisit valuations.

• Japan Post Insurance (7181 JP) reported soft Q1 Tuesday on negative existing policy premium growth and higher (covid-related) underwriting claims costs. Guidance was unchanged but JPI also announced a buyback.
• The buyback structure is designed to keep Japan Post Holdings (6178 JP) under 50% to continue to abide by the strictures and goals of the Japan Postal Privatisation Act.
• 50% or more will be done in a ToSTNeT-3 buyback Thursday morning 12 August. The rest will be bought on market. Impact is non-negligible. And JPI is cheap cheap cheap.

• China Tourism Group Duty Free Corporation Limited (CDF) aims to raise around US$2.5bn in its H-share listing in Hong Kong.
• As per Frost & Sullivan, CDF had 92.3% market share by retail revenue in China duty-free merchandise sales in 2020.
• In this note, we talk about the deal pricing and run the deal through our ECM framework.

• Swire Pacific (19 HK) has announced a “small” buyback at HK$4bn, but it is a material portion of ADV.  
• What remains unknown is how the buyback will be split.  The split will only be known once buyback volumes are announced. 
• Swire is trading cheap at a look-through forward P/B of 0.28x compared to its five-year average of 0.38x, and the two-year average pre-Covid of 0.48x. 

• Yesterday Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced a buyback of shares according to the 2022 AGM mandates approved in May, limited to HK$4bn. 
• A reader question prompted me to look more closely at the rules. There are nuances NOT covered in the announcements. So I work through them. 
• The conclusions are surprising, and lead to one clear trading idea. 

• TSMC’s ADR premium has fallen substantially and is at the lower end of its 3-year range
• ASE’s ADR premium is in contrast near the upper end of its range
• ChipMOS ADRs are now trading at a discount to their Taiwan shares

• China Tourism Group Duty Free Corp Ltd (601888 CH) has launched its H Share listing at HK$143.50-165.50 per share. Pricing is on 18 August and listing on 25 August.
• In CTG Duty Free H Share Listing: Another False Dawn?, we noted that on a fundamental view, we would prefer to remain on the sidelines.
• Our valuation analysis suggests that the A Shares are trading close to fair value and the H Share valuation is unattractive compared to peers. We would pass on the listing.

• Softbank today confirmed that the stories circulating about Softbank having hedged a decent portion – 200+mm shares – of its BABA position were true. 
• The market expectation had been that these pre-paid forwards would be held for another two years. The announcement today is that they will be physically settled early. 
• This means the entire accounting effect – worth ¥4.6trln – will hit the income statement (and balance sheet) in the current quarter. There are investment and index implications

• Softbank will settle all of its forward derivative contracts on Alibaba by the end of September, representing 242mn ADRs. Some had years to run so this is truly surprising
• We estimate Softbank Group (9984 JP) raised $35b selling BABA-linked derivatives since mid-2020, which would imply average proceeds per ADR of $145 versus the $91 it trades at now
• But early settlement also has us wondering when the other show will drop and if that is related to global tech, China or Alibaba specifically 

• As announced, there are 8 adds and 3 deletes for the MSCI Standard indices in Asia Pacific. To trade, there are 8 adds and 2 deletes.
• Most of the changes are inline with what we forecast. The non-inclusion of Gcl Poly Energy Holdings Limited (3800 HK) is the big surprise, though that could change.
• All the adds in China are potential inclusions to the FTSE All-World Index in September and that will add to the passive inflows on the stocks.

• Swire Pacific (A) (19 HK)/Swire Pacific Ltd-Cl B (87 HK) has announced a HK$4bn buyback. While that is 6.5% of shares out, it is over 15% of real float.
• Swire Pacific (A) (19 HK) was trading at a 50% discount to NAV and near the widest level over the last few years.
• There will be passive selling once the buyback is complete, but the stocks should run up prior to that.

• Today Swire Pacific (A) (19 HK) (and Swire Pacific Ltd-Cl B (87 HK)) announced earnings, and they announced a large (HK$4bn) buyback.  
• Details are somewhat thin, but there are a bunch of possibilities, and all of them should have non-negligible impact on Swire and Swire vs Peers. 
• The immediate market response was to send them up 10% on the day. That puts both at somewhere near one-year highs, but the discount to NAV is still big.

• Emperador (EMI SP) currently is just outside the inclusion zone for the FTSE Straits Times Index (STI) (STI INDEX) and a small price bump is needed for index inclusion.
• If Emperador (EMI SP) is added to the index, Comfortdelgro Corp (CD SP) could be deleted as the lowest ranked index constituent.
• Emperador (EMP PM) is a high probability inclusion to the FTSE All-World Index at the September SAIR and the stock could move higher over the next couple of weeks.

• Japan Post Insurance (7181 JP) reported soft Q1 Tuesday on negative existing policy premium growth and higher (covid-related) underwriting claims costs. Guidance was unchanged but JPI also announced a buyback.
• The buyback structure is designed to keep Japan Post Holdings (6178 JP) under 50% to continue to abide by the strictures and goals of the Japan Postal Privatisation Act.
• 50% or more will be done in a ToSTNeT-3 buyback Thursday morning 12 August. The rest will be bought on market. Impact is non-negligible. And JPI is cheap cheap cheap.

• Toyo Corp (8151 JP) is a smallcap electronics firm specialising in sensors/testers/loggers for industrial and data system processes, large scale antennae systems, high tech medical equipment, remote sensing equipment, etc. 
• They have seen their (extraordinarily seasonal) revenues go mostly nowhere over the past ten years, but they have, until recently, accumulated cash and securities. 
• On 10 August, the company announced a LARGE buyback of up to 8.44% of shares out. The details suggest

• China Tourism Group Duty Free Corporation Limited (CDF) is gearing up to launch Hong Kong’s largest listing so far this year, with a reported deal size of around US$2-3bn.
• Prior to the deal launch, we’ve had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
• Overall, most of the recent A/H listings haven’t done much over the first month.

• Reportedly, the board of the National Broadcasting and Telecommunications Commission (NBTC), Thailand’s telco regulator, has called for a more detailed analysis of the deal’s impact on competition, consumers and industry. 
• This follows recent calls by Thailand’s opposition Move Forward party urging the NBTC to block Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB)‘s merger.
• Both DTAC and True are trading tight to terms – especially True. Time to take down borrow.