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• The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
• I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
• The impact on Real World Float is non-negligible. One name in particular is deserving of attention. 

• The review period for the September rebalance of the KRX New Deal indices started on 1 May and will run till 29 July. Implementation is on 8 September.
• Intellian Technologies (189300 KS) and Seojin System Co, Ltd. (178320 KS) could replace Danal Co Ltd (064260 KS) and Kcp Co Ltd (060250 KS) in the Internet Index.
• Nexon Games (225570 KS) could replace Devsisters (194480 KS) in the Game Index, and KMW Co Ltd (032500 KS) could replace AfreecaTV (067160 KS) in the BBIG Index.

• ANZ got about half its equity raise done, with the shortfall bookbuild only being 5% of the institutional total and clearing above TERP. Now the retail rights.
• Risk management mechanisms suggest rights trade expensive to stock near-term, then cheapen, as ANZ shares experience some selling pressure from arbs.
• But ANZ is cheap. Relative weakness on FY2-FY3 EPS forecasts has contributed to 25% underperformance vs Peers since January but Relative Multiple Deterioration has contributed more.

• Link Administration (LNK AU) announced it has agreed to Dye & Durham’s latest $4.81/share offer, which is 13% below its initial $5.50/share approach last December.
• Link shareholders may also receive an additional A$0.13 from the sale of the Banking and Credit Management (BCM) business under the latest offer.
• This transaction is still subject to Australian Competition and Consumer Commission clearance, which should happen once D&D undertakes to offload its GlobalX ops.

• Overnight we got news that the EU had cleared the purchase of Hitachi Transport System (9086 JP) by the KKR bidco.
• What started as an expected five-month process to gain regulatory clearances should now be down to two months. Risk arb is trading wide, but this is an “easy” deal.
• Now trading at 10% annualised to the cash-out date implied by a 30-Sep start date, this is a “good risk.”

• Emperador (EMI SP) started trading on the SGX (SGX SP) on 14 July and so far meets all criteria to be included to the FTSE Straits Times Index (STI INDEX).
• However, it is still a borderline inclusion on free float, market cap and liquidity and will need to pass all three criteria to be added to the index in September.
• If added to the STI, the inclusion will take place on the same day as the potential inclusion of Emperador (EMP PM) in the FTSE All-World Index.

• Group Success Investments is looking to raise up to US$133m by trimming its holdings in Xtep International (1368 HK).
• We can’t say that the deal is expected and short interest on the stock hasn’t been creeping up as well. 
• While the deal won’t be a large one, representing just 5.7 days of three month ADV, the firm’s last deal hasn’t done well.

• Life Insurance Corp of India (LIC) (LICI IN) and Tata Power (TPWR IN) will replace Nmdc Ltd (NMDC IN) and Piramal Enterprises (PIEL IN) at the close on 5 August.
• In September, Adani Wilmar (AWLTD IN), Indian Railway Catering and Tourism (IRCTC IN), Bharat Electronics (BHE IN), Hindustan Aeronautics Ltd (HNAL IN) and Mphasis Ltd (MPHL IN) are potential inclusions.
• At over 4 days of deliverable volume to trade, the impact is especially large on  Bharat Electronics (BHE IN), Zydus Lifesciences Ltd (ZYDUSLIF IN) and Lupin Ltd (LPC IN). 

• Link Administration (LNK AU) has entered a revised scheme implementation deed with Dye&Durham/DND at A$4.81 per share. The scheme meeting will be held in mid-August.
• Shareholders will be supportive due to deal fatigue, and the offer price is 11% above the undisturbed price and at the low end of the original IE valuation range.
• Regulatory approvals are a key risk. DND is presumably confident in its undertakings to gain ACCC approval. At last close, the gross spread is 7.8%.

• Kotak Mahindra Bank (KMB) was deleted from the FTSE All-World Index following the introduction of the minimum headroom rule. With foreign room below 20%, the stock was not added back.
• The latest shareholding pattern as of 30 June shows foreign room at 20.01%. This means that Kotak Mahindra Bank (KMB IN) should be added to the index in September.
• However, the inclusion will take place in a staggered manner. Subject to foreign room staying above 20%, the inflows will come over the next couple of years.

• The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
• I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
• The impact on Real World Float is non-negligible. One name in particular is deserving of attention. 

• Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
• This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack. 
• And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

• Overnight, Toshiba Corp (6502 JP) has released an update “Progress Report on Discussions with Potential Investors and Sponsors. Four advance to the second round, including both PE and strategic investors.  
• Nikkei reported those advancing were Bain, CVC, Brookfield, and JIP-JIC. Blackstone did not advance. Yesterday, Reuters reported that KKR had declined to bid, but might join another bid.
• Now parties will start due diligence, and Toshiba will examine bids for “measures to enhance corporate value” and certainty of execution (given national security-sensitive issues, and funding). 

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• The Nikkei reported yesterday that Toshiba had winnowed the pool of potential partners down to four candidates. 
• All four names (Bain, CVC, Brookfield and Japan Industrial Partners/Japan Investment Corp) have been connected to Toshiba previously. 
• We wonder whether this pool of candidates points to a higher likelihood of a strategic partnership rather than a full buyout.

• In this insight, we take a look at the potential index changes for S&P ASX 300, 200, 100, 50, and 20 in the September 2022 Rebalance.
• I expect there to be 7 ADDs and 7 DELs for the ASX 200 Index and 23 ADDs and 18 DELs for the ASX 300 Index.
• Based on recent price performance, I believe the Potential ADDs could outperform the Potential DELs over the next few weeks.

• Back on the 4 April, asset manager Pendal Group (PDL AU) announced a non-binding proposal from investment firm Perpetual Ltd (PPT AU).
• As widely expected, Pendal’s board unanimously determined that the indicative cash/scrip Offer significantly undervalued the current and future value of the company.
• Pendal said yesterday that it is still in discussions with Perpetual regarding a potential transition.  Using yesterday’s close, and applying the same terms, backs out an indicative price of A$5.67/share. 

• DB was notified of the conversion to a holding company by the Korea FTC. DB must complete the conversion to a holding company by January 1, 2024.
• DB has no option but to ECO DB HiTek, the same trick employed for LG Energy Solution, to meet the 30% stake obligation for DB HiTek.
• There are still opportunities for outright shorting on DB HiTek as DB will likely announce DB HiTek split before August 12.

• In this insight, we take a look at the names leading the race to become ADDs/DELs for the Taiwan 50 and Taiwan Mid-Cap 100 Indices for the September 2022 Rebalance.
• In addition to the Indices specified above, I have also discussed the upcoming index change expectations for the FTSE TWSE Taiwan Dividend+ Index.
• I also discussed some interesting LONG-SHORT trades involving some potential ADDs and DELs.

• On 19 July, Cooke, the spurned suitor, increased its stake in Tassal (TGR AU) to 10.49%. The average price to build the 10.49% stake is A$4.14 per share. 
• Cooke also hired Phil Wiese, the former CEO of Huon Aquaculture (HUO AU), as a MD in Canada. Mr Wiese is well qualified to run Tassal should Cooke acquire it. 
• With shareholders happy to sell to Cooke despite the Board’s assertions that the previous bid undervalued Tassal, a new offer will force the Board to engage.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• The Nikkei 225 Annual Review is in September based on end-July data. Jumping the gun, I propose 3 additions and 3 deletions with granular data and details offered per sector.
• I see ¥600bn to buy and a funding trade of 99% of that. There are 15+ names with more than 1 day of ADV to sell (funding only).
• The impact on Real World Float is non-negligible. One name in particular is deserving of attention. 

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) this morning made a flurry of announcements. First and foremost, ANZ withdrew from discussions on MYOB.
• Q3 earnings ended 30 June saw revenue +5%, lending up 3%yoy, markets revenue +7%, NIM up 3bp (rising rates helps). Basel3 APRA Level2/Level1 CET1 Ratios were 11.1%/10.4%. 
• But the big news: ANZ is buying SunCorp Bank from SunCorp (SUN AU) for A$4.9bn (1.3x NTA), and will raise A$3.5bn through a 1 for 15 renounceable rights offering.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO. The stock was listed on 27th Jan 22. Its six-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• With over 90% of the review period complete, Adani Enterprises (ADE IN) is a high probability inclusion to the NIFTY Index (NIFTY INDEX) and will replace Shree Cement (SRCM IN). 
• We estimate passive NIFTY Index (NIFTY INDEX) trackers will need to buy nearly 7% of the real float on Adani Enterprises (ADE IN) and the stock should continue to outperform. 
• Adani Green Energy (ADANIGR), Adani Transmission (ADANIT) and Avenue Supermarts Ltd (DMART) have higher average free float market caps and could be included if added to the F&O segment.

• Swire Pacific (A) (19 HK) expands its beverages ops, its best-performing unlisted segment, via the acquisition of Coke bottling operations in Vietnam and Cambodia. 
• Preceding my comments on Swire – and Swire Properties (1972 HK) and Cathay Pacific Airways (293 HK) – are the current setup/unwind tables for Asia-Pacific Holdcos. 
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Yesterday I published Nikkei 225 Sep Annual Review Predictions – 3 In, 3 Out. Assuming correct, and we move the last 6mos of data 6mos forward, March23 Rebal is below.
• This too is 3 in, 3 out. But it is complicated. “Required” changes would move the sector balance further out of whack. 
• And while some of the trades are “interesting”, the rebal is smaller and the bigger question is “What comes after that?”

• Over 96% of the way through the review period, we see 1 change using a 12 month minimum listing history, and 5 changes using a 6 month minimum listing history.
• We expect the index committee to continue using the shorter minimum listing history since the potential adds have much larger market caps than the potential deletes.
• The potential adds have outperformed the potential deletes over the last month and there could be more once the current consolidation is complete.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) this morning made a flurry of announcements. First and foremost, ANZ withdrew from discussions on MYOB.
• Q3 earnings ended 30 June saw revenue +5%, lending up 3%yoy, markets revenue +7%, NIM up 3bp (rising rates helps). Basel3 APRA Level2/Level1 CET1 Ratios were 11.1%/10.4%. 
• But the big news: ANZ is buying SunCorp Bank from SunCorp (SUN AU) for A$4.9bn (1.3x NTA), and will raise A$3.5bn through a 1 for 15 renounceable rights offering.

• GlaxoSmithKline PLC (GSK LN) shareholders on 6 July overwhelmingly approved the long-awaited demerger of its GSK Consumer Healthcare unit newly-named Haleon (HLN LN) earlier this month. 
• While not originally universally-desired (Elliott wanted a sale), it was overwhelmingly approved. Haleon lists Monday 18 July with a £40+bn valuation resulting in FTSE 100 and Stoxx Europe 600 changes.
• GSK investors get 1 share of Haleon for every share of GSK held. Post-demerger, the public owns 55%, Pfizer ~32%, GSK ~13%. Lockup ends 10 November. There will be overhang.

• ANZ aims to raise around US$2.4bn (A$3.5bn) via a renounceable entitlement offer to part fund the purchase of Suncorp Bank.
• In our view, neither the fundraising nor the acquisition appear to be particularly well flagged. ANZ’s withdrawal from MYOB talks might be the most positive thing about the announcement.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• The KRX will list 20 new single stock futures (SSF) and 5 single stock options (SSO) next Monday, July 25, including LG Energy Solution (373220 KS).
• It seems very probable that the replacement demand for futures (short) will increase substantially due to a possible saturation of the loan market.
• This situation, coupled with local pensions’ basis trading, can lead to a significantly distorted basis. We should do basis trading or play pair trading (with LG Chem) on this.

• Ten months after China’s SAMR torpedoed Blackstone’s Offer, SOHO China (410 HK) has fallen 61%. Its portfolio of high-quality properties are currently trading at 0.2x P/B. 
• Recent woes concern electricity price violations, tax evasion, and now an investigation into CFO Ni Kuiyang’s alleged insider trading. 
• SOHO is trading cheap on a standalone basis; and to peers. This is still not a good reason to get involved.

• Tianqi Lithium (002466 CH) trades at an 84% premium to Tianqi Lithium (9696 HK) and the AH premium has been volatile since listing.
• Tianqi Lithium (002466 CH)‘s potential inclusion in the MSCI China and FTSE All-World Index could keep the AH premium at a higher level as compared to its peers.
• Tianqi Lithium (9696 HK)‘s inclusion to Southbound Stock Connect in August and potential inclusion to the MSCI and FTSE indices will help keep a lid on the AH premium.

• LG Energy Solution (LGES) raised US$10.8bn in its South Korea IPO. The stock was listed on 27th Jan 22. Its six-month lockup is set to expire soon.
• LGES is the EV battery unit of LG Chem. The company is a major supplier to customers including Tesla and General Motors.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website. 
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. However, such disclosures are by no means an absolute. 
• These insights also flags those companies where shares have been pledged, both recently and ongoing.

• Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
• With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base. 
• But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• Berkshire appears set to exit BYD (1211 HK) partially or in full. But why signal to market well in advance?
• United Tractors (UNTR IJ)‘s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.
• The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.

• 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.
• The highest spreads are 21Vianet Group (VNET US), Alliance Aviation Services (AQZ AU), Ramsay Health Care (RHC AU), Australian Unity Office Fund (AOF AU), Link Administration (LNK AU). 
• The lowest gross spreads are Hwa Hong Corp (HWAH SP), Uniti Group Ltd (UWL AU), Excelpoint Technology (EXLP SP), Giordano International (709 HK), Dongzheng Automotive Finance (2718 HK). 

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• Tianqi’s soggy debut in Hong Kong despite its wide discount will probably put Hong Kong ECM back in snooze mode for a while
• There were no major placements this week and its likely to remain that was as we approach the half-yearly results season.

• Australia and New Zealand Banking Group (ANZ) (ANZ AU) has announced that it is acquiring Suncorp Bank from Suncorp (SUN AU) for an all cash consideration of A$4.9bn.
• ANZ will fund the Suncorp Bank acquisition by a fully underwritten 1:15 pro rata accelerated renounceable entitlement offer to raise A$3.5bn at A$18.9/share, a 12% discount to TERP.
• A small increase in the Herfindahl-Hirschman Index (HHI) for the mortgage lending market will make it difficult for ACCC to deny approval for the acquisition.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea and Chinese ADRs.
• On the ECM front, Tianqi Lithium (9696 HK) listed its H Shares, WCP (WCP KS) plans to launch a KRW900 billion (US$692 million) IPO in August. 
• Event-Driven developments at Link Administration (LNK AU), DTAC/True, BYD (1211 HK), Genting Singapore (GENS SP), Tassal (TGR AU), Resapp Health (RAP AU), Dongzheng Automotive Finance (2718 HK).      

• WCP will enter the KOSDAQ 150 with a passive inflow of about 530K shares, 1.5% of SO, at the close on December 8.
• WCP will be added to the TIGER ETF on October 14 with a passive inflow of about 345K shares, 1.0% of SO, at the close on October 14.
• From a flow trading perspective, the flow volume is certainly substantial enough to design a passive flow trading setup in conjunction with the lockup release schedule.

• The Uniti Group Ltd (UWL AU) Scheme Meeting was held Friday, approving both General Scheme Resolution and Rollover Shares Scheme unanimously. The MBD Bidco deal is done. 
• Friday after the close, the S&P DJI Global Index team announced that Uniti would be deleted from the ASX200 21 July at the close.
• Gold miner West African Resources (WAF AU) was chosen as the replacement. It’s a decent-sized inclusion and should have been well-flagged last week but may have been ignored.

• GlaxoSmithKline PLC (GSK LN) shareholders on 6 July overwhelmingly approved the long-awaited demerger of its GSK Consumer Healthcare unit newly-named Haleon (HLN LN) earlier this month. 
• While not originally universally-desired (Elliott wanted a sale), it was overwhelmingly approved. Haleon lists Monday 18 July with a £40+bn valuation resulting in FTSE 100 and Stoxx Europe 600 changes.
• GSK investors get 1 share of Haleon for every share of GSK held. Post-demerger, the public owns 55%, Pfizer ~32%, GSK ~13%. Lockup ends 10 November. There will be overhang.

• Just days after BYD (1211 HK) surpassed Tesla Motors (TSLA US) as the world’s largest electric vehicle producer by sales, is Warren Buffet cashing in his chips?
• 225mn shares of BYD  – 7.73% of the H shares – moved into CCASS yesterday. These are Berkshire Hathaway’s shares. 
• For a shareholder who has kept his holding in share certificates for 13 years, this development suggests the possibility of a partial or full exit. 

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Bitcoin displays a high conviction bear wedge that will break lower with momentum, and bleed into the global risk cycle given the recent tight correlation.
• Previous bear wedge breakdowns have been reliable and resulted in high momentum drops. Platform illiquidity/closures a system risk. 
• MACD set for a bear turn from resistance that concurs with a decline toward the 15,600 target.

For our next Webinar, we are delighted to welcome back Analyst Henry Soediarko, who will go through his latest stock picks in the ASEAN region, and offer his outlook for 2H 2022.

The webinar will be hosted on Wednesday, 20 July 2022, 17:00 SGT/HKT.

Henry Soediarko is a Long & Short Investment Ideas generator for Asian Equities with 10 years of experience in a Hedge fund focused on bottom-up ideas, searching out mispriced ideas and misunderstood investment theses. He provides on-the-ground insights in various Asian markets with a sway towards ASEAN. 

• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• We estimate passive trackers will need to sell 45.3m shares (A$226m; 10.2 days of ADV) on Uniti Group Ltd (UWL AU) at the close on 21 July.
• With over 10 days of ADV to buy from passive trackers and only 4 days to implementation, West African Resources (WAF AU) could outperform its peers till 21 July.

• Hyundai Motor (005380 KS) launched its long-awaited Ioniq 6 on 14 July. This is the first EV sedan by Hyundai Motor.
• Ioniq 6 could be a big winner for Hyundai Motor. Among all the features of Ioniq 6, the driving range is the biggest improvement versus Ioniq 5. 
• The combination of attractive price, sleek design, and higher driving range is likely to result in a strong demand for Ioniq 6.

• Alkem Laboratories Ltd (ALKEM IN) earns 71% of total revenue from domestic business, which is the most important growth lever of the company. Domestic business revenue grew 29% in FY22.
• The company dominates the anti-infective segment, through its mega brands, with a market share of 12.9%. In the chronic segment, Alkem is growing fast to emerge as a significant player.
• Regular new product launches, including biosimilars, should continue to contribute to Alkem’s growth and fill portfolio gaps. Entry into new therapies would also be an important growth engine, going forward.

• WCP will enter the KOSDAQ 150 with a passive inflow of about 530K shares, 1.5% of SO, at the close on December 8.
• WCP will be added to the TIGER ETF on October 14 with a passive inflow of about 345K shares, 1.0% of SO, at the close on October 14.
• From a flow trading perspective, the flow volume is certainly substantial enough to design a passive flow trading setup in conjunction with the lockup release schedule.

• The FTSE TWSE Taiwan Dividend+ Index is interesting since there are multiple moving parts and is not widely tracked. We take an early look at potential changes in December.
• West African Resources (WAF AU) will replace Uniti Group Ltd (UWL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 21 July.
• There have been some large inflows to the Vanguard FTSE Pacific ETF (VPL US) in the last few weeks.

• SOCAR revised its IPO prospectus. What has changed is the date when the book building for the institutional investors starts (4 August). 
• The IPO price range remains at 34,000 won to 45,000 won. The IPO base offering size is also between US$120 million to US$159 million. 
• We maintain our base case valuation of Socar (target price of 27,967 won), which is 18% lower than the low end of the IPO price range of 34,000 won. 

• There could be one change to the S&P/ASX 200 (AS51 INDEX) in July following the privatisation of Uniti Group Ltd (UWL AU). 
• Then there will be a whole bunch of changes to the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index in September as part of the regular rebalance. 
• There is large short interest on a couple of the potential adds and a lot of the potential deletes. That will drive stock price moves closer to implementation.

• 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.

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Bloomberg is reporting Genting Singapore (GENS SP) has been attracting suitors, including MGM Resorts International (MGM US).
• With Macau all-but emulating a Shanghai-style lockdown, including the recent shuttering of all casinos, large global casino operators will be looking to diversify their revenue base. 
• But with Singapore potentially emerging as Asia’s go-to gaming destination going forward, it’s unlikely the Lim family will exit their Genting flagship.

• Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
• The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
• Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.

• The Healthcare Realty Trust (HR US) / Healthcare Trust Of America (HTA US) transaction is heading towards climax with the critical HR and HTA shareholder votes set for July 15 
• The odds are that activist investor and HR shareholder will not succeed in derailing the deal which it opposes from closing on July 20 
• Notwithstanding the significant spread compression seen in recent weeks, there remains an attractive short-term opportunity for the arbs  

• WCP aims to raise around US$690m via selling a mix of primary and secondary shares in its Korean IPO.
• WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries
• In this note, we will talk about the not-so-positive aspects of the deal.

• The ETF operator (TIGER)’s index tracking conformity was high enough to create trading opportunities aimed at the rebalancing flow.
• Flow/Price directions were mostly synched with only a few exceptions. Of particular importance is that the price impact was substantial compared to the passive flow size. 
• The yield of the tradable names suitable for a basket based on the projected passive impact size was 4.51%.

• Bloomberg reported MGM Resorts International (MGM US) recently approached Genting Singapore (GENS SP)’s controlling shareholder, Genting Bhd (GENT MK), to express an interest in a deal.  
• While the discussions with MGM Resorts have fizzled out, other potential suitors are reportedly interested. Shares are in a trading halt pending a response to an SGX query.
• Genting Singapore trades at a discount to peers. Precedent transactions suggest a potential privatisation price of at least S$1.00 per share, a 33% premium to the last close. 

• Inside is a recap of movements in the last week relating to the Hong Kong Stock Exchange -Shanghai and Shenzhen Northbound Connect facilities, broken down by company and industry.
• Overall, net outflow over the past week was ~US$1.28bn, split between Shanghai (-US$0.85bn) and Shenzhen (-US$0.43bn)
• The largest inflows were into Aier Eye Hospital (300015 CH) and Shenzhen Mindray  (300760 CH). The largest outflows were in China Merchants Bank (600036 CH) and Sungrow Power (300274 CH).

• The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
• We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
• There will be large flows on the current index names at the September rebalance due to capping.

• 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.

• Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
• The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
• Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

• Foreign selling has continued on HDFC Limited (HDFC IN) and HDFC Bank (HDFCB IN) and foreign room on the proforma merged entity is 17.23%.
• Higher than 15% foreign room will require passive MSCI trackers to buy 209m shares (US$4.05bn) of HDFC Bank (HDFCB IN) at the time of merger implementation.
• If foreign selling continues and foreign room on the merged entity exceeds 20%, there will be buying from passive FTSE trackers as well.

• Today is the rebalancing trading day of WISE’s three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
• The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
• Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), & CJ ENM (035760 KS)

• Astra International (ASII IJ) is coming up cheap after United Tractors (UNTR IJ) positively responded to its large share buyback announcement. Yet both companies are looking attractive here. 
• Preceding my comments on Astra and United Tractor are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• According to Reuters, Alibaba Group (9988 HK)’s supermarket chain Freshippo is seeking to raise around $400-500m from a fresh funding round which values the loss making company at $6.0bn.
• The fact that Alibaba is willing to dilute ownership at a significant discount to its expected valuation is an additional sign that Alibaba could be running into some financial difficulties.
• Having slashed spending budgets of its smaller investments and more down rounds expected in ventures that are considered too big to fail, we anticipate a challenging time ahead.   

• We use a simple framework to analyse 3 exchange tokens’ value and we find FTT and LEO tokens are decent bear market plays.
• For crypto exchanges, buying the token is the only way for non-VC investors to gain exposure to the growth. Private valuations could differ greatly from the publicly traded valuations. 
• While exchange tokens are the easiest to understand and most equity-like in the traditional finance sense, we can also further apply the framework to tokens on other protocols.

• Sungeel Hitech announced its IPO book building results. The IPO price has been determined at 50,000 won, higher than the high end of IPO price of 47,500 won.
• The demand ratio for Sungeel Hitech IPO was 2,269.7 to 1 which broke all time records in terms of highest ever demand ratio for a Korean IPO.
• Our base case valuation is implied price per won of 70,992 won per share, which represents 42% higher than the IPO price of 50,000 won.

• The EURO STOXX 50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
• Historically, these Rebalance events have had significant volume impact and they generally involve large cap names. 
• In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2022.

• 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

• The FTSE TWSE Taiwan Dividend+ Index is a funky one that weights stocks by dividend yield. Given dependency on dividends and stock prices, the potential adds/deletes can change often.
• We currently see three changes to the index in December, with another stock very close to deletion zone. Given the difference in market cap and dividend yield, impacts are big.
• There will be large flows on the current index names at the September rebalance due to capping.

• The increase of 225.2 million CCASS shares deposited with Citibank matches Berkshire Hathaway Inc Cl B (BRK/B US)’s stake. BYD (1211 HK) closed -12% down on speculation of a selldown.   
• The H Share recently touched all-time highs and trades at a significant premium to historical multiples. BYD has a recent history of a selldown by a substantial shareholder (Himalaya Capital).
• Berkshire has made a 33x gain on its BYD investment, excluding dividends. Taking money off the table would align with Berkshire’s value investing mandate.

• Yesterday, United Tractors (UNTR IJ) announced a large share buyback. It’s a big buyback but perhaps not as big as the headlines (which say “up to 20%”). 
• The buyback is for 5 trillion rupiah which is about 5% of market cap, and will be conducted on-market over the next three months.
• Looking at the early market reaction, my opinion is that the market does not seem to understand the consequences.

• Glory Star New Media Group H (GSMG US) (GSMG), a leading digital media platform and content-driven e-commerce company in China, has entered a definitive privatisation transaction with Cheers Inc.
• Cheers is offering US$1.55/share, in cash, a 76% premium to GSMG’s undisturbed price, and a 22% premium to the US$1.27/share proposal from GSMG’s CEO Bing Zhang. 
• The buyer consortium owns ~72.8% of shares out and this Offer requires a two-thirds vote from shareholders. This looks done with expected completion this year. But it’s a low-balled Offer.

• This post explains how the rebalancing of the KOSPI 200 and KOSDAQ 150 is calculated. So, please note that this post does not have any investment recommendations.
• Both indices have the same calculation method. However, the thresholds are different. They screen stocks using the three metrics: Market Cap, ADTV, and Market Cap Ranking (buffer).
• The concept itself of these three metrics is not difficult. However, ranking it cumulatively often confuses us.

• In this insight, we discuss a pair trade involving going long on Inner Mongolia Yili Industrial Group (A) (600887 CH)(“Yili”) and going short on China Mengniu Dairy Co (2319 HK).
• Yili has more impressive financial metrics than China Mengniu Dairy in terms of ROE, operating margins, and sales growth. However, Yili is trading at lower EV/EBITDA than China Mengniu Dairy.
• Yili should be trading at premium valuation than China Mengniu Dairy. Therefore, we believe Yili is well poised to outperform China Mengniu Dairy’s share price in the next 12 months. 

• 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.

• WCP (WCP KS), a lithium-ion batteries separator company, is planning to launch a KRW900 billion (US$692 million) IPO in August.  
• The price range of KRW80,000-100,000 implies a market cap of KRW2.7-3.4 trillion (US$2.1-2.6 billion).
• WCP has attractive fundamentals due to the favourable demand/supply balance, technology, strong revenue growth and improving margins. 

• Today is the rebalancing trading day of WISE’s three major theme indexes. The ETF operator (TIGER) is expected to start rebalancing trading after 2 pm.
• The prediction accuracy of the top market cap stocks is relatively high. So, we should target these big boys with a flow at 0.2x or higher relative to ADTV.
• Names in a basket trade setup: Ecopro BM (247540 KS), SK IE Technology (361610 KS), Solus Advanced Materials (336370 KS), Hana Tour Service (039130 KS), & CJ ENM (035760 KS)

• Just days after BYD (1211 HK) surpassed Tesla Motors (TSLA US) as the world’s largest electric vehicle producer by sales, is Warren Buffet cashing in his chips?
• 225mn shares of BYD  – 7.73% of the H shares – moved into CCASS yesterday. These are Berkshire Hathaway’s shares. 
• For a shareholder who has kept his holding in share certificates for 13 years, this development suggests the possibility of a partial or full exit. 

• Emperador Inc (EMP PM) is pre-marketing a secondary listing on the SGX IPO by raising US$300-500 million, according to press reports. 
• Emperador has established a track record of decent revenue growth, profitability and cash generation over the years. 
• While the fundamentals are solid the valuation looks full in comparison to peers and historical trading ranges. 

For our next Webinar, we are excited to welcome Analysts Said Desaque and Osbert Tang, CFA , who will go over China’s latest potential $220 billion stimulus through a massive sale of special bonds. The Analysts will each present their views on the situation and a Q&A will follow.

The webinar will be hosted on Wednesday, 13 July 2022, 17:00 SGT/HKT.

Said DeSaque is a professional economist with over 33 years of experience covering the global economy, with significant expertise in the US, China, Japan, and emerging markets. He worked with US investment banks for 25 years covering institutional investors in Europe, Middle East, Far East and Australia. He covers financial markets on a multi-asset basis, and has been an independent economist covering the global economy and financial markets for the past 8 years since founding DeSaque Macro Research in London.

Osbert Tang is an equity analyst with over 20 years of experience, focusing on China transport, infrastructure, industrials, and utilities. He has been based in Shanghai since 2003, where he accumulated more than 15 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities.

• Tianqi Lithium (TL) raised around US$2bn via its H-shares listing. It undertakes mining of lithium ore and manufacturing of lithium concentrate, lithium compounds and derivatives.
• TL was the largest producer of mined lithium globally in terms of output in 2020 and ranked third in terms of revenue generated from lithium in 2020.
• In this note, we talk about the updates since our last note, along with the trading dynamics.

• Life Insurance Corp of India (LIC) (LICI IN) and Tata Power (TPWR IN) will be added to the Nifty 100 Index (NSE100 INDEX) and Nifty Next 50 Index (NIFTYJR INDEX). 
• Nmdc Ltd (NMDC IN) will be deleted from the CPSE ETF (CPSEBE IN) and there will be no replacement in the index.
• The NMDC deletion along with capping changes means that there is decent volume (and ADV) to buy on quite a few names in the CPSE ETF (CPSEBE IN).

• The price diversion between LG Chem and LG Energy has deepened considerably over the past two days. The sigma is currently -2.35. It is virtually the most extreme level year-to-date.
• LG Energy’s immediate-term overhang risk will likely offset the upcoming passive inflow event. In addition, the intensity of their price cointegration has not been weakened in recent months.
• Therefore, we should consider setting up reversion trading from this point on, aimed at the lockup release on July 27.

• Tianqi Lithium (002466 CH) priced its H Share at HK$82.00 per share to raise net proceeds of HK$13,062 million (US$1.7 billion). The H Share will start trading tomorrow.
• The H Share listing (HK$82.00) and grey market price (HK$76.50) imply an AH discount of 45% and 49%, respectively. This compares to Ganfeng Lithium (1772 HK)’s current 35.3% AH discount.
• The relative valuation is attractive. At the H Share listing price, Tianqi Lithium (9696 HK)’s H Share trades at a -6% discount to the median peers’ CY2022 P/B multiple.

• The increase of 225.2 million CCASS shares deposited with Citibank matches Berkshire Hathaway Inc Cl B (BRK/B US)’s stake. BYD (1211 HK) closed -12% down on speculation of a selldown.   
• The H Share recently touched all-time highs and trades at a significant premium to historical multiples. BYD has a recent history of a selldown by a substantial shareholder (Himalaya Capital).
• Berkshire has made a 33x gain on its BYD investment, excluding dividends. Taking money off the table would align with Berkshire’s value investing mandate.

• 2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
• Even if you do not “play” index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
• Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 

• We turn bullish on Fast Retail as the current quarter marks the bottom for China sales
• The company continues to surprise in its mastery of gross margins and operating costs
• China is key, but the US is emerging as a new (and profitable) growth driver