Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jan 19, 2025

By January 19, 2025 No Comments
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.

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1. Nikkei 225 Index Rebalance Preview (Mar 2025): SHIFT Splits; Updated Ranking, Capping & Funding

By Brian Freitas, Periscope Analytics

  • The review period for the Nikkei 225 Index March rebalance ends in 3 weeks. There could be one outright change and one or two others driven by sector balance.
  • Shift Inc (3697 JP) will have a 15:1 stock split next week and that puts the stock in the list of potential inclusions over the next couple of rebalances.
  • The recent drop in Fast Retailing (9983 JP)‘s stock price will lead to a single step drop in the PAF. That means less passive selling and a smaller funding buy.

2. Henlius (2696 HK): LVC Won’t Block. Buy Here & On Weakness

By David Blennerhassett, Quiddity Advisors

  • Ahead of Shanghai Henlius Biotech (2696 HK)‘s EGM and Court Meeting on the 22 January, the focus has shifted to Loyal Valley Capital (LVC)’s continued buying in the market.
  • After the close of market last Friday, LVC held 7.8295%, above the 7.826% blocking stake. That % was as at 9th January. I assume LVC are still buying.
  • Yet if you analyse how LVC has traded in and out of Henlius, they are not in it to block. They’re in for the back-end scrip option.  

3. Tokyo Metro (9023 JP): Index Inclusions – Light at the End of the Tunnel

By Brian Freitas, Periscope Analytics

  • Tokyo Metro (9023 JP) listed on 23 October and was added to the TSE Tokyo Price Index TOPIX (TPX INDEX) at the close on 28 November.
  • Tokyo Metro (9023 JP) was not expected to be added to one global index (it was not added), while it was expected to be added to the other (and missed).
  • The stock could be added to one global index in February (its close!) and to the other in June (pretty much a sure thing).

4. Kokusai Electric (6525) – Upcoming Lockup Expiry And BIG Index Demand

By Travis Lundy, Quiddity Advisors

  • Kokusai Electric (6525 JP) was IPOed in September 2023. The stock was cheap. It rose sharply, tripling in 9 months. At the ATH, the pre-IPO owners launched a HUGE secondary.
  • It was like a second IPO. The stock dipped, rallied, plummeted into pricing. Stayed there for two days, and in 6 months, the shares have halved. 
  • Lockup expiry is next week, and there is a likely large index event in ~10 weeks.

5. Henlius (2696 HK): Test of Nerves Awaiting LVC’s Next Move

By Arun George, Global Equity Research Ltd

  • The vote on Fosun Pharma’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) is on 22 January. The gross spread ballooned today due to LVC’s amassing a blocking stake.
  • There are valid arguments for LVC to block the vote or to support the offer. LVC’s trading behaviour over the coming days will point to its voting intentions. 
  • I continue to believe that LVC will support the offer. At the current price and for a 15 February payment, the gross/annualised spread is 9.1%/160%.

6. Murata Manufacturing (6981 JP) – No Immediate Passive Buying Could Lead to More Weakness

By Brian Freitas, Periscope Analytics

  • A group of 7 shareholders are looking to sell 61.3m shares in Murata Manufacturing (6981 JP) to raise JPY 143.8bn (US$916m). That is 3.3% of shares outstanding.
  • The shares are being offered at a price range of JPY 2296-2345.5/share, a discount of 5-7% to the last close of the stock.
  • With the offering less than 5% of shares outstanding and less than US$1bn in size, there is no immediate passive buying and there could be further weakness in the stock.

7. Bloks Group (325 HK): Bumper Listing; Index Inclusion Timeline

By Brian Freitas, Periscope Analytics

  • Bloks Group (1850960D CH) was massively oversubscribed, traded 82% higher on Friday and closed its listing day 40% higher than the IPO price.
  • Bloks Group (1850960D CH) now has a full market cap of US$2.7bn. However, lock-ups and cornerstone allocations result in a much lower free float.
  • Index inclusions could take place in August and September, but the passive buying is a fraction of the number of shares that will come off lock-up expiry in early July.

8. Bain To Launch an MBO for Aircraft Maintenance Co JAMCO (7408) ¥1800 Is Too Cheap

By Travis Lundy, Quiddity Advisors

  • Bain is buying out JAMCO (a long time ago called Itochu Aircraft Maintenance) from Itochu, ANA, Bain’s own portfolio company, and the public. It’s an expected deal. A done deal.
  • It is being done too cheaply. The price is 6x next year’s expected EBIT. This year expected ROE is 22%. Next year could be double that.
  • And the company has more in non-operating financial assets than its net equity. And a lot of really old land assets are not marked up. Just a shame.

9. SHIFT (3697) The Next – Potential Big Index Add

By Travis Lundy, Quiddity Advisors

  • Shift Inc (3697 JP) is a high-growth stock in the software services, testing, consulting, development business. They have a big specialist TAM ahead of them. 
  • Revenue is up 50-fold in 10 years. OP is up 85-fold in that period. Revenue is guided +17.5% in the year to Aug 2025. OP is guided +28%.
  • There is an event coming up shortly which could trigger an imminent index inclusion. It’s worth a look.

10. Hyundai Motor (HYUNDAI IN): Anchor Lock-Up Expiry Increases Float; Index Inclusions Near

By Brian Freitas, Periscope Analytics

  • The lock-up on the second half of the anchor investor allocation for Hyundai Motor India (HYUNDAI IN) ends after market close today and the shares will be available for sale tomorrow.
  • The lock-up expiry further increases free float for the stock and there will be multiple index inclusions over the next few months.
  • The largest index inclusion will be in February, followed by smaller inclusions in March and June. In total, passives will mop up around 16% of the float.