Event-Driven and Index Rebalance

Weekly Top Ten Event-Driven and Index Rebalance – Jun 9, 2024

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. TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade

By Brian Freitas, Periscope Analytics

  • There are 13 changes for the TIP Customized Taiwan Select High Dividend Index in June. The TIP Taiwan Select High Dividend ETF (00919 TW) has an AUM of US$6.4bn.
  • One-Way turnover is estimated at 41% and that will result in a round-trip trade of TWD 168.8bn (US$5.2bn). There are 16 stocks that could have over 4x ADV to trade.
  • The rebalance will be implemented over 8 trading days and the ETF has started trading the stocks last week.

2. HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)

By Brian Freitas, Periscope Analytics

3. Shinko Electric (6967) – Break/Gap Risk Early June 2024 Update

By Travis Lundy, Quiddity Advisors

  • When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
  • Nearly 5mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 12wks ago, recommended taking profits.
  • Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.

4. Teijin (3401 JP): Alternative Play on the Potential Infocom Tender

By Arun George, Global Equity Research Ltd

  • Blackstone (BX US) is widely reported to have agreed to acquire Teijin Ltd (3401 JP)’s 55% stake in Infocom Corp (4348 JP) at a valuation of JPY260 billion. 
  • If the valuation refers to market cap and Teijin shares its tax benefits, Teijin’s sale proceeds are around JPY128 billion, which is 42% of its market cap.
  • However, since 9 May, Teijin shares have been flat vs. Infocom shares are up 63%. Teijin’s medium-term plan suggests that the Infocom proceeds could result in substantial share buybacks.

5. STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability

By Brian Freitas, Periscope Analytics

6. Asia Cement (743 HK): $3.22/Share Offer – Really?

By David Blennerhassett, Quiddity Advisors

  • After Chinese cement play Asia Cement China (743 HK) (ACC) was suspended on the 28th May, a punchy Offer from its parent Asia Cement (1102 TT) was expected. 
  • Not to be. Asia Cement is offering $3.22/share, best & final. A 3.01% discount to last close, ~ 45% premium to undisturbed, and a whopping 37% discount to net cash.
  • Asia Cement plus concert parties hold 73.38%, so a blocking stake at the Court Meeting is 2.662%. One (possible) aspect in Asia Cement’s favour is that ACC is not shortable.  

7. SMFG Cross-Shareholding – At Least US$17bn of Cross-Shareholding to Sell, Planning to Speed It Up

By Sumeet Singh, Aequitas Research

  • Following up on our earlier cross-shareholding notes, in this note we look at Sumitomo Mitsui Financial Group (8316 JP) cross-shareholding.
  • SMFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$17bn.
  • In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

8. China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait

By Xinyao (Criss) Wang

  • The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
  • Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
  • For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.

9. Softbank (9984 JP): This Time, It’s Different

By Victor Galliano, Galliano’s Financials Research

  • Elliott Management has emerged as a 2%+ shareholder in SoftBank group and is driving for share buybacks of upto USD15bn; we see this as a game changer for minority shareholders
  • Recent moves to enhance corporate governance in Japan have taken root, yet we see Softbank group as a laggard on corporate governance which been targeted by an experienced activist
  • Softbank shares trade at a 54% discount to the estimated NAV; an activist like Elliott on board could meaningfully drive shareholder value creation and a narrowing of the NAV discount

10. CK Asset Holdings (1113 HK): First Down, Then Up?

By Brian Freitas, Periscope Analytics

  • CK Asset Holdings (1113 HK) has traded lower recently and shorts have exploded in the stock in the last few months.
  • CK Asset Holdings (1113 HK) has underperformed its peers in the last 6 months and trades cheaper on forward PE and price to book.
  • There will be passive selling in the stock in just over two weeks. There will be positioning, but not enough to meet passive supply. Expect a further move lower.