Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu. </li>
<li>We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.</li>
<li>We like Marubeni's strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile. </li>
</ul>


We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu. 
We believe Marubeni has one of the most attractive valuations among the five major Japanese trading companies in terms of ROE vs. P/B and Itochu is the least attractive.
We like Marubeni's strength in food and agri businesses. Itochu is more dependent on metals, minerals and energy sectors which tend to be more volatile. 


A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).</li>
<li>Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.</li>
<li>We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.</li>
</ul>


The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China (MCHI-US), and China Internet (KWEB-US).
Is this just another bear market rally, or will indexes are able to make a higher low and start a new bull market? Either way, it's a start.
We highlight attractive stocks from a bottoms-up perspective, spanning several Sectors. Over half hail from Japan, where the TOPIX Small index is reversing its downtrend.


Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The second tranche of the FFW methodology change for the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> will be implemented at the close of trading today.</li>
<li>One way flow is ~JPY 745bn and will be spread across ~2170 stocks. The largest inflow will be on <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (9432 JP)</a> and the largest outflow on <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203)</a>.</li>
<li>The stocks with the largest inflows have outperformed the stocks with the largest outflows over the last month and the outperformance could continue going into the last tranche in June.</li>
</ul>


The second tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading today.
One way flow is ~JPY 745bn and will be spread across ~2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203).
The stocks with the largest inflows have outperformed the stocks with the largest outflows over the last month and the outperformance could continue going into the last tranche in June.


Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson Inc (2651 JP)</a> acquired the upmarket supermarket operator, Seijo Ishii, in 2014 for ¥55 billion.</li>
<li>It is now considering plans for an IPO for Seijo next year following a boom in the company's fortunes during the pandemic.</li>
<li>Net profit rose 13% last year and the potential for growth remains strong given the expansion of the wealth market in Japan. </li>
</ul>



Lawson Inc (2651 JP) acquired the upmarket supermarket operator, Seijo Ishii, in 2014 for ¥55 billion.
It is now considering plans for an IPO for Seijo next year following a boom in the company's fortunes during the pandemic.
Net profit rose 13% last year and the potential for growth remains strong given the expansion of the wealth market in Japan. 


<ul>
<li>On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.</li>
<li>From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.</li>
<li>Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.</li>
</ul>


On 7 April, the JPX announced the changes to the Free Float Weights (FFW) for the TOPIX Index. There are some big changes due to the updated FFW methodology.
From April to June, we see a one-way turnover of 2.87% and a one-way trade of ¥2,285bn. Some stocks have opposite way flows in different months.
Stocks with inflows outperformed stocks with outflows from Oct-Dec 2021 before giving up all the gains. These stocks have started to outperform and could continue outperforming over the next quarter.


TOPIX FFW Transition - Big Flows from April to June

Japan

Mitsubishi Corporation is a general trading company.  The Company has business groups such as New Business Initiatives, IT & Electronics, Fuels, Metals, Machinery, Chemicals, Living Essentials, and Professional Services.  Mitsubishi diversifies by satellite communications through a joint venture.

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Mitsubishi Corp (8058 JP)

A Pair Trade of Japanese General Trading Companies: Long Marubeni & Short Itochu

We discuss a pair trade among the major Japanese trading companies. We propose going long on Marubeni Corp and going short on Itochu.

Douglas Kim

Cautiously Optimistic Following Downtrend Reversals; Japan Continues to Lead; Bottoms-Up Stock Rec's

The bear market rally that we were on watch for started last week, confirmed by the bullish reversals on the DAX, Hang Seng, MSCI China $MCHI, and...

Vermilion Research

TOPIX Rebalance: Flows at the Close

The second tranche of the FFW methodology change for the TOPIX Index will be implemented at the close of trading today. One way flow is ~JPY 745bn...

Brian Freitas

Lawson Considering IPO for Seijo Ishii

Lawson may arrange an IPO for its upscale supermarket subsidiary Seijo Ishii, a popular retailer which has doubled in size in the last decade and...

Michael Causton

TOPIX FFW Transition - Big Flows from April to June

Changes to the Topix FFW methodology will result in a turnover of 2.87% & trade of ¥2,285bn from April to June. There is a lot to trade on some...

Brian Freitas

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