Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The 2023 Version of <strong>JAPAN PASSIVE: Who Owns What?</strong> where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. </li>
<li>Even if you do not "play" index changes, understanding impact is important. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.</li>
<li>Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. </li>
</ul>


The 2023 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. Advantest is up 100% in 3mos. Existing passive ownership and new passive buying were crucial to that performance.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks in Japan. 


Equity Derivatives Broker - Delta One Japan, Vantage Capital Markets Japan

François-Xavier Pustoc'h

Equity Derivatives Broker - Delta One Japan

Independent Financial Broker

Vantage Capital Markets Japan

We provide world class financial solutions to our extensive institutional client base including rapidly growing corporations, leading investment banks, commercial banks, asset managers, private equity funds, family offices and hedge funds.

Our services include capital market offerings and placements, wholesale brokerage and execution of cash and derivative products (both listed and OTC) across a range of asset classes.

VCM has offices in London, Hong Kong, Tokyo and Dubai from where we service our global client base. Our strength lies in the experience and quality of our teams, supported by excellent operations and infrastructure.

<ul>
<li>On January 31st, Nikkei released a note “<a href="https://indexes.nikkei.co.jp/nkave/archives/news/20250131E_1.pdf" target="_blank" rel="noopener">Regarding the Capping Ratio of Fast Retailing in Nikkei </a><a href="https://indexes.nikkei.co.jp/nkave/archives/news/20250131E_1.pdf" target="_blank" rel="noopener">225</a>” about the change in capping ratio of Fast Retailing (9983.T) in the Nikkei 225 index.</li>
<li>As per the <a href="https://indexes.nikkei.co.jp/nkave/archives/file/nikkei_stock_average_guidebook_en.pdf" target="_blank" rel="noopener">Nikkei Stock Average Index Guidebook</a> (cf. below) the capping ratio will be changed from 0.9 to 0.8 from April 1st, 2025.</li>
<li>The change in the capping ratio is meant to change the weight of the shares from the current 11.18% to below the cap threshold of 10%. </li>
</ul>


On January 31st, Nikkei released a note “Regarding the Capping Ratio of Fast Retailing in Nikkei 225” about the change in capping ratio of Fast Retailing (9983.T) in the Nikkei 225 index.
As per the Nikkei Stock Average Index Guidebook (cf. below) the capping ratio will be changed from 0.9 to 0.8 from April 1st, 2025.
The change in the capping ratio is meant to change the weight of the shares from the current 11.18% to below the cap threshold of 10%. 


Capping Ratio of Fast Retailing in Nikkei 225

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

Index Rebalance

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 Index</a> March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.</li>
<li>Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing</a>'s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.</li>
</ul>


The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.

Fast Retailing's PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.


Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

<ul>
<li>Up to 12 stocks could be deleted from global passive portfolios in August. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.</li>
<li>There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.</li>
<li>The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names. </li>
</ul>


Up to 12 stocks could be deleted from global passive portfolios in August. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names. 


Japan - Passive Selling in a Few Weeks & Shorts Build Up

<ul>
<li>There are a bunch of stocks that have underperformed the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> and their peers and could be deleted from global passive portfolios in August.</li>
<li>The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.</li>
<li>Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.</li>
</ul>


There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.


Japan - Yet Another Big Round of Passive Selling Expected in August

Japan

Nissan Chemical Industries, Ltd. produces a variety of chemical products, ranging from basic chemicals to functional chemical products.  The Company also manufactures agrochemicals and pharmaceutical products.

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Nissan Chemical Industries (4021 JP)

JAPAN PASSIVE: Who Owns What 2023?

This is the annual JAPAN PASSIVE: Who Owns What report for 2023. It is a comprehensive of the major index exposures in Japan by index tracker type,...

Travis Lundy

Capping Ratio of Fast Retailing in Nikkei 225

On January 31st, Nikkei released a note “Regarding the Capping Ratio of Fast Retailing in Nikkei 225” about the change in capping ratio of Fast...

Vantage Capital Markets Japan

Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes

There should be 1 change, could be 3 due to sector balance. The impact on the potential changes varies from 8-38x ADV. Fast Retailing could see a...

Brian Freitas

Japan - Passive Selling in a Few Weeks & Shorts Build Up

There are a bunch of stocks in Japan that could be sold by passive global investors in August. Shorts have increased on nearly all stocks and the...

Brian Freitas

Japan - Yet Another Big Round of Passive Selling Expected in August

There are a bunch of stocks in Japan that could be sold by passive global investors in August. Shorts have increased on all stocks and the extent...

Brian Freitas

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