Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<div><p>On average, J-REITs have historically outperformed the TSEREIT Index in the wake of follow-on equity offerings, with win rates exceeding 80%.</p></div><div><p>While the offerings are mostly of interest to primary market investors, we also see such offerings as catalysts for strong secondary market performance making these events worth tracking for secondary market investors too. We have previously discussed the historical pre- and post-offering performance of JREITs in <a href="https://www.smartkarma.com/insights/j-reit-offering-primer-get-ready-for-offering-season-2021" target="_blank" data-smartkarma-citation="insights:46416" rel="noopener">J-REIT Offering Primer: Get Ready for Offering Season 2021</a>. In this insight, we evaluate the attractiveness of the latest candidate to launch such a follow-on equity offering - <a href="https://www.smartkarma.com/entities/activia-properties-inc" target="_blank" data-smartkarma-citation="entities:9498:1" rel="noopener">Activia Properties (3279 JP)</a> ("API")- with greater emphasis on the potential for strong post-offering secondary market performance. </p></div><p><a href="https://www.smartkarma.com/entities/activia-properties-inc" target="_blank" data-smartkarma-citation="entities:9498:1" rel="noopener">Activia Properties (3279 JP)</a> announced a follow-on equity offering today after market-close to fund part of their recent property acquisition. The primary offer quantity is 49,030 units. In addition, there will also be an over-allotment quantity of 2,500 units. The total size of this offering could be roughly ¥23bn (~US$210mn). </p><p><em>More below the fold. </em></p>

On average, J-REITs have historically outperformed the TSEREIT Index in the wake of follow-on equity offerings, with win rates exceeding 80%.While the offerings are mostly of interest to primary market investors, we also see such offerings as catalysts for strong secondary market performance making these events worth tracking for secondary market investors too. We have previously discussed the historical pre- and post-offering performance of JREITs in J-REIT Offering Primer: Get Ready for Offering Season 2021. In this insight, we evaluate the attractiveness of the latest candidate to launch such a follow-on equity offering - Activia Properties (3279 JP) ("API")- with greater emphasis on the potential for strong post-offering secondary market performance. Activia Properties (3279 JP) announced a follow-on equity offering today after market-close to fund part of their recent property acquisition. The primary offer quantity is 49,030 units. In addition, there will also be an over-allotment quantity of 2,500 units. The total size of this offering could be roughly ¥23bn (~US$210mn). More below the fold. 

Activia Properties (3279 JP): Offering Could Trigger Outperformance Vs TSEREIT Index

Daiwa House Reit Investment / Event-Driven

<p>J-REITs have historically outperformed the TSEREIT Index on average in the wake of follow-on equity offerings, with win rates exceeding 80%.</p><p>While the offerings are mostly of interest to primary market investors, we also see such offerings as catalysts for strong secondary market performance making these events worth tracking for secondary market investors too. We have previously discussed the historical pre- and post-offering performance of JREITs in <em><a href="https://www.smartkarma.com/insights/j-reit-offering-primer-get-ready-for-offering-season-2021" target="_blank" data-smartkarma-citation="insights:46416" rel="noopener">J-REIT Offering Primer: Get Ready for Offering Season 2021</a></em>. In this insight, we evaluate the attractiveness of the latest candidate to launch such a follow-on equity offerings - <a href="https://www.smartkarma.com/entities/daiwa-house-reit-investment-cb077099-8006-45e4-83cf-6ac7f19cd384" target="_blank" data-smartkarma-citation="entities:11283:1" rel="noopener">Daiwa House Reit Investment (8984 JP)</a><strong>("DHR")</strong> - with greater emphasis on the potential for strong post-offering secondary market performance. </p><p>DHR announced a <a href="https://www.daiwahouse-reit.co.jp/file/en-ir_news-3926cc869b501ab42a4918d64facbc098f8c6b97.pdf" target="_blank" rel="noopener">follow-on equity offering</a> after the close on 18th August 2021 to fund part of their recent property acquisition. The primary offer quantity is 115,000 units. In addition, there will also be an over-allotment quantity of 9,000 units. The total size of this offering could be roughly ¥37.7bn (~US$343mn) which is slightly larger than some of the recent offerings by other JREITs. </p><p>The Offer Price will be determined between 25th August 2021 and 27th August 2021 (typically it has been the first day of this window for most JREIT offerings) and the two business days following the Offer Price Determination Day ("Pricing Date") will be the Application Date. </p><p><em>More below the fold. </em></p>

J-REITs have historically outperformed the TSEREIT Index on average in the wake of follow-on equity offerings, with win rates exceeding 80%.While the offerings are mostly of interest to primary market investors, we also see such offerings as catalysts for strong secondary market performance making these events worth tracking for secondary market investors too. We have previously discussed the historical pre- and post-offering performance of JREITs in J-REIT Offering Primer: Get Ready for Offering Season 2021. In this insight, we evaluate the attractiveness of the latest candidate to launch such a follow-on equity offerings - Daiwa House Reit Investment (8984 JP)("DHR") - with greater emphasis on the potential for strong post-offering secondary market performance. DHR announced a follow-on equity offering after the close on 18th August 2021 to fund part of their recent property acquisition. The primary offer quantity is 115,000 units. In addition, there will also be an over-allotment quantity of 9,000 units. The total size of this offering could be roughly ¥37.7bn (~US$343mn) which is slightly larger than some of the recent offerings by other JREITs. The Offer Price will be determined between 25th August 2021 and 27th August 2021 (typically it has been the first day of this window for most JREIT offerings) and the two business days following the Offer Price Determination Day ("Pricing Date") will be the Application Date. More below the fold. 

Daiwa House REIT Investment (8984 JP): Expect A Correction Before Pricing Date

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/weimob-inc" target="_blank" data-smartkarma-citation="entities:27394:1" rel="noopener">Weimob Inc. (2013 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>. Shorts increased in the Materials, Communication Services and Industrials sectors, while decreasing in the Consumer Discretionary, Financials and Information Technology sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a>, <a href="https://www.smartkarma.com/entities/shimizu-corp" target="_blank" data-smartkarma-citation="entities:8530:1" rel="noopener">Shimizu Corp (1803 JP)</a>, <a href="https://www.smartkarma.com/entities/premier-investment-corp" target="_blank" data-smartkarma-citation="entities:19428:1" rel="noopener">Premier Investment (8956 JP)</a>, <a href="https://www.smartkarma.com/entities/screen-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5563:1" rel="noopener">SCREEN Holdings (7735 JP)</a> and <a href="https://www.smartkarma.com/entities/activia-properties-inc" target="_blank" data-smartkarma-citation="entities:9498:1" rel="noopener">Activia Properties (3279 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" data-smartkarma-citation="entities:12926:1" rel="noopener">Kubota Corp (6326 JP)</a>, <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a>, <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a>, <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> and <a href="https://www.smartkarma.com/entities/pharma-foods-international" target="_blank" data-smartkarma-citation="entities:10530:1" rel="noopener">Pharma Foods International (2929 JP)</a>. Shorts increased in the Information Technology, Real Estate and Materials sectors while decreasing in the Industrials and Consumer Discretionary sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>, <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electro-mechanics-co" target="_blank" data-smartkarma-citation="entities:539:1" rel="noopener">Samsung Electro Mechanics Co, Ltd. (009150 KS)</a> and <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a>.</p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/yang-ming-marine-transport" target="_blank" data-smartkarma-citation="entities:8502:1" rel="noopener">Yang Ming Marine Transport (2609 TT)</a>, <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">AU Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/yuanta-financial-holding-co" target="_blank" data-smartkarma-citation="entities:685:1" rel="noopener">Yuanta Financial Holding Co (2885 TT)</a>, <a href="https://www.smartkarma.com/entities/quanta-computer-inc" target="_blank" data-smartkarma-citation="entities:2754:1" rel="noopener">Quanta Computer (2382 TT)</a> and <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> while shorts covered on <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/china-steel-corp" target="_blank" data-smartkarma-citation="entities:962:1" rel="noopener">China Steel (2002 TT)</a>, <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 TT)</a>, <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a> and <a href="https://www.smartkarma.com/entities/wisdom-marine-lines-co-ltd" target="_blank" data-smartkarma-citation="entities:10001:1" rel="noopener">Wisdom Marine Lines (2637 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Kuaishou Technology (1024 HK), JD.com Inc. (9618 HK), Weimob Inc. (2013 HK), Wuxi Biologics (2269 HK) and Tencent (700 HK) while there was short covering on Meituan (3690 HK), Geely Auto (175 HK), Ping An Insurance (H) (2318 HK), Sunny Optical (2382 HK) and Alibaba Group (9988 HK). Shorts increased in the Materials, Communication Services and Industrials sectors, while decreasing in the Consumer Discretionary, Financials and Information Technology sectors.In Japan, stocks increased on Showa Denko K.K. (4004 JP), Shimizu Corp (1803 JP), Premier Investment (8956 JP), SCREEN Holdings (7735 JP) and Activia Properties (3279 JP) while there was short covering on Kubota Corp (6326 JP), ASICS Corp (7936 JP), Nabtesco Corp (6268 JP), Cocokara Fine (3098 JP) and Pharma Foods International (2929 JP). Shorts increased in the Information Technology, Real Estate and Materials sectors while decreasing in the Industrials and Consumer Discretionary sectors.In Korea, shorts increased on SK Innovation (096770 KS), SK Hynix (000660 KS), Hyundai Motor Co (005380 KS), Celltrion Inc (068270 KS) and Samsung Electronics (005930 KS) while shorts were covered on Doosan Heavy Industries &amp; Construction (034020 KS), HMM Co., Ltd. (011200 KS), Samsung SDI (006400 KS), Samsung Electro Mechanics Co, Ltd. (009150 KS) and Oci Co Ltd (010060 KS).In Taiwan, shorts increased on Yang Ming Marine Transport (2609 TT), AU Optronics (2409 TT), Yuanta Financial Holding Co (2885 TT), Quanta Computer (2382 TT) and United Microelectronics Corp (2303 TT) while shorts covered on Evergreen Marine Corp (2603 TT), China Steel (2002 TT), Wan Hai Lines (2615 TT), Pegatron Corp (4938 TT) and Wisdom Marine Lines (2637 TT). 

Asia Shorts: Kuaishou, JD, Geely, Alibaba, Shimizu, Kubota, ASICS, SK Inno, Hynix, Doosan, Yang Ming

Alpha-Centric ESG Research

Kyle Rudden

<p>Announcements keep on coming from <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the <a href="https://www.smartkarma.com/entities/sgx-nikkei-esg-reit-index-futures" target="_blank" data-smartkarma-citation="entities:33480:1" rel="noopener">SGX Nikkei ESG-REIT Index Futures (JRTA INDEX)</a> contract.</p><p>For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.</p><p>Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.</p><p>Think about it. One billion buildings in the world already, and expected to double by 2060.</p>

Announcements keep on coming from Singapore Exchange (SGX SP) and its SGX FIRST sustainable investing platform. Weeks after launching Climate Impact X – SGX's carbon exchange joint venture with DBS, Standard Chartered, and Temasek – the exchange announced (on 14 June) the launch of the SGX Nikkei ESG-REIT Index Futures (JRTA INDEX) contract.For SGX, the launch further solidifies its position as Asia's leading financial exchange for all things sustainable investing and finance (and of course, REITs). For investors, the ESG-REIT Index futures contract expands the menu of products for REIT-related ESG investing. That is far more significant than it sounds; Real Estate is a sleeping ESG giant of sorts, and investment products are lacking.Therein lies the second of two goals for this Insight. The first is, rather obviously, to delve into the SGX Nikkei ESG-REIT product – the underlying index and futures contract. The second is to take it as an opportunity to broach an important, but often underrated, topic – the relationships between ESG and the Real Estate sector, including REITs. Much of it positive, or at least potentially so.Think about it. One billion buildings in the world already, and expected to double by 2060.

SGX Nikkei ESG-REIT Index Futures Launch Is an Ideal Backdrop for an Important Topic: ESG and REITs

<p>In 2020, we have so far witnessed 15 follow-on JREIT offerings cumulatively raising JPY463bn (~US$4.5bn). This has been something of a weak year, understandable because of the covid-19 crisis which hit equity market and JREIT prices in March, and keeping them soft for months afterwards.</p>
<p>Historically, January and February are the busiest months, for a variety of reasons.</p>
<p>From 2015-2020, on average, there have been ~7 offerings from the top 40 JREITs announced within the first two months of the calendar year accounting for roughly a third of the total number of offerings in each year during that period. </p>
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Source: Quiddity, Capital IQ (Data)</div>
In this insight, we take a look at the prospective candidates who are most likely to launch follow-on equity offerings near-term, and we look at the performance characteristics of J-REIT follow-on offerings and the likelihood of profit from participating in the event.</section>

In 2020, we have so far witnessed 15 follow-on JREIT offerings cumulatively raising JPY463bn (~US$4.5bn). This has been something of a weak year, understandable because of the covid-19 crisis which hit equity market and JREIT prices in March, and keeping them soft for months afterwards.
Historically, January and February are the busiest months, for a variety of reasons.
From 2015-2020, on average, there have been ~7 offerings from the top 40 JREITs announced within the first two months of the calendar year accounting for roughly a third of the total number of offerings in each year during that period. 









Source: Quiddity, Capital IQ (Data)
In this insight, we take a look at the prospective candidates who are most likely to launch follow-on equity offerings near-term, and we look at the performance characteristics of J-REIT follow-on offerings and the likelihood of profit from participating in the event.

J-REIT Offering Primer: Get Ready for Offering Season 2021

Japan

Activia Properties, Inc. is a real estate investment trust (J-REIT). The company mainly invests in commercial and office buildings in the Tokyo metropolitan area.

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Activia Properties (3279 JP)