Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. </li>
<li>For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. </li>
<li>Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2023.</li>
</ul>


The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. 
For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. 
Every April, the application of this liquidity factor is reviewed by the TSE. In this insight, we take an early look at what could happen in April 2023.


TOPIX Index Upweights: An Early Preview Of "The Big April Basket" 2023

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<ul>
<li>The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn. </li>
<li>There are four ADDs previously discussed: <a href="https://www.smartkarma.com/entities/sun-inc" target="_blank" data-smartkarma-citation="entities:36668:1" rel="noopener">Sun* (4053 JP)</a>, <a href="https://www.smartkarma.com/entities/appier-group-inc" target="_blank" data-smartkarma-citation="entities:32165:1" rel="noopener">Appier Group (4180 JP)</a>, <a href="https://www.smartkarma.com/entities/chubu-steel-plate-co-ltd" target="_blank" data-smartkarma-citation="entities:18535:1" rel="noopener">Chubu Steel Plate (5461 JP)</a>, and <a href="https://www.smartkarma.com/entities/chubu-steel-plate-co-ltd" target="_blank" data-smartkarma-citation="entities:18535:1" rel="noopener">Chubu Steel Plate (5461 JP)</a>. </li>
<li>There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with &gt;$10mm AND &gt;3 days ADV to sell.</li>
</ul>


The January 2023 TOPIX FFW Trade was announced today. The two-way trade is worth about ¥325bn. 
There are four ADDs previously discussed: Sun* (4053 JP), Appier Group (4180 JP), Chubu Steel Plate (5461 JP), and Chubu Steel Plate (5461 JP). 
There are 57 downweights, 11 upweights (but only seven FFW buys). The rest is reverse funding to buy. There are 10 names with &gt;$10mm AND &gt;3 days ADV to sell.


January TOPIX FFW Review - Some Big Sells

<ul>
<li>In mid-December, digital UX creation agency (90% of revenues) and "talent agency" (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.</li>
<li>This was in Janaghan's "Not Ready" list in <a href="https://www.smartkarma.com/insights/topix-inclusions-who-is-ready-dec-2022" target="_blank" data-smartkarma-citation="insights:85784" rel="noopener">TOPIX Inclusions: Who Is Ready (Dec 2022)</a> because it did not meet two of the requirements. But it turns out it did.</li>
<li>This is therefore a TOPIX inclusion event at end-January 2023.</li>
</ul>


In mid-December, digital UX creation agency (90% of revenues) and "talent agency" (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
This was in Janaghan's "Not Ready" list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
This is therefore a TOPIX inclusion event at end-January 2023.


Sun* (Sun Asterisk - 4053 JP) TOPIX Inclusion Event

<ul>
<li>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>This insight is a follow-up to <a href="https://www.smartkarma.com/insights/topix-inclusions-who-is-ready-dec-2022" target="_blank" data-smartkarma-citation="insights:85784" rel="noopener">TOPIX Inclusions: Who Is Ready (Dec 2022)</a>. </li>
<li>Our latest top pick for TOPIX Inclusion pre-events is <a href="https://www.smartkarma.com/entities/artspark-holdings-inc" target="_blank" data-smartkarma-citation="entities:20774:1" rel="noopener">Artspark Holdings (3663 JP)</a>. </li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
This insight is a follow-up to TOPIX Inclusions: Who Is Ready (Dec 2022). 
Our latest top pick for TOPIX Inclusion pre-events is Artspark Holdings (3663 JP). 


TOPIX Inclusions: Who Is Ready (Jan 2023)

<ul>
<li>
<a href="https://www.smartkarma.com/entities/appier-group-inc" target="_blank" data-smartkarma-citation="entities:32165:1" rel="noopener">Appier Group (4180 JP)</a> had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.</li>
<li>The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.</li>
<li>Share price performance has not kept pace with potential, and yesterday's BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest "risk" here.</li>
</ul>



Appier Group (4180 JP) had been among our picks for TSE Prime promotion and we had recommended positioning for it. That worked. On 8 Dec they announced the promotion.
The company is now part of TSE Prime which means a TOPIX Inclusion at end-January and an upweight in April. More than 20% of TSE float to buy by end-April.
Share price performance has not kept pace with potential, and yesterday's BOJ decision saw a flurry of volume selling (bailing). Pre-IPO holder overhang may be the biggest "risk" here.


Appier (4180) - Down But Not Out; Shareholder Structure Still The Biggest Risk

Japan

Appier Group, Inc. provides artificial intelligence software as a service (AISaaS) services based on data-driven decisions. The Company offers data analysis for potential users predicting and acquiring, relationships building and maintaining, purchasing and action motivation, audience intelligence, and more. Appier Group serves clients across Asian.

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Appier Group (4180 JP)

TOPIX Index Upweights: An Early Preview Of "The Big April Basket" 2023

Daiei Kankyo, Socionext, Sun* , Mercari, Loadstar Capital, Bewith, Medley, and Appier Group are our high-conviction names that could see their...

Janaghan Jeyakumar, CFA

January TOPIX FFW Review - Some Big Sells

The TOPIX January 2023 FFW trade was announced today. 57 down-weights, 11 FFW up-weights. The Phased Weight Reduction has its second leg. Total to...

Travis Lundy

Sun* (Sun Asterisk - 4053 JP) TOPIX Inclusion Event

Sun Asterisk (a.k.a. Sun*) is a "Digital Creative" agency which consults and builds IT products for customers. It will enter TOPIX at end-January....

Travis Lundy

TOPIX Inclusions: Who Is Ready (Jan 2023)

Out of the 1,600+ TSE-listed names that are not part of the Prime market, around 100+ can satisfy most of the key conditions for a prime market...

Janaghan Jeyakumar, CFA

Appier (4180) - Down But Not Out; Shareholder Structure Still The Biggest Risk

The Appier IPO Price (¥1600) plus ¥100 has been strong resistance this year. Tuesday's BOJ surprise saw a sharp high-volume selldown. Paper hands...

Travis Lundy

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