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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<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.</div><div>Hong Kong saw shorts rise on <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/ganfeng-lithium-co-ltd" target="_blank" data-smartkarma-citation="entities:26795:1" rel="noopener">Ganfeng Lithium (1772 HK)</a>, <a href="https://www.smartkarma.com/entities/pharmaron-beijing-co-ltd" target="_blank" data-smartkarma-citation="entities:28428:1" rel="noopener">Pharmaron Beijing Co Ltd-H (3759 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/china-evergrande-group" target="_blank" data-smartkarma-citation="entities:479:1" rel="noopener">Evergrande Real Estate Group (3333 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/ck-asset-holdings-ltd" target="_blank" data-smartkarma-citation="entities:22650:1" rel="noopener">CK Asset Holdings (1113 HK)</a>, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 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> and <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>. Shorts increased in the Consumer Discretionary sector, while decreasing in the Communication Services, Real Estate, Financials and Industrials sectors.</div><div>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/fujitsu-ltd" target="_blank" data-smartkarma-citation="entities:16968:1" rel="noopener">Fujitsu Ltd (6702 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a>, <a href="https://www.smartkarma.com/entities/brother-industries-ltd" target="_blank" data-smartkarma-citation="entities:6114:1" rel="noopener">Brother Industries (6448 JP)</a> and <a href="https://www.smartkarma.com/entities/casio-computer-co-ltd" target="_blank" data-smartkarma-citation="entities:18338:1" rel="noopener">Casio Computer (6952 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/sumco-corp" target="_blank" data-smartkarma-citation="entities:379:1" rel="noopener">SUMCO Corp (3436 JP)</a>, <a href="https://www.smartkarma.com/entities/seiko-epson-corp" target="_blank" data-smartkarma-citation="entities:16793:1" rel="noopener">Seiko Epson (6724 JP)</a>, <a href="https://www.smartkarma.com/entities/symbio-pharmaceuticals-ltd" target="_blank" data-smartkarma-citation="entities:10456:1" rel="noopener">Symbio Pharmaceuticals (4582 JP)</a> and <a href="https://www.smartkarma.com/entities/ebara-corp" target="_blank" data-smartkarma-citation="entities:4728:1" rel="noopener">Ebara Corp (6361 JP)</a>. Shorts increased on Information Technology and Consumer Discretionary stock, while reducing on Industrials and Health Care names.</div><div>In Korea, shorts increased on <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>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 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/mando-corp" target="_blank" data-smartkarma-citation="entities:8119:1" rel="noopener">Mando Corp (204320 KS)</a> and <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> 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/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>, <a href="https://www.smartkarma.com/entities/pan-ocean-co-ltd" target="_blank" data-smartkarma-citation="entities:5279:1" rel="noopener">Pan Ocean (028670 KS)</a>, <a href="https://www.smartkarma.com/entities/ncsoft-corp" target="_blank" data-smartkarma-citation="entities:5169:1" rel="noopener">NCSOFT Corp (036570 KS)</a> and <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>.</div><div>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <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/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/innolux-corp" target="_blank" data-smartkarma-citation="entities:4509:1" rel="noopener">Innolux Corp (3481 TT)</a> and <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> while shorts covered on <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/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a>, <a href="https://www.smartkarma.com/entities/hsin-kuang-steel-co-ltd" target="_blank" data-smartkarma-citation="entities:19760:1" rel="noopener">Hsin Kuang Steel (2031 TT)</a>, <a href="https://www.smartkarma.com/entities/genius-electronic-optical-co-ltd" target="_blank" data-smartkarma-citation="entities:9632:1" rel="noopener">Genius Electronic Optical (3406 TT)</a> and <a href="https://www.smartkarma.com/entities/china-airlines-ltd" target="_blank" data-smartkarma-citation="entities:4591:1" rel="noopener">China Airlines (2610 TT)</a>.</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 Geely Auto (175 HK), Ganfeng Lithium (1772 HK), Pharmaron Beijing Co Ltd-H (3759 HK), Sunny Optical (2382 HK) and Evergrande Real Estate Group (3333 HK) while there was short covering on Alibaba Group (9988 HK), CK Asset Holdings (1113 HK), Tencent (700 HK), Ping An Insurance (H) (2318 HK) and NetEase (9999 HK). Shorts increased in the Consumer Discretionary sector, while decreasing in the Communication Services, Real Estate, Financials and Industrials sectors.In Japan, stocks increased on Fujitsu Ltd (6702 JP), Canon Inc (7751 JP), Renesas Electronics (6723 JP), Brother Industries (6448 JP) and Casio Computer (6952 JP) while there was short covering on Toshiba Corp (6502 JP), SUMCO Corp (3436 JP), Seiko Epson (6724 JP), Symbio Pharmaceuticals (4582 JP) and Ebara Corp (6361 JP). Shorts increased on Information Technology and Consumer Discretionary stock, while reducing on Industrials and Health Care names.In Korea, shorts increased on Samsung Electronics (005930 KS), LG Display (034220 KS), HMM Co., Ltd. (011200 KS), Mando Corp (204320 KS) and SK Hynix (000660 KS) while shorts were covered on Doosan Heavy Industries &amp; Construction (034020 KS), Kakao Corp (035720 KS), Pan Ocean (028670 KS), NCSOFT Corp (036570 KS) and Samsung SDI (006400 KS).In Taiwan, shorts increased on TSMC (2330 TT), Yang Ming Marine Transport (2609 TT), Wan Hai Lines (2615 TT), Innolux Corp (3481 TT) and Evergreen Marine Corp (2603 TT) while shorts covered on AU Optronics (2409 TT), United Microelectronics Corp (2303 TT), Hsin Kuang Steel (2031 TT), Genius Electronic Optical (3406 TT) and China Airlines (2610 TT).

Asia Shorts: Geely, Ganfeng, Pharmaron, Evergrande, Fujitsu, Canon, Renesas, Toshiba, LGD, Doosan

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Fujitsu hit a new high of ¥17,680 on April 30 and at the May 7 close of ¥16,760 was still up 68% from its 52-week low.FY Mar-21 results (OP up 26% on a 7% decline in revenues) and apparently reasonable valuations (16x EPS guidance for FY Mar-22 and 2.3x book value) have helped support the share price.But the news out of the UK is not good.Regarding the Post Office scandal caused by the flawed Horizon computer system supplied by Fujitsu, which UK Prime Minister Boris Johnson called the "one of the biggest miscarriages of justice in our history", the BBC reports that:"So far, nobody at the Post Office or Fujitsu has been held accountable, although the High Court judge said he would refer Fujitsu to the Director of Public Prosecutions for possible further action because he had 'grave concerns' about the evidence of the company's employees." "Asked if other parties - such as the Horizon's developers, Fujitsu - should be held accountable, Ms Page [Barrister representing the aggrieved parties] added: 'I think there will be malicious prosecution claims.... hundreds and hundreds of them.'"The investigation and legal proceedings seem likely to continue for months if not longer. Fujitsu's reputation and a considerable amount of money are at issue.

Fujitsu hit a new high of ¥17,680 on April 30 and at the May 7 close of ¥16,760 was still up 68% from its 52-week low.FY Mar-21 results (OP up 26% on a 7% decline in revenues) and apparently reasonable valuations (16x EPS guidance for FY Mar-22 and 2.3x book value) have helped support the share price.But the news out of the UK is not good.Regarding the Post Office scandal caused by the flawed Horizon computer system supplied by Fujitsu, which UK Prime Minister Boris Johnson called the "one of the biggest miscarriages of justice in our history", the BBC reports that:"So far, nobody at the Post Office or Fujitsu has been held accountable, although the High Court judge said he would refer Fujitsu to the Director of Public Prosecutions for possible further action because he had 'grave concerns' about the evidence of the company's employees." "Asked if other parties - such as the Horizon's developers, Fujitsu - should be held accountable, Ms Page [Barrister representing the aggrieved parties] added: 'I think there will be malicious prosecution claims.... hundreds and hundreds of them.'"The investigation and legal proceedings seem likely to continue for months if not longer. Fujitsu's reputation and a considerable amount of money are at issue.

Fujitsu (6702 JP): Reputation at Risk in UK Post Office Scandal

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Event-Driven

The Nikkei reported today that Bain Capital’s bidding consortium has received preferential negotiating rights from Hitachi. The rumoured valuation is above ¥800bn which would put the premium at just 3.2% above the last close. As we said previously, the potential for a large hike to those terms seems limited and better returns may be on offer in trying to identify other potential buyout targets.

The Nikkei reported today that Bain Capital’s bidding consortium has received preferential negotiating rights from Hitachi. The rumoured valuation is above ¥800bn which would put the premium at just 3.2% above the last close. As we said previously, the potential for a large hike to those terms seems limited and better returns may be on offer in trying to identify other potential buyout targets.

Hitachi Metals – Limited Upside Despite Bain Capital News But Let’s Find the Offshoot Ideas

Japan's Open RAN 5G solution continues to gain traction.<ul>
<li>On December 16, NEC was selected by Telefonica as the system integrator for the first Open RAN pilot system in Germany.</li>
<li>Deutsche Telekom is working with NEC, Fujitsu, Dell, Nokia and others, targeting its first deployment of 4G and 5G Open RAN in 2021.</li>
<li>In late November, Malaysia's Communications and Multimedia Minister Gobind Singh Deo met with NEC, Fujitsu and Rakuten to discuss their 5G proposals.</li>
</ul>This follows the announcement of NEC's 5G Open RAN initiatives in the UK and India. <a href="https://www.smartkarma.com/insights/nec-6701-jp-open-ran-center-to-replace-huawei-5g-in-the-uk" target="_blank" data-smartkarma-citation="insights:45536" rel="noopener">NEC (6701 JP): Open RAN Center to Replace Huawei 5G in the UK</a> .As for NEC's current business, new orders began to recover in 2Q of FY Mar-21. Sales and profits should follow in 2H, led by the Public Infrastructure and Enterprise segments.Our profit forecast brings NEC's projected P/E ratio down to 14x in FY Mar-23, suggesting long-term upside potential of 40% or more.

Japan's Open RAN 5G solution continues to gain traction.
On December 16, NEC was selected by Telefonica as the system integrator for the first Open RAN pilot system in Germany.
Deutsche Telekom is working with NEC, Fujitsu, Dell, Nokia and others, targeting its first deployment of 4G and 5G Open RAN in 2021.
In late November, Malaysia's Communications and Multimedia Minister Gobind Singh Deo met with NEC, Fujitsu and Rakuten to discuss their 5G proposals.
This follows the announcement of NEC's 5G Open RAN initiatives in the UK and India. NEC (6701 JP): Open RAN Center to Replace Huawei 5G in the UK .As for NEC's current business, new orders began to recover in 2Q of FY Mar-21. Sales and profits should follow in 2H, led by the Public Infrastructure and Enterprise segments.Our profit forecast brings NEC's projected P/E ratio down to 14x in FY Mar-23, suggesting long-term upside potential of 40% or more. 

NEC (6701 JP): Japan's Open RAN a Growing Alternative to Huawei

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

THE FAILURE TO FAILOVER -  <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a> released the report in its investigation into the October 1st system failure yesterday. However, the report, although couched in neutral language, details basic failures of communication and proper testing protocols by both the TSE and <a href="https://www.smartkarma.com/entities/fujitsu-ltd" target="_blank" data-smartkarma-citation="entities:16968:1" rel="noopener">Fujitsu (6702 JP) </a>the TSE arrowhead trading system vendor. This failure to conduct worst-case scenario planning is nothing new to those familiar with the implementation and management of IT systems in Japan.   <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/166/119/original/2020-10-20_09-54-29.png?1603155299" class="editor-image img-responsive" data-smartkarma-image-id="166119"></figure><div class="content-caption">Source: TSE</div></section>COUNTERMEASURES - The TSE 'countermeasures' include the establishment of a council to establish 'rules and regulations' to deal with failures which will consist of ' securities companies, investors, and system vendors' and will 'take into account evidence from overseas'. <blockquote>
Establishment of a "Council for Recurrence Prevention Measures" in Response to System Failure 
TSE would like to deeply apologize for the inconvenience caused to many investors and other market users due to the failure in the arrowhead cash equity trading system on October 1, 2020.With the aim of considering how it can develop its response to system failures and its rules and regulations to prevent a recurrence of this incident, TSE will establish a "Council for Recurrence Prevention Measures" comprised of market users. 
1. Purpose The recent system failure revealed not only issues with the IT system itself but also  issues with the operation of the system, such as a need for clarification and better transparency of standards and procedures for recovery, and an absence of rules for order handling in the event of system failures. The market users making up the Council will consider how TSE should develop its responses to system failures and its rules and regulations from the perspective of investors, taking into account evidence from overseas.
2. Council Members A variety of market users such as securities companies, investors, and system vendors are expected to become Council members. The Financial Services Agency of Japan and other such organizations are expected to become observers.
3. Others The secretariat of the Council will be Tokyo Stock Exchange, Inc.The first meeting of the Council will be held by the end of October 2020. Agendas, outlines of minutes, and other related materials will be published on the JPX website after meetings.  
</blockquote>FSA COMES KNOCKING - The Nikkei reported this morning that an FSA onsite-inspection of the TSE began yesterday. Such inspections are normally not pre-announced and never fail to find fault and require remedial action.

THE FAILURE TO FAILOVER -  Japan Exchange Group (8697 JP) released the report in its investigation into the October 1st system failure yesterday. However, the report, although couched in neutral language, details basic failures of communication and proper testing protocols by both the TSE and Fujitsu (6702 JP) the TSE arrowhead trading system vendor. This failure to conduct worst-case scenario planning is nothing new to those familiar with the implementation and management of IT systems in Japan.   Source: TSECOUNTERMEASURES - The TSE 'countermeasures' include the establishment of a council to establish 'rules and regulations' to deal with failures which will consist of ' securities companies, investors, and system vendors' and will 'take into account evidence from overseas'. 
Establishment of a "Council for Recurrence Prevention Measures" in Response to System Failure 
TSE would like to deeply apologize for the inconvenience caused to many investors and other market users due to the failure in the arrowhead cash equity trading system on October 1, 2020.With the aim of considering how it can develop its response to system failures and its rules and regulations to prevent a recurrence of this incident, TSE will establish a "Council for Recurrence Prevention Measures" comprised of market users. 
1. Purpose The recent system failure revealed not only issues with the IT system itself but also  issues with the operation of the system, such as a need for clarification and better transparency of standards and procedures for recovery, and an absence of rules for order handling in the event of system failures. The market users making up the Council will consider how TSE should develop its responses to system failures and its rules and regulations from the perspective of investors, taking into account evidence from overseas.
2. Council Members A variety of market users such as securities companies, investors, and system vendors are expected to become Council members. The Financial Services Agency of Japan and other such organizations are expected to become observers.
3. Others The secretariat of the Council will be Tokyo Stock Exchange, Inc.The first meeting of the Council will be held by the end of October 2020. Agendas, outlines of minutes, and other related materials will be published on the JPX website after meetings.  
FSA COMES KNOCKING - The Nikkei reported this morning that an FSA onsite-inspection of the TSE began yesterday. Such inspections are normally not pre-announced and never fail to find fault and require remedial action.  

🇯🇵 JAPAN • October 1st TSE Incident Report  & FSA Inspection

Japan

Fujitsu Ltd manufactures semiconductor, computer, and communication equipment. The Company provides comprehensive information technology, network and telecommunication solutions, and Internet services.

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Fujitsu Ltd (6702 JP)

Asia Shorts: Geely, Ganfeng, Pharmaron, Evergrande, Fujitsu, Canon, Renesas, Toshiba, LGD, Doosan

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

Fujitsu (6702 JP): Reputation at Risk in UK Post Office Scandal

Fujitsu's culpability in the Horizon/UK Post Office scandal is a serious risk to the company's reputation, to hundreds of billions of Yen in...

Scott Foster

Hitachi Metals – Limited Upside Despite Bain Capital News But Let’s Find the Offshoot Ideas

A rumoured ¥800bn valuation for Hitachi Metals would offer just 3.2% upside from current prices as we previously warned, but there may be other...

Mio Kato

NEC (6701 JP): Japan's Open RAN a Growing Alternative to Huawei

New opportunities in Germany and Malaysia expand the potential for Japanese Open RAN telecom technology beyond Rakuten and the UK. NEC is likely to...

Scott Foster

🇯🇵 JAPAN • October 1st TSE Incident Report & FSA Inspection

THE FAILURE TO FAILOVER - Japan Exchange Group (8697 JP) released the report in its investigation into the October 1st system failure yesterday

Campbell Gunn

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