Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Quantitative Analysis

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. During the month of June, we witnessed <a href="https://www.smartkarma.com/entities/meiko-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:20004:1" rel="noopener">Meiko Electronics (6787 JP)</a>, a stock tracked by Quiddity as a potential TSE Prime candidate, confirm its TSE Prime move. Furthermore, we also witnessed high growth SaaS company <a href="https://www.smartkarma.com/entities/money-forward-inc" target="_blank" data-smartkarma-citation="entities:25919:1" rel="noopener">Money Forward (3994 JP)</a> announce its move to TSE Prime potentially triggering a large inclusion event at the end of July 2021.  Below is a discussion of the situations covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of June 2021.

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. During the month of June, we witnessed Meiko Electronics (6787 JP), a stock tracked by Quiddity as a potential TSE Prime candidate, confirm its TSE Prime move. Furthermore, we also witnessed high growth SaaS company Money Forward (3994 JP) announce its move to TSE Prime potentially triggering a large inclusion event at the end of July 2021.  Below is a discussion of the situations covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of June 2021.   

Index Rebalance

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. After a dry spell in March and April, two new Section Transfers were announced in May 2021: <a href="https://www.smartkarma.com/entities/anshin-guarantor-service-co" target="_blank" data-smartkarma-citation="entities:33234:1" rel="noopener">Anshin Guarantor Service (7183 JP)</a> and <a href="https://www.smartkarma.com/entities/nomura-micro-science-co-ltd" target="_blank" data-smartkarma-citation="entities:11317:1" rel="noopener">Nomura Micro Science (6254 JP)</a>. On the other hand, we also witnessed some Inclusion Events resulting from TSE1 Direct Listings: <a href="https://www.smartkarma.com/entities/tess-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:32979:1" rel="noopener">Tess Holdings Co Ltd (5074 JP)</a> and <a href="https://www.smartkarma.com/entities/kibun-foods-inc" target="_blank" data-smartkarma-citation="entities:33019:1" rel="noopener">Kibun Foods Inc (2933 JP)</a>. Below is a discussion of the situations covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of May 2021.

In this insight, we take a look at the monthly performance of the trading opportunities surrounding TOPIX Index Rebalance events. After a dry spell in March and April, two new Section Transfers were announced in May 2021: Anshin Guarantor Service (7183 JP) and Nomura Micro Science (6254 JP). On the other hand, we also witnessed some Inclusion Events resulting from TSE1 Direct Listings: Tess Holdings Co Ltd (5074 JP) and Kibun Foods Inc (2933 JP). Below is a discussion of the situations covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of May 2021.   

Event-Driven

In January and February 2021 we saw a large wave of TSE1 Section Transfers as many small cap names rushed to get promoted before the new (and more stringent) Section Transfer Requirements were implemented (application deadline November 1, 2020). In contrast, not a single TSE1 Section Transfer was announced in the months of March and April 2021. However, during the month of April, we witnessed TSE's Annual Liquidity Factor Review which caused dozens of stocks to enjoy Index Upweights during the April-end Inclusion Event collectively amount to an estimated upweight size of approximately US$1bn. Below is a look at the performance of the TOPIX-related event trades covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of April 2021.

In January and February 2021 we saw a large wave of TSE1 Section Transfers as many small cap names rushed to get promoted before the new (and more stringent) Section Transfer Requirements were implemented (application deadline November 1, 2020). In contrast, not a single TSE1 Section Transfer was announced in the months of March and April 2021. However, during the month of April, we witnessed TSE's Annual Liquidity Factor Review which caused dozens of stocks to enjoy Index Upweights during the April-end Inclusion Event collectively amount to an estimated upweight size of approximately US$1bn. Below is a look at the performance of the TOPIX-related event trades covered by Quiddity in the Pre-event, Live-event, and Post-event categories during the month of April 2021.  

TOPIX Inclusion Trade Summary: April 2021

In January and February we saw a large wave of TSE1 Section Transfers as many small cap names rushed to get promoted before the new (and more stringent) Section Transfer Requirements were implemented. In contrast, not a single TSE1 Section Transfer was announced in the month of March 2021. 
However, this is only the calm before the storm.
In April 2021, we are expecting dozens of companies to enjoy TOPIX Index upweights as a result of the annual liquidity factor review (and this will mean dozens of downweights too). On the other hand, although fewer companies will qualify under the new rules, small-cap companies could use M&amp;A as an alternative route to Section Transfers to meet criteria as discussed below in this insight.
Furthermore, I have discussed the changes to Quiddity's pre-events watchlist and provided performance updates for one "Live" event stock which is expected to have its Inclusion event at the end of April 2021 and 9 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021.

In January and February we saw a large wave of TSE1 Section Transfers as many small cap names rushed to get promoted before the new (and more stringent) Section Transfer Requirements were implemented. In contrast, not a single TSE1 Section Transfer was announced in the month of March 2021. 
However, this is only the calm before the storm.
In April 2021, we are expecting dozens of companies to enjoy TOPIX Index upweights as a result of the annual liquidity factor review (and this will mean dozens of downweights too). On the other hand, although fewer companies will qualify under the new rules, small-cap companies could use M&amp;A as an alternative route to Section Transfers to meet criteria as discussed below in this insight.
Furthermore, I have discussed the changes to Quiddity's pre-events watchlist and provided performance updates for one "Live" event stock which is expected to have its Inclusion event at the end of April 2021 and 9 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021. 

During the month of February 2021, one of the most anticipated TOPIX Inclusion candidates, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> completed its TOPIX Inclusion Event. We also saw four new names announce their TSE1 moves during this month, among which was <a href="https://www.smartkarma.com/entities/faithnetwork-co-ltd" target="_blank" data-smartkarma-citation="entities:29132:1" rel="noopener">FaithNetwork Co Ltd (3489 JP)</a> the third stock out of the four pre-event bets highlighted in <a href="https://www.smartkarma.com/insights/topix-inclusion-trade-summary-sep-2020" target="_blank" data-smartkarma-citation="insights:43700" rel="noopener">TOPIX Inclusion Trade Summary: Sep 2020</a>. During this month, we also introduced new pre-event picks to be added to our list in <a href="https://www.smartkarma.com/insights/topix-inclusions-who-is-ready-3-0" target="_blank" data-smartkarma-citation="insights:48306" rel="noopener">TOPIX Inclusions: Who Is READY? 3.0</a>. In this insight, I have provided performance updates for 4 "Live" event stocks which are expected to have Inclusion Events at the end of March/April 2021 and 17 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021.

During the month of February 2021, one of the most anticipated TOPIX Inclusion candidates, Toshiba Corp (6502 JP) completed its TOPIX Inclusion Event. We also saw four new names announce their TSE1 moves during this month, among which was FaithNetwork Co Ltd (3489 JP) the third stock out of the four pre-event bets highlighted in TOPIX Inclusion Trade Summary: Sep 2020. During this month, we also introduced new pre-event picks to be added to our list in TOPIX Inclusions: Who Is READY? 3.0. In this insight, I have provided performance updates for 4 "Live" event stocks which are expected to have Inclusion Events at the end of March/April 2021 and 17 "Post" event stocks that completed their Inclusion Events at the end of January 2021 and February 2021. 

Japan

JMDC Inc. offers information services. The Company provides medical data statistics, life insurance data statistics, health data platform management, and other services. JMDC provides its services throughout Japan.

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JMDC (4483 JP)

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