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>
<a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661)</a>, <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723)</a> and <a href="https://www.smartkarma.com/entities/japan-airlines-co-ltd" target="_blank" data-smartkarma-citation="entities:1184:1" rel="noopener">Japan Airlines (9201)</a> will replace <a href="https://www.smartkarma.com/entities/toyobo-co-ltd" target="_blank" data-smartkarma-citation="entities:6187:1" rel="noopener">Toyobo (3101)</a>, <a href="https://www.smartkarma.com/entities/nippon-light-metal-holdings" target="_blank" data-smartkarma-citation="entities:1485:1" rel="noopener">Nippon Light Metal (5703)</a> and <a href="https://www.smartkarma.com/entities/toho-zinc-co-ltd" target="_blank" data-smartkarma-citation="entities:2796:1" rel="noopener">Toho Zinc (5707)</a> in 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>. </li>
<li>
<a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a> has been added at a post-split PAF of 1. This reduces the passive buying on the stock by around a third.</li>
<li>Passive trackers need to buy between 2.2-6.7 days of ADV on the adds while selling between 5-12 days of ADV on the deletes. There's a big funding trade too.</li>
</ul>



Oriental Land (4661), Renesas Electronics (6723) and Japan Airlines (9201) will replace Toyobo (3101), Nippon Light Metal (5703) and Toho Zinc (5707) in the Nikkei 225 (NKY INDEX). 

Oriental Land (4661 JP) has been added at a post-split PAF of 1. This reduces the passive buying on the stock by around a third.
Passive trackers need to buy between 2.2-6.7 days of ADV on the adds while selling between 5-12 days of ADV on the deletes. There's a big funding trade too.


Nikkei 225 Index Rebalance: Oriental Land, Renesas, JAL IN; Toyobo, Nippon LightMetal, Toho Zinc OUT

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

<ul>
<li>Kyocera cut FY Mar-23 operating profit guidance by more than 30% while leaving sales guidance unchanged. Draw your own conclusions about the reliability of company forecasts.</li>
<li>Sales began to decline in 3Q and the rate of decline is likely to increase in 4Q. There is a large inventory overhang.</li>
<li>The shares dropped 3% today. Wait for capitulation as the reality of recession sinks in.</li>
</ul>


Kyocera cut FY Mar-23 operating profit guidance by more than 30% while leaving sales guidance unchanged. Draw your own conclusions about the reliability of company forecasts.
Sales began to decline in 3Q and the rate of decline is likely to increase in 4Q. There is a large inventory overhang.
The shares dropped 3% today. Wait for capitulation as the reality of recession sinks in.


Kyocera (6971 JP): Massive Downward Revision

<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 (NKY INDEX)</a> March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.</li>
<li>
<a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec Corp (6920)</a>, <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661)</a> and <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723)</a> remain our top inclusions, while <a href="https://www.smartkarma.com/entities/toyobo-co-ltd" target="_blank" data-smartkarma-citation="entities:6187:1" rel="noopener">Toyobo Co Ltd (3101)</a>, <a href="https://www.smartkarma.com/entities/nippon-light-metal-holdings" target="_blank" data-smartkarma-citation="entities:1485:1" rel="noopener">Nippon Light Metal (5703)</a> and <a href="https://www.smartkarma.com/entities/toho-zinc-co-ltd" target="_blank" data-smartkarma-citation="entities:2796:1" rel="noopener">Toho Zinc (5707)</a> could be deleted.</li>
<li>Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.

Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.


Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

<ul>
<li>Kyocera's aggressive long-term investment plan makes sense: abandon an unnecessary zero-debt policy and borrow while interest rates are still low. The resulting debt/equity ratio should be manageable.</li>
<li>But the near- to medium-term outlook is not encouraging. Semiconductor inventories are still too high and demand is down. Recovery is likely to be slow.</li>
<li>The shares have dropped 21% since mid-September, but FY Mar-23 guidance looks too high and both consumer and corporate spending are weak. Wait for capitulation.</li>
</ul>


Kyocera's aggressive long-term investment plan makes sense: abandon an unnecessary zero-debt policy and borrow while interest rates are still low. The resulting debt/equity ratio should be manageable.
But the near- to medium-term outlook is not encouraging. Semiconductor inventories are still too high and demand is down. Recovery is likely to be slow.
The shares have dropped 21% since mid-September, but FY Mar-23 guidance looks too high and both consumer and corporate spending are weak. Wait for capitulation.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/bank-of-kyoto" target="_blank" data-smartkarma-citation="entities:5248:1" rel="noopener">Bank of Kyoto (8369 JP)</a> is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.</li>
<li>That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell. </li>
<li>There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 October, and all five of the top holdings are also net sells (0.5-1.1 days).</li>
</ul>



Bank of Kyoto (8369 JP) is currently at a 51% discount to the After Tax Value of its Equity Portfolio assuming its banking ops are priced at a RegionalBankAveragePBR.
That is, believe it or not, relatively narrow, and given the nature of the risks making it a range trade, it makes short-term timing probably a sell. 
There is, helpfully, 6 days of ADV to sell in the TOPIX FFW adjustment on 28 October, and all five of the top holdings are also net sells (0.5-1.1 days).


Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish - Watch for TOPIX Rebal SELL Flow

Japan

Kyocera Corporation manufacturers electronic equipment and components. The Company's products include telecommunication equipment, information equipment, optical equipment, ceramic products, semiconductor parts, chips, hybrid integrated circuits, thermal printheads, image sensors, liquid crystal displays, and connectors. Kyocera operates worldwide.

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Kyocera Corp (6971 JP)

Nikkei 225 Index Rebalance: Oriental Land, Renesas, JAL IN; Toyobo, Nippon LightMetal, Toho Zinc OUT

There are 3 adds and 3 deletes in March - mostly on expected line. The inclusion of Oriental Land at a lower than expected PAF could see some...

Brian Freitas

Kyocera (6971 JP): Massive Downward Revision

Kyocera cut operating profit guidance by 31%, leaving sales guidance unchanged. Materials & logistics costs and the weak cell phone market are to...

Scott Foster

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

With a week left in the review period, we revisit the potential NKY changes in March & highlight top add/delete candidates. There will be a large...

Brian Freitas

Kyocera (6971 JP): Another Leg Down

Kyocera's long-term investment plan makes sense, but its short term optimism unwarranted. Semiconductor inventories are still too high and final...

Scott Foster

Bank of Kyoto (8369 JP) Holdco Maybe Rich-Ish - Watch for TOPIX Rebal SELL Flow

Bank of Kyoto has upped its payout ratio. That has helped the discount narrow but near-term flows, possible relatively soft H1 accounts, and the...

Travis Lundy

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