Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>On 1 June, <a href="https://www.smartkarma.com/entities/lifedrink-co-inc" target="_blank" data-smartkarma-citation="entities:39842:1" rel="noopener">Lifedrink (2585 JP)</a>, which listed in early 2022, announced it would move to TSE Prime in late June, leading to a TOPIX inclusion in late July. </li>
<li>The offset to that was an announcement of an offering, whereby the PE Fund which brought the company to market would sell up to 3.87mm shares, effectively doubling float. </li>
<li>The offering is larger than the TOPIX inclusion. The stock fell the next day, rebounded, then rebounded 11% Monday. Now it's up more and hit a lifetime closing high.</li>
</ul>


On 1 June, Lifedrink (2585 JP), which listed in early 2022, announced it would move to TSE Prime in late June, leading to a TOPIX inclusion in late July. 
The offset to that was an announcement of an offering, whereby the PE Fund which brought the company to market would sell up to 3.87mm shares, effectively doubling float. 
The offering is larger than the TOPIX inclusion. The stock fell the next day, rebounded, then rebounded 11% Monday. Now it's up more and hit a lifetime closing high.


Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang

<ul>
<li>Last Friday, the FFW changes for the TOPIX July Free Float Weight Review were announced. There have also been other recent announcements creating flows on 30 July.</li>
<li>Some of these other recent announcements represent a possible change in ad hoc methodology.</li>
<li>Total Flow for 30 July is ~$3.3bn a side driven by selling flows (3/4 of the buy flows are reverse funding). $2.1bn of selling is &gt; 3 days ADV.</li>
</ul>


Last Friday, the FFW changes for the TOPIX July Free Float Weight Review were announced. There have also been other recent announcements creating flows on 30 July.
Some of these other recent announcements represent a possible change in ad hoc methodology.
Total Flow for 30 July is ~$3.3bn a side driven by selling flows (3/4 of the buy flows are reverse funding). $2.1bn of selling is &gt; 3 days ADV.


July TOPIX FFW Rebal - Bigger Than Expected

Equity Analyst, Event-driven, Quiddity Advisors

Janaghan Jeyakumar, CFA

Equity Analyst, 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 2024.</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 2024.


TOPIX "Big April Basket" 2024 Expectations: More High-Conviction Names; Better Trade Ideas

<ul>
<li>In the two weeks since the announcement, Large ADDs (&gt;2d ADV, &gt;$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (&gt;2d, &gt;$2&lt;$5mm) have outperformed by 1.3%.</li>
<li>Using only &gt;$20mm &gt;2d DELs vs Top 5 $amt &gt;2d ADDs, that's a bit better than 1%. And the really obvious large ones? Not so obvious.</li>
<li>There is still a large reverse funding trade, with some large sells. </li>
</ul>


In the two weeks since the announcement, Large ADDs (&gt;2d ADV, &gt;$5mm) have outperformed Large DELs by 1.3%. Smaller ADDs vs DELs (&gt;2d, &gt;$2&lt;$5mm) have outperformed by 1.3%.
Using only &gt;$20mm &gt;2d DELs vs Top 5 $amt &gt;2d ADDs, that's a bit better than 1%. And the really obvious large ones? Not so obvious.
There is still a large reverse funding trade, with some large sells. 


July TOPIX FFW Rebal - Update With 2 Days To Go on $3bn a Side

David Blennerhassett

<ul>
<li>According to Invest Chosun, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.</li>
<li>
<a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon (7751 JP)</a>'s most recent buyback should be done now-ish. They have been ~15-20% of volume over the past month. The Trade would be short Canon vs <a href="https://www.smartkarma.com/entities/ricoh-company-ltd" target="_blank" data-smartkarma-citation="entities:15359:1" rel="noopener">Ricoh (7752 JP)</a>.</li>
</ul>


According to Invest Chosun, Celltrion Inc (068270 KS) plans to submit a merger registration statement to the KRX in July, with Mirae Asset Securities acting as the lead underwriter.

Fast Retailing (9983 JP) investors are in a conundrum. The stock is doing well. With one quarter to go, the company just raised its full-year EPS target by 8.3%.

Canon (7751 JP)'s most recent buyback should be done now-ish. They have been ~15-20% of volume over the past month. The Trade would be short Canon vs Ricoh (7752 JP).


Last Week in Event SPACE: Celltrion, Fast Retailing, Canon, Costa, Chindata

Japan

Lifedrink Company, Inc. manufactures and distributes non alcoholic beverage products. The Company offers green tea, water bottles, cold drinks, sauce products, and more. Lifedrink markets its products throughout Japan.

Lifedrink (2585 JP)

Lifedrink Company (2585 JP) Ascends to TSE Prime and TOPIX But An Offering Produces Overhang

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July TOPIX FFW Rebal - Bigger Than Expected

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TOPIX "Big April Basket" 2024 Expectations: More High-Conviction Names; Better Trade Ideas

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July TOPIX FFW Rebal - Update With 2 Days To Go on $3bn a Side

The TOPIX July FFW rebalance has gone "right way" so far. But it hasn't been huge, and it has been a better basket trade than single stock trade.

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Last Week in Event SPACE: Celltrion, Fast Retailing, Canon, Costa, Chindata

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

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