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

Event-Driven

<ul>
<li>At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.</li>
<li>Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.</li>
<li>Over the last 6 months, the stocks with inflows (&gt;US$25m) have outperformed the stocks with outflows (&gt;US$25m) with most of the outperformance coming in the last three months.</li>
</ul>


At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.
Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.
Over the last 6 months, the stocks with inflows (&gt;US$25m) have outperformed the stocks with outflows (&gt;US$25m) with most of the outperformance coming in the last three months.


TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<ul>
<li>Japan Industrial Partners (JIP) will launch the <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> tender offer of JPY4,620 per share from 8 August to 20 September.</li>
<li>The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.</li>
<li>The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks. </li>
</ul>


Japan Industrial Partners (JIP) will launch the Toshiba Corp (6502 JP) tender offer of JPY4,620 per share from 8 August to 20 September.
The Board has reaffirmed its recommendation to accept the offer. JIP’s inability to raise its bid is used as an excuse to ignore the material peer rerating and unattractive terms.
The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior alternative, increasing deal risks. 


Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

<ul>
<li>On 28 July, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> disclosed that JIP delayed the tender start to “<em>sometime in August 2023</em>” vs the target “<em>in the last ten days of July 2023.</em>”</li>
<li>Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.</li>
<li>The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness. </li>
</ul>


On 28 July, Toshiba Corp (6502 JP) disclosed that JIP delayed the tender start to “sometime in August 2023” vs the target “in the last ten days of July 2023.”
Toshiba reports 1Q results on 7 August. A solid 1Q will undermine the Board’s recommendation of the offer in part on the premise that the IFA’s DCF valuation is unrealistic.
The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip away at the offer’s attractiveness. 


Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>OVERSEAS.  SPX hit 52W highs as Yellen sees no US Recession;  Rates fall on "inflation behind us" narrative; Global HF unwind bearish US positions; EV WARS as Ford Slashes prices.  </li>
<li>JAPAN.  NKY Futures -0.2% vs Cash; USDJPY 138.7%; Japan Back after Marine Day Holidays to lower US rates, stronger yen, Weaker China, and Tech bid; Blackrock lifts Japan stock outlook </li>
<li>NUGGET.  JAL(9201) Double Winner(Margins+Emmissions) with Fleet Upgrade. Share price has run, but strong tailwinds on demand and operational efficiency. Watch for pullback to pick up.</li>
</ul>


OVERSEAS.  SPX hit 52W highs as Yellen sees no US Recession;  Rates fall on "inflation behind us" narrative; Global HF unwind bearish US positions; EV WARS as Ford Slashes prices.  
JAPAN.  NKY Futures -0.2% vs Cash; USDJPY 138.7%; Japan Back after Marine Day Holidays to lower US rates, stronger yen, Weaker China, and Tech bid; Blackrock lifts Japan stock outlook 
NUGGET.  JAL(9201) Double Winner(Margins+Emmissions) with Fleet Upgrade. Share price has run, but strong tailwinds on demand and operational efficiency. Watch for pullback to pick up.


Ohayo Japan|Equities Cruise on No Recession Narrative; NUGGET: JAL(9201) A Double Winner

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>Corporate governance report and securities report were inadequate because it was not possible to get a complete picture of how many advisors other than ex-CEOs were involved in the company.</li>
<li>Mitsubishi Electric, which has suffered scandals, has revealed that "senior advisors" have been involved in its management. However, it is possible that advisors influence management at other companies as well.</li>
<li>The ex-CEO isn't necessarily in charge of industry association activities, the compensation of the advisors is undisclosed, and Mitsubishi Electric still has a ways to go in improving management transparency.</li>
</ul>


Corporate governance report and securities report were inadequate because it was not possible to get a complete picture of how many advisors other than ex-CEOs were involved in the company.
Mitsubishi Electric, which has suffered scandals, has revealed that "senior advisors" have been involved in its management. However, it is possible that advisors influence management at other companies as well.
The ex-CEO isn't necessarily in charge of industry association activities, the compensation of the advisors is undisclosed, and Mitsubishi Electric still has a ways to go in improving management transparency.


Advisors' Disclosure Is Inadequate and Other Companies May Have Similar Cases

Japan

Mitsubishi Electric Corporation develops, manufactures, and markets electronic equipment.  The Company's products include industrial machinery, heavy electric machinery, data communications systems, electronic devices, and consumer electronics.

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Mitsubishi Electric (6503 JP)

TOPIX October 2023 Rebalance: Round Trip Trade of US$20bn; Upweights Outperform Downweights

There are FFW changes for 700+ stocks and changes to the Phased Weight Reduction list. Round trip trade is around US$20bn and there is over 8 days...

Brian Freitas

Toshiba (6502 JP): Tender Offer Launches, 1Q Results Increase Deal Risks

The 1Q results undermine the Board’s view of an overstated DCF and show its unwillingness to entertain a potential Kioxia merger as a superior...

Arun George

Toshiba (6502 JP): Risk/Reward as 1Q Results and Tender Start Approach

The current low spread points to a done deal, partly due to shareholder fatigue. However, risks persist as the rerating of peers continues to chip...

Arun George

Ohayo Japan|Equities Cruise on No Recession Narrative; NUGGET: JAL(9201) A Double Winner

SPX hit 52W highs as no recession/inflation behind us narrative dominates; NKY Futures -0.2% vs Cash; USDJPY 138.7%; Japan to lower US rates,...

Mark Chadwick

Advisors' Disclosure Is Inadequate and Other Companies May Have Similar Cases

I would like to discuss the May 2 Nikkei article, "Mitsubishi Electric to Abolish Advisory System to Improve Management Transparency."

Metrical Inc

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