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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Toyo Seikan Group Holdings L / Index Rebalance

<p>Nikkei has just announced the changes to 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> as part of its periodic review. The changes will be made prior to the open of the market on 1 October, so passive funds will trade at the closing auction on 30 September.</p><p>There are 3 changes to the index with <a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence Corp (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/murata-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:11649:1" rel="noopener">Murata Manufacturing (6981 JP)</a> and <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo Co Ltd (7974 JP)</a> replacing <a href="https://www.smartkarma.com/entities/nisshinbo-holdings-inc" target="_blank" data-smartkarma-citation="entities:10561:1" rel="noopener">Nisshinbo Holdings (3105 JP)</a>, <a href="https://www.smartkarma.com/entities/toyo-seikan-group-holdings-l" target="_blank" data-smartkarma-citation="entities:11858:1" rel="noopener">Toyo Seikan Group Holdings L (5901 JP)</a> and <a href="https://www.smartkarma.com/entities/sky-perfect-jsat-holdings" target="_blank" data-smartkarma-citation="entities:14097:1" rel="noopener">Sky Perfect Jsat (9412 JP)</a>.</p><p>While the inclusion of <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo Co Ltd (7974 JP)</a> and the deletion of <a href="https://www.smartkarma.com/entities/sky-perfect-jsat-holdings" target="_blank" data-smartkarma-citation="entities:14097:1" rel="noopener">Sky Perfect Jsat (9412 JP)</a> was expected, the other names are relative surprises.</p><p>The impact on the inclusions is not very high in terms of days of ADV to buy and in terms of the real float to buy, but the impact on the deletions is a lot higher. The selling on <a href="https://www.smartkarma.com/entities/nisshinbo-holdings-inc" target="_blank" data-smartkarma-citation="entities:10561:1" rel="noopener">Nisshinbo Holdings (3105 JP)</a> and <a href="https://www.smartkarma.com/entities/toyo-seikan-group-holdings-l" target="_blank" data-smartkarma-citation="entities:11858:1" rel="noopener">Toyo Seikan Group Holdings L (5901 JP)</a> will result in around 18% of the free float of the stock being sold and the stocks could drop a lot before investors start to get involved.</p><p>This is the first review post the market consultation that was announced in May and the conclusions of which were published in July.</p><p>As usual, Nikkei have ignored the sector balance that is spoken about so much in the index methodology. Apparently its easier to write the index methodology than to follow it!</p>

Nikkei has just announced the changes to the Nikkei 225 (NKY INDEX) as part of its periodic review. The changes will be made prior to the open of the market on 1 October, so passive funds will trade at the closing auction on 30 September.There are 3 changes to the index with Keyence Corp (6861 JP), Murata Manufacturing (6981 JP) and Nintendo Co Ltd (7974 JP) replacing Nisshinbo Holdings (3105 JP), Toyo Seikan Group Holdings L (5901 JP) and Sky Perfect Jsat (9412 JP).While the inclusion of Nintendo Co Ltd (7974 JP) and the deletion of Sky Perfect Jsat (9412 JP) was expected, the other names are relative surprises.The impact on the inclusions is not very high in terms of days of ADV to buy and in terms of the real float to buy, but the impact on the deletions is a lot higher. The selling on Nisshinbo Holdings (3105 JP) and Toyo Seikan Group Holdings L (5901 JP) will result in around 18% of the free float of the stock being sold and the stocks could drop a lot before investors start to get involved.This is the first review post the market consultation that was announced in May and the conclusions of which were published in July.As usual, Nikkei have ignored the sector balance that is spoken about so much in the index methodology. Apparently its easier to write the index methodology than to follow it!

Nikkei 225 Index Rebalance: Nintendo, Keyence, Murata IN; Nisshinbo, Toyo Seikan, SKY Perfect OUT

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Activia Properties / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/9498" target="_blank" data-smartkarma-citation="entities:9498:1" rel="noopener">Activia Properties Inc (3279 JP)</a>(API) plans to raise around US$200m/JPY22bn to fund the acquisition of three assets worth JPY44bn.</p></div><div>
<p>We have previously covered four other deals in the name: </p>
<ul><li>US$220m in Dec 2018, <a href="https://www.smartkarma.com/insights/activia-properties-placement-time-for-the-annual-fund-raise-dpu-accretive-past-deals-did-well" target="_blank" rel="noopener">Activia Properties Placement - Time for the Annual Fund Raise, DPU Accretive, past Deals Did Well</a>
</li></ul>
</div><div><ul style="list-style-type: disc;">
<li>US$130m in Dec 2017, <a href="https://www.smartkarma.com/insights/activia-properties-placement-back-again-in-just-over-a-year-past-deals-have-done-well" target="_blank" rel="noopener">Activia Properties Placement - Back Again in Just over a Year, past Deals Have Done Well</a>
</li>
<li>US$270m in Nov 2016,  <a href="https://www.smartkarma.com/insights/activia-properties-back-for-the-annual-capital-raise-but-macro-might-not-be-supportive-this-time" target="_blank" rel="noopener">Activia Properties - Back for the Annual Capital Raise but Macro Might Not Be Supportive This</a>, and</li>
<li>US$161m in Dec 2015,  <a href="https://www.smartkarma.com/insights/activia-properties-accretive-acquisition-should-add-to-the-previous-deals-record" target="_blank" rel="noopener">Activia Properties - Accretive Acquisition Should Add to the Previous Deals Record</a>.</li>
</ul></div><div><p>All the prior deals have done well over the short-term. In this note, we will run the deal through our ECM framework and talk about the deal dynamics.</p></div>

Activia Properties Inc (3279 JP)(API) plans to raise around US$200m/JPY22bn to fund the acquisition of three assets worth JPY44bn.
We have previously covered four other deals in the name: 
US$220m in Dec 2018, Activia Properties Placement - Time for the Annual Fund Raise, DPU Accretive, past Deals Did Well


US$130m in Dec 2017, Activia Properties Placement - Back Again in Just over a Year, past Deals Have Done Well

US$270m in Nov 2016,  Activia Properties - Back for the Annual Capital Raise but Macro Might Not Be Supportive This, and
US$161m in Dec 2015,  Activia Properties - Accretive Acquisition Should Add to the Previous Deals Record.
All the prior deals have done well over the short-term. In this note, we will run the deal through our ECM framework and talk about the deal dynamics.

Activia Properties Placement - Accretive Deal but Comes with a Weak Backdrop

Latest News from the World’s Leading Innovators

Granite Bay Capital

An innovation focussed investment company

Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity.

Thematic (Sector/Industry)

<p>Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic outright.  During the case, Epic Games outlined Google’s plans to develop “a series of internal projects to address the ‘contagion’ it perceived from efforts by Epic and others to offer consumers and developers competitive alternatives and has even contemplated buying some or all of Epic to squelch this threat”.</p>

Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic outright.  During the case, Epic Games outlined Google’s plans to develop “a series of internal projects to address the ‘contagion’ it perceived from efforts by Epic and others to offer consumers and developers competitive alternatives and has even contemplated buying some or all of Epic to squelch this threat”.

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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

<p>Market reaction to slightly weak Nintendo results looks overdone to us. This is particularly so given that it had already fallen 15% since 6 Jul even prior to today’s almost 10% down move. There is likely to be some time yet before earnings start to grow strongly again, but valuation here is compelling enough that a long trade does not seem like a bad idea to us.</p>

Market reaction to slightly weak Nintendo results looks overdone to us. This is particularly so given that it had already fallen 15% since 6 Jul even prior to today’s almost 10% down move. There is likely to be some time yet before earnings start to grow strongly again, but valuation here is compelling enough that a long trade does not seem like a bad idea to us.

Nintendo – Worth Bottom Fishing Since It Is Oversold but Not Yet a True Buy

<p>In May, the Nikkei released a market consultation on proposed changes to 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> covering capping the weight of new constituents in the index at 1% by using a Price Adjustment Factor, limiting the number of index changes at a periodic review to 3, and changing the index universe from stocks listed on TSE's 1st section to stocks that are listed on the Prime Market (post the reorganisation). Most of the proposed changes were subsequently approved.</p><p>This is the first <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> rebalance after the market consultation that tweaked things around. The tweaks could ensure the inclusion of stocks that were historically not included in the index due to their high stock price, though the impact will be much smaller since their weight in the index will not exceed 1%.</p><p>At the upcoming rebalance, we see a high probability of <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo Co Ltd (7974 JP)</a> and <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> being included in the index while there is a lower probability of <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> and <a href="https://www.smartkarma.com/entities/orix-corp" target="_blank" data-smartkarma-citation="entities:9936:1" rel="noopener">Orix Corp (8591 JP)</a> being included.</p><p>Potential deletion candidates are <a href="https://www.smartkarma.com/entities/toho-zinc-co-ltd" target="_blank" data-smartkarma-citation="entities:2796:1" rel="noopener">Toho Zinc (5707 JP)</a>, <a href="https://www.smartkarma.com/entities/sky-perfect-jsat-holdings" target="_blank" data-smartkarma-citation="entities:14097:1" rel="noopener">Sky Perfect Jsat (9412 JP)</a>, <a href="https://www.smartkarma.com/entities/maruha-nichiro-corp" target="_blank" data-smartkarma-citation="entities:20640:1" rel="noopener">Maruha Nichiro (1333 JP)</a> and <a href="https://www.smartkarma.com/entities/pacific-metals-co-ltd" target="_blank" data-smartkarma-citation="entities:3439:1" rel="noopener">Pacific Metals (5541 JP)</a>.</p><p>There will be quite a large impact from passive trading on a few names.</p><p>The changes will be announced early September and will be implemented at the close of trading on 30 September.</p>

In May, the Nikkei released a market consultation on proposed changes to the Nikkei 225 (NKY INDEX) covering capping the weight of new constituents in the index at 1% by using a Price Adjustment Factor, limiting the number of index changes at a periodic review to 3, and changing the index universe from stocks listed on TSE's 1st section to stocks that are listed on the Prime Market (post the reorganisation). Most of the proposed changes were subsequently approved.This is the first Nikkei 225 (NKY INDEX) rebalance after the market consultation that tweaked things around. The tweaks could ensure the inclusion of stocks that were historically not included in the index due to their high stock price, though the impact will be much smaller since their weight in the index will not exceed 1%.At the upcoming rebalance, we see a high probability of Nintendo Co Ltd (7974 JP) and ZOZO Inc (3092 JP) being included in the index while there is a lower probability of Oriental Land (4661 JP) and Orix Corp (8591 JP) being included.Potential deletion candidates are Toho Zinc (5707 JP), Sky Perfect Jsat (9412 JP), Maruha Nichiro (1333 JP) and Pacific Metals (5541 JP).There will be quite a large impact from passive trading on a few names.The changes will be announced early September and will be implemented at the close of trading on 30 September.

Nikkei225 Index Rebalance Preview: Perennial Favourites Could Be In

Japan

Nintendo Co., Ltd. globally develops, manufactures and sells home-use video game hardware and software in home entertainment business.  The company also produces home-game products including cards.

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Nintendo (7974 JP)

Nikkei 225 Index Rebalance: Nintendo, Keyence, Murata IN; Nisshinbo, Toyo Seikan, SKY Perfect OUT

Nintendo, Murata & Keyence are into the Nikkei225 while Nisshinbo, Toyo Seikan & Sky Perfect are out. This trade will be more about the deletes...

Brian Freitas

Activia Properties Placement - Accretive Deal but Comes with a Weak Backdrop

Activia Properties Inc (3279 JP) plans to raise around US$200m/JPY22bn to fund the acquisition of three assets worth JPY44bn.

Sumeet Singh

Weekly Innovation Review (WIRE) #44

Headline Developments On the back of the Epic v Apple case, documents were released highlighting that Google (GOOG) had considered buying Epic...

Granite Bay Capital

Nintendo – Worth Bottom Fishing Since It Is Oversold but Not Yet a True Buy

There is likely to be some time yet before Nintendo earnings start to grow strongly again, but valuation here is compelling enough that a long...

Mio Kato

Nikkei225 Index Rebalance Preview: Perennial Favourites Could Be In

Nintendo could be included in the NKY at the upcoming rebalance though the impact will not be very large. The new methodology could also result in...

Brian Freitas

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