Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.</li>
<li>The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.</li>
<li>The Nikkei Index Team announced <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> would be capped. I didn't expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.</li>
</ul>


The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.
The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.
The Nikkei Index Team announced Fast Retailing (9983 JP) would be capped. I didn't expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.


Sep24 Nikkei 225 Rebal Final Predictions - Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s

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>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 Index</a> September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.</li>
<li>Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.</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>'s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.</li>
</ul>


The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.

Fast Retailing (9983 JP)'s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.


Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

<ul>
<li>The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.</li>
<li>Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.</li>
<li>There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025. </li>
</ul>


The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025. 


Sep24 Nikkei 225 Rebal - Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

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>Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. </li>
<li>Rohm's operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.</li>
<li>1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.</li>
</ul>


Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. 
Rohm's operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.
1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.


Rohm (6963 JP): Negative Scenario Discounted

<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> September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.</li>
<li>Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.</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> will be capped to 10% of the index weight while <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> is also close to the 10% cap.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.

Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.


Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

Japan

ROHM COMPANY LIMITED manufactures custom linear integrated circuits and semiconductor devices for use primarily in consumer electronics.  The Company has plants and sales offices worldwide.  Rohm's subsidiaries include Wako Electric and Apollo Electronics.

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ROHM Co Ltd (6963 JP)

Sep24 Nikkei 225 Rebal Final Predictions - Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s

Nikkei 225 Sep24 Rebal data is done and dusted. I see one automatic DELETE, and one ADD. There is a dark horse possibility to replace that ADD but...

Travis Lundy

Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes

We forecast 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped at 10%. Passives need...

Brian Freitas

Sep24 Nikkei 225 Rebal - Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close

The Nikkei 225 rebal for September is still likely to be a small affair. One ADD. One DELETE. The big capping trade for Fast Retailing is 1% away...

Travis Lundy

Rohm (6963 JP): Negative Scenario Discounted

A 43% decline from its 52-week high has largely discounted the collapse of earnings. This year's guidance is "severe" and projected valuations for...

Scott Foster

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

There could be 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped while Tokyo...

Brian Freitas

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