Index Rebal Trades & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal Trades & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<ul>
<li>The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.</li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.</li>
<li>Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-June 2023.</li>
</ul>


The JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted (capped) market-value-weighted index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to be announced in early August 2023 based on trading data as of end-June 2023.


Quiddity Leaderboard JPX-Nikkei 400: Final Predictions for August 2023

Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Hon Hai Precision Industry / Equity Bottom-Up

<ul>
<li>In our view, Hon Hai 3Q23 results showcased stability for 2023E ahead of expected growth in 2024E-2025E.</li>
<li>The company has maintained its 2025E 10% gross margin target and highlighted how its EV business expansion is continuing.</li>
<li>While Consumer Electronics revenue is expected to fall this year, PC Products is expected to grow given the company believes the PC market has bottomed. Stay Long Hon Hai.</li>
</ul>


In our view, Hon Hai 3Q23 results showcased stability for 2023E ahead of expected growth in 2024E-2025E.
The company has maintained its 2025E 10% gross margin target and highlighted how its EV business expansion is continuing.
While Consumer Electronics revenue is expected to fall this year, PC Products is expected to grow given the company believes the PC market has bottomed. Stay Long Hon Hai.


Hon Hai Sees Computing Products Rebound, PC Market Bottomed; EV Expanding

Japan Specialist

Mark Chadwick

Thematic (Sector/Industry)

<ul>
<li>OVERSEAS.  Powell Testifies. 50bp hike more likely  as inflation higher than expected. Sparks repricing in markets: US Equities hit, UST dumped, USD rises - Choas all round. </li>
<li>JAPAN.  NKY Futs -0.4% vs Cash; USDJPY weakens to 137.1 as Powell tesimony digested;  H3 failure-blow to JP space hopes; "My Number" Use expanded;  Dentsu UK M&amp;A; Many Rating D/Gs </li>
<li>NUGGET. Carbon Capture is a key part of the decarbonization mix; Expect significant spend locally and globally. We look at the opportunity and the firms likely to benefit.  </li>
</ul>


OVERSEAS.  Powell Testifies. 50bp hike more likely  as inflation higher than expected. Sparks repricing in markets: US Equities hit, UST dumped, USD rises - Choas all round. 
JAPAN.  NKY Futs -0.4% vs Cash; USDJPY weakens to 137.1 as Powell tesimony digested;  H3 failure-blow to JP space hopes; "My Number" Use expanded;  Dentsu UK M&amp;A; Many Rating D/Gs 
NUGGET. Carbon Capture is a key part of the decarbonization mix; Expect significant spend locally and globally. We look at the opportunity and the firms likely to benefit.  


Good Morning Japan |Powell Dishes Bitter Pill - Sparks Cross Market Chaos; NUGGET: CCUS Opportunity

<ul>
<li>U.S. chip restrictions have hobbled Hon Hai's China EV competition.</li>
<li>AI and advanced semiconductors will become a necessity for a globally competitive EV platform and Hon Hai appears to be moving aggressively to capture this opportunity.</li>
<li>The shares should see topline growth and major margin expansion into 2025, and the market appears to have not yet priced-in Hon Hai's latest advantageous position.</li>
</ul>


U.S. chip restrictions have hobbled Hon Hai's China EV competition.
AI and advanced semiconductors will become a necessity for a globally competitive EV platform and Hon Hai appears to be moving aggressively to capture this opportunity.
The shares should see topline growth and major margin expansion into 2025, and the market appears to have not yet priced-in Hon Hai's latest advantageous position.


Hon Hai: U.S. Chip Restrictions Vs. China Have Put Hon Hai in a Stronger Than Ever Position

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<ul>
<li>Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.</li>
<li>If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.</li>
<li>I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.</li>
</ul>


Three interviews and comments by Senior Toshiba Boardmembers (chairperson and head of Special Committee) and the CEO prep the ground for a full company deal, or no deal.
If no deal, there's downside to the 5yr average Toshiba/Peers ratio. If you see 50% deal probability, at mid ¥6000s or better, IRRs are OK. But there is jump risk.
I don't see the activists just deciding to bail en masse if no deal. I think they take it further, which means I think the Board wants a deal.


Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

Japan

Sharp Corporation manufactures consumer and industrial electronics. The Company's products include audio-visual and communication equipment such as LCD TVs and mobile phones, home appliances, and electronic components including solar cells and integrated circuits.  Sharp operates its business worldwide.

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Sharp Corp (6753 JP)

Quiddity Leaderboard JPX-Nikkei 400: Final Predictions for August 2023

I expect the JPX-Nikkei Index Changes announcement to be on 7th August 2023 and the Inclusion/Exclusion events to be at the close of 30th August...

Janaghan Jeyakumar, CFA

Hon Hai Sees Computing Products Rebound, PC Market Bottomed; EV Expanding

Hon Hai 3Q23 results showcased stability for 2023E... ahead of expected strong profit growth in 2024E-2025E. Computing Products will show relative...

Vincent Fernando, CFA

Good Morning Japan |Powell Dishes Bitter Pill - Sparks Cross Market Chaos; NUGGET: CCUS Opportunity

REALITY CHECK FROM POWELL; USDJPY weakens to 137.1 as Powell tesimony digested; H3 failure-blow to JP space hopes; "My Number" Use expanded; ...

Mark Chadwick

Hon Hai: U.S. Chip Restrictions Vs. China Have Put Hon Hai in a Stronger Than Ever Position

AI and advanced semiconductors will become a necessity for a globally competitive EV platform -- This means that U.S. chip restricitons for China...

Vincent Fernando, CFA

Toshiba (6502 JP) Getting Closer to Crunch Time So Ongoing News "Leaks" Likely

Bidders are approaching 2nd Round deadlines, and news/comments are starting to seep out. Expect more. I expect a decision at/after H1 results. If...

Travis Lundy

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