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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

The Nikkei today 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>. Most of the changes are minor and will have little to no impact on the index.The main changes proposed include 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).Limiting the weight of the new constituents in the index at 1% will keep index turnover low and reduce the impact of passive buying on the inclusions.Limiting the Price Adjustment Factor to 1 decimal place will necessitate selling of <a href="https://www.smartkarma.com/entities/sompo-holdings-inc" target="_blank" data-smartkarma-citation="entities:632:1" rel="noopener">Sompo Holdings (8630 JP)</a> by passive funds if the proposals are implemented.The consultation closes on 13 June and comments can be submitted <a href="https://indexes.nikkei.co.jp/en/nkave/governance" target="_blank" rel="noopener">here</a>.Finally, the Nikkei thanks everyone's contribution to the consultation but clearly states that it will make a decision at its own discretion... thanks for sharing though!

The Nikkei today released a market consultation on proposed changes to the Nikkei 225 (NKY INDEX). Most of the changes are minor and will have little to no impact on the index.The main changes proposed include 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).Limiting the weight of the new constituents in the index at 1% will keep index turnover low and reduce the impact of passive buying on the inclusions.Limiting the Price Adjustment Factor to 1 decimal place will necessitate selling of Sompo Holdings (8630 JP) by passive funds if the proposals are implemented.The consultation closes on 13 June and comments can be submitted here.Finally, the Nikkei thanks everyone's contribution to the consultation but clearly states that it will make a decision at its own discretion... thanks for sharing though!

Nikkei225 Market Consultation: Tweaks and Changes Proposed; Nikkei Will Use Its Own Discretion

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Texas Storms = Japan Risk:Insurers could suffer record 1Q20 catastrophic (CAT) losses after the historic State of Texas (and beyond) winter storm Uri, which crippled Texas’ electrical grid and caused extensive property damage. Most directly exposed would appear to be Sompo (~2%), and Tokio Marine (1%); and*Watch Your Reinsurance: The risk of this Uri event hitting reinsurance layers is quickly rising given the fluid events and the creep in losses. The situation looks to be quite dicey given the economic impact estimate of between USD 45-50 bn. Add this to Texas’ poor handling of COVID-19, and no doubt this CAT event will result higher bankruptcies across retail energy power companies, energy drillers, etc. which should be additive to reinsurance losses.

*Texas Storms = Japan Risk:Insurers could suffer record 1Q20 catastrophic (CAT) losses after the historic State of Texas (and beyond) winter storm Uri, which crippled Texas’ electrical grid and caused extensive property damage. Most directly exposed would appear to be Sompo (~2%), and Tokio Marine (1%); and*Watch Your Reinsurance: The risk of this Uri event hitting reinsurance layers is quickly rising given the fluid events and the creep in losses. The situation looks to be quite dicey given the economic impact estimate of between USD 45-50 bn. Add this to Texas’ poor handling of COVID-19, and no doubt this CAT event will result higher bankruptcies across retail energy power companies, energy drillers, etc. which should be additive to reinsurance losses.

Japan Insurers – Texas, Don’t Hold ‘Em

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and *Asia-Pac To Follow: As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and *Asia-Pac To Follow: As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.  

Asian Insurers – High Court Ruling A Harbinger For Region

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

Palantir Technologies  / Equity Capital Markets

Palantir Technologies is one of the most anticipated IPOs globally in 2020. Established in 2003, headquartered in Palo Alto, and backed by the highly influential Peter Thiel and the CIA, Palantir is ready to complete its IPO in the next few weeks (most likely in September or October, prior to the U.S. Presidential election in early November).On July 6th, Palantir filed a confidential registration with the U.S. SEC. Palantir's core business is developing software to analyze information. Its main customer is various branches of the U.S. government, including the Department of Defense. <div class="content-highlight">
The main purpose of this insight is as follows:
<ul>
<li>
Discuss the potential inflection point of the global IPO market with the completion of the Palantir IPO</li>
<li>
Provide an initial overview of Palantir</li>
<li>
Highlight potential investment opportunities prior to the Palantir listing</li>
</ul>
</div>

Palantir Technologies is one of the most anticipated IPOs globally in 2020. Established in 2003, headquartered in Palo Alto, and backed by the highly influential Peter Thiel and the CIA, Palantir is ready to complete its IPO in the next few weeks (most likely in September or October, prior to the U.S. Presidential election in early November).On July 6th, Palantir filed a confidential registration with the U.S. SEC. Palantir's core business is developing software to analyze information. Its main customer is various branches of the U.S. government, including the Department of Defense. 
The main purpose of this insight is as follows:


Discuss the potential inflection point of the global IPO market with the completion of the Palantir IPO

Provide an initial overview of Palantir

Highlight potential investment opportunities prior to the Palantir listing



Palantir - The Most Anticipated IPO in 2020

Equity Bottom-Up

* Good Guidance Progess: Tokio Marine Holdings (8766.JP) [Tokio Marine] FY 3Q20 results came in at JPY 110.1 bn (1Q-3Q ¥226.7 bn, +2% yoy) with profits available to shareholders coming in at JPY 36.9 bn (1Q-3Q ¥214.9 bn, +15% yoy) – approximately 70% progress of Tokio Marine’s full-year guidance; and *….But It Won’t Last For Long: Near-term, there are significant concerns over impact of the general COVID-19 market turmoil on Tokio Marine’s own/invested securities portfolio; losses within the overseas asset manager (Delphi) and AUM redemptions; potential claims if Tokyo Olympics are canceled; and other COVID-19-related business claims.  Further, given the two major CAT events there is risk of higher reinsurance rates and concerns over the CAT/reserve ratio. In other words, FY 4Q20 results look to be quite the disaster for Tokio Marine.

* Good Guidance Progess: Tokio Marine Holdings (8766.JP) [Tokio Marine] FY 3Q20 results came in at JPY 110.1 bn (1Q-3Q ¥226.7 bn, +2% yoy) with profits available to shareholders coming in at JPY 36.9 bn (1Q-3Q ¥214.9 bn, +15% yoy) – approximately 70% progress of Tokio Marine’s full-year guidance; and *….But It Won’t Last For Long: Near-term, there are significant concerns over impact of the general COVID-19 market turmoil on Tokio Marine’s own/invested securities portfolio; losses within the overseas asset manager (Delphi) and AUM redemptions; potential claims if Tokyo Olympics are canceled; and other COVID-19-related business claims.  Further, given the two major CAT events there is risk of higher reinsurance rates and concerns over the CAT/reserve ratio. In other words, FY 4Q20 results look to be quite the disaster for Tokio Marine.

Tokio Marine Holdings – COVID-19 Risks Prevail

Japan

Sompo Holdings, Inc, is a holding company established through the integration of Sompo Japan Insurance Inc. and NIPPONKOA Insurance Company Limited. Through subsidiaries, the Company provides non-life insurance including marine, fire, and automobile, as well as life insurance.

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Sompo Holdings (8630 JP)

Nikkei225 Market Consultation: Tweaks and Changes Proposed; Nikkei Will Use Its Own Discretion

There are a few big changes proposed to the Nikkei225 index methodology along with a few minor tweaks. Sompo (8630 JP) will be sold at the 2021...

Brian Freitas

Japan Insurers – Texas, Don’t Hold ‘Em

JAPAN INSURANCE: Insurers could suffer record 1Q20 catastrophic (CAT) losses after the Texas winter storm. Most directly exposed are Sompo (~2%)...

Thomas J. Monaco

Asian Insurers – High Court Ruling A Harbinger For Region

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the...

Thomas J. Monaco

Palantir - The Most Anticipated IPO in 2020

Palantir Technologies is one of the most anticipated IPOs globally in 2020. Established in 2003, headquartered in Palo Alto, and backed by the...

Douglas Kim

Tokio Marine Holdings – COVID-19 Risks Prevail

* Good Guidance Progess: Tokio Marine Holdings (8766.JP) [Tokio Marine] FY 3Q20 results came in at JPY 110.1 bn (1Q-3Q ¥226.7 bn, +2% yoy) with...

Thomas J. Monaco

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