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/nifty-index" target="_blank" data-smartkarma-citation="entities:23617:1" rel="noopener">NIFTY</a> family of indices, <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a>, the KRX New Deal Index and a global index ends on 31 January.</li>
<li>The January rebalance of the IDX30 and LQ45 indices will be implemented at the close of trading on 31 January.</li>
<li>There have been huge inflows into the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300 Index</a> ETFs for another week. This will increase the impact on the index changes at the next rebalance.</li>
</ul>


The review period for the NIFTY family of indices, Nikkei 225, STAR50, the KRX New Deal Index and a global index ends on 31 January.
The January rebalance of the IDX30 and LQ45 indices will be implemented at the close of trading on 31 January.
There have been huge inflows into the CSI 300 Index ETFs for another week. This will increase the impact on the index changes at the next rebalance.


Index Rebalance & ETF Flow Recap: CSI300, CSI500, SSE50, ChiNext, KOSPI200, Renesas, IDX30/LQ45

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>It will be useful for investors if timely disclosure information, which has large market impact but is still disclosed in English by half of companies, is disclosed in English simultaneously.</li>
<li>By limiting the TSE policy to documents that are already disclosed in English by many companies, there is concern that other high-demand documents may not be disclosed in English.</li>
<li>An analysis of English disclosure status and value creation indicators shows that many companies, even those with high profitability and high stock valuation, are not ready for disclosure in English.</li>
</ul>


It will be useful for investors if timely disclosure information, which has large market impact but is still disclosed in English by half of companies, is disclosed in English simultaneously.
By limiting the TSE policy to documents that are already disclosed in English by many companies, there is concern that other high-demand documents may not be disclosed in English.
An analysis of English disclosure status and value creation indicators shows that many companies, even those with high profitability and high stock valuation, are not ready for disclosure in English.


TSE Policy Seems to Be that Disclosure in English Is Left to the Companies' Own Initiative

<ul>
<li>It is premature to start discussions on stopping raising the hurdles of the Corporate Governance Code when Japan's boards are not dominated by a majority of independent directors.</li>
<li>If listed companies are left to voluntarily improve their corporate governance practices, differences in corporate governance practice efforts among listed companies are expected to widen.</li>
<li>Companies with high percentage of foreign shareholders, primarily those with large market capitalization, are expected to continue to improve their corporate governance practices through engagement by overseas investors. vice versa</li>
</ul>


It is premature to start discussions on stopping raising the hurdles of the Corporate Governance Code when Japan's boards are not dominated by a majority of independent directors.
If listed companies are left to voluntarily improve their corporate governance practices, differences in corporate governance practice efforts among listed companies are expected to widen.
Companies with high percentage of foreign shareholders, primarily those with large market capitalization, are expected to continue to improve their corporate governance practices through engagement by overseas investors. vice versa


Size of Market Capitalization Will Make a Difference in Corporate Governance and Value Creation

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> and <a href="https://www.smartkarma.com/entities/nec-corp" target="_blank" data-smartkarma-citation="entities:17084:1" rel="noopener">NEC Corp (6701 JP)</a> are looking to sell their entire stake in <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> in a deal that will raise around US$2.2bn.</li>
<li>
<a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> dropped a bit in November following INCJ's stake sale but momentum has picked up again as the stock reaches for new highs.</li>
<li>The float increase in global indices will coincide with the offering. There will be BIG buying by <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TSE Tokyo Price Index TOPIX (TPX INDEX)</a> trackers in October.</li>
</ul>



Hitachi Ltd (6501 JP) and NEC Corp (6701 JP) are looking to sell their entire stake in Renesas Electronics (6723 JP) in a deal that will raise around US$2.2bn.

Renesas Electronics (6723 JP) dropped a bit in November following INCJ's stake sale but momentum has picked up again as the stock reaches for new highs.
The float increase in global indices will coincide with the offering. There will be BIG buying by TSE Tokyo Price Index TOPIX (TPX INDEX) trackers in October.


Renesas Electronics (6723 JP): Passives Will Need to Buy a LOT This Year

<ul>
<li>Government ministries, agencies and the TSE want to raise the value of the Tokyo market, even if it means using the opinions of overseas investors, including activist investors.</li>
<li>Companies with high foreign ownership and large market capitalization are proactive in corporate governance efforts, while many other companies are passive, indicating that differences in efforts among companies are significant.</li>
<li>Thanks to the revision of the Corporate Governance Code, corporate governance practices have improved mainly in terms of formal criteria, and now substantive improvements are required.</li>
</ul>


Government ministries, agencies and the TSE want to raise the value of the Tokyo market, even if it means using the opinions of overseas investors, including activist investors.
Companies with high foreign ownership and large market capitalization are proactive in corporate governance efforts, while many other companies are passive, indicating that differences in efforts among companies are significant.
Thanks to the revision of the Corporate Governance Code, corporate governance practices have improved mainly in terms of formal criteria, and now substantive improvements are required.


CG Watch, Which Made Great Strides Will Be Tested Next Time for Substantial Governance Improvements

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Index Rebalance & ETF Flow Recap: CSI300, CSI500, SSE50, ChiNext, KOSPI200, Renesas, IDX30/LQ45

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

TSE Policy Seems to Be that Disclosure in English Is Left to the Companies' Own Initiative

I would like to discuss the issues on the TSE's December 18 disclosure on the "Expansion of English Disclosure in the Prime Market."

Metrical Inc

Size of Market Capitalization Will Make a Difference in Corporate Governance and Value Creation

I would like to discuss the issues on the December 12 Nikkei article, "Corporate Governance Reform Focusing on Substance.”

Metrical Inc

Renesas Electronics (6723 JP): Passives Will Need to Buy a LOT This Year

Hitachi and NEC are looking to sell their entire stakes in Renesas at a 6-8% discount to the last close and raise around US$2.2bn. TOPIX trackers...

Brian Freitas

CG Watch, Which Made Great Strides Will Be Tested Next Time for Substantial Governance Improvements

I would like to discuss the issues on the December 15 Nikkei article, "Japan's Corporate Governance Ranks Second in Asia in Challenges, Rated 'High...

Metrical Inc