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>Since Corporate Governance Code limits disclosures on climate change to prime market companies, it'll encourage the transition from Prime to Standard market and discourage the transition from Sandard to Prime.</li>
<li>While it'll be interesting to see how many years "Scope 3" disclosures will be mandatory, more attention will be paid to how companies uses the cash from reducing policy shareholdings.</li>
<li>Although the situation is different than it was in 2000 because few companies are underfunded, attention should be paid to whether retirement benefit trusts will become a refuge for policy-shareholdings.</li>
</ul>


Since Corporate Governance Code limits disclosures on climate change to prime market companies, it'll encourage the transition from Prime to Standard market and discourage the transition from Sandard to Prime.
While it'll be interesting to see how many years "Scope 3" disclosures will be mandatory, more attention will be paid to how companies uses the cash from reducing policy shareholdings.
Although the situation is different than it was in 2000 because few companies are underfunded, attention should be paid to whether retirement benefit trusts will become a refuge for policy-shareholdings.


Another Catalyst for Expected Reduction in Policy Shareholdings

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

Event-Driven

<ul>
<li>Nine shareholders are looking to sell 33.48m shares of <a href="https://www.smartkarma.com/entities/asahi-group-holdings-ltd" target="_blank" data-smartkarma-citation="entities:10482:1" rel="noopener">Asahi Group Holdings (2502 JP)</a>. That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.</li>
<li>Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.</li>
<li>There will be buying from global trackers but nothing from <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TOPIX</a> trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.</li>
</ul>


Nine shareholders are looking to sell 33.48m shares of Asahi Group Holdings (2502 JP). That is US$1.28bn, 24x ADV and 6.6% of shares outstanding.
Given the recent run up in the stock, there could be downside over the next couple of weeks ahead of the pricing date.
There will be buying from global trackers but nothing from TOPIX trackers, so not a lot of stock will be mopped up. Passive buying before settlement could create a squeeze.


Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key

<ul>
<li>Tobin's Q is not high for companies whose policy holdings are low relative to their net assets or total assets. When discussing policy shareholdings, deemed shareholdings should be included.</li>
<li>Companies with a low ratio of total policy holdings plus deemed holdings to total assets have notably higher ROE, ROA, and Tobin's Q. Vice versa.</li>
<li>These companies generate returns exceeding their cost of capital and are managed with asset and capital efficiency in mind, which shows in their approach to policy shareholdings as governance practices.</li>
</ul>


Tobin's Q is not high for companies whose policy holdings are low relative to their net assets or total assets. When discussing policy shareholdings, deemed shareholdings should be included.
Companies with a low ratio of total policy holdings plus deemed holdings to total assets have notably higher ROE, ROA, and Tobin's Q. Vice versa.
These companies generate returns exceeding their cost of capital and are managed with asset and capital efficiency in mind, which shows in their approach to policy shareholdings as governance practices.


Why Should Policy Shares Be Viewed as Including Deemed Shares Held?

<ul>
<li>30% female board member set by TSE isn't surprising, as it's level within reach, but the fact that TSE set explicit target that companies can't excuses is a first step.</li>
<li>To ensure that a female board member isn't isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.</li>
<li>In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.</li>
</ul>


30% female board member set by TSE isn't surprising, as it's level within reach, but the fact that TSE set explicit target that companies can't excuses is a first step.
To ensure that a female board member isn't isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.


The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

<ul>
<li>TSE plans to publish a list of companies that disclosed and those that are "under consideration" for disclosure in "Management Conscious of Cost of Capital and Stock Price." </li>
<li>TSE's plan to introduce actual investor feedback on how investors view dialogue and engagement and what kind of information disclosure and IR they expect from companies is commendable.</li>
<li>It is very important to know what investors actually want to know, what management is doing to achieve this, and how they should interact with investors in IR activities.</li>
</ul>


TSE plans to publish a list of companies that disclosed and those that are "under consideration" for disclosure in "Management Conscious of Cost of Capital and Stock Price." 
TSE's plan to introduce actual investor feedback on how investors view dialogue and engagement and what kind of information disclosure and IR they expect from companies is commendable.
It is very important to know what investors actually want to know, what management is doing to achieve this, and how they should interact with investors in IR activities.


Preparation in Advance for In-Depth Discussions Is Important for Both Investors and Managers

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)

Another Catalyst for Expected Reduction in Policy Shareholdings

I would like to discuss the issues on the October 18 Nikkei article, "Stranded Asset Risk in Policy Stockholdings: Greenhouse Gas Disclosure...

Metrical Inc

Asahi Group (2502 JP): Big Placement with Limited Index Buying; Timing Is Key

9 shareholders are looking to sell 33.48m shares (6.6% of shares out). The stock has run up and should correct in the short-term. Global passives...

Brian Freitas

Why Should Policy Shares Be Viewed as Including Deemed Shares Held?

I would like to discuss the issues on policy shareholdings from the October 13 Nikkei article, "Aisin's resolve, will it break the bedrock of...

Metrical Inc

The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

I would like to discuss "Revision of the System for appointing Woman Board Members in the Prime Market" published by the TSE on October 11.

Metrical Inc

Preparation in Advance for In-Depth Discussions Is Important for Both Investors and Managers

I would like to discuss "Future Efforts Concerning "Measures to Achieve Management Conscious of Cost of Capital and Stock Price" and "Promotion and...

Metrical Inc