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>TSE published "English Disclosure Practice Guide" for companies with the aim of promoting disclosure in English for communicating with foreign investors, who have significant presence in TSE and Japanese companies.</li>
<li>The purpose of English-language disclosure is to attract investment from overseas investors and improve valuations, but there is mismatch between information needs of overseas investors and English-language disclosure of companies.</li>
<li>While this handbook is helpful for companies attempting to disclose in English for the first time, in-depth approach may be necessary for companies that need further communications with overseas investors.</li>
</ul>


TSE published "English Disclosure Practice Guide" for companies with the aim of promoting disclosure in English for communicating with foreign investors, who have significant presence in TSE and Japanese companies.
The purpose of English-language disclosure is to attract investment from overseas investors and improve valuations, but there is mismatch between information needs of overseas investors and English-language disclosure of companies.
While this handbook is helpful for companies attempting to disclose in English for the first time, in-depth approach may be necessary for companies that need further communications with overseas investors.


In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors

<ul>
<li>Prime market was conceived as a market for institutional investors to invest in, but the problem is that little has changed in substance as a result of the market reclassification.</li>
<li>The current discussion hasn't raised any debate on raising the market cap-threshold for prime market. To keep up appearances as a global market, TSE will proceed with disclosure in English.</li>
<li>TSE will probably set 5-year exit deadline for companies that don't meet the listing criteria  within the next year, and will prepare a market for those companies.</li>
</ul>


Prime market was conceived as a market for institutional investors to invest in, but the problem is that little has changed in substance as a result of the market reclassification.
The current discussion hasn't raised any debate on raising the market cap-threshold for prime market. To keep up appearances as a global market, TSE will proceed with disclosure in English.
TSE will probably set 5-year exit deadline for companies that don't meet the listing criteria  within the next year, and will prepare a market for those companies.


Review of TSE Market Reclassification Requires a Big Cleanup, Not a Small Cleanup as It Should Be

<ul>
<li>If discussion doesn't proceed from the starting point that respect for rights should be for the coexistence of humankind, not for the maintenance of corporate activities, it will get confused.</li>
<li>Although human rights were included in the 2021 revision of the Corporate Governance Code in the Principles of Sustainability, it is not thought to have been effective.</li>
<li>The repeated human rights violation scandals at companies and the fact that these companies have human rights policies in place infers that this is a deeply rooted problem in society.</li>
</ul>


If discussion doesn't proceed from the starting point that respect for rights should be for the coexistence of humankind, not for the maintenance of corporate activities, it will get confused.
Although human rights were included in the 2021 revision of the Corporate Governance Code in the Principles of Sustainability, it is not thought to have been effective.
The repeated human rights violation scandals at companies and the fact that these companies have human rights policies in place infers that this is a deeply rooted problem in society.


The Resolution of Human Rights Issues Should Not Be a Means to a Purpose

<ul>
<li>Neither the company nor the employees have made sufficient investments, despite the fact that both sides see a gap between the skills they need and the reality.</li>
<li>Many companies either fail to link their management strategy to their human capital investment and human resource strategy, or don't have a clear policy for human capital investment.</li>
<li>If investment in human resources is curbed in order to maintain short-term profit margins, this will lead to weighing on growth potential and profit margins in the medium-to-long term.</li>
</ul>


Neither the company nor the employees have made sufficient investments, despite the fact that both sides see a gap between the skills they need and the reality.
Many companies either fail to link their management strategy to their human capital investment and human resource strategy, or don't have a clear policy for human capital investment.
If investment in human resources is curbed in order to maintain short-term profit margins, this will lead to weighing on growth potential and profit margins in the medium-to-long term.


Recognizing Human Resource Strategy as a Management Issue and Creating the Policy Is the First Step

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>At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.</li>
<li>Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.</li>
<li>Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.</li>
</ul>


At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.
Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.
Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.


TOPIX October Rebalance: BIG One With ¥1.8tn a Side to Trade

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)

In-Depth Approach Is Necessary for Companies Seeking Further Communication with Overseas Investors

TSE disclosed the English Disclosure Practice Handbook on September 22, 2022, and I would like to summarized the contents and discuss the issues in...

Metrical Inc

Review of TSE Market Reclassification Requires a Big Cleanup, Not a Small Cleanup as It Should Be

I would like to consider the issues on the discussions at the July 29th Follow-up Meeting on the Revision of Market Segmentation, which were...

Metrical Inc

The Resolution of Human Rights Issues Should Not Be a Means to a Purpose

I would like to discuss the issues related to human rights on the Nikkei article, " Companies Urge Responses to Human Rights Issues."

Metrical Inc

Recognizing Human Resource Strategy as a Management Issue and Creating the Policy Is the First Step

I would like to discussed the issues related to the human capital investment on the Nikkei article, "MHLW Formulates Guidelines for Relearning."

Metrical Inc

TOPIX October Rebalance: BIG One With ¥1.8tn a Side to Trade

Lower FFWs on 970 stocks and higher FFWs on 114 stocks will result in one-way turnover of 2.52% leading to a one-way trade of ¥1.8tn at the close...

Brian Freitas