Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>Risk reward favours this shift in allocation between these markets.  </li>
<li>Short to mid-term concerns on the Indian market warrant this strategic change</li>
<li>Slowing revenue growth and less government spending leading to decelerating profits which is not yet reflected in market multiples</li>
</ul>


Risk reward favours this shift in allocation between these markets.  
Short to mid-term concerns on the Indian market warrant this strategic change
Slowing revenue growth and less government spending leading to decelerating profits which is not yet reflected in market multiples


2025 High Conviction Idea: The Case for a Rotation Out of India into Hong Kong - Part 1

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>Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.</li>
<li>Reently-Listed <a href="https://www.smartkarma.com/entities/tokyo-metro-co-ltd" target="_blank" data-smartkarma-citation="entities:40930:1" rel="noopener">Tokyo Metro (9023 JP)</a>, <a href="https://www.smartkarma.com/entities/rigaku-holdings-corporation" target="_blank" data-smartkarma-citation="entities:43950:1" rel="noopener">Rigaku Holdings (268A JP)</a>, and <a href="https://www.smartkarma.com/entities/intermestic-inc" target="_blank" data-smartkarma-citation="entities:43929:1" rel="noopener">Intermestic (262A JP)</a> were added to the TOPIX index at the end of November 2024.</li>
<li>Our long-term pre-event candidate <a href="https://www.smartkarma.com/entities/japan-eyewear-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:40217:1" rel="noopener">Japan Eyewear Holdings (5889 JP)</a> has applied for a Section Transfer to the Prime Market which means there could be TOPIX Inclusion in the near future.</li>
</ul>


Quiddity's "Who is Ready" series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
Reently-Listed Tokyo Metro (9023 JP), Rigaku Holdings (268A JP), and Intermestic (262A JP) were added to the TOPIX index at the end of November 2024.
Our long-term pre-event candidate Japan Eyewear Holdings (5889 JP) has applied for a Section Transfer to the Prime Market which means there could be TOPIX Inclusion in the near future.


TOPIX Inclusions: Who Is Ready (Dec 2024)

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>In many cases of bad disclosures where the capital allocation policy has not been adequately considered, the company often fails to develop a concrete growth strategy using cash.</li>
<li>The reason for the misaligned disclosures with investors may be that the company lacks the process to produce projected financial statements and to estimate corporate value/share price calculated from DCF.</li>
<li>If a plan containing unreasonable figures is disclosed as is, the independent outside director may not be involved in the decision making or may not be accompanied by adequate skills.</li>
</ul>


In many cases of bad disclosures where the capital allocation policy has not been adequately considered, the company often fails to develop a concrete growth strategy using cash.
The reason for the misaligned disclosures with investors may be that the company lacks the process to produce projected financial statements and to estimate corporate value/share price calculated from DCF.
If a plan containing unreasonable figures is disclosed as is, the independent outside director may not be involved in the decision making or may not be accompanied by adequate skills.


Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors' Perspective

<ul>
<li>A monthly review of how the markets and our themes are currently performing</li>
<li>Analysing what went wrong and what went right in stocks and sectors</li>
<li>Highlighting positions added or removed from the thematic investment portfolio</li>
</ul>


A monthly review of how the markets and our themes are currently performing
Analysing what went wrong and what went right in stocks and sectors
Highlighting positions added or removed from the thematic investment portfolio


November Themes and Thematic Portfolio Review

<ul>
<li>The measure to implement 100% inclusion or separation of subsidiary profits from parent company profits is only the first step, and this alone won't reflect positively on the stock price.</li>
<li>The key is the second phase of measures to strengthen the parent company's overall ability to generate cash flow by investing in highly profitable businesses after restructuring its business portfolio.</li>
<li>Hitachi is one of the few cases where it quickly implemented the second phase and reflected growth in corporate value in its stock price through realization of cash flow expansion.</li>
</ul>


The measure to implement 100% inclusion or separation of subsidiary profits from parent company profits is only the first step, and this alone won't reflect positively on the stock price.
The key is the second phase of measures to strengthen the parent company's overall ability to generate cash flow by investing in highly profitable businesses after restructuring its business portfolio.
Hitachi is one of the few cases where it quickly implemented the second phase and reflected growth in corporate value in its stock price through realization of cash flow expansion.


In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

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)

2025 High Conviction Idea: The Case for a Rotation Out of India into Hong Kong - Part 1

Shift in allocation from Indian to Chinese markets is favored due to short/mid-term concerns, including slowing revenue growth and decelerating...

Rikki Malik

TOPIX Inclusions: Who Is Ready (Dec 2024)

Japan Eyewear Holdings (5889 JP) is likely to have a TOPIX Inclusion event in 1H 2025 and this might help the stock outperform the TOPIX index...

Janaghan Jeyakumar, CFA

Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors' Perspective

I would like to discuss the issues on the document “Points and Examples of Gaps from Investors' Perspective (Draft)” disclosed by the TSE on...

Metrical Inc

November Themes and Thematic Portfolio Review

We review overall market performance, our investment themes, highlighting additions and substractions in the thematic portfolio.

Rikki Malik

In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

I would like to discuss the October 30 Nikkei Shimbun article, “Following Hitachi, whose stock price is performing well, NEC and Toyota Tsusho are...

Metrical Inc

2025 High Conviction Idea: The Case for a Rotation Out of India into Hong Kong - Part 1

​Shift in allocation from Indian to Chinese markets is favored due to short/mid-term concerns, including slowing revenue growth and decelerating...

Rikki Malik

TOPIX Inclusions: Who Is Ready (Dec 2024)

Japan Eyewear Holdings (5889 JP) is likely to have a TOPIX Inclusion event in 1H 2025 and this might help the stock outperform the TOPIX index...

Janaghan Jeyakumar, CFA

Independent Directors Are Responsible for Disclosures that Have Gaps from the Investors' Perspective

I would like to discuss the issues on the document “Points and Examples of Gaps from Investors' Perspective (Draft)” disclosed by the TSE on...

Metrical Inc

November Themes and Thematic Portfolio Review

We review overall market performance, our investment themes, highlighting additions and substractions in the thematic portfolio.

Rikki Malik

In the Dissolution of the Parent-Subsidiary Listing, the Second Step Is Key for the Parent Company

I would like to discuss the October 30 Nikkei Shimbun article, “Following Hitachi, whose stock price is performing well, NEC and Toyota Tsusho are...

Metrical Inc

Shift in allocation from Indian to Chinese markets is favored due to short/mid-term concerns, including slowing revenue growth and decelerating...