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

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>Earnings surpassed consensus expectations providing no pullback to allow entry</li>
<li>Most operating metrics improved and all trends are goign in the right direction</li>
<li>Capital management is top of mind for management with a common thread of increasing ROEs and PBRs</li>
</ul>


Earnings surpassed consensus expectations providing no pullback to allow entry
Most operating metrics improved and all trends are goign in the right direction
Capital management is top of mind for management with a common thread of increasing ROEs and PBRs


Japanese Megabanks' Earnings Exceed Expectations - Stay on the Train?

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>Even if the initial AUM is small, the impact of launch of a publicly offered mutual fund for retail investors by a foreign activist investor is expected to be significant.</li>
<li>If Dalton gains the support of individual investors through publicly offered investment trust, it would give more legitimacy to the management improvement plans that Dalton is pressing Japanese company for.</li>
<li>Increased attention to the activist investors is expected to lead to a certain number of individual shareholders voting in favor of shareholder proposals, as well as  overseas investor engagement.</li>
</ul>


Even if the initial AUM is small, the impact of launch of a publicly offered mutual fund for retail investors by a foreign activist investor is expected to be significant.
If Dalton gains the support of individual investors through publicly offered investment trust, it would give more legitimacy to the management improvement plans that Dalton is pressing Japanese company for.
Increased attention to the activist investors is expected to lead to a certain number of individual shareholders voting in favor of shareholder proposals, as well as  overseas investor engagement.


The Impact of Launching a Publicly Offered Mutual Fund by an Activist Investor Is ....

<ul>
<li>Even the companies with US type 3 committees, which is expected to have higher awareness of corporate governance, there're differences in the status of nominating committee activities among the companies.</li>
<li>While doubts about whether the nominating committee is fulfilling its function have not been dispelled, there have been cases of low approval rates for proposals for the election of directors.</li>
<li>Since discussions in voluntary nominating committees are only advisory, more companies are expected to move to Company with US type 3 Committees, which have statutory nominating committees.</li>
</ul>


Even the companies with US type 3 committees, which is expected to have higher awareness of corporate governance, there're differences in the status of nominating committee activities among the companies.
While doubts about whether the nominating committee is fulfilling its function have not been dispelled, there have been cases of low approval rates for proposals for the election of directors.
Since discussions in voluntary nominating committees are only advisory, more companies are expected to move to Company with US type 3 Committees, which have statutory nominating committees.


Nominating Committee Is Becoming More Active in a Few Companies, but No Sign yet of Spreading to All

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>
<a href="https://www.smartkarma.com/entities/kansai-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:18907:1" rel="noopener">Kansai Electric Power (9503 JP)</a> is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.</li>
<li>
<a href="https://www.smartkarma.com/entities/kansai-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:18907:1" rel="noopener">Kansai Electric Power (9503 JP)</a> is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.</li>
<li>There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.</li>
</ul>



Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.

Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.


KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering

<ul>
<li>While good for small-cap stocks to disclose stock price improvement plans, which is the minimum to be eligible for TOPIX, few global investors can invest in company of this size.</li>
<li>Since many Japanese small-cap companies have diversified businesses and compete with numerous companies for a market that is not large, forcing low profit margins, a market shakeout is necessary.</li>
<li>The key is whether small cap companes that are beyond the reach of overseas investor engagement can execute a business portfolio review on its own initiative.</li>
</ul>


While good for small-cap stocks to disclose stock price improvement plans, which is the minimum to be eligible for TOPIX, few global investors can invest in company of this size.
Since many Japanese small-cap companies have diversified businesses and compete with numerous companies for a market that is not large, forcing low profit margins, a market shakeout is necessary.
The key is whether small cap companes that are beyond the reach of overseas investor engagement can execute a business portfolio review on its own initiative.


Market Shakeout Should Come with Business Portfolio Restructuring Especially for Small-Cap Companies

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)

Japanese Megabanks' Earnings Exceed Expectations - Stay on the Train?

Banks' strong earnings performance and focus on capital management drives positive stock price performance. Will it continue?

Rikki Malik

The Impact of Launching a Publicly Offered Mutual Fund by an Activist Investor Is ....

I have considered the October 25 Nikkei article, “Activist Investment Trust Target Individuals, to be Sold by US based Dalton Investments.”

Metrical Inc

Nominating Committee Is Becoming More Active in a Few Companies, but No Sign yet of Spreading to All

I would like to discuss the October 22 Nikkei Shimbun article, ““Nominating Committee Holds 80% of Meetings to Discuss Top Management Appointments,...

Metrical Inc

KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering

KEPCO is down 22.8% from the time of the announcement of the primary + secondary offering. The stock is now back to where it was at the start of...

Brian Freitas

Market Shakeout Should Come with Business Portfolio Restructuring Especially for Small-Cap Companies

I would like to discuss the issues on the October 21 Nikkei article, “TOPIX Reform Presses Small Cap Stocks to Transform; Investment Opportunities...

Metrical Inc