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>In October 2024, <a href="https://www.smartkarma.com/entities/celsys-inc" target="_blank" data-smartkarma-citation="entities:20774:1" rel="noopener">CELSYS (3663 JP)</a>, <a href="https://www.smartkarma.com/entities/pksha-technology-inc" target="_blank" data-smartkarma-citation="entities:26181:1" rel="noopener">PKSHA Technology (3993 JP)</a>, and <a href="https://www.smartkarma.com/entities/genova-inc" target="_blank" data-smartkarma-citation="entities:43939:1" rel="noopener">GENOVA (9341 JP)</a> were included in the TOPIX index.</li>
<li>Next, <a href="https://www.smartkarma.com/entities/wa-inc" target="_blank" data-smartkarma-citation="entities:29189:1" rel="noopener">WA Inc (7683 JP)</a> will be included in TOPIX at the end of December 2024.</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.
In October 2024, CELSYS (3663 JP), PKSHA Technology (3993 JP), and GENOVA (9341 JP) were included in the TOPIX index.
Next, WA Inc (7683 JP) will be included in TOPIX at the end of December 2024.


TOPIX Inclusions: Who Is Ready (Nov 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>While the move to strengthen shareholder returns is a step forward among companies, there is a concern about whether they are using their cash to invest fully in future growth.</li>
<li>Interestingly, while rising foreign shareholdings are driving companies that can't spend their cash reserves effectively to repurchase shares, overseas investors are overselling Japanese stocks in the first half of FY2024.</li>
<li>There has been focus on measures to reduce the denominator of ROE, but the current pace of reduction of policy shareholdings and cash reserves isn't sufficient to significantly boost ROE.</li>
</ul>


While the move to strengthen shareholder returns is a step forward among companies, there is a concern about whether they are using their cash to invest fully in future growth.
Interestingly, while rising foreign shareholdings are driving companies that can't spend their cash reserves effectively to repurchase shares, overseas investors are overselling Japanese stocks in the first half of FY2024.
There has been focus on measures to reduce the denominator of ROE, but the current pace of reduction of policy shareholdings and cash reserves isn't sufficient to significantly boost ROE.


Overseas Investors' Net Sale of Japanese Stocks Imply Priority of Profit Growth over Share Buybacks

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

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>This week, earnings results for the megabanks risk being a “sell on the news” event.</li>
<li>Analysts have been raising earnings estimates over the past 2 months.</li>
<li>Longer term story intact with most dynamics trending in their favour.</li>
</ul>


This week, earnings results for the megabanks risk being a “sell on the news” event.
Analysts have been raising earnings estimates over the past 2 months.
Longer term story intact with most dynamics trending in their favour.


Making Bank - Sector Outperforming Despite the BoJ's “dovishness”

<ul>
<li>Companies that have been identified by investors as having issues with their policy shareholdings have included in annual securities reports a direction to reduce them a year ahead of schedule.</li>
<li>It's progress to disclose in annual securities reports the policy. However, the focus is on whether the policy is reasonable and whether the speed and milestones of reduction are sufficient.</li>
<li>The slow pace of the company's policy of “reducing” cross-shareholdings is no longer reasonable, as both the elimination of cross-shareholdings and the improvement of ROE have been slow in pace.</li>
</ul>


Companies that have been identified by investors as having issues with their policy shareholdings have included in annual securities reports a direction to reduce them a year ahead of schedule.
It's progress to disclose in annual securities reports the policy. However, the focus is on whether the policy is reasonable and whether the speed and milestones of reduction are sufficient.
The slow pace of the company's policy of “reducing” cross-shareholdings is no longer reasonable, as both the elimination of cross-shareholdings and the improvement of ROE have been slow in pace.


Facing the Fundamental Issue that Policy Shareholdings Have Delayed Management Improvement Is Key

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

<ul>
<li>US equity indices led global markets in a post-election sharp decline in implied volatility.</li>
<li>With only 34 trading days left in 2024, investors might want to hedge the gains from a profitable year with tactical long puts.</li>
<li>Several markets make good candidates for long put positions due to a combination of cheap options and potentially bearish factors. One example being the <a href="https://www.smartkarma.com/entities/s-p-asx-200" target="_blank" data-smartkarma-citation="entities:22901:1" rel="noopener">S&amp;P/ASX 200 (AS51 INDEX)</a> </li>
</ul>


US equity indices led global markets in a post-election sharp decline in implied volatility.
With only 34 trading days left in 2024, investors might want to hedge the gains from a profitable year with tactical long puts.
Several markets make good candidates for long put positions due to a combination of cheap options and potentially bearish factors. One example being the S&amp;P/ASX 200 (AS51 INDEX) 


EQD | Global Option Implied Volatility – 34 Trading Days Left in 2024, Year-End Positioning.

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)

TOPIX Inclusions: Who Is Ready (Nov 2024)

There are currently 76 names that satisfy all 5 key Segment Transfer requirements based on current data. Another 70 names can satisfy 4 out of 5...

Janaghan Jeyakumar, CFA

Making Bank - Sector Outperforming Despite the BoJ's “dovishness”

Analysts raise earnings estimates for megabanks, but upcoming results may trigger a "sell on the news" reaction. Overall, long-term outlook...

Rikki Malik

Facing the Fundamental Issue that Policy Shareholdings Have Delayed Management Improvement Is Key

I would like to discuss the issues on the October 8 Nikkei article, “15% of companies disclosed policy shareholding policy in 2024 annual...

Metrical Inc

EQD | Global Option Implied Volatility – 34 Trading Days Left in 2024, Year-End Positioning.

Global equity indices saw a post-election volatility drop, making options cheap in several, but not all, markets. Consider hedging gains with...

Gaudenz Schneider

TOPIX Inclusions: Who Is Ready (Nov 2024)

There are currently 76 names that satisfy all 5 key Segment Transfer requirements based on current data. Another 70 names can satisfy 4 out of 5...

Janaghan Jeyakumar, CFA

Overseas Investors' Net Sale of Japanese Stocks Imply Priority of Profit Growth over Share Buybacks

I would like to discuss the issues on the October 10 Nikkei article, “Share Buybacks on pace to double in FY2023, Absorbing Overseas Investors'...

Metrical Inc

Making Bank - Sector Outperforming Despite the BoJ's “dovishness”

​Analysts raise earnings estimates for megabanks, but upcoming results may trigger a "sell on the news" reaction. Overall, long-term outlook...

Rikki Malik

Facing the Fundamental Issue that Policy Shareholdings Have Delayed Management Improvement Is Key

I would like to discuss the issues on the October 8 Nikkei article, “15% of companies disclosed policy shareholding policy in 2024 annual...

Metrical Inc

EQD | Global Option Implied Volatility – 34 Trading Days Left in 2024, Year-End Positioning.

​Global equity indices saw a post-election volatility drop, making options cheap in several, but not all, markets. Consider hedging gains with...

Gaudenz Schneider

Analysts raise earnings estimates for megabanks, but upcoming results may trigger a "sell on the news" reaction. Overall, long-term outlook...

Global equity indices saw a post-election volatility drop, making options cheap in several, but not all, markets. Consider hedging gains with...