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

Rikki Malik

Cross Asset Strategy

<ul>
<li>A review of recent events/data impacting our investment themes or outlook</li>
<li>While it may not be what investors are clamouring for - China follows through with its policies.</li>
<li>The broad Japanese indices continue to struggle despite JPY weakness</li>
</ul>


A review of recent events/data impacting our investment themes or outlook
While it may not be what investors are clamouring for - China follows through with its policies.
The broad Japanese indices continue to struggle despite JPY weakness


Overview #11 – China Follows Through While Japan Dithers and India Feeds the Ducks

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>The timing of disclosures by companies reviewed by audit firms has changed little from the previous year, but over the past five years it has gradually become earlier.</li>
<li>Although quarterly reports are unified into the disclosure of quarterly financial statements without mandatory reviews, many large companies disclose their financial statements with reviews, so the administrative burden doesn't decrease.</li>
<li>Many smaller companies that disclosed without review experienced a reduced burden, but their financial statements are relatively less reliable than those of larger companies that do have review.</li>
</ul>


The timing of disclosures by companies reviewed by audit firms has changed little from the previous year, but over the past five years it has gradually become earlier.
Although quarterly reports are unified into the disclosure of quarterly financial statements without mandatory reviews, many large companies disclose their financial statements with reviews, so the administrative burden doesn't decrease.
Many smaller companies that disclosed without review experienced a reduced burden, but their financial statements are relatively less reliable than those of larger companies that do have review.


Quarterly Reporting Review Results in Reliability in F/S Between Larger and Smaller Companies

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/rigaku-holdings-corporation" target="_blank" data-smartkarma-citation="entities:43950:1" rel="noopener">Rigaku Holdings (268A JP)</a> listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.</li>
<li>At the reported indicative IPO price of JPY 1230/share, <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> will be valued at JPY 277.1bn (US$1.87bn).</li>
<li>The stock should be added to the <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 INDEX</a> on 28 November while inclusion in global indices will take place in February and June next year.</li>
</ul>



Rigaku Holdings (268A JP) listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
At the reported indicative IPO price of JPY 1230/share, Rigaku Holdings (268A JP) will be valued at JPY 277.1bn (US$1.87bn).
The stock should be added to the TOPIX INDEX on 28 November while inclusion in global indices will take place in February and June next year.


Rigaku Holdings (268A JP) IPO: TOPIX Inclusion in November; Global Indices in 2025

<ul>
<li>Unlike the transfer of personnel rights, which is resisted by management, equity compensation that can be used to retain talent is attractive to management and is likely to accelerate.</li>
<li>If equity compensation plans are introduced for employees with a low ratio of female managers, the gap in compensation between men and women is expected to widen.</li>
<li>The introduction of equity compensation for employees is anticipated to provide an opportunity for management “kaizen” tips to emerge from individual workplaces.</li>
</ul>


Unlike the transfer of personnel rights, which is resisted by management, equity compensation that can be used to retain talent is attractive to management and is likely to accelerate.
If equity compensation plans are introduced for employees with a low ratio of female managers, the gap in compensation between men and women is expected to widen.
The introduction of equity compensation for employees is anticipated to provide an opportunity for management “kaizen” tips to emerge from individual workplaces.


If Equity Compensation Are Introduced for Employees as Is, the Gender Gap in Compensation Widens

<ul>
<li>
<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> had a blockbuster listing yesterday, finishing the day 45% higher. That took the estimated div yield down from 3.33% (at the IPO price) to 2.3%.</li>
<li>One expected index inclusion will not take place due to insufficient information on IPO allocations and that leads to a much lower free float than expected.</li>
<li>That inclusion will now be deferred to June; BUT there could be two other (bigger) index inclusions on the cards prior to that.</li>
</ul>



Tokyo Metro (9023 JP) had a blockbuster listing yesterday, finishing the day 45% higher. That took the estimated div yield down from 3.33% (at the IPO price) to 2.3%.
One expected index inclusion will not take place due to insufficient information on IPO allocations and that leads to a much lower free float than expected.
That inclusion will now be deferred to June; BUT there could be two other (bigger) index inclusions on the cards prior to that.


Tokyo Metro (9023 JP): One Miss; A Bigger Index Inclusion Coming?

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)

Overview #11 – China Follows Through While Japan Dithers and India Feeds the Ducks

A review of recent events/data impacting our investment themes and outlook. We look at the big kahunas in Asia - China, Japan and India

Rikki Malik

Quarterly Reporting Review Results in Reliability in F/S Between Larger and Smaller Companies

I would like to discuss the issues on the September 4 Nikkei Shimbun article, “Unification of Financial Statements, 20% of which are ‘Accountant...

Metrical Inc

Rigaku Holdings (268A JP) IPO: TOPIX Inclusion in November; Global Indices in 2025

Rigaku priced its IPO at the top end of the range and there could be further gains today. TOPIX inclusion comes next month and inclusion in other...

Brian Freitas

If Equity Compensation Are Introduced for Employees as Is, the Gender Gap in Compensation Widens

I would like to discuss the issues on the September 9 article, “Employees Participate in Management through Stock Compensation in 30% of Listed...

Metrical Inc

Tokyo Metro (9023 JP): One Miss; A Bigger Index Inclusion Coming?

Tokyo Metro could drop today following the disappointment around Fast Entry later this month. But that will increase the forecast div yield. There...

Brian Freitas