In today’s briefing:
- TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- Mercari (4385) | We Were Wrong…its Worse
- TOPIX July Rebalance: Flows at the Close Today
- JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
- Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
- The State of Listed Companies Should Be Discussed Together with Discussion of Quarterly Disclosure
TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close.
- There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
- The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.
Mercari (4385) | We Were Wrong…its Worse
- Shopify Inc (SHOP US) ‘s share price declined by -15% in after hours trade on weaker-than-expected US E-commerce trends
- Mercari Inc (4385 JP) ‘s US business is highly correlated with its US peer, as is its stock price
- A normalisation of e-commerce trends could also impact its much larger Japanese GMV as consumers shift spending patterns back to normal
TOPIX July Rebalance: Flows at the Close Today
- FFW changes and Mercari Inc (4385 JP)‘s inclusion in the TOPIX will lead to a one-way turnover of 0.55% and one-way trade of JPY 443bn (US$3.23bn) at the close today.
- There is net buying in Consumer Discretionary, Financials and Communication Services stocks, while there will be net selling in Consumer Staples and Health Care stocks.
- The upweights have outperformed the downweights since announcement of the changes and there has not been a lot of excess volume traded in the last couple of weeks.
JPX-Nikkei 400 2022 Rebal: Final Pre-Event Phase Strategy Worked. What Next?
- In JPX-Nikkei 400 2022 Rebal: Final Predictions, I discussed Quiddity’s final predictions for Potential ADDs/DELs for the JPX-Nikkei Index August 2022 Annual Review.
- In that insight, I classified the potential ADDs/DELs by conviction levels and discussed why the high conviction ADDs and DELs deserved a higher weight than the other baskets.
- Since then, the LONG High Conviction ADDs – SHORT High conviction DELs Trade has outperformed the other LONG-SHORT combinations.
Softbank Corp (Buy) – PayPay Conversion, Re-Valuation Gain Confirmed for Q3
- Softbank and Z Holdings have confirmed the conversion of PayPay preferred equity into common in-line with previous guidance for ownership levels and a revaluation gain
- Z Holdings will sell the credit card business to PayPay to align transactional fintech which makes distribution, product development and branding easier
- Our outlook has not changed but we are lowering our target price to reflect diminished expectations announced at Q4 results. We remain at Buy but prefer NTT/KDDI in telcos
Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
- Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
- However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
- Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.
The State of Listed Companies Should Be Discussed Together with Discussion of Quarterly Disclosure
- The proposal is to reduce the workload on companies by eliminating the requirement for quarterly disclosure in the annual securities report and instead submitting the financial results to the TSE.
- Future discussions will focus on how much of the new sustainability disclosures. Listed companies are diverse, and while a few companies are proactive, many are backward-looking in their efforts.
- In conjunction with the quarterly disclosure, the time has come to discuss how listed companies should be. 300 companies are allowed to list without meeting the prime market listing criteria.
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