Daily Brief Japan: Rakuten, JSR Corp, TSE Tokyo Price Index TOPIX and more

• A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
• Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
• How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone. 

• For the month of March 2024, 8 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
• The average premium for the new transactions announced (or first discussed) in March was ~55%. The average premium YTD is ~39%.
• This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

• Market structure is the main factor hindering trading liquidity. In addition to the cross-holdings that remain, ETFs held by the Bank of Japan cast a shadow over trading liquidity.
• Companies are key on this issue. In addition to accelerating to reducte cross-shareholdings, English-language disclosure of annual securities reports, which are in high demand by long-term investors, should be promoted.
• If long-term overseas investors get serious about investing in Japanese equities, the increase in trading liquidity in Japanese equities will be sustainable, and broker coverage will naturally expand.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Kawasan Industri Jababeka
• Rakuten
• Tata Motors ADR