In today’s briefing:
- Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday
- FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
- Mitsubishi Heavy Industries (7011) | Three Reasons to BUY
- Seven & I Marches On in the US Despite Headwinds From Inflation
- Listing a Subsidiary May Tell Market that the Parent Company Isn’t Confident in Generating Cash Flow
Last Leg of TOPIX and JPNK400 FFW Rebal – ¥780bn One-Way Flow Wednesday
- The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.
- There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded.
- Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers’ float) has gone up significantly through this process.
FTSE GEIS Sep 2022 Index Rebalance Preview: Japan
- The FTSE Russell September 2022 SAIR will use closing prices from 30 June to calculate the market cap cut-offs to determine the inclusions and exclusions for the All-World/All-Cap indices.
- We see 1 add for the All-World Index and 5 for the All-Cap Index. We see 3 stocks moving from All-Cap to All-World and 5 stocks moving the other way.
- There are other stocks that are close adds, upweights, downweights and deletes and price moves over the next few days will determine their status.
Mitsubishi Heavy Industries (7011) | Three Reasons to BUY
- The recent correction in the share price offers a good chance for long-term bulls to get into the stock
- MHI is the core play on Japan’s energy security given its portfolio of gas and nuclear power plant assets
- The unseasonably HOT weather and potential power cuts, at the same time as soaring energy costs, could be the catalyst for the government to push for nuclear restarts
Seven & I Marches On in the US Despite Headwinds From Inflation
- Seven & I Holdings (3382 JP) should breeze through its rather unchallenging expectations when it releases its first-quarter results next week.
- The company has raised its previous guidance multiple times last year and we expect a similar pattern in the first half next year with 7-Eleven US continuing to exceed expectations.
- Thus, we would buy Seven & I Holdings leading up to earnings expecting a decent upside on rising guidance.
Listing a Subsidiary May Tell Market that the Parent Company Isn’t Confident in Generating Cash Flow
- On June 1, the Nikkei Shimbun carried an article titled “Parent-subsidiary listing, investors cynical about ‘governance barrier'”. I would like to discuss the issues in the article.
- The dissolution of parent-subsidiary listings has accelerated, with approximately 20% of parent-subsidiary listings having been dissolved for 2 years. On the other hand, plans for new subsidiary listings are underway.
- Rakuten and Panasonic are telling the market that they are not very good at generating cash flow. Not coincidentally, the stock prices of these companies are suffering from underperformance.
Before it’s here, it’s on Smartkarma
