Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Thematic (Sector/Industry)

<p style="text-align: justify;">Over the last few years, with the advent of listed dividend futures, a large spectrum of market participants have started to trade dividends making it an asset class in its own right. With heightened equity market volatility and unprecedented central bank intervention, investing and trading in dividends via the SGX Nikkei 225 Dividend Futures provides market participants with a pure play on company fundamentals without taking on any of the equity valuation risk. This has increased liquidity in the product and expectations are for volumes and open interest to continue to grow over time.</p>
<p style="text-align: justify;">Equity implied repo, on the other hand, is not as widely traded but that is changing with the introduction of listed Total Return Futures (TRF) that closely replicate the pay-off of OTC traded Total Return Swaps (TRS). TRFs offer numerous advantages over TRS’ in that they are fully fungible, centrally cleared (mitigates counterparty risk), and portfolio margined (offering margin offsets with other listed products). Japan implied equity repo has been volatile over the last few years partly due to the Bank of Japan’s ETF buying program opening up trading opportunities and attracting a new breed of investors to the TRF product. The SGX Nikkei 225 TR Index Futures offer a trading vehicle to get exposure to the index repo.</p>

Over the last few years, with the advent of listed dividend futures, a large spectrum of market participants have started to trade dividends making it an asset class in its own right. With heightened equity market volatility and unprecedented central bank intervention, investing and trading in dividends via the SGX Nikkei 225 Dividend Futures provides market participants with a pure play on company fundamentals without taking on any of the equity valuation risk. This has increased liquidity in the product and expectations are for volumes and open interest to continue to grow over time.
Equity implied repo, on the other hand, is not as widely traded but that is changing with the introduction of listed Total Return Futures (TRF) that closely replicate the pay-off of OTC traded Total Return Swaps (TRS). TRFs offer numerous advantages over TRS’ in that they are fully fungible, centrally cleared (mitigates counterparty risk), and portfolio margined (offering margin offsets with other listed products). Japan implied equity repo has been volatile over the last few years partly due to the Bank of Japan’s ETF buying program opening up trading opportunities and attracting a new breed of investors to the TRF product. The SGX Nikkei 225 TR Index Futures offer a trading vehicle to get exposure to the index repo.

Dividends and Repo as Asset Classes - Focus on the Nikkei 225 Index

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/145/201/original/File%202020-07-10%204%2058%2031.jpeg?1594328270" class="editor-image img-responsive" data-smartkarma-image-id="145201"></figure><div class="content-caption">Source • Our World In Data</div>
<p><strong>COVID-19 RETURNS</strong> - The other 'result' reported yesterday was the record daily COVID-19 new case count for Tokyo of<strong> 224</strong> and a three-month nationwide high of <strong>354</strong>. Japan's 7-day rolling average is now close to that of Italy. Although hospital capacity is no longer an issue and only 216 people are in critical care, the pace of normalisation will have to be readjusted.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/145/202/original/2020-07-10_06-33-39.png?1594330447" class="editor-image img-responsive" data-smartkarma-image-id="145202"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/145/203/original/2020-07-10_06-37-00.png?1594330642" class="editor-image img-responsive" data-smartkarma-image-id="145203"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>NEW LOWS</strong> - With three large retailers reporting weak quarters, both our Results Score and Interim Forecast/Revision Score reached new ten-year lows. The Annual Forecast/Revision Score is flattered by a high degree of forecasting reticence at present. The Cabinet Office Leading Indicator of Business Conditions suggests that these Scores will close the 'gap' to the 2009 lows in the next month.</p>
<p style="text-align: center;"><strong>DAILY STATS</strong></p>
</div><hr><div><p style="text-align: center;"><strong>31 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 7 Positive / 0 Neutral / 24 Negative</li>
<li>
<strong>Average Results Score Change:</strong> -4.9</li>
<li>
<strong>Average % Change in Revenue:</strong> -9.6% Quarter YoY / +1.4% Rolling TTM YoY</li>
<li>
<strong>Average Operating Profit Margin Change: </strong>-0.9ppt</li>
</ul></div><hr><div><p style="text-align: center;"><br><strong>12 Annual • 3 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 5 Positive / 0 Neutral / 7 Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change:</strong> 1 Positive / 0 Neutral / 2 Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -4.5</li>
</ul></div>


Source • Our World In Data
COVID-19 RETURNS - The other 'result' reported yesterday was the record daily COVID-19 new case count for Tokyo of 224 and a three-month nationwide high of 354. Japan's 7-day rolling average is now close to that of Italy. Although hospital capacity is no longer an issue and only 216 people are in critical care, the pace of normalisation will have to be readjusted.
Source • Japan Analytics
NEW LOWS - With three large retailers reporting weak quarters, both our Results Score and Interim Forecast/Revision Score reached new ten-year lows. The Annual Forecast/Revision Score is flattered by a high degree of forecasting reticence at present. The Cabinet Office Leading Indicator of Business Conditions suggests that these Scores will close the 'gap' to the 2009 lows in the next month.
DAILY STATS
31 Quarterly Results

Results Score: 7 Positive / 0 Neutral / 24 Negative

Average Results Score Change: -4.9

Average % Change in Revenue: -9.6% Quarter YoY / +1.4% Rolling TTM YoY

Average Operating Profit Margin Change: -0.9ppt
 12 Annual • 3 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 5 Positive / 0 Neutral / 7 Negative

Interim Forecast/Revision Score Change: 1 Positive / 0 Neutral / 2 Negative

Average Forecast/Revision Score Change: -4.5


🇯🇵 JAPAN • Results & Revisions 9th July - COVID-19 Returns & New Lows

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<p><a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> backed off of stiff resistance at the 23,000 zone and a secondary test and failure at this level would set up a harder pullback cycle. Japan has been a market we have been long since late March and on dip in May.</p><p>USD/JPY is expected break lower below the 106.80 pivot support to test 1.05 which will act as the bigger risk inflection. Below 105 we are eyeing 100-102.</p><p>23,000-500 marks a tough congestion area as pointed out in the daily chart cycle (previous lows and range zone).</p><p>We outline three trades. Buy a dip for a test on 23k, short 23k for a deeper summer pullback and then buying that low for a Q3 rise to test macro triple tops outlined in the weekly cycle.</p>

Nikkei 225 (NKY INDEX) backed off of stiff resistance at the 23,000 zone and a secondary test and failure at this level would set up a harder pullback cycle. Japan has been a market we have been long since late March and on dip in May.USD/JPY is expected break lower below the 106.80 pivot support to test 1.05 which will act as the bigger risk inflection. Below 105 we are eyeing 100-102.23,000-500 marks a tough congestion area as pointed out in the daily chart cycle (previous lows and range zone).We outline three trades. Buy a dip for a test on 23k, short 23k for a deeper summer pullback and then buying that low for a Q3 rise to test macro triple tops outlined in the weekly cycle.

<div>
<a href="https://www.smartkarma.com/entities/s-p-500" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 (SPX INDEX)</a>  2,950 buy zone and level to put on risk in Asia and Europe worked well but charts have shown clear fractures after the SPX break below trendline pivot. This reaction higher will exhaust by late this week or early next week ahead off the bigger turn cycle due from June 22 into July but could impact weaker markets as soon at June 18 (HK, Singapore, Malaysia, Europe).</div><div></div><div>Cycle - June 22/27 primary cycle turn timeline. If we are rallying into this cycle we expect a top (base case and so far on track). SPX 3,120 a key level to monitor into the 18th.</div><div></div><div>Call to put on risk in Asia in our long group yesterday (Nikkei, ASX, Taiwan, Korea, Europe) to trade a one week push back into sell zones to set up a bigger cycle peak in late June.</div>


S&amp;P 500 (SPX INDEX)  2,950 buy zone and level to put on risk in Asia and Europe worked well but charts have shown clear fractures after the SPX break below trendline pivot. This reaction higher will exhaust by late this week or early next week ahead off the bigger turn cycle due from June 22 into July but could impact weaker markets as soon at June 18 (HK, Singapore, Malaysia, Europe).Cycle - June 22/27 primary cycle turn timeline. If we are rallying into this cycle we expect a top (base case and so far on track). SPX 3,120 a key level to monitor into the 18th.Call to put on risk in Asia in our long group yesterday (Nikkei, ASX, Taiwan, Korea, Europe) to trade a one week push back into sell zones to set up a bigger cycle peak in late June.

Event-Driven

<p>The Nikkei225 2020 dividend futures have traded higher as the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" rel="noopener" data-smartkarma-citation="entities:22909:1">Nikkei 225 (NKY INDEX)</a> index has continued to rally. At current traded levels, the 2020 dividend futures imply a 10% drop from the expiry level of the Nikkei225 2019 dividend futures contract.</p><p>In the current economic environment and using bottom up estimates, we feel that this is overly positive and trades in line with the bull case scenario that we outlined in our earlier Insight.</p><p>The risk/reward at this point favours selling the Nikkei225 dividend futures and we feel that there will be an opportunity to cover the short in the next couple of months.</p>

The Nikkei225 2020 dividend futures have traded higher as the Nikkei 225 (NKY INDEX) index has continued to rally. At current traded levels, the 2020 dividend futures imply a 10% drop from the expiry level of the Nikkei225 2019 dividend futures contract.In the current economic environment and using bottom up estimates, we feel that this is overly positive and trades in line with the bull case scenario that we outlined in our earlier Insight.The risk/reward at this point favours selling the Nikkei225 dividend futures and we feel that there will be an opportunity to cover the short in the next couple of months.

Nikkei225 Dividend Futures: Trading Near Our Bull Case

Japan

The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated Japanese companies listed in the First Section of the Tokyo Stock Exchange. The Nikkei Stock Average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 225. 

Nikkei 225 (NKY INDEX)

Dividends and Repo as Asset Classes - Focus on the Nikkei 225 Index

Over the last few years, with the advent of listed dividend futures, a large spectrum of market participants have started to trade dividends making...

Brian Freitas

🇯🇵 JAPAN • Results & Revisions 9th July - COVID-19 Returns & New Lows

COVID-19 RETURNS - The other 'result' reported yesterday was the record daily COVID-19 new case count for Tokyo of 224 and a three-month...

Campbell Gunn

Nikkei 23k Sell Zone

Nikkei 225 (NKY INDEX) backed off of stiff resistance at the 23,000 zone and a secondary test and failure at this level would set up a harder...

Thomas Schroeder

Asia's Rally into Sell Zones

S&P 500 (SPX INDEX) 2,950 buy zone and level to put on risk in Asia and Europe worked well but charts have shown clear fractures after the...

Thomas Schroeder

Nikkei225 Dividend Futures: Trading Near Our Bull Case

The Nikkei225 2020 dividend futures have traded higher as the Nikkei 225 (NKY INDEX) index has continued to rally. At current traded levels, the...

Brian Freitas