Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.</li>
<li>This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.</li>
<li>This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.</li>
</ul>


As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.
This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.


2022 JPX Nikkei 400 Rebal Update - Going the Right Way

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/073/556/original/Update.png?1545212207" class="editor-image img-responsive" data-smartkarma-image-id="73556"></figure>
<div class="content-caption">Source: Japan Analytics</div>
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight <a href="https://www.smartkarma.com/insights/japan-quarterly-cash-flow-update-yen-weakens-normal-service-resumed" target="_blank" data-smartkarma-citation="insights:23357">Yen Weakens &gt; Normal Service Resumed</a> with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier <a href="https://www.smartkarma.com/insights/japan-share-buybacks-less-than-meets-the-eye" target="_blank" data-smartkarma-citation="insights:22599">Insight</a>. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a>, <a href="https://www.smartkarma.com/entities/3548" target="_blank" data-smartkarma-citation="entities:3548:1">Kawasaki Kisen Kaisha (9107 JP)</a>, <a href="https://www.smartkarma.com/entities/2818" target="_blank" data-smartkarma-citation="entities:2818:1">Hanwa (8078 JP)</a>, <a href="https://www.smartkarma.com/entities/19550" target="_blank" data-smartkarma-citation="entities:19550:1">Open House (3288 JP)</a>, <a href="https://www.smartkarma.com/entities/26074" target="_blank" data-smartkarma-citation="entities:26074:1">Macnica Fuji Electronics (3132 JP)</a>, and <a href="https://www.smartkarma.com/entities/13747" target="_blank" data-smartkarma-citation="entities:13747:1">Digital Garage (4819 JP)</a>.


Source: Japan Analytics
JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens &gt; Normal Service Resumed with data from all of the most quarterly reports filed last month. Our aggregate cash flow model reformulated cash flows into eight categories which sum to Change in Cash - Free Cash Flow (Operating Cash Flow less Investing Cash Flow), Financing Cash Flow, Shareholder Cash Flow (Equity Cash Flow and Dividend Cash Flow) and Minorities. In the last three months, Japan's non-financial companies generated ¥12.1t in Operating Cash Flow while investing ¥9.2t - the largest quarterly amount of capex since 2016-Q4.  Of the total ¥2.9t in Free Cash Flow, 65% was returned to shareholders of which half was in the form of reductions in equity - an improving and welcome trend which we covered in an earlier Insight. After a ¥0.8t increase in debt and a ¥0.3t increase in Minorities Cash Flow, aggregate cash rose by ¥2.2t for the quarter. Since 2011-Q4, 58% of the ¥102.7t in cumulative FCF has been allocated to shareholders and 40% to cash, leaving considerable room for improvement in the relative size of these ratios.
SECTORS &amp; STOCKS - In the DETAIL below, we also look at sector cash flow trends and provide brief comments on some of the most significant changes in individual cash flows over the last three months including Softbank Group (9984 JP), Kawasaki Kisen Kaisha (9107 JP), Hanwa (8078 JP), Open House (3288 JP), Macnica Fuji Electronics (3132 JP), and Digital Garage (4819 JP).

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

Thematic (Sector/Industry)

CAPITAL RAISING - WHOS NEXT? - A number of large capital increases have been announced by large and mid capitalisation Japanese companies in the last few months, the most recent of which have been from <a href="https://www.smartkarma.com/entities/7431" target="_blank" data-smartkarma-citation="entities:7431:1">Outsourcing Inc (2427 JP)</a> and <a href="https://www.smartkarma.com/entities/11796" target="_blank" data-smartkarma-citation="entities:11796:1">Daido Metal (7245 JP)</a>. The response to the dilution has been a predictable decline in share price, although, at least in the case of <a href="https://www.smartkarma.com/entities/7431" target="_blank" data-smartkarma-citation="entities:7431:1">Outsourcing (2427 JP)</a>, a good part of the response occurred before the announcement of the offering, as mentioned in <a href="https://www.smartkarma.com/profiles/713" target="_blank" data-smartkarma-citation="accounts:713">Mio Kato</a>'s note of yesterday - <a href="https://www.smartkarma.com/insights/outsourcing-2427-high-fixed-cost-burden-but-stronger-balance-sheet-opens-up-growth-again" target="_blank" data-smartkarma-citation="insights:23864">High Fixed Cost Burden but Stronger Balance Sheet Opens Up Growth Again</a>. In an attempt to suggest which companies are at risk of similar 'surprises', we have compiled a list of companies with similar financial profiles. 17 larger capitalisation and 22 mid capitalisation companies make the 'cut'.

CAPITAL RAISING - WHOS NEXT? - A number of large capital increases have been announced by large and mid capitalisation Japanese companies in the last few months, the most recent of which have been from Outsourcing Inc (2427 JP) and Daido Metal (7245 JP). The response to the dilution has been a predictable decline in share price, although, at least in the case of Outsourcing (2427 JP), a good part of the response occurred before the announcement of the offering, as mentioned in Mio Kato's note of yesterday - High Fixed Cost Burden but Stronger Balance Sheet Opens Up Growth Again. In an attempt to suggest which companies are at risk of similar 'surprises', we have compiled a list of companies with similar financial profiles. 17 larger capitalisation and 22 mid capitalisation companies make the 'cut'.

Macro & Asian equity Technical Strategies, BBSP Asia

Federico D'Inca

Macro & Asian equity Technical Strategies

BBSP Asia

Technical Analysis

Japan Airport Terminal Co / Technical Analysis

Mid-Term Country Allocation (Tactical view) in terms of RV vs MXAPThis week:• No change in tactical allocation • The ASX drifted last week, testing our support, before bouncing back significantly. The ratio ASX/MXAP is also testing a key level above which we keep our rating unchanged for ASX (ie, “Increase exposure”). • Keep rating unchanged for the other countries (Nikkei, Nifty, HSI, HSCEI), i.e. maintain “Increase Exposure”. • Kospi remains “Hold” as ratio is still drifting sideways below first…

Mid-Term Country Allocation (Tactical view) in terms of RV vs MXAPThis week:• No change in tactical allocation • The ASX drifted last week, testing our support, before bouncing back significantly. The ratio ASX/MXAP is also testing a key level above which we keep our rating unchanged for ASX (ie, “Increase exposure”). • Keep rating unchanged for the other countries (Nikkei, Nifty, HSI, HSCEI), i.e. maintain “Increase Exposure”. • Kospi remains “Hold” as ratio is still drifting sideways below first…

BBSP Equity Asia Weekly Research 14 June 2017

Bullish reaction off key long-term channel support at 769. Daily RSI bullish reaction off ascendant support. Complete corrective fractal structure.Strategy: Buy at market (circa 800) stop/pivot: 769 (daily VWAP close) target 915 (standard) 1050 (maximum).Conviction: ** Two Star (2/3 maximum risk size for allocation) Key:    * One star (1/3 standard risk allocation size)            ** Two stars (2/3 standard risk allocation size)            *** Three stars Strong View SV (3/3 standard risk size)…

Bullish reaction off key long-term channel support at 769. Daily RSI bullish reaction off ascendant support. Complete corrective fractal structure.Strategy: Buy at market (circa 800) stop/pivot: 769 (daily VWAP close) target 915 (standard) 1050 (maximum).Conviction: ** Two Star (2/3 maximum risk size for allocation) Key:    * One star (1/3 standard risk allocation size)            ** Two stars (2/3 standard risk allocation size)            *** Three stars Strong View SV (3/3 standard risk size)…

HANWA Co Ltd (8078 JT)  +14% Upside at Least Potentially +30%

Japan

HANWA CO., LTD. wholesales, imports, and exports steel products, nonferrous metals, industrial machines, and food products.  The Company also handles chemical products, construction materials, and information equipment.  Hanwa has several subsidiaries and sales bases in the U.S. and around Asia.

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Hanwa Co Ltd (8078 JP)

2022 JPX Nikkei 400 Rebal Update - Going the Right Way

JPX Nikkei 400 rebalance is going the right way in the 6 trading days so far, and it wasn't done on Day1 (which was lacklustre). It may be under...

Travis Lundy

Japan: The 2018-Q3 Cash Flow Stakes - Runners, Riders & Red Flags

JAPAN CORPORATE CASH FLOW UPDATE - This insight updates our previous Insight Yen Weakens > Normal Service Resumed with data from all of the...

Campbell Gunn

Japan: Capital Raising - Who's Next?

CAPITAL RAISING - WHOS NEXT? - A number of large capital increases have been announced by large and mid capitalisation Japanese companies in the...

Campbell Gunn

BBSP Equity Asia Weekly Research 14 June 2017

Mid-Term Country Allocation (Tactical view) in terms of RV vs MXAPThis week:• No change in tactical allocation• The ASX drifted last week, testing...

BBSP Asia

HANWA Co Ltd (8078 JT) +14% Upside at Least Potentially +30%

Bullish reaction off key long-term channel support at 769. Daily RSI bullish reaction off ascendant support. Complete corrective fractal...

BBSP Asia

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