Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Event-Driven

<p>The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor ("LF") of 0.75 to derive the final FFW used for index calculation.</p><p>In <a href="https://www.smartkarma.com/insights/topix-index-upweights-the-big-april-basket-2021" target="_blank" data-smartkarma-citation="insights:49660" rel="noopener">TOPIX Index Upweights: The Big April Basket 2021</a>, I discussed how the Tokyo Stock Exchange reviews this Liquidity Factor every April and highlighted 50 names (the "Big April Basket 2021") that could potentially have their liquidity factors removed in this April's review.</p><div class="content-highlight">
<p><em>Today after the close, the official review results were announced and <strong>48 out of 50</strong> names in our Big April Basket 2021 were correct translating to a hit ratio of 96%. There were 11 other names added, and two of the names we expected to see the LF lifted did not. </em></p>
<p><em>As of today's close, our Big April Basket (equally-weighted) is <strong>up +3.61% against the TOPIX Index in 7 trading</strong><strong> days</strong> (since the close of the day after the insight) and there could be more to come. </em></p>
</div><p>Below is a discussion on the details of the official review results and what changes are required for our basket strategy during the event-leg which could run until the end of April. </p>

The Tokyo Stock Exchange (TSE) calculates Free-Float Weight (FFW) for each listed company and uses this value as a key component of TOPIX Index Calculation. For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor ("LF") of 0.75 to derive the final FFW used for index calculation.In TOPIX Index Upweights: The Big April Basket 2021, I discussed how the Tokyo Stock Exchange reviews this Liquidity Factor every April and highlighted 50 names (the "Big April Basket 2021") that could potentially have their liquidity factors removed in this April's review.
Today after the close, the official review results were announced and 48 out of 50 names in our Big April Basket 2021 were correct translating to a hit ratio of 96%. There were 11 other names added, and two of the names we expected to see the LF lifted did not. 
As of today's close, our Big April Basket (equally-weighted) is up +3.61% against the TOPIX Index in 7 trading days (since the close of the day after the insight) and there could be more to come. 
Below is a discussion on the details of the official review results and what changes are required for our basket strategy during the event-leg which could run until the end of April. 

TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<p>This morning in the Nikkei there is an <a href="https://asia.nikkei.com/Business/Business-deals/Toshiba-receives-offer-from-CVC-to-go-private-in-20bn-deal" target="_blank" rel="noopener">article</a> (English, Japanese is <a href="https://www.nikkei.com/article/DGXZQOUC06CLO0W1A400C2000000/?unlock=1" target="_blank" rel="noopener">here</a>) headlined...</p><blockquote><p><strong>Toshiba receives offer from CVC to go private in $20bn deal</strong></p></blockquote><p>The accompanying article in Japanese including CEO Kurumatani-san's comments suggests that the board will meet today to discuss it. The initial response to the press was that it had received the initial proposal yesterday without any previous consultation, so the company would seek more information and consider the proposal carefully.</p><p>It's early days. The headline number of ¥5,000/share is too low, by a fair bit, and there are a lot of hurdles (which are NOT shareholders wanting more) before this could go forward (allowing shareholders to want more).</p><p>Exactly one year ago today, I wrote <a href="https://www.smartkarma.com/insights/an-mbo-for-toshiba-not-as-silly-as-it-sounds" target="_blank" data-smartkarma-citation="insights:38199" rel="noopener"><strong>An MBO for Toshiba? Not As Silly As It Sounds</strong></a> after an article in an "investigative" magazine called FACTA (most famous for pre-commenting on the fraud on Olympus nearly a decade ago) put out an article <em>"Toshiba: Kurumatani's Astonishing MBO Scheme: Will He Be Able to Expel Noisy Shareholders?" (東芝・車谷が「MBO」画策の仰天: 物言う株主「放逐」は叶うか).</em></p><p>The article spent a lot of time talking about Kurumatani-san as a person, the insinuations that he hates shareholders, and about his desire to control his own fate - to <em>"have his own castle"</em> (by getting noisy activists out). The story suggested then that he saw his chance now (early April 2020) as the fall in the share price saw foreigners sell (that analysis was weak; I expect the activists were not the ones selling down hard in an illiquid market in the covid-crash, and I said as much). The article name-dropped PE funds and related parties (one fund, Integral, was led by a former SMBC colleague; and CVC - where Kurumatani-san spent a year as the Japan rep after leaving SMBC when he didn't get the nod for the top job - was mentioned as another), but I highlighted, </p><div>
<blockquote><p>The "astonishing scheme" about the MBO though is not to be ignored. It serves a LOT of purposes. </p></blockquote>
<p>I stand by that conclusion, and it is worth thinking about how this might play out.</p>
<p>Much more below the fold.</p>
<div><p></p></div>
</div>

This morning in the Nikkei there is an article (English, Japanese is here) headlined...Toshiba receives offer from CVC to go private in $20bn dealThe accompanying article in Japanese including CEO Kurumatani-san's comments suggests that the board will meet today to discuss it. The initial response to the press was that it had received the initial proposal yesterday without any previous consultation, so the company would seek more information and consider the proposal carefully.It's early days. The headline number of ¥5,000/share is too low, by a fair bit, and there are a lot of hurdles (which are NOT shareholders wanting more) before this could go forward (allowing shareholders to want more).Exactly one year ago today, I wrote An MBO for Toshiba? Not As Silly As It Sounds after an article in an "investigative" magazine called FACTA (most famous for pre-commenting on the fraud on Olympus nearly a decade ago) put out an article "Toshiba: Kurumatani's Astonishing MBO Scheme: Will He Be Able to Expel Noisy Shareholders?" (東芝・車谷が「MBO」画策の仰天: 物言う株主「放逐」は叶うか).The article spent a lot of time talking about Kurumatani-san as a person, the insinuations that he hates shareholders, and about his desire to control his own fate - to "have his own castle" (by getting noisy activists out). The story suggested then that he saw his chance now (early April 2020) as the fall in the share price saw foreigners sell (that analysis was weak; I expect the activists were not the ones selling down hard in an illiquid market in the covid-crash, and I said as much). The article name-dropped PE funds and related parties (one fund, Integral, was led by a former SMBC colleague; and CVC - where Kurumatani-san spent a year as the Japan rep after leaving SMBC when he didn't get the nod for the top job - was mentioned as another), but I highlighted, 
The "astonishing scheme" about the MBO though is not to be ignored. It serves a LOT of purposes. 
I stand by that conclusion, and it is worth thinking about how this might play out.
Much more below the fold.



Toshiba - The CEO Gets His MBO Bidder and Toshiba Will Get Interestinger

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

<p><a href="https://asia.nikkei.com/Business/Business-deals/Toshiba-receives-offer-from-CVC-to-privatize-in-20bn-deal" target="_blank" rel="noopener">Nikkei Asia reported</a> today that CVC Capital Partners would propose a privatisation of Toshiba valuing the company at $20.8bn. CVC will discuss the terms of the deal with management and will also need to win approval from the Finance Ministry. The question is whether shareholders would accept such a bid as it looks perhaps a little light.</p>

Nikkei Asia reported today that CVC Capital Partners would propose a privatisation of Toshiba valuing the company at $20.8bn. CVC will discuss the terms of the deal with management and will also need to win approval from the Finance Ministry. The question is whether shareholders would accept such a bid as it looks perhaps a little light.

Toshiba – CVC Capital Partners Bid Highlights Value

David Blennerhassett

Last Week in Event SPACE: Xiaomi, AGL Energy, TOPIX's Big April Basket, Evergrande Auto

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>There was no report from the SFC this week since Friday was a holiday. The report should be published on Wednesday when markets reopen. For the week from 29 March - 1 April, the highest shorts in notional terms were on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/tracker-fund-of-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:29257:1" rel="noopener">Tracker Fund of Hong Kong Ltd (2800 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> and <a href="https://www.smartkarma.com/entities/baidu-inc-a55ca720-5968-48f0-8194-ac94390d065c" target="_blank" data-smartkarma-citation="entities:32212:1" rel="noopener">Baidu (9888 HK)</a>. </p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/base-inc" target="_blank" data-smartkarma-citation="entities:28353:1" rel="noopener">BASE Inc (4477 JP)</a>, <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a>, <a href="https://www.smartkarma.com/entities/gmo-payment-gateway-inc" target="_blank" data-smartkarma-citation="entities:1492:1" rel="noopener">GMO Payment Gateway (3769 JP)</a>, <a href="https://www.smartkarma.com/entities/freee-kk" target="_blank" data-smartkarma-citation="entities:28424:1" rel="noopener">freee (4478 JP)</a> and <a href="https://www.smartkarma.com/entities/sanken-electric-co-ltd" target="_blank" data-smartkarma-citation="entities:6073:1" rel="noopener">Sanken Electric (6707 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/eneos-holdings-inc" target="_blank" data-smartkarma-citation="entities:638:1" rel="noopener">ENEOS Holdings (5020 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-airport-terminal-co" target="_blank" data-smartkarma-citation="entities:18034:1" rel="noopener">Japan Airport Terminal Co (9706 JP)</a>, <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-lease-finance" target="_blank" data-smartkarma-citation="entities:1467:1" rel="noopener">Mitsubishi UFJ Lease &amp; Finance (8593 JP)</a>, <a href="https://www.smartkarma.com/entities/change-inc" target="_blank" data-smartkarma-citation="entities:27414:1" rel="noopener">Change Inc (3962 JP)</a> and <a href="https://www.smartkarma.com/entities/benext-group" target="_blank" data-smartkarma-citation="entities:17685:1" rel="noopener">BeNEXT Group (2154 JP)</a>. Shorts increased in the Information Technology and Indsutrials sectors, and decreased in the the Energy sector.</p></div><div><p>In Korea, short increased on <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> and <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-biologics-co-ltd" target="_blank" data-smartkarma-citation="entities:22932:1" rel="noopener">Samsung Biologics Co., (207940 KS)</a>, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a> and <a href="https://www.smartkarma.com/entities/posco-chemical-co-ltd" target="_blank" data-smartkarma-citation="entities:12421:1" rel="noopener">Posco Chemical Co Ltd (003670 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/inventec-corp" target="_blank" data-smartkarma-citation="entities:20856:1" rel="noopener">Inventec Corp (2356 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a>, <a href="https://www.smartkarma.com/entities/richwave-technology-corp" target="_blank" data-smartkarma-citation="entities:18629:1" rel="noopener">Richwave Technology (4968 TT)</a> and <a href="https://www.smartkarma.com/entities/asia-cement-corp" target="_blank" data-smartkarma-citation="entities:15350:1" rel="noopener">Asia Cement (1102 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>, <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> and <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">AU Optronics (2409 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.There was no report from the SFC this week since Friday was a holiday. The report should be published on Wednesday when markets reopen. For the week from 29 March - 1 April, the highest shorts in notional terms were on Tencent Holdings (700 HK), Tracker Fund of Hong Kong Ltd (2800 HK), Ping An Insurance (H) (2318 HK), Meituan (3690 HK) and Baidu (9888 HK). In Japan, stocks that saw the most shorts were BASE Inc (4477 JP), Toshiba Corp (6502 JP), GMO Payment Gateway (3769 JP), freee (4478 JP) and Sanken Electric (6707 JP) while shorts decreased on ENEOS Holdings (5020 JP), Japan Airport Terminal Co (9706 JP), Mitsubishi UFJ Lease &amp; Finance (8593 JP), Change Inc (3962 JP) and BeNEXT Group (2154 JP). Shorts increased in the Information Technology and Indsutrials sectors, and decreased in the the Energy sector.In Korea, short increased on Samsung Electronics (005930 KS), SK Hynix (000660 KS), Naver Corp (035420 KS) and Hyundai Motor Co (005380 KS) while shorts decreased on Celltrion Inc (068270 KS), Samsung Biologics Co., (207940 KS), Netmarble Corporation (251270 KS) and Posco Chemical Co Ltd (003670 KS). Stocks in Taiwan that saw the highest increase in shorts were Inventec Corp (2356 TT), Yageo Corporation (2327 TT), Richwave Technology (4968 TT) and Asia Cement (1102 TT) while shorts were covered on TSMC (2330 TT), Mediatek Inc (2454 TT), United Microelectronics Corp (2303 TT) and AU Optronics (2409 TT). 

Asia Short Interest: Tencent, Ping An, Baidu, BASE, Toshiba, GMO Payment, BeNext, Inventec, Mediatek

Japan

Toshiba Corporation manufactures and markets electrical and electronic products. The Company's products include digital products such as PCs and televisions, NAND flash memories, and system LSIs (large-scale integrated), as well as social infrastructures such as power generators, medical equipment, and home appliances.

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Toshiba Corp (6502 JP)

TOPIX Upweights: Big April Basket 2021 Pre-Event Is a WIN! Now the Event-Leg!

The Big April FFW/LF Basket Trade was a big win, with 48 out of 50 proposed names seeing their Liquidity Factor removed. So far, outperformance has...

Janaghan Jeyakumar, CFA

Toshiba - The CEO Gets His MBO Bidder and Toshiba Will Get Interestinger

3mos ago Toshiba was cheap. Now TOPIX squeezes float, Kioxia is hot, Activists won the EGM, now looking at the AGM. Whoops. Look at the Birdie!...

Travis Lundy

Toshiba – CVC Capital Partners Bid Highlights Value

CVC Partners is reported to be in the process of bidding for Toshiba at a premium of about 30% to last close. This continues a recent surge of good...

Mio Kato

Last Week in Event SPACE: Xiaomi, AGL Energy, TOPIX's Big April Basket, Evergrande Auto

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Asia Short Interest: Tencent, Ping An, Baidu, BASE, Toshiba, GMO Payment, BeNext, Inventec, Mediatek

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas

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