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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>The review period for the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.</li>
<li>Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.</li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> will be capped to 10% of the index weight while <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> is also close to the 10% cap.</li>
</ul>


The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.

Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.


Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY</li>
<li>Full year operating profit guidance maintained at Y450 billion, just slightly below the street </li>
<li>The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers</li>
</ul>


Fast Retail missed analyst estimates for Q2 sales and operating profit. Revenue growth slowed to 5% YoY
Full year operating profit guidance maintained at Y450 billion, just slightly below the street 
The stock is trading at 27x EV/EBIT, in-line with historical averages, but still expensive in absolute terms and versus global peers


Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

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.

<ul>
<li>While domestic revenues may have slowed, Uniqlo's domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&amp;A expenditure.</li>
<li>Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.</li>
<li>Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> in the current earnings cycle.</li>
</ul>


While domestic revenues may have slowed, Uniqlo's domestic OP shows upside potential driven by upside to GM and a gradual reduction in SG&amp;A expenditure.
Simultaneously, Uniqlo International is exhibiting strong performance, with anticipated revenue and OP growth of 21% and 30% YoY respectively.
Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing (9983 JP) in the current earnings cycle.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.</li>
<li>If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.</li>
<li>At Friday's close, we were borderline above a double-downweight trigger. At Monday's open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.</li>
</ul>



Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
At Friday's close, we were borderline above a double-downweight trigger. At Monday's open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.


Fast Retailing (9983) - Now At Double Downweight Levels

David Blennerhassett

<ul>
<li>The trade of being short <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> vs Nikkei 225 or Sector Basket is fundamentally slightly short Nikkei 225 froth.</li>
<li>
<a href="https://www.smartkarma.com/entities/giordano-international-ltd" target="_blank" data-smartkarma-citation="entities:13899:1" rel="noopener">Giordano (709 HK)</a>'s SGM will likely pivot off how the shareholders under Halcyon Securities vote. Digging a little deeper as to who these shareholders are, provides some (not-altogether) surprising results.</li>
<li>
<a href="https://www.smartkarma.com/entities/az-com-maruwa-holdings" target="_blank" data-smartkarma-citation="entities:17280:1" rel="noopener">AZ-Com Maruwa Holdings (9090 JP)</a> intends to launch a Tender Offer on <a href="https://www.smartkarma.com/entities/chilled-frozen-logistics-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:40987:1" rel="noopener">Chilled &amp; Frozen Logistics Holdings (9099 JP)</a> without having contacted C&amp;F first. A HOSTILE deal. Yum!</li>
</ul>


The trade of being short Fast Retailing (9983 JP) vs Nikkei 225 or Sector Basket is fundamentally slightly short Nikkei 225 froth.

Giordano (709 HK)'s SGM will likely pivot off how the shareholders under Halcyon Securities vote. Digging a little deeper as to who these shareholders are, provides some (not-altogether) surprising results.

AZ-Com Maruwa Holdings (9090 JP) intends to launch a Tender Offer on Chilled &amp; Frozen Logistics Holdings (9099 JP) without having contacted C&amp;F first. A HOSTILE deal. Yum!


Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan's Big Dividend

Japan

FAST RETAILING CO., LTD. operates a chain of clothing stores, UNIQLO, throughout Japan and in other markets overseas including UK, China, Hong Kong, South Korea, US, France, Singapore and Russia.  The Company designs, manufactures, and retails its own line of casual clothing.

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Fast Retailing (9983 JP)

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

There could be 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped while Tokyo...

Brian Freitas

Fast Retailing(9983) | Not So Fast

Fast Retailer's Q2 sales and operating profit fell short of analyst estimates, with revenue growth slowing to 5% YoY. The stock is trading at a...

Mark Chadwick

Fast Retailing: Earnings Preview

Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing in the...

Oshadhi Kumarasiri

Fast Retailing (9983) - Now At Double Downweight Levels

Now clearly into double-sell territory but nota bene: A double sell only works for the first couple of %, then we're back into single-sell...

Travis Lundy

Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan's Big Dividend

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

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes

There could be 3 changes for the NKY in September with sector balance determining the inclusions. Fast Retailing will be capped while Tokyo...

Brian Freitas

Fast Retailing(9983) | Not So Fast

​Fast Retailer's Q2 sales and operating profit fell short of analyst estimates, with revenue growth slowing to 5% YoY. The stock is trading at a...

Mark Chadwick

Fast Retailing: Earnings Preview

Despite expecting a strong earnings beat, concerns over high valuations and index issues make us cautious about trading Fast Retailing in the...

Oshadhi Kumarasiri

Fast Retailing (9983) - Now At Double Downweight Levels

Now clearly into double-sell territory but nota bene: A double sell only works for the first couple of %, then we're back into single-sell...

Travis Lundy

Last Week in Event SPACE: Fast Retailing, Giordano, C&F Logistics, Swire, Japan's Big Dividend

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

Fast Retailer's Q2 sales and operating profit fell short of analyst estimates, with revenue growth slowing to 5% YoY. The stock is trading at a...