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.

Event-Driven

<p>Softbank stock ended up locked limit up towards the end of the trading day after the company announced a massive ¥4.5trn in asset sales/monetisation together with a ¥2.0trn share buyback on top of the already announced ¥0.5trn buyback. Together the two buybacks could soak up 45% of outstanding shares. Given that the stock had fallen 53% between the 12<sup>th</sup> of February and last Thursday, the 19<sup>th</sup> of March, it is not surprising that it went limit up. It would not be entirely surprising if the stock were limit up again tomorrow. If so, that could have some interesting implications for other Nikkei names. Details below.</p>

Softbank stock ended up locked limit up towards the end of the trading day after the company announced a massive ¥4.5trn in asset sales/monetisation together with a ¥2.0trn share buyback on top of the already announced ¥0.5trn buyback. Together the two buybacks could soak up 45% of outstanding shares. Given that the stock had fallen 53% between the 12th of February and last Thursday, the 19th of March, it is not surprising that it went limit up. It would not be entirely surprising if the stock were limit up again tomorrow. If so, that could have some interesting implications for other Nikkei names. Details below.

What Do You Buy if the Softbank Mega-Buyback Drives a Nikkei Squeeze?

<p>On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.</p>

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<div><p>Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and Thursday, as it was the year before that. </p></div><div><h2>This Year it is Friday and Monday</h2></div><div><p>What is it about Tuesday and Wednesday? The answer, as it is every year (on days such as the above), is hundreds of billions of yen of flows from people who are obliged to allocate money on these particular days.</p></div><div><p>For most, the benchmark is this upcoming Friday.</p></div><div><p></p></div>

Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and Thursday, as it was the year before that. This Year it is Friday and MondayWhat is it about Tuesday and Wednesday? The answer, as it is every year (on days such as the above), is hundreds of billions of yen of flows from people who are obliged to allocate money on these particular days.For most, the benchmark is this upcoming Friday.

JAPAN DELTA III - The Annual TOPIX Dividend Trade

<p>We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.</p>

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

<p>With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to favour TOPIX-based ETFs over Nikkei-based ETFs it made sense for TOPIX to outperform Nikkei today. However, we found the degree of outperformance to be slightly surprising as TOPIX rose 2.60% while the Nikkei barely squeaked out a +0.06% gain. Below, we examine some individual names within the two indices to try and identify pairs which could generate alpha based on this theme.</p>

With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to favour TOPIX-based ETFs over Nikkei-based ETFs it made sense for TOPIX to outperform Nikkei today. However, we found the degree of outperformance to be slightly surprising as TOPIX rose 2.60% while the Nikkei barely squeaked out a +0.06% gain. Below, we examine some individual names within the two indices to try and identify pairs which could generate alpha based on this theme.

Japan

FamilyMart Co., Ltd. operates convenience store chains. The Company provides rice balls, hot snacks, stews, beverages, and other products. FamilyMart conducts businesses in China, Taiwan, South Korea, Thailand, and other countries and regions.

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FamilyMart Co Ltd (8028 JP)

What Do You Buy if the Softbank Mega-Buyback Drives a Nikkei Squeeze?

Softbank stock ended up locked limit up towards the end of the trading day after the company announced a massive ¥4.5trn in asset...

Mio Kato

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due...

Mio Kato

JAPAN DELTA III - The Annual TOPIX Dividend Trade

Last year was Tuesday and Wednesday. The two years before were too. The year before that was Monday and Tuesday. Five years ago was Wednesday and...

Travis Lundy

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei....

Mio Kato

The Topix Vs. Nikkei Skew

With the BOJ announcing yesterday that it would double the upper limit of its ETF purchases to ¥12trn a year and its previous policy shift to...

Mio Kato

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