Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Quantitative Analysis

<div>
When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 
</div>
<div>
In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 
</div>


When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 


In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 


There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of <a href="https://www.smartkarma.com/insights/topix-inclusion-4931-jp-shinnihonseiyaku" target="_blank" data-smartkarma-citation="insights:45660" rel="noopener">TOPIX Inclusion (4931 JP): Shinnihonseiyaku</a> where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. <hr><div class="content-remarks">This insight is an update to <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-who-is-ready" target="_blank" data-smartkarma-citation="insights:41091" rel="noopener">TOPIX Inclusion Pre-Events: Who Is Ready?</a>. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. </div>

There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of TOPIX Inclusion (4931 JP): Shinnihonseiyaku where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. This insight is an update to TOPIX Inclusion Pre-Events: Who Is Ready?. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. 

TOPIX Inclusions:  New Regulations! Who Is READY? 2.0

The month of August has been a fairly quiet one as far as TSE1 promotion announcements go. At the time of writing, there has been only one TSE1 promotion so far this month - <a href="https://www.smartkarma.com/insights/topix-inclusion-7059-jp-copro-holdings" target="_blank" data-smartkarma-citation="insights:42694" rel="noopener">TOPIX Inclusion (7059 JP): COPRO Holdings</a> (though another was announced after the close today).  
In this month's summary, I have provided performance updates for our "Pre-event" strategies and discussed 9 "Post" events which involve stocks which had their Inclusion Events at the end of July and August 2020. 
As always, there is more below the fold.

The month of August has been a fairly quiet one as far as TSE1 promotion announcements go. At the time of writing, there has been only one TSE1 promotion so far this month - TOPIX Inclusion (7059 JP): COPRO Holdings (though another was announced after the close today).  
In this month's summary, I have provided performance updates for our "Pre-event" strategies and discussed 9 "Post" events which involve stocks which had their Inclusion Events at the end of July and August 2020. 
As always, there is more below the fold. 

In June 2020, we saw some interesting TSE1 Approval announcements including names like <a href="https://www.smartkarma.com/entities/tsuzuki-denki-co-ltd" target="_blank" data-smartkarma-citation="entities:8270:1" rel="noopener">Tsuzuki Denki (8157 JP)</a> and <a href="https://www.smartkarma.com/entities/mixi-inc" target="_blank" data-smartkarma-citation="entities:602:1" rel="noopener">Mixi Inc (2121 JP)</a> which enjoyed strong price rallies following their announcements. As of end-June, there were 10 live pre-events, 5 live inclusion events, and a half dozen just-post-inclusion names which announced in April/May 2020 which entered TOPIX at the end of June and July. These were discussed in detail in <a href="https://www.smartkarma.com/insights/topix-inclusion-trade-summary-june-2020" target="_blank" data-smartkarma-citation="insights:40784" rel="noopener">TOPIX Inclusion Trade Summary: June 2020</a>. In this month's summary, I have provided updates on our "TOPIX Inclusion Pre-events Watchlist" and how a equally-weighted portfolio constructed according to <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-post-ipo-basket-trade-in-detail" target="_blank" data-smartkarma-citation="insights:41411" rel="noopener">TOPIX Inclusion Pre-Events: Post-IPO Basket Trade in Detail</a> would have performed in the month of July. I have also provided a summary of six "Live Events" which are expected to have their TOPIX Inclusion events at the end of August 2020 and a list of four just-post-inclusion names which have had their Inclusion events at the end of May/June 2020. As always, there is more below the fold.

In June 2020, we saw some interesting TSE1 Approval announcements including names like Tsuzuki Denki (8157 JP) and Mixi Inc (2121 JP) which enjoyed strong price rallies following their announcements. As of end-June, there were 10 live pre-events, 5 live inclusion events, and a half dozen just-post-inclusion names which announced in April/May 2020 which entered TOPIX at the end of June and July. These were discussed in detail in TOPIX Inclusion Trade Summary: June 2020. In this month's summary, I have provided updates on our "TOPIX Inclusion Pre-events Watchlist" and how a equally-weighted portfolio constructed according to TOPIX Inclusion Pre-Events: Post-IPO Basket Trade in Detail would have performed in the month of July. I have also provided a summary of six "Live Events" which are expected to have their TOPIX Inclusion events at the end of August 2020 and a list of four just-post-inclusion names which have had their Inclusion events at the end of May/June 2020. As always, there is more below the fold.

In my previous insight <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-post-ipo-strategies-for-japanese-small-caps-1cb373f5-ef5b-4447-8e93-6209ced24be8" target="_blank" data-smartkarma-citation="insights:41358" rel="noopener">TOPIX Inclusion Pre-Events: Post-IPO Strategies for Japanese Small-Caps</a>, I discussed potential screening methods which focused on identifying stocks with high likelihood of TSE1 promotion in order to generate strong market-neutral returns. In this insight, we focus on the "PRE-EVENT BASKET-TRADE" Strategy. This is a portfolio strategy created to take advantage of the speculative demand potential TSE1-promotion candidates enjoy in the period between 6 and 12 months after their IPO.<div class="content-highlight">The strategy has identified 91 positions to take over the past three and a half years and the average TOPIX-relative return for the 91 trades is 18.8% for 150 calendar days (average annualized price return vs TOPIX is 45.2% for the 91 trades). </div>Below, we take a closer look at how an equally-weighted portfolio would have performed in the past, the risk-return attributes of the strategy, modifications to overcome liquidity constraints, and lists of stocks that would be in the current portfolio and stocks that could enter the portfolio in future. <div style="text-align: left;" class="content-caption">To non-Smartkarma subscribers.... Don't you want to <a href="https://www.smartkarma.com/compose/insight/41411/me/?share=Quiddity1" target="_blank" rel="noopener">know more</a>?</div>

In my previous insight TOPIX Inclusion Pre-Events: Post-IPO Strategies for Japanese Small-Caps, I discussed potential screening methods which focused on identifying stocks with high likelihood of TSE1 promotion in order to generate strong market-neutral returns. In this insight, we focus on the "PRE-EVENT BASKET-TRADE" Strategy. This is a portfolio strategy created to take advantage of the speculative demand potential TSE1-promotion candidates enjoy in the period between 6 and 12 months after their IPO.The strategy has identified 91 positions to take over the past three and a half years and the average TOPIX-relative return for the 91 trades is 18.8% for 150 calendar days (average annualized price return vs TOPIX is 45.2% for the 91 trades).  Below, we take a closer look at how an equally-weighted portfolio would have performed in the past, the risk-return attributes of the strategy, modifications to overcome liquidity constraints, and lists of stocks that would be in the current portfolio and stocks that could enter the portfolio in future. To non-Smartkarma subscribers.... Don't you want to know more?

TOPIX Inclusion Pre-Events: Post-IPO Basket Trade in Detail

Japan

Software Service, Inc. develops and sells medical information software for hospital uses.  The products include electronic medical carte and order entry system.  The Company also provides training and maintenance services.

Findex Inc plans, develops and maintains software products specialized in healthcare.  The Company also builds and provides medical net-work system for medical industry.

Medical Data Vision Co.,Ltd. was founded in 2003. The company's line of business includes developing integrated medical information systems, analysis of medical information, and business consulting for medical institutions.

SHIP HEALTHCARE HOLDINGS, INC. mainly distributes medical equipment and physics & chemistry equipment.  The Company also sells equipment used for medical facility and office automation.  Ship Healthcare provides integrated consultation as well as maintenance services.

MANI, INC. manufactures medical goods and equipment.  The Company's products include threads and needles for surgeries, surgical knives for eye surgeries, and dental instruments and equipment.

CE Holdings Co Ltd develops and sells packaged medical information software for hospital uses.  The Company also develops software upon clients' request.  CSI sells system equipment and provides consulting services.

TOHO HOLDINGS CO., LTD. is a wholesaler of medicine and medical tools and equipment.  The Company mainly sells to hospitals and pharmacies.  Toho's merchandise are nursing products mainly for elderly and handicapped, and these include pajamas and bedding products, wheelchairs, walkers, diapers, bathing products, and health foods.

AS ONE CORPORATION wholesales laboratory equipment, scientific equipment, and related products.  The Company sells its products through catalogs and provides quick delivery by using the on-line ordering system.

DATA HORIZON CO., LTD. provides billing data services for welfare and medical organizations. The Company also provides consultation services on public health.

NIPRO CORPORATION manufactures medical products.  The Company's products include artificial dialysis and blood transfusion equipment, hypodermic syringes, and glass products for medical use.

Winning Health Technology Group Co., Ltd. develops and sells medical software, and provides technology supporting services and comprehensive information technology solutions to the health care industry.

Winning Health Technology Group Co., Ltd. A (300253 CH)

Winning Health Technology Group Co., Ltd. A

NextGen Healthcare, Inc. develops and markets healthcare information systems. The Company's systems automate medical group practices, physical hospitals, management service organizations, community health centers, and dental schools. NextGen Healthcare offers its services throughout the United States.

Allscripts Healthcare Solutions, Inc. develops and markets clinical software. The Company's products include electronic health records, electronic prescribing, revenue cycle management, practice management, document management, medication services, hospital care management, emergency department information systems and homecare automation.

Allscripts Healthcare Solutions (MDRX US)

Omnicell, Inc. provides an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities.  The Company's solutions include pharmacy and supply systems, clinical reference tools, an Internet-based procurement application, and decision support tools.  Omnicell sells and leases its products and services to a range of healthcare facilities.

EMIS Group Plc is a healthcare information technology company. The Company computerizes patients' medical records and allows primary, secondary and community healthcare practitioners to view and contribute to a patient's core medical record.

Craneware plc engages in the development, licensing, and ongoing support of computer software for the United States healthcare industry. The company offers access management and strategic pricing products comprising InSight Medical Necessity, which provides medical necessity validation and advance beneficiary notice creation; and Patient Charge Estimator software, which simplifies the process of providing patient bill estimates for inpatient and outpatient services. It also provides charge capture and pricing solutions include Chargemaster Toolkit that automates chargemaster management processes for capturing optimal legitimate reimbursement for hospitals; Physician Revenue Toolkit, a software for managing physician group charges, codes, RVUs, fee schedules, and related information; Pricing Analyzer software that simplifies the price modeling process; Reference Plus, a platform for hospitals to perform chargemaster analysis; Pharmacy ChargeLink, which improves charge capture, pricing, and cost management; and Supplies ChargeLink that optimize reimbursement for codable supplies by identifying missing or invalid charges, as well as offers supporting modules. In addition, the company offers coding integrity solutions consisting of Bill Analyzer, which automates claim and coding reviews to identify missed charges, billing errors, and categorize areas of risk. Further, it provides revenue recovery and retention solutions, including InSight Audit, a Web-based audit management tool to manage claim audits and workflow from one central location; InSight Payment Variance Analyzer, which identifies, tracks, and helps eliminate revenue lost in the form of underpaid claims; and InSight Denials that analyses, tracks, trends, and reports on denial data. Additionally, the company offers companion implementation and consulting services. Craneware plc was founded in 1999 and is headquartered in Edinburgh, the United Kingdom.

HealthStream, Inc. offers a Web-based solution to the continuing education and training needs of the healthcare community.  The Company distributes numerous hours of continuing education and training content to doctors, nurses, allied health professionals, and other healthcare workers through its network of distribution partners.

Evolent Health, Inc. provides a purpose-built platform, powered by our technology, proprietary processes and integrated services, enables providers to migrate their economic orientation from fee-for-service, or FFS, reimbursement to payment models that reward high-quality and cost-effective care, or value-based payment models.

Simulations Plus, Inc. develops drug discovery and development simulation software, which is licensed to and used in the conduct of drug research for pharmaceutical companies worldwide.  The Company's other businesses are based on its proprietary software technologies and provide support for the emerging pharmaceutical enterprise.

RaySearch Laboratories AB develops methods and software for cancer radiation therapy.  The Company's main product is ORBIT, a software framework for solving optimization problems in radiotherapy, and its modular structure can be adapted to many different types of environments.  RaySearch works with corporations and institutions worldwide, and sells to suppliers of treatment planning systems.

JMDC Inc. offers information services. The Company provides medical data statistics, life insurance data statistics, health data platform management, and other services. JMDC provides its services throughout Japan.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

JMDC (4483 JP)

TOPIX Inclusion Trade Summary: Nov 2020

November review of pre-events, live events, and post-events in the TOPIX Inclusion trade universe. There are a dozen pre-event recommendations...

Janaghan Jeyakumar, CFA

TOPIX Inclusions: New Regulations! Who Is READY? 2.0

The TSE has new Listing Rules and Criteria for TSE1 listing and promotion. That means new analysis on what pre-event trades. One TOP PICK to trade...

Janaghan Jeyakumar, CFA

TOPIX Inclusion Trade Summary: Aug 2020

A monthly round-up of TSE Section Transfer (upwards) and future index inclusion-related events including the high-return Quiddity Post-IPO Strategy

Janaghan Jeyakumar, CFA

TOPIX Inclusion Trade Summary: July 2020

In June 2020, we saw some interesting TSE1 Approval announcements including names like Tsuzuki Denki (8157 JP) and Mixi Inc (2121 JP) which enjoyed...

Janaghan Jeyakumar, CFA

TOPIX Inclusion Pre-Events: Post-IPO Basket Trade in Detail

In my previous insight TOPIX Inclusion Pre-Events: Post-IPO Strategies for Japanese Small-Caps, I discussed potential screening methods which...

Janaghan Jeyakumar, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)