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

<ul>
<li>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. </li>
<li>For companies with "low liquidity" the FFW will be multiplied by a fixed liquidity factor of 0.75 to derive the final FFW used for index calculation. </li>
<li>Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting opportunities for a basket trade. </li>
</ul>


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 of 0.75 to derive the final FFW used for index calculation. 
Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting opportunities for a basket trade. 


TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)

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 <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.<div class="content-highlight">
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. 
</div>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.

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!

Japan

LECIP HOLDINGS CORPORATION manufactures display and lighting devices for bus, train, and automotive.  The Company also manufactures neon transformers for sign and display, uninterruptible power supply, and chargers.

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Lecip Holdings (7213 JP)

TOPIX Index Upweights: The Big April Basket 2022 (Pre-Event)

Every April, the application of this liquidity factor is reviewed by the TSE for all TSE1 constituents. This situation opens up interesting...

Janaghan Jeyakumar, CFA

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

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