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

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!

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being included in TOPIX at the end of December. 
A couple are decently largecap. Most are smaller.
A good question to ask when looking at these stocks might be... What Really Happens Around TOPIX Inclusions?
Having traded them for much of the last 20yrs, I had my hypotheses, and had done studies over the years for my own purposes, but I had not done a study recently.  To check my personal hypotheses I tested 340+ TOPIX inclusions over the past five years. 
There are patterns to the history of trading these events which are worth a look. Some of the patterns are reasonably interesting.

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being included in TOPIX at the end of December. 
A couple are decently largecap. Most are smaller.
A good question to ask when looking at these stocks might be... What Really Happens Around TOPIX Inclusions?
Having traded them for much of the last 20yrs, I had my hypotheses, and had done studies over the years for my own purposes, but I had not done a study recently.  To check my personal hypotheses I tested 340+ TOPIX inclusions over the past five years. 
There are patterns to the history of trading these events which are worth a look. Some of the patterns are reasonably interesting.

Historical TOPIX Inclusions:  How Do They Do Around Inclusion Date?

Japan

MAINICHI COMNET CO., LTD operates an apartment rental agency for students. The Company provides consulting services and plans for various college activities.  The Company also acts as a temporary employment agency for college students.

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

Mainichi Comnet (8908 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

Historical TOPIX Inclusions: How Do They Do Around Inclusion Date?

There are seven stocks which were promoted/reassigned from TSE2, MOTHERS, and JASDAQ in November 2018 leading to the same seven stocks being...

Travis Lundy

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)