Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The TSE Free Float Weight Rebalance to be executed at the close Monday (30 May) is about ¥729bn a side, so it will add ~¥1.5trln to volumes. </li>
<li>A sector-neutral basket of the 98 top upweights and 98 top downweights across the 33 TOPIX sectors saw the upweights UNDER-perform the downweights by about 0.3% since the April rebalance.</li>
<li>Monday again sees very large buy and sell flows at the close. This is a guide to taking advantage of those flows. Sector tables and a spreadsheet is attached.</li>
</ul>


The TSE Free Float Weight Rebalance to be executed at the close Monday (30 May) is about ¥729bn a side, so it will add ~¥1.5trln to volumes. 
A sector-neutral basket of the 98 top upweights and 98 top downweights across the 33 TOPIX sectors saw the upweights UNDER-perform the downweights by about 0.3% since the April rebalance.
Monday again sees very large buy and sell flows at the close. This is a guide to taking advantage of those flows. Sector tables and a spreadsheet is attached.


TOPIX May Rebalance - The BIG Flows at the Close MONDAY

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<ul>
<li>The latest figures show that Japanese incomes fell for the first time in five years in 2021. </li>
<li>But despite this, average monthly household expenditure recovered and then accelerated at the end of the year. Online spending grew significantly, and much of this was new growth</li>
<li>We detail below which retailers are likely to benefit from these shifts in consumption behaviour over the next few years.</li>
</ul>


The latest figures show that Japanese incomes fell for the first time in five years in 2021. 
But despite this, average monthly household expenditure recovered and then accelerated at the end of the year. Online spending grew significantly, and much of this was new growth
We detail below which retailers are likely to benefit from these shifts in consumption behaviour over the next few years.


Japanese Household Expenditure in 2021 and Beyond: Which Retailers Will Benefit?

APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Mitsubishi Estate Logistics / Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mitsubishi-estate-logistics" target="_blank" data-smartkarma-citation="entities:25867:1" rel="noopener">Mitsubishi Estate Logistics (3481 JP)</a> (MEL) is looking to raise US$203m to acquire two new properties. </li>
<li>The properties are expected to be more accretive to DPU than its last year's placement, the deal has also been well-flagged and MEL has made capital raise an annual routine.</li>
<li>In this note, we will look at the assets to be acquired, impact on forecast and portfolio, and run the deal through our framework.</li>
</ul>



Mitsubishi Estate Logistics (3481 JP) (MEL) is looking to raise US$203m to acquire two new properties. 
The properties are expected to be more accretive to DPU than its last year's placement, the deal has also been well-flagged and MEL has made capital raise an annual routine.
In this note, we will look at the assets to be acquired, impact on forecast and portfolio, and run the deal through our framework.


Mitsubishi Estate Logistics Placement - Annual Routine

<p>On Thursday, the Nikkei came out with an <a href="https://asia.nikkei.com/Economy/BOJ-to-widen-interest-rate-target-range-to-support-bank-profits" target="_blank" rel="noopener">article</a> during the lunch break of equities trading. The headline said <em>"BOJ to widen interest rate target range to support bank profits" </em>and indeed in the article it noted that the BOJ would allow the long end of the curve to fluctuate more widely, creating a slightly steeper curve. This could lead to slightly better bank profits less because of the extra 5bp on the curve but more because of the expectation of forcing borrowers to pay more on an absolute basis. </p><p>What was MORE important for equity markets was the idea that the BOJ <em>"would also abolish its target for purchasing exchange-traded funds, now 6 trillion yen ($55 billion) per year, and instead vow to make such purchases only in times of market turmoil."</em></p><p>The article also suggested that the "Target" would be removed for the ¥90bn of J-REITs they buy as a base case (doubled now to ¥180bn as the ¥6trln was doubled to ¥12trln in the depths of the covid crash of March 2020). </p><p>This move caused Nikkei to underperform TOPIX on the day. TOPIX actually ended up on the day, and ended above where the market closed the AM session before the article came out. Nikkei fell, and started underperforming TOPIX from that point on. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/872/original/Screenshot+2021-03-21+at+3.26.17+PM.png?1616311594" class="editor-image img-responsive" data-smartkarma-image-id="195872"></figure><p></p></section><p>Nikkei underperformed TOPIX in the AM session on Friday, and when the BOJ announcements came mid-day on Friday, there were additional subtleties involved. </p><p>The details are <a href="https://www.boj.or.jp/en/announcements/release_2021/rel210319c.pdf" target="_blank" rel="noopener">here</a>. The presentation with the basic details is <a href="https://www.boj.or.jp/en/announcements/release_2021/k210319b.pdf" target="_blank" rel="noopener">here</a>.</p><ul>
<li>The target rates for ETF and REIT buying will be abolished, but the current "Target Rate" of annual buying will become annual maxima (¥12 trillion for ETFs, ¥180bn for J-REITs, with ongoing maximum ownership limits on ETFs in place).</li>
<li>Buying of ETFs and J-REITs will be conducted "as necessary" "in times of market turbulence" and such buying will be done only on TOPIX ETFs.</li>
<li>The "Special Rules for Purchases of ETFs to Support Firms Proactively Investing in Physical and Human Capital" will continue as before with only specific ETFs permitted in this group. The amount of ~¥300bn/year and ¥1.2bn per business day will continue.</li>
</ul><p>It based the new policy on the Reference <a href="https://www.boj.or.jp/en/announcements/release_2021/k210319c.pdf" target="_blank" rel="noopener">document</a> which backs up the changes in policy is <em>much</em> more interesting reading.  Appendix 5 and Chart 12 are the parts you want to read.</p><p>The hypotheses and results are described here.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/195/869/original/Screenshot+2021-03-21+at+3.02.28+PM.png?1616310186" class="editor-image img-responsive" data-smartkarma-image-id="195869"></figure></section><p>There are a couple of other side conclusions but the base understanding is...</p><div class="content-highlight"><p>When the BOJ steps into the market in size, in times of market turbulence, and when stocks are trading below their medium-term average, it has a greater effect per dollar spent on market-wide risk premia as measured in option premia than buying in normal times, and size matters when looking at the risk premia change on single stocks.  </p></div><h3>What This Means</h3><ul>
<li>When the BOJ steps into the market in size, in times of market turbulence, and when stocks are trading below their medium-term average, it has a greater effect per dollar spent on market-wide risk premia as measured in option premia than buying in normal times, and size matters when looking at the risk premia change on single stocks.  </li>
<li>Expect the BOJ to follow the concept of its study (Appendix 5 again).</li>
<li>Expect the BOJ to pay greater attention to futures activity. </li>
</ul><h3>What This Does NOT Mean</h3><ul><li>It does NOT mean the BOJ will be selling any ETFs.</li></ul><hr><p>It is worthwhile taking a look at WHY the market reacted the way it did on Thursday and Friday afternoon, and it is worthwhile looking at what the BOJ ETF buying might look like going forward. </p><p>So we do so below the fold.</p><p>Note: This is part 1 of the analysis of potential future BOJ ETF Buying. Part II looks at the difference in single stock makeup. </p>

On Thursday, the Nikkei came out with an article during the lunch break of equities trading. The headline said "BOJ to widen interest rate target range to support bank profits" and indeed in the article it noted that the BOJ would allow the long end of the curve to fluctuate more widely, creating a slightly steeper curve. This could lead to slightly better bank profits less because of the extra 5bp on the curve but more because of the expectation of forcing borrowers to pay more on an absolute basis. What was MORE important for equity markets was the idea that the BOJ "would also abolish its target for purchasing exchange-traded funds, now 6 trillion yen ($55 billion) per year, and instead vow to make such purchases only in times of market turmoil."The article also suggested that the "Target" would be removed for the ¥90bn of J-REITs they buy as a base case (doubled now to ¥180bn as the ¥6trln was doubled to ¥12trln in the depths of the covid crash of March 2020). This move caused Nikkei to underperform TOPIX on the day. TOPIX actually ended up on the day, and ended above where the market closed the AM session before the article came out. Nikkei fell, and started underperforming TOPIX from that point on. Nikkei underperformed TOPIX in the AM session on Friday, and when the BOJ announcements came mid-day on Friday, there were additional subtleties involved. The details are here. The presentation with the basic details is here.
The target rates for ETF and REIT buying will be abolished, but the current "Target Rate" of annual buying will become annual maxima (¥12 trillion for ETFs, ¥180bn for J-REITs, with ongoing maximum ownership limits on ETFs in place).
Buying of ETFs and J-REITs will be conducted "as necessary" "in times of market turbulence" and such buying will be done only on TOPIX ETFs.
The "Special Rules for Purchases of ETFs to Support Firms Proactively Investing in Physical and Human Capital" will continue as before with only specific ETFs permitted in this group. The amount of ~¥300bn/year and ¥1.2bn per business day will continue.
It based the new policy on the Reference document which backs up the changes in policy is much more interesting reading.  Appendix 5 and Chart 12 are the parts you want to read.The hypotheses and results are described here.There are a couple of other side conclusions but the base understanding is...When the BOJ steps into the market in size, in times of market turbulence, and when stocks are trading below their medium-term average, it has a greater effect per dollar spent on market-wide risk premia as measured in option premia than buying in normal times, and size matters when looking at the risk premia change on single stocks.  What This Means
When the BOJ steps into the market in size, in times of market turbulence, and when stocks are trading below their medium-term average, it has a greater effect per dollar spent on market-wide risk premia as measured in option premia than buying in normal times, and size matters when looking at the risk premia change on single stocks.  
Expect the BOJ to follow the concept of its study (Appendix 5 again).
Expect the BOJ to pay greater attention to futures activity. 
What This Does NOT MeanIt does NOT mean the BOJ will be selling any ETFs.It is worthwhile taking a look at WHY the market reacted the way it did on Thursday and Friday afternoon, and it is worthwhile looking at what the BOJ ETF buying might look like going forward. So we do so below the fold.Note: This is part 1 of the analysis of potential future BOJ ETF Buying. Part II looks at the difference in single stock makeup. 

Quantifying the BOJ Change in ETF Policy: Assessing Future ETF Buying Methodology

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

<div><p style="text-align: center;"><strong>• RESULTS &amp; REVISIONS SUMMARY - 10th FEBRUARY •</strong></p></div><div><p>Of Wednesday's 477 results announcements, 70% scored positively for earnings momentum despite trailing revenues falling by 2.1% on average and a 3.5 point decline in operating margins. 11% of companies were in the red for the quarter.  Just 61% of the 204 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +2.9 points.</p></div><div><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p></div><div>
<p>The 'best' larger-cap announcements came from <a href="https://www.smartkarma.com/entities/rinnai-corp" target="_blank" data-smartkarma-citation="entities:1303:1" rel="noopener">Rinnai (5947 JP)</a>, <a href="https://www.smartkarma.com/entities/inpex-corp" target="_blank" data-smartkarma-citation="entities:20665:1" rel="noopener">Inpex (1605 JP)</a>, and <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>; the 'worst' were from <a href="https://www.smartkarma.com/entities/mitsubishi-estate-co-ltd" target="_blank" data-smartkarma-citation="entities:566:1" rel="noopener">Mitsubishi Estate (8802 JP)</a>, <a href="https://www.smartkarma.com/entities/nippon-paint-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:7387:1" rel="noopener">Nippon Paint (4612 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-electric-power-co-inc" target="_blank" data-smartkarma-citation="entities:15457:1" rel="noopener">Tokyo Electric Power (9501 JP)</a>.  For more, see the <strong>DETAIL</strong> section below.</p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/286/original/2021-02-12_05-27-56.png?1613075287" class="editor-image img-responsive" data-smartkarma-image-id="188286"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/287/original/2021-02-12_05-28-34.png?1613075326" class="editor-image img-responsive" data-smartkarma-image-id="188287"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/288/original/2021-02-12_05-29-12.png?1613075365" class="editor-image img-responsive" data-smartkarma-image-id="188288"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/289/original/2021-02-12_05-30-04.png?1613075416" class="editor-image img-responsive" data-smartkarma-image-id="188289"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/290/original/2021-02-12_05-30-41.png?1613075454" class="editor-image img-responsive" data-smartkarma-image-id="188290"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/188/291/original/2021-02-12_05-31-25.png?1613075496" class="editor-image img-responsive" data-smartkarma-image-id="188291"></figure></section><p></p>
</div>

• RESULTS &amp; REVISIONS SUMMARY - 10th FEBRUARY •Of Wednesday's 477 results announcements, 70% scored positively for earnings momentum despite trailing revenues falling by 2.1% on average and a 3.5 point decline in operating margins. 11% of companies were in the red for the quarter.  Just 61% of the 204 annual forecasts/revision announcements scored positively, and the average Forecast/Revision score was +2.9 points.• BEST &amp; WORST •
The 'best' larger-cap announcements came from Rinnai (5947 JP), Inpex (1605 JP), and Toyota Motor (7203 JP); the 'worst' were from Mitsubishi Estate (8802 JP), Nippon Paint (4612 JP) and Tokyo Electric Power (9501 JP).  For more, see the DETAIL section below.



🇯🇵 JAPAN • Results & Revisions Update 02/​10 - Rinnai, INPEX, Toyota, Nippon Paint

Japan

DAIWA HOUSE INDUSTRY CO., LTD. designs and builds residential, commercial, and institutional buildings.  The Company constructs single-family houses, collective housings, condominiums, stores, office buildings, factories, and hospitals. DAIWA HOUSE INDUSTRY also operates real estate businesses. The Company, through its subsidiaries, manages hotels and golf country clubs.

Mitsui Fudosan Co., Ltd. provides overall real estate services such as leasing, subdivision, construction, sales, and maintenance of office buildings and residential houses.  The Company also manufactures building materials, operates commercial facilities including hotels and golf places, and provides financial services such as securitization of real estate properties.

Sumitomo Realty & Development Co., Ltd. develops, manages, and sells houses and condominiums.  The Company also develops and manages real estates in overseas. Sumitomo Realty & Development undertakes infrastructure projects, manages real estate properties, and provides financing services to its customers.  The Company operates fitness clubs and restaurants as well.

Hulic Company, Limited. operates real estate business and marketable securities investment business.  The Company also conducts environment related businesses.

Tokyu Fudosan Holdings, Corp. is a holding company established through the merger of Tokyu Land Corporation, Tokyu Community Corp, and Tokyu Livable Inc. The Company manages operations for its subsidiaries.

DAITO TRUST CONSTRUCTION CO., LTD. operates building construction and real estate businesses.  The Company plans and constructs apartment and commercial buildings mainly for land owners.  Daito Trust Construction provides brokerage and maintenance services as well.

Tokyo Tatemono Co., Ltd. develops, sells, and leases commercial buildings, condominiums, and houses.   The Company also develops and manages hotels, vacation houses, leisure facilities, and resort places.

Open House Co.,Ltd. provides real estate services. The Company offers services including renting, buying, selling and appraising real estate.

Nomura Real Estate Holdings, Inc. sells and leases condominiums, residential houses, and office buildings.  The Company also manages REITs, real estate development, and consulting services.

AEON Mall Co., Ltd. develops, manages, and maintains large-scale shopping malls throughout Japan. The Company develops shopping malls, rent the space, manages and maintains the shopping malls.

The Wharf (Holdings) Limited, through its subsidiaries, develops and invests in real estate properties. The Company also owns and manages hotels and operates logistics business. In addition, the Wharf operates telecommunication business, cable television, and Internet-related businesses.

SM Prime Holdings Inc., through its subsidiaries, is engaged in residential property, shopping malls, offices, hotels and convention centers development.

Sun Hung Kai Properties Limited develops and invests in properties. The Company operates and manages hotels, properties, car parking, and transportation infrastructures. Sun Hung Kai Properties serves customers in Hong Kong.

Henderson Land Development Company Limited, through its subsidiaries, develops, invests in, and manages properties. The Company also provides project management, construction, and finance services. In addition, Henderson Land Development operates department stores, hotels, and infrastructure business.

China Resources Land Limited, through its subsidiaries, develops and invests in properties.  The Company also provides corporate financing and electrical engineering services.

China Overseas Land & Investment Limited provides real estate services. The Company develops, manages, and invests in commercial properties. China Overseas Land & Investment serves customers globally.

China Overseas Land & Investment (688 HK)

Godrej Properties, Ltd. is a real estate development company.

Swire Properties Limited develops and manages commercial, retail, and residential properties. The Company's investment portfolio includes office and retail premises, and serviced apartments and other residential accommodation.

Longfor Properties Co. Ltd. operates in the property development, property investment and property management businesses in China.

Poly Real Estate Group Co., Ltd. mainly develops and sells residential homes. The company is also in the business of leasing and rental of real estates, and property management.

Poly Real Estate Group Co., Ltd (600048 CH)

Mitsubishi Estate Company Ltd. invests in real estate properties in Japan.  The Company leases, manages, and develops commercial buildings in central Tokyo. Mitsubishi Estate also develops and sells residential properties and parking lots and manages recreational facilities including golf courses and tennis clubs.

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Mitsubishi Estate (8802 JP)

TOPIX May Rebalance - The BIG Flows at the Close MONDAY

The TOPIX Rebalance at end-May is upon us. ¥700+bn of buys and ¥700bn of sell flows at the close today (Friday). The big buys are NTT, Sony,...

Travis Lundy

Japanese Household Expenditure in 2021 and Beyond: Which Retailers Will Benefit?

Japanese spent more on homes and less on clothes in the last two years but they also added to their savings. This insight analyses the key...

Michael Causton

Mitsubishi Estate Logistics Placement - Annual Routine

Mitsubishi Estate Logistics (3481 JP) is looking to raise US$203m to acquire two new properties. In this note, we discuss the assets to be...

Clarence Chu

Quantifying the BOJ Change in ETF Policy: Assessing Future ETF Buying Methodology

The BOJ has announced a change in ETF Buying Program Parameters. The study/review they did is required reading to understand how they might buy...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions Update 02/10 - Rinnai, INPEX, Toyota, Nippon Paint

Of Wednesday's 477 results announcements, 70% scored positively for earnings momentum despite trailing revenues falling by 2.1% on average and a...

Campbell Gunn

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

TOPIX May Rebalance - The BIG Flows at the Close MONDAY

The TOPIX Rebalance at end-May is upon us. ¥700+bn of buys and ¥700bn of sell flows at the close today (Friday). The big buys are NTT, Sony,...

Travis Lundy

Japanese Household Expenditure in 2021 and Beyond: Which Retailers Will Benefit?

Japanese spent more on homes and less on clothes in the last two years but they also added to their savings. This insight analyses the key...

Michael Causton

Mitsubishi Estate Logistics Placement - Annual Routine

Mitsubishi Estate Logistics (3481 JP) is looking to raise US$203m to acquire two new properties. In this note, we discuss the assets to be...

Clarence Chu

Quantifying the BOJ Change in ETF Policy: Assessing Future ETF Buying Methodology

The BOJ has announced a change in ETF Buying Program Parameters. The study/review they did is required reading to understand how they might buy...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions Update 02/​10 - Rinnai, INPEX, Toyota, Nippon Paint

Of Wednesday's 477 results announcements, 70% scored positively for earnings momentum despite trailing revenues falling by 2.1% on average and a...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions Update 02/10 - Rinnai, INPEX, Toyota, Nippon Paint