Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/dena-co-ltd" target="_blank" data-smartkarma-citation="entities:747:1" rel="noopener">DeNA (2432 JP)</a> announced in June a buyback programme to buy up to ¥15bn of stock over the next nine months. They are two-thirds the way through. </li>
<li>At current pace, they should finish by end-Jan or early Feb, then cancel 8mm shares, leading to a small TOPIX selldown <em>likely</em> in March or April. </li>
<li>The company remains cash and securities rich (net cash, after-tax value of securities, and equity affiliates are 100% of market cap). And growth lines will slowly claw their way positive.</li>
</ul>



DeNA (2432 JP) announced in June a buyback programme to buy up to ¥15bn of stock over the next nine months. They are two-thirds the way through. 
At current pace, they should finish by end-Jan or early Feb, then cancel 8mm shares, leading to a small TOPIX selldown likely in March or April. 
The company remains cash and securities rich (net cash, after-tax value of securities, and equity affiliates are 100% of market cap). And growth lines will slowly claw their way positive.


DeNA (2432) Buyback - Accretive on a Low Leverage Business Which Will Grow In Time

Event-Driven

<ul>
<li>As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.</li>
<li>This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.</li>
<li>This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.</li>
</ul>


As designed, the JPX-Nikkei400 Index is something of a disaster. It aims to be slightly 'smart' vs other cap-weighted indices like TOPIX, but tracking error vs TOPIX is de minimus.
This year, in week 1, the ADD vs DELETE performance is positive. If we sector-hedge the ADDs vs DELETEs, it's doing even better.
This is probably due to relatively low pre-positioning, and cares. Momentum suggests one could be long ADDs vs DELETEs. And there is the perennial trade to watch out for.


2022 JPX Nikkei 400 Rebal Update - Going the Right Way

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<div>
<div>JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.</div>
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</div><div>
<p>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. </p>
<p>Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. The rebalance of 2021 took place yesterday. It was discussed in <a href="https://www.smartkarma.com/insights/the-2021-jpx-nikkei-400-rebalance-another-year-another-mess-bigger-but-smaller" target="_blank" data-smartkarma-citation="insights:55716" rel="noopener">The 2021 JPX Nikkei 400 Rebalance. Another Year, Another Mess - Bigger, But Smaller</a> - there were lots of large names deleted because of covid-related writedowns and losses, and in typical JPX Nikkei 400 construction fashion, I expect most of them will be back in the index three years from now after they have rebounded. </p>
<p>Below is a look at the lists of potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022. </p>
</div>


JPX-Nikkei 400 is composed of common stocks whose main market is the TSE1, TSE2, JASDAQ, and Mothers sections (which will become the Prime Market, Standard Market, or Growth Market next April) of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents selected based on several factors including market capitalization, trading value, operating profits, and ROE.


A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review is conducted using the final business day of June as the base date. 
Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event and others. The rebalance of 2021 took place yesterday. It was discussed in The 2021 JPX Nikkei 400 Rebalance. Another Year, Another Mess - Bigger, But Smaller - there were lots of large names deleted because of covid-related writedowns and losses, and in typical JPX Nikkei 400 construction fashion, I expect most of them will be back in the index three years from now after they have rebounded. 
Below is a look at the lists of potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2022. 


JPX-Nikkei 400 Rebalance 2022: Leader Board End-Aug 2021

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.

Equity Capital Markets

<p>Krafton’s IPO is having a rather inauspicious start, opening down almost 10% from its KRW498,000 IPO price and falling as much as 20% at its intraday lows. That they somehow managed to convince some investors to pay up at the high end of the downwardly revised range should be considered a godsend, but with the stock falling so dramatically, should you be chasing this downwards?</p>

Krafton’s IPO is having a rather inauspicious start, opening down almost 10% from its KRW498,000 IPO price and falling as much as 20% at its intraday lows. That they somehow managed to convince some investors to pay up at the high end of the downwardly revised range should be considered a godsend, but with the stock falling so dramatically, should you be chasing this downwards?

Krafton IPO – Should You Chase This Down?

<p>Krafton appears to be doing the PR rounds regarding investor interest in its IPO. <a href="https://asia.nikkei.com/Business/Markets/IPO/Krafton-expects-IPO-success-as-big-investors-show-interest" target="_blank" rel="noopener">The Nikkei</a> and various other news outlets had some positive sounding stories. If Krafton does indeed manage to price at the top end of its range or above we think that would be a fantastic opportunity for investors...</p>

Krafton appears to be doing the PR rounds regarding investor interest in its IPO. The Nikkei and various other news outlets had some positive sounding stories. If Krafton does indeed manage to price at the top end of its range or above we think that would be a fantastic opportunity for investors...

Krafton IPO - A Few Thoughts on Its IP and the Tencent Relationship

Japan

mixi, Inc. operates community style website, mixi.  The Company sells advertising spaces on its website.  mixi also runs online recruiting services for IT related positions.

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Mixi Inc (2121 JP)

DeNA (2432) Buyback - Accretive on a Low Leverage Business Which Will Grow In Time

DeNA (2432) is a nice pot of assets with a small business attached. It should be better. It appears to be on its way to getting better. It is very...

Travis Lundy

2022 JPX Nikkei 400 Rebal Update - Going the Right Way

JPX Nikkei 400 rebalance is going the right way in the 6 trading days so far, and it wasn't done on Day1 (which was lacklustre). It may be under...

Travis Lundy

JPX-Nikkei 400 Rebalance 2022: Leader Board End-Aug 2021

The next annual rebalance for the JPX-Nikkei 400 Index will be in August 2022. With roughly a year to go, we take an early look at the leader...

Janaghan Jeyakumar, CFA

Krafton IPO – Should You Chase This Down?

Despite the double digit fall vs. its IPO price we feel that risks for Krafton remain skewed to the downside and that it is the most attractive...

Mio Kato

Krafton IPO - A Few Thoughts on Its IP and the Tencent Relationship

If Krafton manages to price at the top end of its range or above as rumoured we think that would be a fantastic opportunity for investors...

Mio Kato

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