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>JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.</li>
<li>A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.</li>
<li>Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in <em>August 2023</em> based on trading data as of end-<em>August 2022</em>.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-August 2022.


Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<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 Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.</li>
<li>Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).</li>
<li>
<a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a> is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> at the September rebalance.</li>
</ul>


There are 36 adds and 34 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. Some of the changes are interesting.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.75% and a two-way trade of JPY 444.45bn (US$3.3bn).

Oriental Land (4661 JP) is a delete from the JPX Nikkei 400 Index but a high probability inclusion to the Nikkei 225 (NKY INDEX) at the September rebalance.


JPX Nikkei 400 Index Rebalance: Some Biggish Impact Stocks

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

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 Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nihon-m-a-center-inc" target="_blank" data-smartkarma-citation="entities:17616:1" rel="noopener">Nihon M&amp;A Center (2127 JP)</a> reported 4QFY03/2022 results last week. Revenue declined 20.5% YoY to JPY6.1bn (vs consensus JPY7.6bn) while OP decreased 60.3% YoY to JPY889m (vs consensus JPY3.1bn)</li>
<li>Revenue for FY03/2022 increased 16.1% YoY to JPY40.4bn (vs guidance JPY39.bn) while OP increased 7.1% YoY to JPY16.4bn (vs guidance JPY18bn).</li>
<li>The company also announced in December last year that there were irregularities in recording sales and the share price has declined 47% since then.</li>
</ul>



Nihon M&amp;A Center (2127 JP) reported 4QFY03/2022 results last week. Revenue declined 20.5% YoY to JPY6.1bn (vs consensus JPY7.6bn) while OP decreased 60.3% YoY to JPY889m (vs consensus JPY3.1bn)
Revenue for FY03/2022 increased 16.1% YoY to JPY40.4bn (vs guidance JPY39.bn) while OP increased 7.1% YoY to JPY16.4bn (vs guidance JPY18bn).
The company also announced in December last year that there were irregularities in recording sales and the share price has declined 47% since then.


Nihon M&A: Earnings Drop Due to New Revenue Recognition Criteria; Guidance Seems Unrealistic

BayCurrent Consulting  / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/baycurrent-consulting-inc" target="_blank" data-smartkarma-citation="entities:25985:1" rel="noopener">Baycurrent Consulting (6532 JP)</a> reported 4QFY02/2022 results today. Revenue grew 30.9% YoY to JPY16.2bn while OP increased 61.3% YoY to JPY6.8bn.</li>
<li>Full-Year FY02/2022 revenues grew 34.4% YoY to JPY57.6bn and OP increased 58.7% YoY to JPY21.5bn. Both revenue and OP beat guidance by 1.9% and 2.4% respectively.</li>
<li>BayCurrent’s shares are down 30% since its peak in September 2021, and we think current share price offers a good entry point.</li>
</ul>



Baycurrent Consulting (6532 JP) reported 4QFY02/2022 results today. Revenue grew 30.9% YoY to JPY16.2bn while OP increased 61.3% YoY to JPY6.8bn.
Full-Year FY02/2022 revenues grew 34.4% YoY to JPY57.6bn and OP increased 58.7% YoY to JPY21.5bn. Both revenue and OP beat guidance by 1.9% and 2.4% respectively.
BayCurrent’s shares are down 30% since its peak in September 2021, and we think current share price offers a good entry point.


BayCurrent: Strong Results but Guidance Seems Too Conservative

Japan

Nihon M&A Center Inc. provides M&A advisory services to small and medium-sized enterprises. The Company, established by certified public accountants and tax accountants, offers M&A related services such as reorganization and MBO (Management Buy-Out) as well.

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Nihon M&A Center (2127 JP)

JPX-Nikkei 400 Rebal 2023: End-Aug 2022

Some Potential ADDs have underperformed their EPS Trends and Potential DELs have outperformed their EPS trends and this makes the LONG Potential...

Janaghan Jeyakumar, CFA

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 Index Rebalance: Some Biggish Impact Stocks

There are 36 adds & 34 deletes for the JPX Nikkei 400 Index at the August rebalance leading to an estimated one way turnover of 4.75% and a two-way...

Brian Freitas

Nihon M&A: Earnings Drop Due to New Revenue Recognition Criteria; Guidance Seems Unrealistic

Nihon's revenue and OP declined YoY in 4QFY03/2022 and it becomes clear that huge growth in Nihon's top line and strong margins were due to...

Shifara Samsudeen, ACMA, CGMA

BayCurrent: Strong Results but Guidance Seems Too Conservative

BayCurrent reported 4QFY02/2022 results today. Revenue grew 30.9% YoY to JPY16.2bn while OP increased 61.3% YoY to JPY6.8bn. We think the company's...

Shifara Samsudeen, ACMA, CGMA

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