Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<ul>
<li>KDDI's entire network was out over the weekend and whilst service has been restored, there are still sporadic complaints </li>
<li>There are near-term risks for higher user churn and lost Q2 revenue, but these are on the margin and downside should be manageable (i.e. no change on company guidance)</li>
<li>Looking past near-term weakness, KDDI remains an attractive defensive play </li>
</ul>


KDDI's entire network was out over the weekend and whilst service has been restored, there are still sporadic complaints 
There are near-term risks for higher user churn and lost Q2 revenue, but these are on the margin and downside should be manageable (i.e. no change on company guidance)
Looking past near-term weakness, KDDI remains an attractive defensive play 


KDDI (Buy) - Network Outage Is a Bad Look but Concerns Should Fade over Time

Thematic (Sector/Industry)

<ul>
<li>The regulator says that subscribers to discount mobile plans have exceeded 40mn, 15 months after mobile operators first launched them  in response to regulatory pressure</li>
<li>Net additons have stepped down as the rush of early adopters has passed and the data seems supportive of financial guidance for erosion that is modestly higher YoY</li>
<li>A press release touting the success of <em>ongoing</em> efforts to control mobile pricing comes at a good time</li>
</ul>


The regulator says that subscribers to discount mobile plans have exceeded 40mn, 15 months after mobile operators first launched them  in response to regulatory pressure
Net additons have stepped down as the rush of early adopters has passed and the data seems supportive of financial guidance for erosion that is modestly higher YoY
A press release touting the success of ongoing efforts to control mobile pricing comes at a good time


Japan Telecoms - New (Discount) Mobile Pricing Plan Users Exceed 40mn

<ul>
<li>With inflation exceeding 2% for only the third time in 22 years, hopes for employee wage hikes in Prime Minister Kishida's New Capitalism are likely to get more attention</li>
<li>But the telcos appear to be largely ahead of this already where we have visibility with wage increases of 1-2% already built into FY22 financial guidance </li>
<li>NTT's widespread telework offer is an example of how telcos have other tools to apply. We remain Overweight the Japan telecom sector with NTT and KDDI as top picks</li>
</ul>


With inflation exceeding 2% for only the third time in 22 years, hopes for employee wage hikes in Prime Minister Kishida's New Capitalism are likely to get more attention
But the telcos appear to be largely ahead of this already where we have visibility with wage increases of 1-2% already built into FY22 financial guidance 
NTT's widespread telework offer is an example of how telcos have other tools to apply. We remain Overweight the Japan telecom sector with NTT and KDDI as top picks


Japan Telecoms - FY22 Guidance Largely Insulated from Pressure to Raise Wages

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 last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.</li>
<li>There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. </li>
<li>Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers' float) has gone up significantly through this process. </li>
</ul>


The last of the three-leg rebalance for TOPIX and JPNK400 index weights takes place Wednesday 29 June at the close. This one is a bit larger than expected in April.
There were a large number of cancellations of shares by TSE Prime members in May which ups the predicted value to be traded. 
Interestingly, because lots of names have seen share cancellations and FFW drops, the average passive ownership of TSE Float (not other providers' float) has gone up significantly through this process. 


Last Leg of TOPIX and JPNK400 FFW Rebal - ¥780bn One-Way Flow Wednesday

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>The third tranche of the FFW methodology change for the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX)</a> will be implemented at the close of trading on 29 June.</li>
<li>One-Way flow is ~JPY 742bn and will be spread across 2170 stocks. The largest inflow will be on <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (9432 JP)</a> and the largest outflow on <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>.</li>
<li>Stocks with the largest impact of inflows have outperformed stocks with the largest impact of outflows, but there has been underperformance over the last couple of weeks.</li>
</ul>


The third tranche of the FFW methodology change for the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) will be implemented at the close of trading on 29 June.
One-Way flow is ~JPY 742bn and will be spread across 2170 stocks. The largest inflow will be on NTT (9432 JP) and the largest outflow on Toyota Motor (7203 JP).
Stocks with the largest impact of inflows have outperformed stocks with the largest impact of outflows, but there has been underperformance over the last couple of weeks.


TOPIX Rebalance: Flows at the Close on 29 June

Japan

Nippon Telegraph and Telephone Corporation provides a variety of telecommunication services, including telephone, telegraph, leased circuits, data communication, terminal equipment sales, and related services. The Company provides both local and long distance telephone services within Japan.

NTT (Nippon Telegraph & Telephone) (9432 JP)

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NTT (Nippon Telegraph & Telephone) (9432 JP)

KDDI (Buy) - Network Outage Is a Bad Look but Concerns Should Fade over Time

KDDI's network outage was large-scale but financial and operational impacts should be limited to Q2 and our overall outlook on the stock as an...

Kirk Boodry

Japan Telecoms - New (Discount) Mobile Pricing Plan Users Exceed 40mn

The regulator says there are users of new discount mobile pricing plans have exceeded 40mn. That tracks with financial guidance and is a positive...

Kirk Boodry

Japan Telecoms - FY22 Guidance Largely Insulated from Pressure to Raise Wages

With inflation rising above 2% for only the third time in 22 years, talk of the need for higher wages is likely to increase but telecom operators...

Kirk Boodry

Last Leg of TOPIX and JPNK400 FFW Rebal - ¥780bn One-Way Flow Wednesday

There are 2+ days until the last stage of the TSE FFW Rebalance is done. This time sees more changes because of increased share cancellation in...

Travis Lundy

TOPIX Rebalance: Flows at the Close on 29 June

The third and final tranche of the FFW methodology change for the TOPIX Index will be implemented at the close of trading on 29 June. One way flow...

Brian Freitas

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