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

Event-Driven

<ul>
<li>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> market consultation released last week could lead to some tweaks to the index methodology and the stock selection process. Nothing really material enough though.</li>
<li>Potential index inclusions in September are <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics</a>, <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land</a> and <a href="https://www.smartkarma.com/entities/pan-pacific-international-holdings-corporation" target="_blank" data-smartkarma-citation="entities:13475:1" rel="noopener">Pan Pacific International Holdings</a>, while <a href="https://www.smartkarma.com/entities/toyobo-co-ltd" target="_blank" data-smartkarma-citation="entities:6187:1" rel="noopener">Toyobo Co Ltd</a>, <a href="https://www.smartkarma.com/entities/nippon-light-metal-holdings" target="_blank" data-smartkarma-citation="entities:1485:1" rel="noopener">Nippon Light Metal</a> and <a href="https://www.smartkarma.com/entities/oki-electric-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:2181:1" rel="noopener">Oki Electric Industry</a> are potential index deletions.</li>
<li>Passive <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225</a> trackers will need to buy between 4-9% of the real float on the high/ medium probability names, while they need to buy between 2.5-14 days of ADV.</li>
</ul>


The Nikkei 225 (NKY INDEX) market consultation released last week could lead to some tweaks to the index methodology and the stock selection process. Nothing really material enough though.
Potential index inclusions in September are Renesas Electronics, Oriental Land and Pan Pacific International Holdings, while Toyobo Co Ltd, Nippon Light Metal and Oki Electric Industry are potential index deletions.
Passive Nikkei 225 trackers will need to buy between 4-9% of the real float on the high/ medium probability names, while they need to buy between 2.5-14 days of ADV.


Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes

In May, the Nikkei released a market consultation on proposed changes 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> covering capping the weight of new constituents in the index at 1% by using a Price Adjustment Factor, limiting the number of index changes at a periodic review to 3, and changing the index universe from stocks listed on TSE's 1st section to stocks that are listed on the Prime Market (post the reorganisation). Most of the proposed changes were subsequently approved.This is the first <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> rebalance after the market consultation that tweaked things around. The tweaks could ensure the inclusion of stocks that were historically not included in the index due to their high stock price, though the impact will be much smaller since their weight in the index will not exceed 1%.At the upcoming rebalance, we see a high probability of <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo Co Ltd (7974 JP)</a> and <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> being included in the index while there is a lower probability of <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> and <a href="https://www.smartkarma.com/entities/orix-corp" target="_blank" data-smartkarma-citation="entities:9936:1" rel="noopener">Orix Corp (8591 JP)</a> being included.Potential deletion candidates are <a href="https://www.smartkarma.com/entities/toho-zinc-co-ltd" target="_blank" data-smartkarma-citation="entities:2796:1" rel="noopener">Toho Zinc (5707 JP)</a>, <a href="https://www.smartkarma.com/entities/sky-perfect-jsat-holdings" target="_blank" data-smartkarma-citation="entities:14097:1" rel="noopener">Sky Perfect Jsat (9412 JP)</a>, <a href="https://www.smartkarma.com/entities/maruha-nichiro-corp" target="_blank" data-smartkarma-citation="entities:20640:1" rel="noopener">Maruha Nichiro (1333 JP)</a> and <a href="https://www.smartkarma.com/entities/pacific-metals-co-ltd" target="_blank" data-smartkarma-citation="entities:3439:1" rel="noopener">Pacific Metals (5541 JP)</a>.There will be quite a large impact from passive trading on a few names.The changes will be announced early September and will be implemented at the close of trading on 30 September.

In May, the Nikkei released a market consultation on proposed changes to the Nikkei 225 (NKY INDEX) covering capping the weight of new constituents in the index at 1% by using a Price Adjustment Factor, limiting the number of index changes at a periodic review to 3, and changing the index universe from stocks listed on TSE's 1st section to stocks that are listed on the Prime Market (post the reorganisation). Most of the proposed changes were subsequently approved.This is the first Nikkei 225 (NKY INDEX) rebalance after the market consultation that tweaked things around. The tweaks could ensure the inclusion of stocks that were historically not included in the index due to their high stock price, though the impact will be much smaller since their weight in the index will not exceed 1%.At the upcoming rebalance, we see a high probability of Nintendo Co Ltd (7974 JP) and ZOZO Inc (3092 JP) being included in the index while there is a lower probability of Oriental Land (4661 JP) and Orix Corp (8591 JP) being included.Potential deletion candidates are Toho Zinc (5707 JP), Sky Perfect Jsat (9412 JP), Maruha Nichiro (1333 JP) and Pacific Metals (5541 JP).There will be quite a large impact from passive trading on a few names.The changes will be announced early September and will be implemented at the close of trading on 30 September.

Nikkei225 Index Rebalance Preview: Perennial Favourites Could Be In

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

When investors are chucking in the towel, including the event space (RV, risk arb etc.), it's time for some old school perspective.
In this insight, I look at <a href="https://en.wikipedia.org/wiki/Benjamin_Graham" target="_blank" rel="noopener">Benjamin Graham</a>'s Net Nets, or working capital (current assets less current liabilities), then subtract any debt not included in current liabilities. To make it simple, I use current assets less total liabilities.
This set of data is what Graham would deem stocks priced for liquidation.
I calculate 1,087 stocks trading below their net current asset value (NCAV) across Japan, Hong Kong, Korea, Australia, Taiwan and Singapore.
That number declines to 114 for stocks which trade &gt;US1$mn/day (3-month basis), and just 20 trading &gt;US$5mn/day.
A rundown of those stocks is shown below.

When investors are chucking in the towel, including the event space (RV, risk arb etc.), it's time for some old school perspective.
In this insight, I look at Benjamin Graham's Net Nets, or working capital (current assets less current liabilities), then subtract any debt not included in current liabilities. To make it simple, I use current assets less total liabilities.
This set of data is what Graham would deem stocks priced for liquidation.
I calculate 1,087 stocks trading below their net current asset value (NCAV) across Japan, Hong Kong, Korea, Australia, Taiwan and Singapore.
That number declines to 114 for stocks which trade &gt;US1$mn/day (3-month basis), and just 20 trading &gt;US$5mn/day.
A rundown of those stocks is shown below.

Travis Lundy

Today after the close the Nikkei Inc announced the results of the Annual Review for the <a href="https://indexes.nikkei.co.jp/en/nkave/archives/news/20180905E_1.pdf" target="_blank">Nikkei 225</a> and the <a href="https://indexes.nikkei.co.jp/en/nkave/archives/news/20180905E_2.pdf" target="_blank">Nikkei 300</a>.<ul>
<li>
In the Nikkei 225, <a href="https://www.smartkarma.com/entities/8197" target="_blank" data-smartkarma-citation="entities:8197:1">Cyberagent Inc (4751 JP)</a> will replace <a href="https://www.smartkarma.com/entities/19521" target="_blank" data-smartkarma-citation="entities:19521:1">Furukawa Co Ltd (5715 JP)</a>. Cyberagent has been assigned a presumed par value of 250 yen. The Nikkei 225 Rebalance is likely to be worth roughly $300-400mm a side. </li>
<li>
In the Nikkei 300, <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence Corp (6861 JP)</a> will replace <a href="https://www.smartkarma.com/entities/1175" target="_blank" data-smartkarma-citation="entities:1175:1">Nippon Sharyo (7102 JP)</a>. The Nikkei 300 rebalance has almost no significance in flow terms as far as I can tell.</li>
</ul>The changes on both are effective on October 1st, meaning the changes will be executed at the close of the last trading day of September. Outside of these names, there is an interesting angle which is looking at all the names which were deemed "possible" but did not make the cut.

Today after the close the Nikkei Inc announced the results of the Annual Review for the Nikkei 225 and the Nikkei 300.

In the Nikkei 225, Cyberagent Inc (4751 JP) will replace Furukawa Co Ltd (5715 JP). Cyberagent has been assigned a presumed par value of 250 yen. The Nikkei 225 Rebalance is likely to be worth roughly $300-400mm a side. 

In the Nikkei 300, Keyence Corp (6861 JP) will replace Nippon Sharyo (7102 JP). The Nikkei 300 rebalance has almost no significance in flow terms as far as I can tell.
The changes on both are effective on October 1st, meaning the changes will be executed at the close of the last trading day of September. Outside of these names, there is an interesting angle which is looking at all the names which were deemed "possible" but did not make the cut.

2018 Annual Nikkei 225 Rebalance - Small Potatoes As Expected

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 Bottom-Up

On Friday <a href="https://www.smartkarma.com/entities/3439" target="_blank" data-smartkarma-citation="entities:3439:1">Pacific Metals (5541 JP)</a> announced upward revisions to both 1H and FY numbers on account of increasing spreads between ferronickel prices and nickel ore prices. This had been telegraphed and we noted the conservatism of the company's forecasts in <a href="https://www.smartkarma.com/insights/pacific-metals-boost-from-indonesian-nickel-ore-export-resumption-could-put-this-on-7x-pe" target="_blank" data-smartkarma-citation="insights:21372">Pacific Metals: Boost from Indonesian Nickel Ore Export Resumption Could Put This on 7x PE</a>. In the report we predicted that PTP for FY03/19 could be JPY8-10bn compared to the company's forecast at the time of JPY0.8bn. The revision moves the…

On Friday Pacific Metals (5541 JP) announced upward revisions to both 1H and FY numbers on account of increasing spreads between ferronickel prices and nickel ore prices. This had been telegraphed and we noted the conservatism of the company's forecasts in Pacific Metals: Boost from Indonesian Nickel Ore Export Resumption Could Put This on 7x PE. In the report we predicted that PTP for FY03/19 could be JPY8-10bn compared to the company's forecast at the time of JPY0.8bn. The revision moves the…

Japan

Pacific Metals Co., Ltd. manufactures ferronickel, stainless steel, and metal powder.  The Company, a member of the Nippon Steel Group, exports mainly to South Korea and Taiwan.  Pacific Metals produces electromagnetic materials for data communications as well.

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Pacific Metals (5541 JP)

Nikkei 225 Index Rebalance Preview: Market Consultation & Potential Changes

Based on the market consultation and the new liquidity measure, we have Renesas Electronics, Oriental Land and Pan Pacific International Holdings...

Brian Freitas

Nikkei225 Index Rebalance Preview: Perennial Favourites Could Be In

Nintendo could be included in the NKY at the upcoming rebalance though the impact will not be very large. The new methodology could also result in...

Brian Freitas

Asia-Pac Stocks Priced For Liquidation

When investors are chucking in the towel, including the event space (RV, risk arb etc.), it's time for some old school perspective. In this...

David Blennerhassett

2018 Annual Nikkei 225 Rebalance - Small Potatoes As Expected

Today after the close the Nikkei Inc announced the results of the Annual Review for the Nikkei 225 and the Nikkei 300. In the Nikkei 225,...

Travis Lundy

Pacific Metals: +15% on Upward Revision

On Friday Pacific Metals (5541 JP) announced upward revisions to both 1H and FY numbers on account of increasing spreads between ferronickel prices...

Mio Kato

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