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

<p>With the Section Transfer Requirements to move to TSE1 becoming more stringent, some small-cap candidates have been rushing to enter TSE1 so that they can avoid having to face the new regulations under which they may struggle to qualify. This trend has resulted in a "<em>flurry</em>" of TOPIX Inclusion Trades in the month of December 2020 as <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> predicted in <a href="https://www.smartkarma.com/insights/the-tse-s-listing-criteria-revisions-part-i" target="_blank" data-smartkarma-citation="insights:43150" rel="noopener">The TSE's Listing Criteria Revisions - Part I</a>.</p>
<blockquote>
<p>For index inclusion and event traders taking advantage of a large number of interesting trades, the number will suddenly go waaaay down. This means <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> likely has a flurry of interesting trade ideas to read about in the next few months, but after about March next year, things will drop off in a hurry.</p>
</blockquote>
<p>In this insight, I have provided performance updates for 11 "Live" event stocks which are expected to have Inclusion Events at the end of January 2021 and 6 "Post" event stocks that completed their Inclusion Events at the end of November 2020 and December 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. </p>

With the Section Transfer Requirements to move to TSE1 becoming more stringent, some small-cap candidates have been rushing to enter TSE1 so that they can avoid having to face the new regulations under which they may struggle to qualify. This trend has resulted in a "flurry" of TOPIX Inclusion Trades in the month of December 2020 as Travis Lundy predicted in The TSE's Listing Criteria Revisions - Part I.

For index inclusion and event traders taking advantage of a large number of interesting trades, the number will suddenly go waaaay down. This means Janaghan Jeyakumar, CFA likely has a flurry of interesting trade ideas to read about in the next few months, but after about March next year, things will drop off in a hurry.

In this insight, I have provided performance updates for 11 "Live" event stocks which are expected to have Inclusion Events at the end of January 2021 and 6 "Post" event stocks that completed their Inclusion Events at the end of November 2020 and December 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

<p>About ten weeks ago, <a href="https://www.smartkarma.com/profiles/janaghan-jeyakumar-cfa" target="_blank" data-smartkarma-citation="accounts:3173" rel="noopener">Janaghan Jeyakumar, CFA</a> wrote about the likelihood that <a href="https://www.smartkarma.com/entities/sre-holdings-corp" target="_blank" data-smartkarma-citation="entities:29672:1" rel="noopener">SRE Holdings Corp (2980 JP)</a> would move to the TSE's First Section in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-event-trade-2980-jp-sre-holdings" target="_blank" data-smartkarma-citation="insights:43530" rel="noopener">TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings</a> which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. </p><p>Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-recent-tachiaigai-bunbai-round-up" target="_blank" data-smartkarma-citation="insights:40509" rel="noopener">TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up</a> and <a href="https://www.smartkarma.com/insights/historical-topix-inclusions-what-flavor-performs-best" target="_blank" data-smartkarma-citation="insights:39523" rel="noopener">Historical TOPIX Inclusions:  What Flavor Performs Best?</a>). His more recent work developed since the TSE1 Listing Rules changed last month is available in <a href="https://www.smartkarma.com/insights/topix-inclusions-new-regulations-who-is-ready-2-0" target="_blank" data-smartkarma-citation="insights:45783" rel="noopener">TOPIX Inclusions:  New Regulations! Who Is READY? 2.0</a>.</p><p>Indeed, SRE was his top pick:</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/178/339/original/Screenshot%202020-12-14%20at%207.14.20%20PM.png?1607944479" class="editor-image img-responsive" data-smartkarma-image-id="178339"></figure></section><p>Today after market close, SRE announced (<a href="https://ssl4.eir-parts.net/doc/2980/tdnet/1912909/00.pdf" target="_blank" rel="noopener">J-only</a>) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. </p><p>They also announced a small offering which can be ignored.</p><p>In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. </p>

About ten weeks ago, Janaghan Jeyakumar, CFA wrote about the likelihood that SRE Holdings Corp (2980 JP) would move to the TSE's First Section in TOPIX Inclusion Pre-Event Trade (2980 JP): SRE Holdings which pretty much explained the case in its title, and suggested that it was a likely candidate to move when it reached its 1-year anniversary of listing. Janaghan's analysis on SRE was based on his analysis of TOPIX Inclusion bets in TOPIX Inclusion Pre-Events: Recent "Tachiaigai Bunbai" Round-Up and Historical TOPIX Inclusions:  What Flavor Performs Best?). His more recent work developed since the TSE1 Listing Rules changed last month is available in TOPIX Inclusions:  New Regulations! Who Is READY? 2.0.Indeed, SRE was his top pick:Today after market close, SRE announced (J-only) they had received approval to move from TSE MOTHERS to the First Section of the Tokyo Stock Exchange as of 23rd December 2020 - two trading days after the end of the above-mentioned 1-year post-IPO waiting period. TSE1 reassignment triggers inclusion into the TOPIX Index and the Inclusion Event can be expected to be at the close of trading 28th January 2021. They also announced a small offering which can be ignored.In this insight, we take a look at the Index Inclusion Parameters and the offering to evaluate the upside potential of the TOPIX Inclusion Event. It is, for those of you who follow the Quiddity TOPIX Inclusion Framework, a GREEN, but it is really just across the border from BLUE which is still OK. 

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

Quantitative Analysis

<div>
<p>When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. </p>
</div>
<div>
<p>In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. </p>
</div>


When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur. This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 


In this insight, I have provided performance updates for 7 "Live" event stocks which are expected to have Inclusion Events at the end of December 2020 or January 2021 and 8 "Post" event stocks that completed their Inclusion Events at the end of October 2020 and November 2020. Furthermore, I have also highlighted some interesting Pre-event situations involving stocks that are likely to become TSE1-promotion candidates in the near future. 


<p>There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  </p><p>Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of <a href="https://www.smartkarma.com/insights/topix-inclusion-4931-jp-shinnihonseiyaku" target="_blank" data-smartkarma-citation="insights:45660" rel="noopener">TOPIX Inclusion (4931 JP): Shinnihonseiyaku</a> where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. </p><p>However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. </p><p>In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. </p><hr><div class="content-remarks"><p>This insight is an update to <a href="https://www.smartkarma.com/insights/topix-inclusion-pre-events-who-is-ready" target="_blank" data-smartkarma-citation="insights:41091" rel="noopener">TOPIX Inclusion Pre-Events: Who Is Ready?</a>. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. </p></div>

There are currently ~1,500 stocks listed in the Mothers, JASDAQ, and Second Sections of the Tokyo Stock Exchange. As time passes, some of these stocks will "graduate" to the First Section of the Tokyo Stock Exchange (TSE1), triggering inclusion into the TOPIX Index causing passive funds tracking TOPIX to buy them on an inclusion event. This presents various trading opportunities in several phases of this event timeline.  Being able to identify such candidates at a "Pre-event" phase (before the TSE reassignment is confirmed) can unlock great value for speculative bets as we recently witnessed in the case of TOPIX Inclusion (4931 JP): Shinnihonseiyaku where the stock gained 90%+ in the ~5 months leading to the TSE1-reassignment announcement. However, in July 2020, TSE introduced more stringent new Section Transfer Requirements and TSE1 Listing Criteria adding a new layer of complexity to this prediction process, especially during the period of transition from the old rules to the new rules. In this insight, we take a look at how some of the potential TSE1 candidates will fare against these New Section Transfer Requirements and evaluate their attractiveness at the Pre-event phase. This insight is an update to TOPIX Inclusion Pre-Events: Who Is Ready?. Please refer to that insight for more information on the approach used in the below analysis. Note that some assumptions used in the analysis have changed since then. 

TOPIX Inclusions:  New Regulations! Who Is READY? 2.0

<div>
<p>When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur.</p>
<p>This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. </p>
<p>In this insight, I have provided performance updates for 3 "Live" event stocks which have announced their TSE1 move in  October 2020 and 5 "Post" event stocks that completed their Inclusion Events today and some Pre-event trades involving stocks that are likely to become TSE1-promotion candidates in the near future. </p>
</div>


When Japanese small-cap stocks listed on JASDAQ, MOTHERS, and the Second Section of the Tokyo Stock Exchange aim at the big leagues and apply for reassignment to the First Section of the Tokyo Stock Exchange and are accepted, it causes significant events to occur.
This triggers inclusion into the TOPIX Index which means passive funds tracking TOPIX need to buy on an inclusion event. This opens up several interesting trading opportunities for investors. 
In this insight, I have provided performance updates for 3 "Live" event stocks which have announced their TSE1 move in  October 2020 and 5 "Post" event stocks that completed their Inclusion Events today and some Pre-event trades involving stocks that are likely to become TSE1-promotion candidates in the near future. 


Japan

SRE Holdings Corporation operates real estate businesses. The Company provides real estate sales, housing renovation, housing loans, real estate brokerage, and other services. SRE Holdings also operates information technology platform development, artificial intelligence solution development, and other businesses.

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SRE Holdings Corp (2980 JP)

TOPIX Inclusion Trade Summary: Dec 2020

TOPIX Inclusions for the month of December - past, current, and looking ahead to January. There is still a flurry of pre-Nov1 application names...

Janaghan Jeyakumar, CFA

SRE (2980) TOPIX Inclusion Announced. It's GREEN!

SRE (2980) is going into TOPIX. Credit Janaghan Jeyakumar for the call. This is a GREEN inclusion - about 10 days of ADV and the company is a...

Travis Lundy

TOPIX Inclusion Trade Summary: Nov 2020

November review of pre-events, live events, and post-events in the TOPIX Inclusion trade universe. There are a dozen pre-event recommendations...

Janaghan Jeyakumar, CFA

TOPIX Inclusions: New Regulations! Who Is READY? 2.0

The TSE has new Listing Rules and Criteria for TSE1 listing and promotion. That means new analysis on what pre-event trades. One TOP PICK to trade...

Janaghan Jeyakumar, CFA

TOPIX Inclusion Trade Summary: Oct 2020

TOPIX Inclusion Trade summary for October 2020. "Live" events, "Completed" events, and the unwind of the Post-IPO Basket Trade Strategy due to TSE...

Janaghan Jeyakumar, CFA

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