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>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

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>Of course, When the BOJ's ETF purchases were active, there were concerns about their impact on stock price formation, but now the impact is much smaller.</li>
<li>However, the BOJ has a presence in listed companies as a silent major shareholder, it is highly questionable whether its voting rights are being properly exercised.</li>
<li>While the silent major shareholder exists, overseas investors have played major role in enhancing corporate governance. In addition to cross-shareholding structures, they also have to contend with the silent shareholder.</li>
</ul>


Of course, When the BOJ's ETF purchases were active, there were concerns about their impact on stock price formation, but now the impact is much smaller.
However, the BOJ has a presence in listed companies as a silent major shareholder, it is highly questionable whether its voting rights are being properly exercised.
While the silent major shareholder exists, overseas investors have played major role in enhancing corporate governance. In addition to cross-shareholding structures, they also have to contend with the silent shareholder.


Share Buybacks Exceed BOJ's ETF Purchases, but BOJ's Presence Is Significant in Another Aspect

<ul>
<li>The Nikkei suggests that the aging population may be the cause. However, performance is assumed to be factor, even when young people open accounts, they investment mostly in foreign stocks.</li>
<li>In the end, what matters most is that the listed company presents growth expectations. This is what leads to stock performance.</li>
<li>While tax and other support are one of the factors that motivate individuals to invest, if companies aren’t attractive for investment, their investments are likely to be in foreign stocks.</li>
</ul>


The Nikkei suggests that the aging population may be the cause. However, performance is assumed to be factor, even when young people open accounts, they investment mostly in foreign stocks.
In the end, what matters most is that the listed company presents growth expectations. This is what leads to stock performance.
While tax and other support are one of the factors that motivate individuals to invest, if companies aren’t attractive for investment, their investments are likely to be in foreign stocks.


Isn't Performance of Japanese Stocks, After All, the Reason for Declining % Individual Shareholders?

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>In last week's Int'l Compass (July 21) we discussed positive signals that suggested the lows for this bear market may have already been established, or that downside is limited.</li>
<li>But we also noted that various downtrends remained firmly intact, and that we needed to see indexes reverse their downtrends in order to get more constructive at the index level.</li>
<li>It appears the bullish reversals have begun, as the SPX, MSCI ACWI (ACWI-US), and STOXX 600 are the first three major indexes to reverse topside their 4-month and YTD downtrends.</li>
</ul>


In last week's Int'l Compass (July 21) we discussed positive signals that suggested the lows for this bear market may have already been established, or that downside is limited.
But we also noted that various downtrends remained firmly intact, and that we needed to see indexes reverse their downtrends in order to get more constructive at the index level.
It appears the bullish reversals have begun, as the SPX, MSCI ACWI (ACWI-US), and STOXX 600 are the first three major indexes to reverse topside their 4-month and YTD downtrends.


Europe, MSCI ACWI Bullish Downtrend Reversals as Japan Tests Resistance; Tech, Health Care Buys

<ul>
<li>The reason for the limited increase in GPIF's ESG investments must be thought of separately in terms of GPIF-specific factors and the overall trend in ESG investing.</li>
<li>Because investors consider which combination of managers in their asset allocation will work best for the overall portfolio, there are factors that cannot be determined by individual ESG investing alone.</li>
<li>ESG investing has been expanding, but with so many ESG indices and vendors in disarray, some problems are pointed out. It's important to review the effectiveness of the ESG indices.</li>
</ul>


The reason for the limited increase in GPIF's ESG investments must be thought of separately in terms of GPIF-specific factors and the overall trend in ESG investing.
Because investors consider which combination of managers in their asset allocation will work best for the overall portfolio, there are factors that cannot be determined by individual ESG investing alone.
ESG investing has been expanding, but with so many ESG indices and vendors in disarray, some problems are pointed out. It's important to review the effectiveness of the ESG indices.


It Is Very Important to Review ESG Investing Before the Risks Become Evident

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

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

Isn't Performance of Japanese Stocks, After All, the Reason for Declining % Individual Shareholders?

I would like to discuss about the Nikkei article, "Based on TSE disclosure data, the ratio of individual shareholdings is on a downward trend."

Metrical Inc

Europe, MSCI ACWI Bullish Downtrend Reversals as Japan Tests Resistance; Tech, Health Care Buys

Bullish reversals have begun, as the $SPX, MSCI ACWI $ACWI, and $STOXX 600 are the first three major indexes to reverse topside their 4-month and...

Vermilion Research

It Is Very Important to Review ESG Investing Before the Risks Become Evident

I would like to discuss the issues on the Nikkei article "GPIF's increase in ESG index investments in the previous fiscal year was limited."

Metrical Inc

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

Share Buybacks Exceed BOJ's ETF Purchases, but BOJ's Presence Is Significant in Another Aspect

I would like to discuss the Nikkei's article reporting that "while the Bank of Japan's ETF purchases of shares have declined significantly, share...

Metrical Inc

Isn't Performance of Japanese Stocks, After All, the Reason for Declining % Individual Shareholders?

I would like to discuss about the Nikkei article, "Based on TSE disclosure data, the ratio of individual shareholdings is on a downward trend."

Metrical Inc

Europe, MSCI ACWI Bullish Downtrend Reversals as Japan Tests Resistance; Tech, Health Care Buys

Bullish reversals have begun, as the $SPX, MSCI ACWI $ACWI, and $STOXX 600 are the first three major indexes to reverse topside their 4-month and...

Vermilion Research

It Is Very Important to Review ESG Investing Before the Risks Become Evident

I would like to discuss the issues on the Nikkei article "GPIF's increase in ESG index investments in the previous fiscal year was limited."

Metrical Inc