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>The "minimum majority of outside directors" is an eye catcher, but it does't affect most companies because the 1/3 outside director ratio applies if a nominating committee is in place.</li>
<li>Since companies with majority of independent directors are 12.1% in prime market, the objective becomes to achieve the minimum requirement (1/3 INEDs), and few companies engage in further improving practices.</li>
<li>Companies with over 50% independent director have extremely superior market values in capitalization, ROE, ROA, and Tobin's Q. Therefore, the acceleration of increasing independent director ratios should be seriously implemented.</li>
</ul>


The "minimum majority of outside directors" is an eye catcher, but it does't affect most companies because the 1/3 outside director ratio applies if a nominating committee is in place.
Since companies with majority of independent directors are 12.1% in prime market, the objective becomes to achieve the minimum requirement (1/3 INEDs), and few companies engage in further improving practices.
Companies with over 50% independent director have extremely superior market values in capitalization, ROE, ROA, and Tobin's Q. Therefore, the acceleration of increasing independent director ratios should be seriously implemented.


Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies

<ul>
<li>Since there's little opposition to the argument that quarterly securities reports should no longer be mandatory, securities reports in 1Q/3Q are almost identical content to the disclosures to TSE.</li>
<li>To ensure the reliability of the financial statements submitted to TSE, which are replacing current statutory documents, the requirement of review by auditor could be a solution to the problem.</li>
<li>In this review, the addition of the cash flow statement and segment information in 1Q and 3Q financial statements is very useful and a step forward.</li>
</ul>


Since there's little opposition to the argument that quarterly securities reports should no longer be mandatory, securities reports in 1Q/3Q are almost identical content to the disclosures to TSE.
To ensure the reliability of the financial statements submitted to TSE, which are replacing current statutory documents, the requirement of review by auditor could be a solution to the problem.
In this review, the addition of the cash flow statement and segment information in 1Q and 3Q financial statements is very useful and a step forward.


Unification of Quarterly Securities Reports with Financial Summary to TSE Is Generally Appropriate

<ul>
<li>The carryback of pension obligations and expenses resulting from higher bond yields is a factor in the increase in operating profit.</li>
<li>While this'll lead to higher EPS, which should lead to higher dividends and more room for stock price appreciation, there's concern that inflating the B/S will lead to stagnant ROE.</li>
<li>In addition, since FY3/2024 profits will be boosted by pension financing factors unrelated to the core business, lower profit growth rate in FY3/2025 will put pressure on the stock price.</li>
</ul>


The carryback of pension obligations and expenses resulting from higher bond yields is a factor in the increase in operating profit.
While this'll lead to higher EPS, which should lead to higher dividends and more room for stock price appreciation, there's concern that inflating the B/S will lead to stagnant ROE.
In addition, since FY3/2024 profits will be boosted by pension financing factors unrelated to the core business, lower profit growth rate in FY3/2025 will put pressure on the stock price.


Investors Will Again Demand Concrete Measures to Raise ROE and Boost Shareholder Returns in FY3/2025

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>New LDP leader and Japanese PM favours interest rate normalisation</li>
<li>This supports our outlook for a strengthening JPY against the USD</li>
<li>The Japanese central bank may now face pressure to raise rates</li>
</ul>


New LDP leader and Japanese PM favours interest rate normalisation
This supports our outlook for a strengthening JPY against the USD
The Japanese central bank may now face pressure to raise rates


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>
<a href="https://www.smartkarma.com/entities/nomura-research-institute-ltd" target="_blank" data-smartkarma-citation="entities:18129:1" rel="noopener">Nomura Research Institute (4307 JP)</a> and <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a> will replace <a href="https://www.smartkarma.com/entities/nippon-paper-industries-co-l" target="_blank" data-smartkarma-citation="entities:557:1" rel="noopener">Nippon Paper Industries Co L (3863 JP)</a> and <a href="https://www.smartkarma.com/entities/dic-corp" target="_blank" data-smartkarma-citation="entities:7343:1" rel="noopener">Dic Corp (4631 JP)</a> in 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>. </li>
<li>
<a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) </li>
<li>Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.</li>
</ul>



Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX). 

Fast Retailing (9983 JP)'s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!) 
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.


Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

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)

Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies

I would like to discuss the issues on the November 1 Nikkei article, "Nomura Asset Management Revises Voting Criteria to Include a Majority of...

Metrical Inc

Unification of Quarterly Securities Reports with Financial Summary to TSE Is Generally Appropriate

I would like to discuss the issues on the TSE's October 27th disclosure of the "Practical Policy on Review of Quarterly Disclosures (Draft)."

Metrical Inc

Investors Will Again Demand Concrete Measures to Raise ROE and Boost Shareholder Returns in FY3/2025

I would like to discuss the issues on the October 24 Nikkei article, Corporate Pension Burden to Decrease by 6 Trillion Yen in FY2022 as Rising...

Metrical Inc

Banking on the BoJ

New Japanese PM's interest rate stance could lead to a stronger JPY against USD. Higher rates will help certain sectors in the market

Rikki Malik

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies

I would like to discuss the issues on the November 1 Nikkei article, "Nomura Asset Management Revises Voting Criteria to Include a Majority of...

Metrical Inc

Unification of Quarterly Securities Reports with Financial Summary to TSE Is Generally Appropriate

I would like to discuss the issues on the TSE's October 27th disclosure of the "Practical Policy on Review of Quarterly Disclosures (Draft)."

Metrical Inc

Investors Will Again Demand Concrete Measures to Raise ROE and Boost Shareholder Returns in FY3/2025

I would like to discuss the issues on the October 24 Nikkei article, Corporate Pension Burden to Decrease by 6 Trillion Yen in FY2022 as Rising...

Metrical Inc

Banking on the BoJ

​New Japanese PM's interest rate stance could lead to a stronger JPY against USD. Higher rates will help certain sectors in the market

Rikki Malik

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute and Ryohin Keikaku replace Nippon Paper and DIC in the Nikkei 225. Fast Retailing will be capped (and probably again in...

Brian Freitas

New Japanese PM's interest rate stance could lead to a stronger JPY against USD. Higher rates will help certain sectors in the market