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 announcement of the inclusion of <a href="https://www.smartkarma.com/entities/uber-technologies-inc" target="_blank" data-smartkarma-citation="entities:430:1" rel="noopener">Uber Technologies (UBER US)</a> in the <a href="https://www.smartkarma.com/entities/s-p-500-index" target="_blank" data-smartkarma-citation="entities:22886:1" rel="noopener">S&amp;P 500 INDEX</a> was a big one last week. There were announcements for some other indices too.</li>
<li>There are many indices in China that will be rebalanced at the close on Friday, the biggest being the <a href="https://www.smartkarma.com/entities/shanghai-shenzhen-csi-300-inde" target="_blank" data-smartkarma-citation="entities:22906:1" rel="noopener">CSI 300</a>, <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI 500</a>, <a href="https://www.smartkarma.com/entities/sse-science-and-technology-innovation-board-50-index" target="_blank" data-smartkarma-citation="entities:29279:1" rel="noopener">STAR50</a>, <a href="https://www.smartkarma.com/entities/shanghai-stock-exchange-sse-50-a-share-index" target="_blank" data-smartkarma-citation="entities:31073:1" rel="noopener">SSE50</a> and <a href="https://www.smartkarma.com/entities/kraneshares-csi-china-internet-etf" target="_blank" data-smartkarma-citation="entities:28208:1" rel="noopener">KWEB US</a>.</li>
<li>Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.</li>
</ul>


The announcement of the inclusion of Uber Technologies (UBER US) in the S&amp;P 500 INDEX was a big one last week. There were announcements for some other indices too.
There are many indices in China that will be rebalanced at the close on Friday, the biggest being the CSI 300, CSI 500, STAR50, SSE50 and KWEB US.
Relatively quiet in ETF world with net inflows to China focused ETFs and net outflows for Japan.


Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

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 same problem underlies the fact that women are more likely to be part-time/ non-regular workers, as well as the lower percentage of management positions and shorter length of service.</li>
<li>Setting targets and implementing measures for % of female managerial positions is important, since the higher ratio will narrow the gender wage gap, but this alone is not sufficient.</li>
<li>It's necessary to ensure that women have the same position in workplace even if they leave the workforce, and to change social systems and people's mindset to support child care.</li>
</ul>


The same problem underlies the fact that women are more likely to be part-time/ non-regular workers, as well as the lower percentage of management positions and shorter length of service.
Setting targets and implementing measures for % of female managerial positions is important, since the higher ratio will narrow the gender wage gap, but this alone is not sufficient.
It's necessary to ensure that women have the same position in workplace even if they leave the workforce, and to change social systems and people's mindset to support child care.


Women's Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

<ul>
<li>Since the list of companies disclosing information based on TSE's request only shows "whether they disclosed," more companies will disclose the information in their corporate governance reports by December anyway.</li>
<li>Good practices published by TSE will provide hints for companies to improve their future disclosures. Investors will also be more likely to demand improvements from companies based on good practices.</li>
<li>The next step after disclosing the cost of capital is whether companies can disclose measures to fill gap between cost of capital and actual return and to raise return further.</li>
</ul>


Since the list of companies disclosing information based on TSE's request only shows "whether they disclosed," more companies will disclose the information in their corporate governance reports by December anyway.
Good practices published by TSE will provide hints for companies to improve their future disclosures. Investors will also be more likely to demand improvements from companies based on good practices.
The next step after disclosing the cost of capital is whether companies can disclose measures to fill gap between cost of capital and actual return and to raise return further.


Companies Are Finally at the Starting Line of Taking the First Steps to Improve ROE

<ul>
<li>TSE suggests presenting management strategies without sticking to the medium-term management plan, but the "medium-term management plan briefing" is the only opportunity to hear management policies from the company.</li>
<li>The primary reason why companies whose stock prices outperform even though they don't publish medium-term management plan are founding-family companies is that their interests align with those of their shareholders.</li>
<li>To align management with shareholders, it was also necessary to require CEOs with low stock ownership to increase the ratio of variable compensation and adopt stock grants in director compensation.</li>
</ul>


TSE suggests presenting management strategies without sticking to the medium-term management plan, but the "medium-term management plan briefing" is the only opportunity to hear management policies from the company.
The primary reason why companies whose stock prices outperform even though they don't publish medium-term management plan are founding-family companies is that their interests align with those of their shareholders.
To align management with shareholders, it was also necessary to require CEOs with low stock ownership to increase the ratio of variable compensation and adopt stock grants in director compensation.


Alignment of Management and Shareholder Interests Could Be the Beginning of Happiness

<ul>
<li>Since Corporate Governance Code limits disclosures on climate change to prime market companies, it'll encourage the transition from Prime to Standard market and discourage the transition from Sandard to Prime.</li>
<li>While it'll be interesting to see how many years "Scope 3" disclosures will be mandatory, more attention will be paid to how companies uses the cash from reducing policy shareholdings.</li>
<li>Although the situation is different than it was in 2000 because few companies are underfunded, attention should be paid to whether retirement benefit trusts will become a refuge for policy-shareholdings.</li>
</ul>


Since Corporate Governance Code limits disclosures on climate change to prime market companies, it'll encourage the transition from Prime to Standard market and discourage the transition from Sandard to Prime.
While it'll be interesting to see how many years "Scope 3" disclosures will be mandatory, more attention will be paid to how companies uses the cash from reducing policy shareholdings.
Although the situation is different than it was in 2000 because few companies are underfunded, attention should be paid to whether retirement benefit trusts will become a refuge for policy-shareholdings.


Another Catalyst for Expected Reduction in Policy Shareholdings

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)

Index Rebalance & ETF Flow Recap: KWEB, CSI300/500, STAR50, SSE50, ChiNext, SET50, Chips, Denso, SPX

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

Women's Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

I would like to discuss the issues on the October 17 Nikkei article, "Gender Wage Gap Still Twice the Average of Developed Countries, Slowing Pace...

Metrical Inc

Companies Are Finally at the Starting Line of Taking the First Steps to Improve ROE

I would like to discuss TSE's material on October 26th "Publication of the List of Disclosed Companies Regarding "Measures to Achieve Management...

Metrical Inc

Alignment of Management and Shareholder Interests Could Be the Beginning of Happiness

I would like to discuss the issues on the October 20 Nikkei article, "Companies without Mid-Term Management Plans See Their Stock Prices Rise."

Metrical Inc

Another Catalyst for Expected Reduction in Policy Shareholdings

I would like to discuss the issues on the October 18 Nikkei article, "Stranded Asset Risk in Policy Stockholdings: Greenhouse Gas Disclosure...

Metrical Inc