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>Modest profit growth and slow ROE growth are expected this year, and sustained TOPIX appreciation in the future will depend on increases in ROE and ROE+DOE.</li>
<li>Lower OP Margin is the reason for the lack of ROE growth in FY3/2023. OP Margin and ROE are expected to have difficulty rebounding from this year's profit forecast.</li>
<li>Looking at the results of DOE, Total Dividends Paid and Dividend Payout for FY3/2023, which have not improved, there is still a lot of room for shareholder returns.</li>
</ul>


Modest profit growth and slow ROE growth are expected this year, and sustained TOPIX appreciation in the future will depend on increases in ROE and ROE+DOE.
Lower OP Margin is the reason for the lack of ROE growth in FY3/2023. OP Margin and ROE are expected to have difficulty rebounding from this year's profit forecast.
Looking at the results of DOE, Total Dividends Paid and Dividend Payout for FY3/2023, which have not improved, there is still a lot of room for shareholder returns.


Amid Slow ROE Improvement, Calls for Stronger Shareholder Returns Will Become Even Stronger

<ul>
<li>The number of companies that announced their intention to move to Standard Market has increased to 48, while most of 268 transitional companies are expected to move to Standard Market.</li>
<li>Companies that cannot meet Prime Market listing criteria in 2026 can also move to Standard Market by undergoing examination, so they don't need to announce their move in a hurry.</li>
<li>Prime Market has slimmed down from TSE 1st Section by 600 companies, but it will remain market where many companies with market capitalization of about 50 billion yen are listed. </li>
</ul>


The number of companies that announced their intention to move to Standard Market has increased to 48, while most of 268 transitional companies are expected to move to Standard Market.
Companies that cannot meet Prime Market listing criteria in 2026 can also move to Standard Market by undergoing examination, so they don't need to announce their move in a hurry.
Prime Market has slimmed down from TSE 1st Section by 600 companies, but it will remain market where many companies with market capitalization of about 50 billion yen are listed. 


The Fruit of TSE Market Reorganization Was the Creation of Prime Market with 600 Fewer Companies

<ul>
<li>To narrow the gender wage gap for all workers, reducing non-regular female workers, who make up the majority, is a possible solution, but changing this structure will not be easy.</li>
<li>Many companies recognize that the low ratio of female managers (about 10% among listed companies) is behind the gender wage gap among regular workers.</li>
<li>However, many companies aren't taking immediate actions because they believe that % of female managers will increase as the age of newly hired female full-time hires in recent years increases.</li>
</ul>


To narrow the gender wage gap for all workers, reducing non-regular female workers, who make up the majority, is a possible solution, but changing this structure will not be easy.
Many companies recognize that the low ratio of female managers (about 10% among listed companies) is behind the gender wage gap among regular workers.
However, many companies aren't taking immediate actions because they believe that % of female managers will increase as the age of newly hired female full-time hires in recent years increases.


Gender Wage Gap Has Structural Problems and a Less than Positive Attitude of Companies

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 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.</li>
<li>Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).</li>
<li>There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.</li>
</ul>


There are 38 adds/36 deletes for the JPX Nikkei 400 Index to bring the number of index constituents back to 400. There are stocks with multiple days ADV to trade.
Based on the adds, deletes and capping changes, we estimate one way turnover of 4.35% and a two-way trade of JPY 461bn (US$3.24bn).
There are a few stocks that will have same way flow from other index trackers within a few weeks of the JPX Nikkei 400 Index rebalance.


JPX Nikkei 400 Index Rebalance: Some Big Impact Names

<ul>
<li>Managers/Executives should receive compensation that is appropriate to increase corporate value and stock price, and executive compensation should be tied to the realization of corporate value and stock price growth.</li>
<li>Not many companies have been able to increase their corporate value by hiring global talent on their boards like Hitachi, MUFG, Mitsui &amp; Company, and Daikin.</li>
<li>Currently, the relationship between executive compensation and corporate value is inconsistent. The optimal proportion of variable compensation and the acquisition/utilization of global human resources to strengthen competitiveness will be key.</li>
</ul>


Managers/Executives should receive compensation that is appropriate to increase corporate value and stock price, and executive compensation should be tied to the realization of corporate value and stock price growth.
Not many companies have been able to increase their corporate value by hiring global talent on their boards like Hitachi, MUFG, Mitsui &amp; Company, and Daikin.
Currently, the relationship between executive compensation and corporate value is inconsistent. The optimal proportion of variable compensation and the acquisition/utilization of global human resources to strengthen competitiveness will be key.


No Consistent Relationship Between Executive Compensation and Stock Price/ Earnings Has Been Seen

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)

Amid Slow ROE Improvement, Calls for Stronger Shareholder Returns Will Become Even Stronger

I would like to discuss the Nikkei article of July 8, 2023, which stated that "ROE Declines Despite Forecast for Highest Profit in FY2023, Ample...

Metrical Inc

The Fruit of TSE Market Reorganization Was the Creation of Prime Market with 600 Fewer Companies

I would like to discuss the issues on the July 11 Nikkei article, "48 Companies Intend to Leave TSE Prime Market; One Year after Market...

Metrical Inc

Gender Wage Gap Has Structural Problems and a Less than Positive Attitude of Companies

I would like to discuss the issues on the July 13 Nikkei article, "Gender Wage Gap in Japanese Companies Averages 30%, with Finance and Insurance...

Metrical Inc

JPX Nikkei 400 Index Rebalance: Some Big Impact Names

There are 38 adds and 36 deletes for the JPXNK400 Index. The adds have outperformed the deletes and there is a fair bit to trade on a lot of...

Brian Freitas

No Consistent Relationship Between Executive Compensation and Stock Price/ Earnings Has Been Seen

I would like to discuss the issues regarding the July 11 Nikkei article, "316 Companies Disclosed Highest Number of Executives with Compensation of...

Metrical Inc