Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Japan Petroleum Exploration / Event-Driven

<ul>
<li>Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.</li>
<li>The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.</li>
<li>In this insight I look at several possible rankings for potential large buyback targets.</li>
</ul>


Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.
The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.
In this insight I look at several possible rankings for potential large buyback targets.


JAPAN GOVERNANCE CHANGES II - Who Could Surprise on Buybacks? Quant Rankings

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

<ul>
<li>At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.</li>
<li>Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.</li>
<li>Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.</li>
</ul>


At the October rebalance, there are 970 stocks that will have a lower FFW while 114 stocks will have a higher FFW. 493 stocks will undergo a Phased Weight Reduction.
Estimated one-way turnover is 2.54% resulting in a one-way trade of ¥1.815tn. 500 stocks have over 4 days ADV to trade, 100 stocks have over 9 days ADV to trade.
Setting the threshold at +/-US$50m to trade, the stocks with inflows have outperformed the stocks with outflows by 6.5% over the last four months.


TOPIX October Rebalance: BIG One With ¥1.8tn a Side to Trade

<ul>
<li>In mid-January, the TSE announced a "name-and-shame" list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】.  But they did not actually shame.</li>
<li>The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a <a href="https://www.jpx.co.jp/english/news/1020/u5j7e50000001bqd-att/240201en.pdf" target="_blank" rel="noopener">presentation</a> and set of <a href="https://www.jpx.co.jp/english/news/1020/u5j7e50000001bqd-att/240201en2.pdf" target="_blank" rel="noopener">case studies</a>.
</li>
<li>Designed to present the "Investor's Point of View", they have unexpectedly worthwhile advice/commentary for corporates. The TSE appears to be trying hard to prompt serious consideration rather than box-ticking.</li>
</ul>


In mid-January, the TSE announced a "name-and-shame" list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】.  But they did not actually shame.
The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a presentation and set of case studies.

Designed to present the "Investor's Point of View", they have unexpectedly worthwhile advice/commentary for corporates. The TSE appears to be trying hard to prompt serious consideration rather than box-ticking.


Updated Tool for TSE "Mgmt Conscious of Capital Cost/Stock Price" And New Presentation/CaseStudies

<ul>
<li>This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts). </li>
<li>The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%. </li>
<li>My prediction that this will be a record year for stock buybacks still stands.</li>
</ul>


This past week, nearly 150 companies in Japan announced buyback programmes totalling ¥2.1trln. 3 Tenders, 26 ToSTNeT-3 buybacks (including at least 5 delayed starts). 
The median on-market buyback was 2.40% of shares, the average 2.9% (both measured as practical maxima at announcement. Median/Average % of ADV was 7.6/9.2%. 
My prediction that this will be a record year for stock buybacks still stands.


The September 2021 Nikkei 225 Rebalance was the first under the new rules. It was discussed in <a href="https://www.smartkarma.com/insights/2021-nikkei-225-rebalance-nintendo-murata-keyence-in-nisshinbo-toyo-seikan-skupper-out" target="_blank" data-smartkarma-citation="insights:57008" rel="noopener">2021 Nikkei 225 Rebalance: Nintendo, Murata, Keyence IN; Nisshinbo, Toyo Seikan, 'Skupper' OUT</a> about three weeks ago when announced. The ADDITIONS and DELETIONS were announced on 6 September for implementation on 30 September at the close. There was, ex-ante, quite a bit to buy, and not a huge amount to sell from the explicit deletions, though there is a little to sell on a down-weight to the Price Adjustment Factor on <a href="https://www.smartkarma.com/entities/sompo-holdings-inc" target="_blank" data-smartkarma-citation="entities:632:1" rel="noopener">Sompo Holdings (8630 JP)</a> and there was - on an ex-ante basis - something like US$4.8bn of the other 221 names to sell. <section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/232/054/original/N225+Sep+2021+Adds+Deletes.png?1632731028" class="editor-image img-responsive" data-smartkarma-image-id="232054"></figure></section>That was then. Since then, we have had 13 trading days to build up new pre-positioning or unwind previous pre-positioning. And we are have a run-up to the trade on Thursday at the close. An accompanying insight will briefly discuss the OTHER delta trade which interferes with the smooth flow of this event. More below.

The September 2021 Nikkei 225 Rebalance was the first under the new rules. It was discussed in 2021 Nikkei 225 Rebalance: Nintendo, Murata, Keyence IN; Nisshinbo, Toyo Seikan, 'Skupper' OUT about three weeks ago when announced. The ADDITIONS and DELETIONS were announced on 6 September for implementation on 30 September at the close. There was, ex-ante, quite a bit to buy, and not a huge amount to sell from the explicit deletions, though there is a little to sell on a down-weight to the Price Adjustment Factor on Sompo Holdings (8630 JP) and there was - on an ex-ante basis - something like US$4.8bn of the other 221 names to sell. That was then. Since then, we have had 13 trading days to build up new pre-positioning or unwind previous pre-positioning. And we are have a run-up to the trade on Thursday at the close. An accompanying insight will briefly discuss the OTHER delta trade which interferes with the smooth flow of this event. More below.

September 2021 Nikkei 225 Rebal With 3 Days Left

Japan

Toyo Seikan Group Holdings Ltd primarily manufactures, markets, and sells metal, plastic, and glass packaging products and containers.  The Company specializes in food cans, 18-liter cans, and other beverage cans.  Toyo Seikan also produces steel products such as steel sheets.

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Toyo Seikan Group Holdings L (5901 JP)

JAPAN GOVERNANCE CHANGES II - Who Could Surprise on Buybacks? Quant Rankings

JAPAN GOVERNANCE: There is a buyback story coming. It will be big. Bigger than the past year or two, and it will continue. What to buy?

Travis Lundy

TOPIX October Rebalance: BIG One With ¥1.8tn a Side to Trade

Lower FFWs on 970 stocks and higher FFWs on 114 stocks will result in one-way turnover of 2.52% leading to a one-way trade of ¥1.8tn at the close...

Brian Freitas

Updated Tool for TSE "Mgmt Conscious of Capital Cost/Stock Price" And New Presentation/CaseStudies

The TSE update for this will come out in a day or two. There will be some commentary on the update. It is not meaningful yet, mostly because...

Travis Lundy

JAPAN BUYBACKS: A Very Big Week

Almost ¥2.2trln of buybacks were announced this past week. Several large ones but 120+ different companies in total. This is the push higher for a...

Travis Lundy

September 2021 Nikkei 225 Rebal With 3 Days Left

The September 2021 Nikkei 225 Rebalance has performed "as expected" for both the ADDs and the DELETEs. It appears that the DELETEs have seen...

Travis Lundy

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