In today’s briefing:
- Japan – Passive Selling in a Few Weeks & Shorts Build Up
- Fast Retailing (9983) | Q3 Masterclass
- Update: Shinko Electric (6967) Shorter-Dated and Break Risk Small but GAP RISK Now Much Higher
- Last Week in Event SPACE: Rio Tinto, Ryohin Keikaku/Fast Retailing, WH Group, ThaiBev/F&N, PCCW
- Sumitomo Forestry (1911 JP): Selloff Provides Entry for Potential Index Inclusion
- China Healthcare Weekly (Aug.4)- Taiji Group & China TCM, TCM Formula Granules VBP, Keymed’s Trouble
- Local Market Observations on Timing Samsung Electronics 1P Discount Narrowing
- Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Nuvoton Deletion & Positioning
- Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Aug24)
- Taiwan Dual-Listings Monitor: TSMC and ASE Premiums Break Down Again; ASE Spread Near 1-Year Lows
Japan – Passive Selling in a Few Weeks & Shorts Build Up
- Up to 12 stocks could be deleted from global passive portfolios in August. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
- The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.
Fast Retailing (9983) | Q3 Masterclass
- Fast Retailing delivered an impressive Q3 report. Sales +10% YoY were +3% above our expectations.
- Big jump in profitability. OP +31% YoY to Y145b driven by +57% jump in Uniqlo Japan earnings. Record consolidated OPM ~19%
- Uniqlo’s performance is leaving global peers in its wake. Profitability now rivalling Inditex. However, valuations remain at a premium
Update: Shinko Electric (6967) Shorter-Dated and Break Risk Small but GAP RISK Now Much Higher
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 7mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5mos ago, recommended taking profits.
- Ibiden has now underperformed Shinko by 25+% in 2-plus weeks. GAP RISK is higher but this is a short-timer. HUGE yield to “expected” start date, so everyone assumes a delay.
Last Week in Event SPACE: Rio Tinto, Ryohin Keikaku/Fast Retailing, WH Group, ThaiBev/F&N, PCCW
- At a time when the LSE has dumbed down the checks and balances for listed companies, now may be the right time to consider collapsing Rio Tinto (RIO AU)‘s DLC.
- Re: Sep24 Nikkei 225 Rebal, long Ryohin Keikaku (7453 JP) vs. Fast Retailing (9983 JP), but this may not last. It has worked very well.
- Unless we see a significant (and sustainable) reversal in WH Group (288 HK)‘s US/Mexican ops in the interim results, now hardly appears the opportune time for a Smithfield IPO.
Sumitomo Forestry (1911 JP): Selloff Provides Entry for Potential Index Inclusion
- Sumitomo Forestry (1911 JP) is a potential inclusion to a global index at the August rebalance. If added, passive trackers will need to buy over 6x ADV.
- Sumitomo Forestry (1911 JP) has traded lower on risk-off sentiment and further downside provides an entry point that could pay off if the stock is added to the index.
- Sumitomo Forestry (1911 JP) has outperformed its peers but trades at similar valuations to some stocks. A long/short trade could protect the downside.
China Healthcare Weekly (Aug.4)- Taiji Group & China TCM, TCM Formula Granules VBP, Keymed’s Trouble
- TCM formula granules VBP would cause some disturbance to related enterprises’ performance, but the substitution of TCM formula granules for TCM decoction pieces is a trend, indicating long-term optimistic growth.
- Keymed’s CM310 would probably miss the NRDL negotiation this year, which will put the Company in passive situation. Based on competitive landscape, we are worried about the performance of Keymed.
- Unsatisfactory performance of Taiji’s shares is related to concerns on China TCM’s privatization/24H1 results.However, even without the integration with China TCM, Taiji’s market value should be more than RMB20 billion.
Local Market Observations on Timing Samsung Electronics 1P Discount Narrowing
- Local traders see interest rate cuts and value-up disclosures as key for timing Samsung Electronics 1P discount narrowing.
- Samsung’s only realistic value-up goal beyond 50% FCF return is improving ROE, likely through a pref-skewed buyback or cancellation program.
- If Samsung announces a value-up plan during the Bank of Korea’s rate cuts, local traders expect the 1P discount to reverse, targeting October-November for position entry.
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Nuvoton Deletion & Positioning
- Nuvoton Technology (4919 TT) should be deleted from the Yuanta/P-Shares Taiwan Dividend Plus ETF in September and that will trigger selling of over 4 days of ADV.
- Nuvoton Technology (4919 TT) has underperformed most of its peers since the start of the calendar year and shorts have started to increase in the stock.
- Positioning appears light and the recent deletion from an index has increased the real float of the stock. Recent semiconductor weakness could further pressure the stock.
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Aug24)
- July saw 825 new Corporate Governance Reports filed and 8 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed. June saw 1,673 and 5, respectively. That’s 2500 cos.
- We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
- We hope this tool will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.
Taiwan Dual-Listings Monitor: TSMC and ASE Premiums Break Down Again; ASE Spread Near 1-Year Lows
- TSMC: Premium Breaks Back Down to +8.3%; 5-15% Could Now Be the Key Range
- UMC: -2.2% Discount; Good Level to Go Long the Premium
- ASE: Premium Breaks Down Again, Now Only +1.5%; Consider Going Long
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