'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/035/original/2020-03-15_07-07-04.png?1584223644" class="editor-image img-responsive" data-smartkarma-image-id="123035"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>RELATIVE VALUE</strong> - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The<strong> -0.57% daily average rate of decline</strong> over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our <a href="https://www.smartkarma.com/insights/japan-market-update-opportunity-knocks" target="_blank" data-smartkarma-citation="insights:37049" rel="noopener">Opportunity Knocks?</a> Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. <strong>Japanese equities now offer attractive relative value and should outperform over the coming months.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/034/original/2020-03-15_06-53-01.png?1584222882" class="editor-image img-responsive" data-smartkarma-image-id="123034"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/036/original/2020-03-15_07-18-49.png?1584224347" class="editor-image img-responsive" data-smartkarma-image-id="123036"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/037/original/2020-03-15_07-23-55.png?1584224666" class="editor-image img-responsive" data-smartkarma-image-id="123037"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>IT'S DIFFERENT THIS TIME</strong> - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been <strong>four days in the last twenty-eight years</strong> with worse 56-day rates of decline - all in October 2008. <strong>All four days provided fearless investors with excellent medium-term gains.</strong> Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the <em>Covid-19 recession</em> on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Who’s Swimming Naked?</a> cover those companies to which this does not apply. <strong>Overall</strong>, <strong>for Japan at least, it is different this time.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/039/original/File%202020-03-15%203%2024%2020.jpeg?1584225464" class="editor-image img-responsive" data-smartkarma-image-id="123039"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/040/original/File%202020-03-15%203%2026%2031.jpeg?1584225508" class="editor-image img-responsive" data-smartkarma-image-id="123040"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/041/original/File%202020-03-15%207%2044%2021.jpeg?1584225894" class="editor-image img-responsive" data-smartkarma-image-id="123041"></figure><p></p><div class="content-caption">Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]</div><p><strong>CONTAINING COVID</strong> - According to <a href="https://ourworldindata.org/coronavirus" target="_blank" rel="noopener">data</a> from the peerless <strong>Global Change Data Lab</strong> at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/038/original/2020-03-15_07-34-05.png?1584225268" class="editor-image img-responsive" data-smartkarma-image-id="123038"></figure><div class="content-caption">Source • oann.com</div><p><strong>KEEP CALM AND CARRY ON -</strong> Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them <em>sine populo</em>. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. </p><p><strong>A COVID-19 WORLD</strong> - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      </p><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this<strong> once-in-a-decade</strong> opportunity to buy high-quality Japanese companies at attractive prices.</p></div>

Source • Japan AnalyticsRELATIVE VALUE - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The -0.57% daily average rate of decline over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our Opportunity Knocks? Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. Japanese equities now offer attractive relative value and should outperform over the coming months.Source • Japan AnalyticsIT'S DIFFERENT THIS TIME - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been four days in the last twenty-eight years with worse 56-day rates of decline - all in October 2008. All four days provided fearless investors with excellent medium-term gains. Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the Covid-19 recession on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on Who’s Swimming Naked? cover those companies to which this does not apply. Overall, for Japan at least, it is different this time.Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]CONTAINING COVID - According to data from the peerless Global Change Data Lab at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. Source • oann.comKEEP CALM AND CARRY ON - Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them sine populo. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. A COVID-19 WORLD - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      In the DETAIL section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this once-in-a-decade opportunity to buy high-quality Japanese companies at attractive prices.

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The short notional in the market for the data released 10 March is US$24.94bn (up by US$1.92bn excluding FX movements) with the largest short positions in <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>,<span style="color: #0b0114;"><a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>.  </span></p></div><div><p>Most shorted stocks as a percentage of free float are <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:3700:1">Anritsu Corp (6754 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>, <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a> and <a href="https://www.smartkarma.com/entities/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a> while the stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/vital-ksk-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7398:1">Vital Ksk Holdings (3151 JP)</a>, <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1"></a><a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:2007:1">Katakura Industries (3001 JP)</a>, <a href="https://www.smartkarma.com/entities/j-trust-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:20246:1">J Trust Co Ltd (8508 JP)</a> and <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>. </p></div><div><p>The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5718:1">Shiseido Co Ltd (4911 JP)</a> and <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12933:1">Kao Corp (4452 JP)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a>, <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-gr" target="_blank" rel="noopener" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/fuji-heavy-industries-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5439:1">Subaru Corp (7270 JP)</a>.   <a href="https://www.smartkarma.com/entities/fuji-heavy-industries-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5439:1"></a></p></div><div><p>Sectorally, short positions increased in Consumer Discretionary (US$649m), Consumer Staples (US$522m) and Information Technology (US$368m), while shorts were covered in Financials (US$56m) and Health Care (US$26m).</p></div>

The short notional in the market for the data released 10 March is US$24.94bn (up by US$1.92bn excluding FX movements) with the largest short positions in Itochu Corp (8001 JP), Toyota Motor (7203 JP),Fast Retailing (9983 JP), Canon Inc (7751 JP) and Taiyo Yuden (6976 JP).  Most shorted stocks as a percentage of free float are Anritsu Corp (6754 JP), Taiyo Yuden (6976 JP), Aruhi Corp (7198 JP) and Tokai Carbon (5301 JP) while the stocks with the highest days to cover are Vital Ksk Holdings (3151 JP), Katakura Industries (3001 JP), J Trust Co Ltd (8508 JP) and Itochu Corp (8001 JP). The largest increases in short notional over the week were Fast Retailing (9983 JP), Canon Inc (7751 JP), Shiseido Co Ltd (4911 JP) and Kao Corp (4452 JP) while shorts were covered in Tokai Carbon (5301 JP), Itochu Corp (8001 JP), Sumitomo Mitsui Financial (8316 JP) and Subaru Corp (7270 JP).   Sectorally, short positions increased in Consumer Discretionary (US$649m), Consumer Staples (US$522m) and Information Technology (US$368m), while shorts were covered in Financials (US$56m) and Health Care (US$26m).

Spike in Shorts on Consumer Discretionary and Staples - Fast Retailing, Shiseido, Kao, FamilyMart

<div><p style="text-align: center;"><strong> • RELATIVE PRICE SCORE - COMPANIES •</strong></p></div><div>
<strong>RELATIVE PRICE SCORE OUTLIERS </strong>- The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.</div><div></div><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/886/original/2020-03-02_09-36-07.png?1583109407" class="editor-image img-responsive" data-smartkarma-image-id="120886"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERBOUGHT MEAN REVERSION</strong> - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are <a href="https://www.smartkarma.com/entities/systena-corp" target="_blank" data-smartkarma-citation="entities:20438:1" rel="noopener">Systena (2317 JP)</a> which was Very Overbought two quarters ago, <a href="https://www.smartkarma.com/entities/kotobuki-spirits-co-ltd" target="_blank" data-smartkarma-citation="entities:20062:1" rel="noopener">Kotobuki Spirits (2222 JP)</a>, <a href="https://www.smartkarma.com/entities/toei-co-ltd" target="_blank" data-smartkarma-citation="entities:15379:1" rel="noopener">Toei (9605 JP)</a>, and the amusement park operator <a href="https://www.smartkarma.com/entities/fuji-kyuko-co-ltd" target="_blank" data-smartkarma-citation="entities:1305:1" rel="noopener">Fuji Kyuko (9010 JP)</a>, which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/887/original/2020-03-02_09-42-41.png?1583109791" class="editor-image img-responsive" data-smartkarma-image-id="120887"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERSOLD MEAN REVERSION</strong> - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari (4385 JP)</a> which we suggested was <em>'due for another bounce</em>' in our December Insight. Otherwise, <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/chugoku-electric-power-co" target="_blank" data-smartkarma-citation="entities:16243:1" rel="noopener">Chugoku Electric Power (9504 JP)</a>, <a href="https://www.smartkarma.com/entities/tv-asahi-holdings-corp" target="_blank" data-smartkarma-citation="entities:8830:1" rel="noopener">Tv Asahi (9409 JP)</a>, and <a href="https://www.smartkarma.com/entities/suntory-beverage-food-ltd" target="_blank" data-smartkarma-citation="entities:8218:1" rel="noopener">Suntory Beverage &amp; Food (2587 JP)</a> all saw substantial recoveries.</p>
</div><div></div><div><div class="content-highlight"><p>Following on from our previous Insight <a href="https://www.smartkarma.com/insights/japan-march-sector-peer-group-relative-price-scores" target="_blank" data-smartkarma-citation="insights:36972" rel="noopener">March Sector &amp; Peer Group Relative Price Scores -</a>  which covered Sectors and Peer Groups, in the<strong> DETAIL </strong>section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.</p></div></div>

 • RELATIVE PRICE SCORE - COMPANIES •
RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.
Source • Japan Analytics
OVERBOUGHT MEAN REVERSION - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are Systena (2317 JP) which was Very Overbought two quarters ago, Kotobuki Spirits (2222 JP), Toei (9605 JP), and the amusement park operator Fuji Kyuko (9010 JP), which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.
Source • Japan Analytics
OVERSOLD MEAN REVERSION - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by Mercari (4385 JP) which we suggested was 'due for another bounce' in our December Insight. Otherwise, Japan Post Bank (7182 JP), Chugoku Electric Power (9504 JP), Tv Asahi (9409 JP), and Suntory Beverage &amp; Food (2587 JP) all saw substantial recoveries.
Following on from our previous Insight March Sector &amp; Peer Group Relative Price Scores -  which covered Sectors and Peer Groups, in the DETAIL section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.

🇯🇵 JAPAN • March Company Relative Price Scores - Playing the Extremes

<div><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE •</strong></p></div><div><p><strong>RELATIVE PRICE SCORE OUTLIERS </strong>- The <strong>Relative Price Score</strong> (<strong>RPS</strong>) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, '<strong>Overbought'</strong> and '<strong>Oversold</strong>' outliers and short-term changes in scoring can offer interesting trading opportunities.</p></div><p>The data for all 3,871 currently-listed Companies is cap-weight-aggregated into <strong>Relative Price Scores</strong> for our 328 <strong>Peer Groups</strong> and 30 <strong>Sectors.</strong> The Overbought and Oversold outlier 'thresholds are set' at <strong>+4</strong> &amp; <strong>-2</strong> for Companies, <strong>+3</strong> &amp; <strong>-1.5</strong> for Peer Groups and <strong>+2</strong> and <strong>-1</strong> for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over one million historical observations.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/245/original/2020-02-27_08-50-00.png?1582762915" class="editor-image img-responsive" data-smartkarma-image-id="120245"></figure><div class="content-caption">Source • Japan Analytics</div><p>With a few exceptions, mean reversion from these extreme outlying states occurs typically in weeks or months. The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 <strong>Technology</strong> 'bubble' to the <strong>REIT</strong> and<strong> Real Estate</strong> peak of 2013/14, the <strong>Healthcare</strong> and <strong>FB&amp;T</strong> market of 2016/17. On the downside, there is greater 'persistence' in the Oversold zone, particularly recently for <strong>Energy</strong>, <strong>Banks</strong> and <strong>Utilities</strong> Sectors.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/400/original/2020-02-28_07-33-54.png?1582842856" class="editor-image img-responsive" data-smartkarma-image-id="120400"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/402/original/2020-02-28_07-34-58.png?1582842919" class="editor-image img-responsive" data-smartkarma-image-id="120402"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>CONSUMER SERVICES</strong> - The most recent case of Sector mean reversion is in <strong>Consumer Services</strong>, driven primarily by the performance of <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a>, a business that is now seeing a direct impact from Covid-19 with the closure of Tokyo Disneyland until March 15th announced today. This news is prompting some short-covering in the Friday afternoon session; however, at 31X EV/OP, there is still 63% downside to a residual income-based no-growth valuation. We expect both the Sector's and company's RPS to retrace the gains of the last two years.  </p><div><p>In the<strong> DETAIL</strong> section below, we provide an update on  Sector and Peer Group trends, over the last three months and adds some stock-specific comments. A separate Insight to follow in the next few days will cover the Relative Price Scores for individual companies.</p></div>

• RELATIVE PRICE SCORE •RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer interesting trading opportunities.The data for all 3,871 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over one million historical observations.Source • Japan AnalyticsWith a few exceptions, mean reversion from these extreme outlying states occurs typically in weeks or months. The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 Technology 'bubble' to the REIT and Real Estate peak of 2013/14, the Healthcare and FB&amp;T market of 2016/17. On the downside, there is greater 'persistence' in the Oversold zone, particularly recently for Energy, Banks and Utilities Sectors.Source • Japan AnalyticsCONSUMER SERVICES - The most recent case of Sector mean reversion is in Consumer Services, driven primarily by the performance of Oriental Land (4661 JP), a business that is now seeing a direct impact from Covid-19 with the closure of Tokyo Disneyland until March 15th announced today. This news is prompting some short-covering in the Friday afternoon session; however, at 31X EV/OP, there is still 63% downside to a residual income-based no-growth valuation. We expect both the Sector's and company's RPS to retrace the gains of the last two years.  In the DETAIL section below, we provide an update on  Sector and Peer Group trends, over the last three months and adds some stock-specific comments. A separate Insight to follow in the next few days will cover the Relative Price Scores for individual companies.

🇯🇵 JAPAN • March Sector & Peer Group Relative Price Scores -

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/740/original/2020-02-07_03-39-22.png?1581019080" class="editor-image img-responsive" data-smartkarma-image-id="116740"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>INTO THE 'RED'</strong> - As predicted, our Results Score dipped into negative territory yesterday, declining by 56 basis points to -0.21. Of the 65 large-cap results, only ten companies had positive qoq changes in Results Score, while seventeen saw double-digit declines. <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> did well to limit its quarterly year-on-year changes in Revenue and OP to -3%, and they are forecasting similar declines against TTM numbers for the full year. The Forecast/Revision Score added six basis points driven primarily by <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido (4911 JP)</a> overly optimistic initial forecast for FY2020. 'Mr Market' meanwhile is content to bid up share prices to close to the recent highs, and 8% below the January 2018 peak, when the Results Score was 7.54. </p><hr><p style="text-align: center;"><strong>• SECTOR TIMELINE •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/741/original/2020-02-07_03-45-05.png?1581019946" class="editor-image img-responsive" data-smartkarma-image-id="116741"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR TIMELINE</strong> - The majority of Sectors saw lower Results &amp; Revision Scores yesterday, with <strong>Food, Beverages &amp; Tobacco</strong> being the exception due to <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a>'s stable topline performance and better-than-expected 2020 forecast. <a href="https://www.smartkarma.com/entities/mitsubishi-heavy-industries" target="_blank" data-smartkarma-citation="entities:13613:1" rel="noopener">Mitsubishi Heavy Industries (7011 JP)</a> decline into the red at the OP level and full-year downward revision took the <strong>Machinery</strong> Sector lower, while <a href="https://www.smartkarma.com/entities/seibu-holdings-inc" target="_blank" data-smartkarma-citation="entities:458:1" rel="noopener">Seibu (9024 JP)</a> was the negative driver for <strong>Multi-Industry</strong>. <a href="https://www.smartkarma.com/entities/terumo-corp" target="_blank" data-smartkarma-citation="entities:6708:1" rel="noopener">Terumo (4543 JP)</a> and <a href="https://www.smartkarma.com/entities/olympus-corp" target="_blank" data-smartkarma-citation="entities:356:1" rel="noopener">Olympus (7733 JP)</a> fuelled the decline in <strong>Healthcare</strong> and <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">Fujifilm (4901 JP)</a> did the same for <strong>Technology Hardware</strong>. </p>

Source • Japan AnalyticsINTO THE 'RED' - As predicted, our Results Score dipped into negative territory yesterday, declining by 56 basis points to -0.21. Of the 65 large-cap results, only ten companies had positive qoq changes in Results Score, while seventeen saw double-digit declines. Toyota Motor (7203 JP) did well to limit its quarterly year-on-year changes in Revenue and OP to -3%, and they are forecasting similar declines against TTM numbers for the full year. The Forecast/Revision Score added six basis points driven primarily by Shiseido (4911 JP) overly optimistic initial forecast for FY2020. 'Mr Market' meanwhile is content to bid up share prices to close to the recent highs, and 8% below the January 2018 peak, when the Results Score was 7.54. • SECTOR TIMELINE •Source • Japan AnalyticsSECTOR TIMELINE - The majority of Sectors saw lower Results &amp; Revision Scores yesterday, with Food, Beverages &amp; Tobacco being the exception due to Japan Tobacco (2914 JP)'s stable topline performance and better-than-expected 2020 forecast. Mitsubishi Heavy Industries (7011 JP) decline into the red at the OP level and full-year downward revision took the Machinery Sector lower, while Seibu (9024 JP) was the negative driver for Multi-Industry. Terumo (4543 JP) and Olympus (7733 JP) fuelled the decline in Healthcare and Fujifilm (4901 JP) did the same for Technology Hardware. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 6th February ▲ 2914 4911 6406 ▼ 9024 4901 7951

Japan

Shiseido Company, Limited manufactures cosmetic and toiletry products. The Company offers an array of makeup and skin-care products, toiletries, beauty salon, pharmaceuticals, foodstuffs, and fine chemicals.

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Shiseido Company (4911 JP)

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