'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. 

Quantitative Analysis

MARKET COMPOSITE
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/380/original/2019-01-13_13-31-55.png?1547353946" class="editor-image img-responsive" data-smartkarma-image-id="75380"></figure>
<div class="content-caption">Source: Japan Analytics</div>
NEW YEAR RALLY - From the December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have recovered to 14% by number and 20% by value - just on the 'buying zone' line. As we <a href="https://www.smartkarma.com/insights/japan-2018-market-review-bear-market-rally-ahead" target="_blank" data-smartkarma-citation="insights:26917">expected</a>, the Total Market Value has rallied 8.7% and looks to have some further to run, especially if the Yen reverses some of its recent strength. The Bank of Japan provided a 'helping hand' on both 4th and 10th January, the only days this year so far on which the market declined. 
<hr>
SECTORS
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/383/original/2019-01-13_15-22-47.png?1547360595" class="editor-image img-responsive" data-smartkarma-image-id="75383"></figure>
<div style="text-align: left;" class="content-caption">LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.</div>
SECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days remain, predictably, domestic and defensive - REITs, Information Technology, Media and Utilities continue from our previous review with Healthcare and Transportation replacing Food, Beverages and Tobacco and Internet Content &amp; Services. Equally predictable is the bottom half-dozen. Banks, Autos, Metals, Electrical Equipment, and Chemicals remain from 23rd December Moving Average Outliers <a href="https://www.smartkarma.com/insights/japan-moving-average-outliers-year-end-blues" target="_blank" data-smartkarma-citation="insights:26895">Insight</a>, with Building Materials replacing Non-Bank Finance. Over the last trading five days, however, there has been a noticeable reversal with Autos, Electrical Equipment, and Machinery all over '55' while Other Consumer Products, Restaurants, Telecommunications and Food, Beverages &amp; Tobacco are all below '40'.
<hr>
COMPANIES
COMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, our moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/382/original/2019-01-13_15-19-43.png?1547360415" class="editor-image img-responsive" data-smartkarma-image-id="75382"></figure>
<div class="content-caption">Source: Japan Analytics</div>
THE +/-100% CLUB - The number of extreme negative outliers reached a peak for 1,352 on December 25th and has since returned to 'normal' levels. We suggested in the previous Insight in this series that such an extreme number of extremes was a signal of a short-term bottom, which, so far, has proved to be correct.
<div class="content-highlight">
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. 
</div>

MARKET COMPOSITE

Source: Japan Analytics
NEW YEAR RALLY - From the December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have recovered to 14% by number and 20% by value - just on the 'buying zone' line. As we expected, the Total Market Value has rallied 8.7% and looks to have some further to run, especially if the Yen reverses some of its recent strength. The Bank of Japan provided a 'helping hand' on both 4th and 10th January, the only days this year so far on which the market declined. 

SECTORS

LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.
SECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days remain, predictably, domestic and defensive - REITs, Information Technology, Media and Utilities continue from our previous review with Healthcare and Transportation replacing Food, Beverages and Tobacco and Internet Content &amp; Services. Equally predictable is the bottom half-dozen. Banks, Autos, Metals, Electrical Equipment, and Chemicals remain from 23rd December Moving Average Outliers Insight, with Building Materials replacing Non-Bank Finance. Over the last trading five days, however, there has been a noticeable reversal with Autos, Electrical Equipment, and Machinery all over '55' while Other Consumer Products, Restaurants, Telecommunications and Food, Beverages &amp; Tobacco are all below '40'.

COMPANIES
COMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, our moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 

Source: Japan Analytics
THE +/-100% CLUB - The number of extreme negative outliers reached a peak for 1,352 on December 25th and has since returned to 'normal' levels. We suggested in the previous Insight in this series that such an extreme number of extremes was a signal of a short-term bottom, which, so far, has proved to be correct.

In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. 


Japan: Moving Average Outliers - New Year Rally

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In November 2017, <a href="https://www.smartkarma.com/entities/637" target="_blank" data-smartkarma-citation="entities:637:1">Toshiba Corp (6502 JP)</a> bowed to the inevitable and issued shares in order to shore up shareholder equity ahead of the 31 March 2018 deadline where if the company had not announced a positive shareholder equity number, it would have been delisted according to the Enforcement Rules of the Tokyo Stock Exchange. So it issued ¥600 billion of equity in an accelerated privately-negotiated placement to hedge funds. There was some jawboning later from domestic institutions who had not gotten the show on the deal, but they would do well to remember that when Toshiba was in dire straits earlier that year, and continued listing was not guaranteed because of accounting issues which were later overcome (before the equity issuance), it was the hedge funds who bought dozens of percent of the company - not domestic financial institutions. In any case, the equity was predictably needed, but as a way of making it clear that it would not be forever, the release accompanying the financing said the company would accelerate returns to shareholders once the sale of Toshiba Memory Corporation was complete. That return of capital to shareholders was <a href="https://www.toshiba.co.jp/about/ir/en/news/20180613_1.pdf" target="_blank">announced</a> in June 2018 after the closing of the TMC transaction had been confirmed. Toshiba would buy back ¥700 billion of shares. At the time, that was up to 40% of shares outstanding, but the shares rose as the shares of companies with large buyback plans do, and it took until November to dot the "i"s and cross the "t"s on making sure that the cash in the bank account was deemed distributable capital surplus. On November 8th, a year after announcing the sale of equity, Toshiba announced the start of a Very Large Buyback. A few days later the company announced a large ToSTNeT-3 buyback, offering to buy back all  ¥700 billion of shares the following morning at that day's close. A week later the company had bought back ¥243 billion or more than 35% of the total buyback then announced further purchases would be made in the market. That's when the fun began. <hr>For previous recent treatment on the Toshiba buyback, see the following:    <a href="https://www.smartkarma.com/insights/toshiba-king-street-s-buyback-proposals-lack-required-detail" target="_blank" data-smartkarma-citation="insights:24727">Toshiba: King Street's Buyback Proposals Lack Required Detail</a> (5 Oct 2018)     <a href="https://www.smartkarma.com/insights/toshiba-s-buyback-how-it-might-work" target="_blank" data-smartkarma-citation="insights:25748">Toshiba's Buyback - How It Might Work</a> (9 Nov 2018)     <a href="https://www.smartkarma.com/insights/toshiba-s-tostnet-3-buyback-unwinding-another-game-of" target="_blank" data-smartkarma-citation="insights:25863">Toshiba's ToSTNeT-3 Buyback: Unwinding? Another Game of 🐓?</a> (12 Nov 2018)     <a href="https://www.smartkarma.com/insights/toshiba-tostnet-3-round-2-579bn-to-go" target="_blank" data-smartkarma-citation="insights:25945">Toshiba ToSTNeT-3: Round 2 (¥579bn To Go)</a> (14 Nov 2018)     <a href="https://www.smartkarma.com/insights/toshiba-tostnet-3-buyback-means-1-3-done-off-to-buy-in-the-market-now" target="_blank" data-smartkarma-citation="insights:26126">Toshiba ToSTNeT-3 Buyback Means 1/3 Done. Off To Buy In The Market Now!</a> (21 Nov 2018)     <a href="https://www.smartkarma.com/insights/toshiba-buyback-update-not-banging-down-doors-to-get-stock-yet" target="_blank" data-smartkarma-citation="insights:26434">Toshiba Buyback Update - Not Banging Down Doors To Get Stock Yet</a> (3 Dec 2018)

In November 2017, Toshiba Corp (6502 JP) bowed to the inevitable and issued shares in order to shore up shareholder equity ahead of the 31 March 2018 deadline where if the company had not announced a positive shareholder equity number, it would have been delisted according to the Enforcement Rules of the Tokyo Stock Exchange. So it issued ¥600 billion of equity in an accelerated privately-negotiated placement to hedge funds. There was some jawboning later from domestic institutions who had not gotten the show on the deal, but they would do well to remember that when Toshiba was in dire straits earlier that year, and continued listing was not guaranteed because of accounting issues which were later overcome (before the equity issuance), it was the hedge funds who bought dozens of percent of the company - not domestic financial institutions. In any case, the equity was predictably needed, but as a way of making it clear that it would not be forever, the release accompanying the financing said the company would accelerate returns to shareholders once the sale of Toshiba Memory Corporation was complete. That return of capital to shareholders was announced in June 2018 after the closing of the TMC transaction had been confirmed. Toshiba would buy back ¥700 billion of shares. At the time, that was up to 40% of shares outstanding, but the shares rose as the shares of companies with large buyback plans do, and it took until November to dot the "i"s and cross the "t"s on making sure that the cash in the bank account was deemed distributable capital surplus. On November 8th, a year after announcing the sale of equity, Toshiba announced the start of a Very Large Buyback. A few days later the company announced a large ToSTNeT-3 buyback, offering to buy back all  ¥700 billion of shares the following morning at that day's close. A week later the company had bought back ¥243 billion or more than 35% of the total buyback then announced further purchases would be made in the market. That's when the fun began. For previous recent treatment on the Toshiba buyback, see the following:    Toshiba: King Street's Buyback Proposals Lack Required Detail (5 Oct 2018)     Toshiba's Buyback - How It Might Work (9 Nov 2018)     Toshiba's ToSTNeT-3 Buyback: Unwinding? Another Game of 🐓? (12 Nov 2018)     Toshiba ToSTNeT-3: Round 2 (¥579bn To Go) (14 Nov 2018)     Toshiba ToSTNeT-3 Buyback Means 1/3 Done. Off To Buy In The Market Now! (21 Nov 2018)     Toshiba Buyback Update - Not Banging Down Doors To Get Stock Yet (3 Dec 2018)

Toshiba Buyback: Proceeding Apace, But That's Slow

Differentiated global TMT & Internet Research

New Street Research Insights

New Street Research

Research is provided by our team of experienced analysts. Our work is idea driven, based on independence of thought, sector expertise, and firmly focused on fundamentals and valuation of telecoms and internet names globally. New Street is headquartered in London with offices in New York, Singapore and Australia. 

New Street Research is an independent, partner-owned, research firm specialising in equity and debt research. Our equity research embraces the following sectors:

Pan European Telecom Services and Cable
US Telecoms, Cable, Satellite and Towers
Global Emerging Market Telecoms
Japan Telecoms
Asian Internet
Pan European Healthcare
US Healthcare
Japanese Healthcare

We also provide debt research on:
Pan European Telecom Services and Cable

Equity Bottom-Up

The Japanese telecom market was more volatile in 2018 than anticipated. However, <a href="https://www.smartkarma.com/profiles/1917" target="_blank" data-smartkarma-citation="accounts:1917">Chris Hoare</a> remains broadly positive on the sector for 2019. While pressure on the revenue line is intensifying, we do do not expect a price war to break out. In fact, we look for volatility to ease as the year progresses. Operators point to opex reductions and handset subsidy reductions to offset revenue weakness. We think that earnings are likely to surprise on to the upside. Over time we also look for dividend payout ratios to gradually rise, with the <a href="https://www.smartkarma.com/entities/27445" target="_blank" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a> (KK) listing the long term catalyst.  For <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> (SB) we look for market confidence to improve on the Vision Fund strategy, as profitable exits/up-valuations of assets such as Uber are announced.The sector is recovering from <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo's (9437 JP)</a> price cut announcements but we don't think they will slash prices (cuts will be selective). Our top pick is now <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a> which could actually benefit from <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten's (4755 JP)</a> entry (as the roaming partner). DoCoMo is most affected but there are plenty of cost cutting opportunities. <a href="https://www.smartkarma.com/entities/623" target="_blank" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a> has optimistic guidance with substantial opex and capex cost cuts planned. Our order of preference for the stocks is now: KDDI (Buy), followed in order by NTT (Buy), SB Group (Buy), DoCoMo (Buy) and SB Corp (Neutral). We do not currently cover Rakuten.

The Japanese telecom market was more volatile in 2018 than anticipated. However, Chris Hoare remains broadly positive on the sector for 2019. While pressure on the revenue line is intensifying, we do do not expect a price war to break out. In fact, we look for volatility to ease as the year progresses. Operators point to opex reductions and handset subsidy reductions to offset revenue weakness. We think that earnings are likely to surprise on to the upside. Over time we also look for dividend payout ratios to gradually rise, with the Softbank Corp (9434 JP) (KK) listing the long term catalyst.  For Softbank Group (9984 JP) (SB) we look for market confidence to improve on the Vision Fund strategy, as profitable exits/up-valuations of assets such as Uber are announced.The sector is recovering from NTT Docomo's (9437 JP) price cut announcements but we don't think they will slash prices (cuts will be selective). Our top pick is now KDDI (9433 JP) which could actually benefit from Rakuten's (4755 JP) entry (as the roaming partner). DoCoMo is most affected but there are plenty of cost cutting opportunities. NTT (Nippon Telegraph &amp; Telephone) (9432 JP) has optimistic guidance with substantial opex and capex cost cuts planned. Our order of preference for the stocks is now: KDDI (Buy), followed in order by NTT (Buy), SB Group (Buy), DoCoMo (Buy) and SB Corp (Neutral). We do not currently cover Rakuten. 

Japanese Telcos: What to Look for in 2019. Earnings May Surprise on the Upside.

Founder & CEO. Oil markets macro-analysis., Vanda Insights

Vandana Hari

Founder & CEO. Oil markets macro-analysis.

Vanda Insights

Vanda Insights is a Singapore-based boutique provider of intelligence on the global energy markets, launched in September 2016. The venture was born out of a desire to extract the signal from the noise in the complex and often volatile oil markets. Our succinct and clear macro analysis is relied upon by thousands of readers globally, including those doing business directly or indirectly in the physical commodity and derivatives markets; wealth managers; governments, regulatory bodies and think-tanks; as well as trade organizations and educational institutions.

Global Energy Markets

Commodities

It has been anything but a happy start to 2019 for the stock markets, which remained under pressure as trading resumed in the new year. A clutch of weak manufacturing data for December – from China to the eurozone and the US – soured the mood for investors through last week. 
That was followed by a rare revenue warning from <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple Inc (AAPL US)</a> , citing slowing sales in China, which drew fresh attention to the vulnerability of American companies from the bitter trade war between the world’s two largest economies. The only assets that seemed to be in favour were the safe havens such as <a href="https://www.smartkarma.com/entities/22870" target="_blank" data-smartkarma-citation="entities:22870:1">Gold (GOLD COMDTY)</a> and the Japanese yen. 
Beijing provided the first major lift to market sentiment on Friday, by lowering the reserve requirement ratio for Chinese banks, in a bid to inject more cash into the system. US Fed Chairman Jerome Powell signalling a "patient" approach to monetary policy in a panel discussion in Atlanta later in the day and a strong US jobs report for December completed the trinity of factors that closed the week with a rally in stock markets as well as crude. 
Brent and WTI closed nearly 2% higher on the day, just above $57 and just under $48 respectively. Sentiment in the oil market was boosted by initial surveys showing a surprisingly large drop in OPEC production in December.
OPEC/non-OPEC cuts of 1.2 million b/d took effect on January 1 and should yield results in the coming weeks, but we expect crude to remain largely beholden to the twists and turns in the global economy. Just as in the broader financial markets, so in the oil markets, all eyes will now turn to the high-level trade negotiations between the US and China, due to be held in Beijing over January 7-8.

It has been anything but a happy start to 2019 for the stock markets, which remained under pressure as trading resumed in the new year. A clutch of weak manufacturing data for December – from China to the eurozone and the US – soured the mood for investors through last week. 
That was followed by a rare revenue warning from Apple Inc (AAPL US) , citing slowing sales in China, which drew fresh attention to the vulnerability of American companies from the bitter trade war between the world’s two largest economies. The only assets that seemed to be in favour were the safe havens such as Gold (GOLD COMDTY) and the Japanese yen. 
Beijing provided the first major lift to market sentiment on Friday, by lowering the reserve requirement ratio for Chinese banks, in a bid to inject more cash into the system. US Fed Chairman Jerome Powell signalling a "patient" approach to monetary policy in a panel discussion in Atlanta later in the day and a strong US jobs report for December completed the trinity of factors that closed the week with a rally in stock markets as well as crude. 
Brent and WTI closed nearly 2% higher on the day, just above $57 and just under $48 respectively. Sentiment in the oil market was boosted by initial surveys showing a surprisingly large drop in OPEC production in December.
OPEC/non-OPEC cuts of 1.2 million b/d took effect on January 1 and should yield results in the coming weeks, but we expect crude to remain largely beholden to the twists and turns in the global economy. Just as in the broader financial markets, so in the oil markets, all eyes will now turn to the high-level trade negotiations between the US and China, due to be held in Beijing over January 7-8.  

Weekly Oil Views: Crude Remains at the Mercy of Fickle Financial Markets

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

We analyse the holdings of the world's largest banks by the 255 global equity funds in our analysis. For each region (America/EMEA/Asia), we have selected the 6 largest banks by total assets, as defined by the S&amp;P Global Market Intelligence Report, 2018.We find that overall, holdings in these banks are on the decline, and in some cases, investor flight has been acute.  Only 2 of the 18 banks are held overweight by global investors, with <a href="https://www.smartkarma.com/entities/279" target="_blank" data-smartkarma-citation="entities:279:1">Citigroup Inc (C US)</a> and <a href="https://www.smartkarma.com/entities/525" target="_blank" data-smartkarma-citation="entities:525:1">Bnp Paribas (BNP FP)</a> seeing the biggest exodus through 2018.

We analyse the holdings of the world's largest banks by the 255 global equity funds in our analysis. For each region (America/EMEA/Asia), we have selected the 6 largest banks by total assets, as defined by the S&amp;P Global Market Intelligence Report, 2018.We find that overall, holdings in these banks are on the decline, and in some cases, investor flight has been acute.  Only 2 of the 18 banks are held overweight by global investors, with Citigroup Inc (C US) and Bnp Paribas (BNP FP) seeing the biggest exodus through 2018.

Big Banks - A Crisis of Investor Confidence

United States

Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables and accessories, and sells a variety of related accessories. The Company also offers payment, digital content, cloud and advertising services. Apple Inc.'s customers are primarily in consumer, small & mid-sized business, education, enterprise and government markets worldwide.

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Apple (AAPL US)

Japan: Moving Average Outliers - New Year Rally

MARKET COMPOSITE NEW YEAR RALLY - From the December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the...

Campbell Gunn

Toshiba Buyback: Proceeding Apace, But That's Slow

In November 2017, Toshiba Corp (6502 JP) bowed to the inevitable and issued shares in order to shore up shareholder equity ahead of the 31 March...

Travis Lundy

Japanese Telcos: What to Look for in 2019. Earnings May Surprise on the Upside.

The Japanese telecom market was more volatile in 2018 than anticipated. However, Chris Hoare remains broadly positive on the sector for 2019. While...

New Street Research

Weekly Oil Views: Crude Remains at the Mercy of Fickle Financial Markets

It has been anything but a happy start to 2019 for the stock markets, which remained under pressure as trading resumed in the new year. A clutch of...

Vandana Hari

Big Banks - A Crisis of Investor Confidence

We analyse the holdings of the world's largest banks by the 255 global equity funds in our analysis. For each region (America/EMEA/Asia), we have...

Steven Holden

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