Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish </li>
<li>Expectations for gradual recovery as China recovers from lockdowns, but power-saving measures are a new risk</li>
<li>Weak end demand for mobile, PC, and consumer electronics are likely to foreshadow capex cuts in 2023 </li>
</ul>


Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish 
Expectations for gradual recovery as China recovers from lockdowns, but power-saving measures are a new risk
Weak end demand for mobile, PC, and consumer electronics are likely to foreshadow capex cuts in 2023 


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>The theme we have seen over the past four weeks is an increasing number of indexes reversing 4-10-month downtrends and/or breaking above important resistance levels, with no failed breakouts.</li>
<li>We continue to believe that global equities are going through a bottoming process, but the real test will come during the eventual pullback, which we believe we are now experiencing.</li>
<li>We are watching to see whether these breakout levels and important moving averages (e.g., 50-day MAs) will hold.</li>
</ul>


The theme we have seen over the past four weeks is an increasing number of indexes reversing 4-10-month downtrends and/or breaking above important resistance levels, with no failed breakouts.
We continue to believe that global equities are going through a bottoming process, but the real test will come during the eventual pullback, which we believe we are now experiencing.
We are watching to see whether these breakout levels and important moving averages (e.g., 50-day MAs) will hold.


Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Berkshire appears set to exit <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> partially or in full. But why signal to market well in advance?</li>
<li>
<a href="https://www.smartkarma.com/entities/united-tractors-tbk-pt" target="_blank" data-smartkarma-citation="entities:698:1" rel="noopener">United Tractors (UNTR IJ)</a>'s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.</li>
<li>The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.</li>
</ul>


Berkshire appears set to exit BYD (1211 HK) partially or in full. But why signal to market well in advance?

United Tractors (UNTR IJ)'s buyback should be impactful. They could do another one afterwards as they have lots of cash. This is a raging buy. Buy now. With both hands.
The BOJ was expected to change its ETF allocations. It stopped buying Nikkei 225 and JPX Nikkei 400 ETFs. As the world moves more to passive, expect float to decrease.


Last Week in Event SPACE: BYD, Astra/United Tractor, Japan Passive, AGL, Genting Singapore

Travis Lundy

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. </li>
<li>Even if you do not "play" index changes, understanding impact is important. <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a> entered Nikkei 225 in July 2020 after rising 30%. That was the top.</li>
<li>Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. </li>
</ul>


2022 Version of JAPAN PASSIVE: Who Owns What? where we break down the major (and minor) passive tracking indices and which category of investor owns how much of each. 
Even if you do not "play" index changes, understanding impact is important. Japan Exchange Group (8697 JP) entered Nikkei 225 in July 2020 after rising 30%. That was the top.
Understanding the nature of the ownership and flows is crucial to understanding how to trade certain stocks. 


<ul>
<li>Fanuc's share price is geared into the machine tool cycle. Unfortunately the cycle is rolling over</li>
<li>Fanuc is also facing extreme margin pressure from rising parts and logistics costs</li>
<li>We expect the share price to trade down 20% from here and bottom at around 2x book value</li>
</ul>


Fanuc's share price is geared into the machine tool cycle. Unfortunately the cycle is rolling over
Fanuc is also facing extreme margin pressure from rising parts and logistics costs
We expect the share price to trade down 20% from here and bottom at around 2x book value


Japan

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

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Fanuc Corp (6954 JP)

Fanuc (6954 JP) | Lights Out in China

Machine tool orders have recorded 20 consecutive months of growth – we expect a turn in cycle and remain bearish We see additional risks in China...

Mark Chadwick

Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples

Japan is the latest major country to break out, and we are buyers. Japan continues to be considerably further along in the bottoming process...

Vermilion Research

Last Week in Event SPACE: BYD, Astra/United Tractor, Japan Passive, AGL, Genting Singapore

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

JAPAN PASSIVE: Who Owns What 2022?

JAPAN PASSIVE: Who Owns What 2022 Version. This is a mark to market of the passive tracking data from domestic and international investors in...

Travis Lundy

Fanuc (6954 JP) | Beware of the Cycle

We remain bearish on Fanuc for two key reasons: (1) its fortunes are tied to the machine tool order cycle and (2) margin pressure due to rising...

Mark Chadwick

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