Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

We previously highlighted the odd discrepancy between the values of <a href="https://www.smartkarma.com/entities/9485" target="_blank" data-smartkarma-citation="entities:9485:1">United Inc (2497 JP)</a> and <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari Inc (4385 JP)</a>. Since our previous comments on United in <a href="https://www.smartkarma.com/insights/united-with-mercari-we-stand" target="_blank" data-smartkarma-citation="insights:21486">United (With Mercari) We Stand:</a><ul>
<li>United is up 5.4%</li>
<li>Mercari is down 23.9%</li>
<li>Furthermore, at the ratio of short 0.457 Mercari shares per United share, the stub is up 88.1% on a net basis and 13.3% on a gross basis</li>
</ul>We examine the continuing risk-reward for the trade below.

We previously highlighted the odd discrepancy between the values of United Inc (2497 JP) and Mercari Inc (4385 JP). Since our previous comments on United in United (With Mercari) We Stand:
United is up 5.4%
Mercari is down 23.9%
Furthermore, at the ratio of short 0.457 Mercari shares per United share, the stub is up 88.1% on a net basis and 13.3% on a gross basis
We examine the continuing risk-reward for the trade below.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Today after the close the Nikkei Inc announced the results of the Annual Review for the <a href="https://indexes.nikkei.co.jp/en/nkave/archives/news/20180905E_1.pdf" target="_blank">Nikkei 225</a> and the <a href="https://indexes.nikkei.co.jp/en/nkave/archives/news/20180905E_2.pdf" target="_blank">Nikkei 300</a>.<ul>
<li>
In the Nikkei 225, <a href="https://www.smartkarma.com/entities/8197" target="_blank" data-smartkarma-citation="entities:8197:1">Cyberagent Inc (4751 JP)</a> will replace <a href="https://www.smartkarma.com/entities/19521" target="_blank" data-smartkarma-citation="entities:19521:1">Furukawa Co Ltd (5715 JP)</a>. Cyberagent has been assigned a presumed par value of 250 yen. The Nikkei 225 Rebalance is likely to be worth roughly $300-400mm a side. </li>
<li>
In the Nikkei 300, <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence Corp (6861 JP)</a> will replace <a href="https://www.smartkarma.com/entities/1175" target="_blank" data-smartkarma-citation="entities:1175:1">Nippon Sharyo (7102 JP)</a>. The Nikkei 300 rebalance has almost no significance in flow terms as far as I can tell.</li>
</ul>The changes on both are effective on October 1st, meaning the changes will be executed at the close of the last trading day of September. Outside of these names, there is an interesting angle which is looking at all the names which were deemed "possible" but did not make the cut.

Today after the close the Nikkei Inc announced the results of the Annual Review for the Nikkei 225 and the Nikkei 300.

In the Nikkei 225, Cyberagent Inc (4751 JP) will replace Furukawa Co Ltd (5715 JP). Cyberagent has been assigned a presumed par value of 250 yen. The Nikkei 225 Rebalance is likely to be worth roughly $300-400mm a side. 

In the Nikkei 300, Keyence Corp (6861 JP) will replace Nippon Sharyo (7102 JP). The Nikkei 300 rebalance has almost no significance in flow terms as far as I can tell.
The changes on both are effective on October 1st, meaning the changes will be executed at the close of the last trading day of September. Outside of these names, there is an interesting angle which is looking at all the names which were deemed "possible" but did not make the cut.

2018 Annual Nikkei 225 Rebalance - Small Potatoes As Expected

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<ul>
<li>
Bitmain's Micree Zhan - The controversial Bitmain IPO continued to receive a lot of spotlight, with continued questions and concerns about its pre-IPO institutional investment and lack of clarity in its recent earnings. Jihan Wu, the co-CEO of Bitmain, has received most of the attention but we now know that the other co-CEO, Micree Zhan, is the largest owner with a 36.58% stake in Bitmain, compared to Jihan Wu's stake of 20.5%. Supposedly, Micree Zhan is the mastermind behind Bitmain's ASIC chips technology.</li>
<li>
Bithumb, one of the largest crypto exchanges in Korea, which has temporarily stopped taking new customers since the US$30 million hacking incident in June, started to take in new customers once again. This has had a positive impact on Bitcoin price.</li>
<li>
"I respect Bitmain, but we will top them." - This quote is from GMO Internet (Japan)'s CEO Masatoshi Kumagi.  The fact that Bitmain made so much money in the past two years, it is bound to attract a lot of major competition, including from GMO Internet which has aggressively expanded its high quality crypto mining machines. GMO Internet also recently mentioned that it will stop mining Bitcoin Cash. </li>
</ul>



Bitmain's Micree Zhan - The controversial Bitmain IPO continued to receive a lot of spotlight, with continued questions and concerns about its pre-IPO institutional investment and lack of clarity in its recent earnings. Jihan Wu, the co-CEO of Bitmain, has received most of the attention but we now know that the other co-CEO, Micree Zhan, is the largest owner with a 36.58% stake in Bitmain, compared to Jihan Wu's stake of 20.5%. Supposedly, Micree Zhan is the mastermind behind Bitmain's ASIC chips technology.

Bithumb, one of the largest crypto exchanges in Korea, which has temporarily stopped taking new customers since the US$30 million hacking incident in June, started to take in new customers once again. This has had a positive impact on Bitcoin price.

"I respect Bitmain, but we will top them." - This quote is from GMO Internet (Japan)'s CEO Masatoshi Kumagi.  The fact that Bitmain made so much money in the past two years, it is bound to attract a lot of major competition, including from GMO Internet which has aggressively expanded its high quality crypto mining machines. GMO Internet also recently mentioned that it will stop mining Bitcoin Cash. 


This Week in Blockchain & Cryptos: Micree Zhan, Bithumb, & "I Respect Bitmain, but We Will Top Them"

'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. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/034/original/2018-08-16_19-07-34.png?1534672507" class="editor-image img-responsive" data-smartkarma-image-id="61034"></figure><div class="content-caption">Source: Japan Analytics</div>A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our '<a href="https://www.smartkarma.com/insights/japan-most-overbought-most-oversold-the-relative-price-score" target="_blank" data-smartkarma-citation="insights:21149">Nifty 50</a>' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.<div class="content-highlight">MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.</div>SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post [6178 JP</a>]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.<div class="content-highlight">
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
</div>SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.<div class="content-highlight">
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
</div>TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/038/original/2018-08-19_19-33-03.png?1534674804" class="editor-image img-responsive" data-smartkarma-image-id="61038"></figure>

Source: Japan AnalyticsA GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our 'Nifty 50' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is Japan Post [6178 JP]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

<div>
<h2>This Week's Blockchain &amp; Crypto Headlines:</h2>
</div>
The following were the main headlines impacting the blockchain and cryptocurrencies sectors in South Korea, Japan, and globally in the past week. 
[SOUTH KOREA]
<ul>
<li>
Bithumb stops issuing new virtual accounts - Bithumb, the largest cryptocurrency exchange in Korea, announced that it will stop issuing new virtual accounts starting August 1st since it failed to renew a contract with NH Nonghyup Bank. However, customers who already have virtual accounts…</li>
</ul>


This Week's Blockchain &amp; Crypto Headlines:

The following were the main headlines impacting the blockchain and cryptocurrencies sectors in South Korea, Japan, and globally in the past week. 
[SOUTH KOREA]


Bithumb stops issuing new virtual accounts - Bithumb, the largest cryptocurrency exchange in Korea, announced that it will stop issuing new virtual accounts starting August 1st since it failed to renew a contract with NH Nonghyup Bank. However, customers who already have virtual accounts…


This Week in Blockchain & Cryptos: Legitimizing Cryptos in Korea & Top Bitcoin Cities in the World

Japan

CyberAgent, Inc. operates blog media website, Ameba.  The Company also operates internet advertising agency, foreign exchange trading website, and creates PC and mobile contents such as advertisements and games. CyberAgent invests in companies with internet related business.

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CyberAgent Inc (4751 JP)

Still United but Mercari Being Refunded

We previously highlighted the odd discrepancy between the values of United Inc (2497 JP) and Mercari Inc (4385 JP). Since our previous comments on...

Mio Kato

2018 Annual Nikkei 225 Rebalance - Small Potatoes As Expected

Today after the close the Nikkei Inc announced the results of the Annual Review for the Nikkei 225 and the Nikkei 300. In the Nikkei 225,...

Travis Lundy

This Week in Blockchain & Cryptos: Micree Zhan, Bithumb, & "I Respect Bitmain, but We Will Top Them"

Bitmain's Micree Zhan - The controversial Bitmain IPO continued to receive a lot of spotlight, with continued questions and concerns about its...

Douglas Kim

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in...

Campbell Gunn

This Week in Blockchain & Cryptos: Legitimizing Cryptos in Korea & Top Bitcoin Cities in the World

This Week's Blockchain & Crypto Headlines: The following were the main headlines impacting the blockchain and cryptocurrencies sectors in...

Douglas Kim

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