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>Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany's DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).</li>
<li>The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.</li>
<li>Relative strength on Japan's TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors</li>
</ul>


Downtrends remain intact for Japan’s TOPIX/Nikkei 225, Hong Kong’s Hang Seng, Europe’s EURO STOXX50, Germany's DAX, China (MCHI-US), and all the MSCI global indexes (ACWI, ACWI ex-US, EM, and EAFE).
The majority of these indexes are in well-defined downtrends; that means when the downtrends eventually reverse, it will be clear and we will be ready to buy/turn bullish.
Relative strength on Japan's TOPIX is reversing topside a 4.5-year downtrend, signaling Japan is emerging as leadership. We highlight buy opportunities in Japan and also in defensive Sectors


Japan Emerging as Leadership; Actionable Themes: Japan and Defensives

<ul>
<li>Since March we have consistently said we believe any bottoming process would likely take weeks or months and could come with more tests of the lows, or even an undercut.</li>
<li>We are testing the March lows now in several global indexes, including the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), and EM (EEM-US).</li>
<li>While this is a logical spot for a bounce, we see rallies as selling opportunities at the index level</li>
</ul>


Since March we have consistently said we believe any bottoming process would likely take weeks or months and could come with more tests of the lows, or even an undercut.
We are testing the March lows now in several global indexes, including the MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), and EM (EEM-US).
While this is a logical spot for a bounce, we see rallies as selling opportunities at the index level


MSCI ACWI, ACWI Ex-US, EM Testing Logical Support; Actionable Themes: Defensives & Reopening Stocks

Global Healthcare Analyst

Tina Banerjee

Equity Bottom-Up

<ul>
<li>Chugai’s in-house drug, Actemra is recommended by the WHO for the treatment of hospitalized COVID-19 patients. In-licensed drug Ronapreve is approved for the treatment of mild to moderate COVID-19 patients.</li>
<li>Actemra and Ronapreve together are expected to contribute 29% of total revenue in 2021. Approval of oral COVID-19 anti-viral pill will pressurize both the drugs in 2022 and beyond.</li>
<li>Chugai’s recently in-licensed gene therapy drug candidate for Duchenne muscular dystrophy will have to compete with existing drug and other pipeline candidates in Japan.  </li>
</ul>


Chugai’s in-house drug, Actemra is recommended by the WHO for the treatment of hospitalized COVID-19 patients. In-licensed drug Ronapreve is approved for the treatment of mild to moderate COVID-19 patients.
Actemra and Ronapreve together are expected to contribute 29% of total revenue in 2021. Approval of oral COVID-19 anti-viral pill will pressurize both the drugs in 2022 and beyond.
Chugai’s recently in-licensed gene therapy drug candidate for Duchenne muscular dystrophy will have to compete with existing drug and other pipeline candidates in Japan.  


Chugai Pharmaceutical (4519 JP): Actemra Loses Its Sheen on Arrival of Oral COVID-19 Pill

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<p style="text-align: center;"><strong>• THE POST-COVID ROTATION •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/288/original/2021-02-28_08-38-14.png?1614469105" class="editor-image img-responsive" data-smartkarma-image-id="191288"></figure><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/191/290/original/2021-02-28_08-57-32.png?1614470265" class="editor-image img-responsive" data-smartkarma-image-id="191290"></figure></section></section><section class="figure"><div style="text-align: center;" class="content-caption"> Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>THE 2021 ROTATION ACCELERATES</strong> - As we noted in <a href="https://www.smartkarma.com/insights/japan-the-post-covid-rotation-from-growth-to-value-begins-02-05-results-revisions-update" target="_blank" data-smartkarma-citation="insights:47877" rel="noopener">The Post-COVID Rotation from Growth to Value Begins</a>, the Japanese equity market has been led by overvalued and overvalued for most of the last year overbought high-quality growth companies in the <strong>Technology Hardware</strong>, <strong>Electrical Equipment</strong>, <strong>Internet</strong>, and <strong>Healthcare</strong> Sectors. These companies were deemed to be 'COVID-resistant' and were consistently well-bid regardless of price. The stocks leading this 'charge' were <a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 (2413 JP),</a><a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a>, <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" data-smartkarma-citation="entities:15441:1" rel="noopener">MonotaRO (3064 JP)</a>, <a href="https://www.smartkarma.com/entities/chugai-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:4489:1" rel="noopener">Chugai Pharmaceutical (4519 JP)</a>, and <a href="https://www.smartkarma.com/entities/nidec-corp" target="_blank" data-smartkarma-citation="entities:7245:1" rel="noopener">Nidec (6594 JP)</a>, while the only cyclical Sector that has seen a major recovery was Energy. Meanwhile, shares in domestically-orientated Sectors and companies heavily exposed to COVID-related delines in business activity languished despite valuations reaching ten or twenty-year lows. </p><p><strong>PEAKED?</strong> - Over the last twenty trading days during which TOPIX reached 1,974.99. The <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> breached 30,000, many of these market leaders have seen a significant correction, while the market has rotated into domestic, cyclical, and financial Sectors - as illustrated by our Sector Relative Price Score timelines in the chart above. In the<strong> DETAIL</strong> Section below, we will review the current market technicals after Friday's 4% N225 decline and look at the leading stocks on both 'sides' of this rotation trade.</p>

• THE POST-COVID ROTATION • Source for all charts &amp; tables: Japan AnalyticsTHE 2021 ROTATION ACCELERATES - As we noted in The Post-COVID Rotation from Growth to Value Begins, the Japanese equity market has been led by overvalued and overvalued for most of the last year overbought high-quality growth companies in the Technology Hardware, Electrical Equipment, Internet, and Healthcare Sectors. These companies were deemed to be 'COVID-resistant' and were consistently well-bid regardless of price. The stocks leading this 'charge' were M3 (2413 JP),Lasertec (6920 JP), MonotaRO (3064 JP), Chugai Pharmaceutical (4519 JP), and Nidec (6594 JP), while the only cyclical Sector that has seen a major recovery was Energy. Meanwhile, shares in domestically-orientated Sectors and companies heavily exposed to COVID-related delines in business activity languished despite valuations reaching ten or twenty-year lows. PEAKED? - Over the last twenty trading days during which TOPIX reached 1,974.99. The Nikkei 225 (NKY INDEX) breached 30,000, many of these market leaders have seen a significant correction, while the market has rotated into domestic, cyclical, and financial Sectors - as illustrated by our Sector Relative Price Score timelines in the chart above. In the DETAIL Section below, we will review the current market technicals after Friday's 4% N225 decline and look at the leading stocks on both 'sides' of this rotation trade.

🇯🇵 JAPAN • The Post-COVID Rotation Accelerates

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

<p>With the Nikkei 225 index breaking 30k this month, we thought it pertinent to look in more detail at Japan positioning among Global fund managers.  Our data shows that Japan is underowned by Global managers versus its own history and held underweight versus the benchmark MSCI All Country World index.  Current positioning levels are towards their lowest ever levels, yet we are not seeing a sweeping reversal of sentiment in our data just yet, merely a stalling of the declines. </p><p>However, the outperformance of MSCI Japan versus the AC World index over the last 6-months and the psychological breaking of 30,000 in the Nikkei 225 index are both signs that momentum is gathering steam.   We see rising ownership levels in a number of key companies, led by <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> , <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1" rel="noopener">Nintendo Co Ltd (7974 JP)</a> and <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> and high conviction in <a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence Corp (6861 JP)</a> among Global investors.  Outside of these 4 stocks, we would highlight the largest index weight, <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> as a laggard and a stock that has the potential to play a much greater role in Global portfolios going forwards.</p><p><em>Analysis taken from our Global active fund research, covering 386 managers with combined AUM of $960bn </em></p>

With the Nikkei 225 index breaking 30k this month, we thought it pertinent to look in more detail at Japan positioning among Global fund managers.  Our data shows that Japan is underowned by Global managers versus its own history and held underweight versus the benchmark MSCI All Country World index.  Current positioning levels are towards their lowest ever levels, yet we are not seeing a sweeping reversal of sentiment in our data just yet, merely a stalling of the declines. However, the outperformance of MSCI Japan versus the AC World index over the last 6-months and the psychological breaking of 30,000 in the Nikkei 225 index are both signs that momentum is gathering steam.   We see rising ownership levels in a number of key companies, led by Sony Corp (6758 JP) , Nintendo Co Ltd (7974 JP) and Tokyo Electron (8035 JP) and high conviction in Keyence Corp (6861 JP) among Global investors.  Outside of these 4 stocks, we would highlight the largest index weight, Toyota Motor (7203 JP) as a laggard and a stock that has the potential to play a much greater role in Global portfolios going forwards.Analysis taken from our Global active fund research, covering 386 managers with combined AUM of $960bn 

Global Fund Positioning in Japan:  Underweight and Underowned

Japan

Daiichi Sankyo Co, Ltd is a holding company established through merger of Sankyo and Daiichi pharmaceutical. The Group manufactures pharmaceuticals for human/veterinary use and medical tools and equipment. It also researches and promotes products through related companies throughout the world. The Group also produces food, food additives, livestock feeds, and agrochemicals.

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Daiichi Sankyo (4568 JP)

Japan Emerging as Leadership; Actionable Themes: Japan and Defensives

Despite the intact downtrend on Japan's TOPIX, relative strength is reversing topside a 4.5-year downtrend; this tells us Japan is emerging as...

Vermilion Research

MSCI ACWI, ACWI Ex-US, EM Testing Logical Support; Actionable Themes: Defensives & Reopening Stocks

We are testing the March lows in several global indexes, including the MSCI $ACWI, ACWI ex-US $ACWX, and EM $EEM. While this is a logical spot for...

Vermilion Research

Chugai Pharmaceutical (4519 JP): Actemra Loses Its Sheen on Arrival of Oral COVID-19 Pill

Chugai's COVID-19 drugs do not seem to be stack up well against the newly approved oral COVID-19 drugs in 2022 and beyond. The company has already...

Tina Banerjee

🇯🇵 JAPAN • The Post-COVID Rotation Accelerates

Over the last 20 trading days during which TOPIX reached 1,974.99, many market leaders have seen a significant correction, and there has been a...

Campbell Gunn

Global Fund Positioning in Japan: Underweight and Underowned

With the Nikkei 225 index breaking 30k this month, Global managers remain under-invested and underweight Japan versus the benchmark MSCI All...

Steven Holden

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