Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Equity Bottom-Up

<p>Muji’s US bankruptcy and poor trading in Europe, along with weaker sales at home, led to <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku (7453 JP)</a>’s first revenue decline in a decade and the first loss in 19 years. Growth in Asia and the promise of significant growth in the food category – an idea we are very bullish about – suggest hope for a rebound next year.</p>

Muji’s US bankruptcy and poor trading in Europe, along with weaker sales at home, led to Ryohin Keikaku (7453 JP)’s first revenue decline in a decade and the first loss in 19 years. Growth in Asia and the promise of significant growth in the food category – an idea we are very bullish about – suggest hope for a rebound next year.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<div>
<p>The BOJ's buying of ETFs continues but the pace has slowed in recent months. This does not mean we don't get ETF news, comments, etc. </p>
<p>BOJ Governor Kuroda was in front of parliament a week ago and talked about the BOJ's ETF-buying programmes. There are questions from former BOJ executives out in the wild about what the BOJ will do to a) stop buying, b) reduce its holdings in ETFs, etc. </p>
<p>Mr Kuroda was quite clear with his answer. From a Reuters <a href="https://www.reuters.com/article/japan-economy-kuroda-etf-idUST9N2GT02I" target="_blank" rel="noopener">note</a> last week...</p>
</div><div><blockquote>
<p>The BOJ already buys ETFs “quite flexibly” and can reduce purchases when the market risk premium is not rising, Kuroda told parliament.</p>
<p>“If inflation hits our 2% target and an exit from our massive stimulus programme comes into sight, there will certainly be debate on how to end our ETF buying. But it’s premature to do so at this stage.”</p>
</blockquote></div><div>The proof is in the pudding.</div><div></div><div>Historically, the pattern based on analysis of the data was that if the AM session close of the market was lower than the previous full-day close, the BOJ would be in buying in the PM session. First it was when the market was down more than 100bp. Then it was 50bp. Then 25bp, then even when it was down at all. </div><div></div><div>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/908/original/Screenshot%202020-11-25%20at%2012.09.11%20PM.png?1606277380" class="editor-image img-responsive" data-smartkarma-image-id="173908"></figure></section><p>As the chart shows, the rolling 3mo and 6mo purchase total annualises out to ¥4.5 trillion and ¥5.0 trillion, respectively.  The BOJ has substantially lowered how much it is buying, mostly because the market is well-behaved. The buying they did the few times they were involved in January and February was ¥70bn a day. When risk went bad in March, they upped it to ¥100bn, then ¥120bn, and by mid-March had lifted the annual total limit to ¥11.7trln, buying ¥200bn on many days, and effectively in April, there were only two days where the market fell in the morning session and the BOJ was not in buying. Things looked up in markets as they were looking down fundamentally and the BOJ lowered its involvement as the risk premium wasn't rising when earnings projections were falling sharply. </p>
<div>
<p>However, I expect this lull is temporary. They are effectively building up a very large buffer so they can go in at a higher rate when necessary. With the market up 12% month-to-date, and US stocks seemingly on a tear of vaccine-related hope, and month-end globally looking very much like a sell of stocks to buy bonds from an allocator or risk-parity perspective, they may be back in before you think. </p>
<p>More discussion below the fold. </p>
</div>
</div>


The BOJ's buying of ETFs continues but the pace has slowed in recent months. This does not mean we don't get ETF news, comments, etc. 
BOJ Governor Kuroda was in front of parliament a week ago and talked about the BOJ's ETF-buying programmes. There are questions from former BOJ executives out in the wild about what the BOJ will do to a) stop buying, b) reduce its holdings in ETFs, etc. 
Mr Kuroda was quite clear with his answer. From a Reuters note last week...

The BOJ already buys ETFs “quite flexibly” and can reduce purchases when the market risk premium is not rising, Kuroda told parliament.
“If inflation hits our 2% target and an exit from our massive stimulus programme comes into sight, there will certainly be debate on how to end our ETF buying. But it’s premature to do so at this stage.”
The proof is in the pudding.Historically, the pattern based on analysis of the data was that if the AM session close of the market was lower than the previous full-day close, the BOJ would be in buying in the PM session. First it was when the market was down more than 100bp. Then it was 50bp. Then 25bp, then even when it was down at all. 
As the chart shows, the rolling 3mo and 6mo purchase total annualises out to ¥4.5 trillion and ¥5.0 trillion, respectively.  The BOJ has substantially lowered how much it is buying, mostly because the market is well-behaved. The buying they did the few times they were involved in January and February was ¥70bn a day. When risk went bad in March, they upped it to ¥100bn, then ¥120bn, and by mid-March had lifted the annual total limit to ¥11.7trln, buying ¥200bn on many days, and effectively in April, there were only two days where the market fell in the morning session and the BOJ was not in buying. Things looked up in markets as they were looking down fundamentally and the BOJ lowered its involvement as the risk premium wasn't rising when earnings projections were falling sharply. 

However, I expect this lull is temporary. They are effectively building up a very large buffer so they can go in at a higher rate when necessary. With the market up 12% month-to-date, and US stocks seemingly on a tear of vaccine-related hope, and month-end globally looking very much like a sell of stocks to buy bonds from an allocator or risk-parity perspective, they may be back in before you think. 
More discussion below the fold. 



JAPAN FLOW:  BOJ ETF Exit Fretting Is A Thing But Shouldn't Be. BOJ Buys Slower But Still Bigly

<p>Fast Retailing looks like finally having the potential to become number one.</p><p>Like other Japanese apparel retailers, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a> faces challenges over the coming six months but its discipline and forward planning bode well for improving returns.</p><p>It is overseas markets where its real opportunity and challenges lie but Uniqlo looks like having more traction globally than ever before, fast becoming a true global retailer.</p><p>While disciplined supply chain management and product development help, there is one ingredient above all that looks set to help it compete at the top of the rankings: at last it has a coherent, meaningful – and increasingly global – brand.</p><p>Today, Uniqlo is regarded as an innovator not through design but through fabric development, using its access to Japan’s myriad textile and technology businesses to adapt new inventions to apparel and accessories.</p><p>This coherent branding means Fast Retailing looks set to take on Inditex and H&amp;M for leadership at the top of the global apparel rankings.</p><p>On the profit side, while Fast Retailing has for long been a profit machine compared to its Japanese peers, it has always lagged companies like Inditex because of its insistence of maintaining store stock levels. It is now working to rationalise this policy with significant implications for future profitability.</p><p>The following is an in-depth review of Uniqlo from a brand, merchandising and marketing perspective.</p>

Fast Retailing looks like finally having the potential to become number one.Like other Japanese apparel retailers, Fast Retailing (9983 JP) faces challenges over the coming six months but its discipline and forward planning bode well for improving returns.It is overseas markets where its real opportunity and challenges lie but Uniqlo looks like having more traction globally than ever before, fast becoming a true global retailer.While disciplined supply chain management and product development help, there is one ingredient above all that looks set to help it compete at the top of the rankings: at last it has a coherent, meaningful – and increasingly global – brand.Today, Uniqlo is regarded as an innovator not through design but through fabric development, using its access to Japan’s myriad textile and technology businesses to adapt new inventions to apparel and accessories.This coherent branding means Fast Retailing looks set to take on Inditex and H&amp;M for leadership at the top of the global apparel rankings.On the profit side, while Fast Retailing has for long been a profit machine compared to its Japanese peers, it has always lagged companies like Inditex because of its insistence of maintaining store stock levels. It is now working to rationalise this policy with significant implications for future profitability.The following is an in-depth review of Uniqlo from a brand, merchandising and marketing perspective.

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

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.

Alibaba Group Holding  / Equity Bottom-Up

<p>On the 10th of November, the State Administration for Industry and Commerce (SAIC) issued a draft legislature on the “Guidelines on Anti-monopoly in the Field of Platform Economy”. Following the news, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>’s share price fell by around 12% over the course of the last week, despite the company’s record-smashing Singles’ Day sales. In this note, we take a look at how the new anti-monopoly regulations would affect Alibaba. </p>

On the 10th of November, the State Administration for Industry and Commerce (SAIC) issued a draft legislature on the “Guidelines on Anti-monopoly in the Field of Platform Economy”. Following the news, Alibaba Group (BABA US)’s share price fell by around 12% over the course of the last week, despite the company’s record-smashing Singles’ Day sales. In this note, we take a look at how the new anti-monopoly regulations would affect Alibaba. 

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

MSCI Emerging Markets Index / Technical Analysis

<p style="text-align: justify;">Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in <strong>China, India, Taiwan</strong>, and <strong>South Korea </strong>continue to be a major focus when it comes to individual stock recommendations.</p>

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1-year highs -- a positive risk-on signal. Stocks doing business in China, India, Taiwan, and South Korea continue to be a major focus when it comes to individual stock recommendations.

Japan

FAST RETAILING CO., LTD. operates a chain of clothing stores, UNIQLO, throughout Japan and in other markets overseas including UK, China, Hong Kong, South Korea, US, France, Singapore and Russia.  The Company designs, manufactures, and retails its own line of casual clothing.

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Fast Retailing (9983 JP)

Muji Leaks Red After Tough Summer

Ryohin Keikaku (Muji) had a tough six months from March but its plans to grow food sales from around 6% to 30% of sales along with expansion in...

Michael Causton

JAPAN FLOW: BOJ ETF Exit Fretting Is A Thing But Shouldn't Be. BOJ Buys Slower But Still Bigly

The BOJ is still buying, and Kuroda-san says it will continue, despite a new wave of questions about the policy, and eventual exiting. Exit is...

Travis Lundy

Uniqlo: The Toyota of Clothing

Uniqlo's branding is at last coming together outside Japan. For the first time, we finally believe Fast Retailing may be on track for global...

Michael Causton

Alibaba: Crime and Punishment

How does the new anti-monopoly regulation affect Alibaba? Does the new legislature prohibit exclusive agreements? Does this mean Alibaba would lose...

Supun Walpola

Emerging Markets Breaking Out

Emerging markets (EEM-US) are breaking above major $46.30 resistance to hit highs not seen since June 2018. Additionally, RS on EEM-US is near 1...

Vermilion Research

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