Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div>The short notional in the market for the data released 28 April is US$33.44bn (down by US$62mm excluding FX movements and ETFs) with the largest short positions in <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1"></a><a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:27445:1">Softbank Corp (9434 JP)</a>. </div><div>Most shorted stocks as a percentage of free float are <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a>, <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:3700:1">Anritsu Corp (6754 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>, <a href="https://www.smartkarma.com/entities/nitta-gelatin-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1481:1">Nitta Gelatin (4977 JP)</a> and <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1">Leopalace21 Corp (8848 JP)</a> while the stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/nitta-gelatin-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1481:1">Nitta Gelatin (4977 JP)</a>, <a href="https://www.smartkarma.com/entities/vital-ksk-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7398:1">Vital Ksk Holdings (3151 JP)</a>, <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a>, <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:2007:1">Katakura Industries (3001 JP)</a> and <a href="https://www.smartkarma.com/entities/zojirushi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:19842:1">Zojirushi Corp (7965 JP)</a>.</div><div>The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/astellas-pharma-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:6091:1">Astellas Pharma (4503 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18107:1">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12926:1">Kubota Corp (6326 JP)</a> and <a href="https://www.smartkarma.com/entities/ana-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:5308:1">Ana Holdings (9202 JP)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5718:1">Shiseido Co Ltd (4911 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:11266:1">Japan Exchange Group (8697 JP)</a> and <a href="https://www.smartkarma.com/entities/monotaro-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15441:1">Monotaro Co Ltd (3064 JP)</a>.   </div><div>Sectorally, short positions increased in Health Care (US$175m), Communication Services (US$49m) and Industrials (US$42m) while shorts decreased in Consumer Staples (US$118m) and Consumer Discretionary (US$86m).</div>

The short notional in the market for the data released 28 April is US$33.44bn (down by US$62mm excluding FX movements and ETFs) with the largest short positions in Itochu Corp (8001 JP), Fast Retailing (9983 JP), Toyota Motor (7203 JP), Canon Inc (7751 JP) and Softbank Corp (9434 JP). Most shorted stocks as a percentage of free float are Aruhi Corp (7198 JP), Anritsu Corp (6754 JP), Taiyo Yuden (6976 JP), Nitta Gelatin (4977 JP) and Leopalace21 Corp (8848 JP) while the stocks with the highest days to cover are Nitta Gelatin (4977 JP), Vital Ksk Holdings (3151 JP), Aruhi Corp (7198 JP), Katakura Industries (3001 JP) and Zojirushi Corp (7965 JP).The largest increases in short notional over the week were Astellas Pharma (4503 JP), Advantest Corp (6857 JP), Kubota Corp (6326 JP) and Ana Holdings (9202 JP) while shorts were covered in Shiseido Co Ltd (4911 JP), Fast Retailing (9983 JP), Japan Exchange Group (8697 JP) and Monotaro Co Ltd (3064 JP).   Sectorally, short positions increased in Health Care (US$175m), Communication Services (US$49m) and Industrials (US$42m) while shorts decreased in Consumer Staples (US$118m) and Consumer Discretionary (US$86m).

More Covering on Consumer Staples and Discretionary

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

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.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/anta-sports-products-ltd" target="_blank" rel="noopener">Anta Sports Products (2020 HK)</a> is a leading Chinese retailer of indoor &amp; outdoor sports footwear, apparel, and accessories carrying brands such as FILA, ANTA, Descente, KOLON Sports, Sprandi and Kingkow. Revenue has grown by 30.6% CAGR over the last five years and operating profit margins have improved from 22.7% to 25.5% over the same period. The company’s business model requires low levels of capital expenditure and working capital, resulting in a five-year free cash flow CAGR rate of 37%.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/129/615/original/image_66205574921587786522829.png?1587786524" width="480" height="288" class="editor-image img-responsive" data-smartkarma-image-id="129615"></figure>
<div class="content-caption">Source: Cap IQ</div>
Such performance warrants a rich valuation. Although not cheap, ANTA Sports’ forward multiples don’t really seem to justify the company’s future potential. Currently at a 7% discount to the peer average FY 2 PE of 21.3x, we believe ANTA Sports is undervalued relative to the company's potential growth and compared to regional peers.
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 48.0pt;">
 
</td>
<td style="width: 53.0pt;">
 
</td>
<td colspan="3" style="text-align: center; width: 149pt;">
PE
</td>
<td colspan="3" style="text-align: center; width: 2in;">
EV/EBIT
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
 
</td>
<td style="width: 53.0pt;">
 
</td>
<td style="text-align: right; width: 54.7pt;">
FY 0
</td>
<td style="text-align: right; width: 47.15pt;">
FY 1
</td>
<td style="text-align: right; width: 47.15pt;">
FY 2
</td>
<td style="text-align: right; width: 48pt;">
FY 0
</td>
<td style="text-align: right; width: 48pt;">
FY 1
</td>
<td style="text-align: right; width: 48pt;">
FY 2
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
SEHK:2020
</td>
<td style="width: 53.0pt;">
ANTA Sports
</td>
<td style="text-align: right; width: 54.7pt;">
              28.8
</td>
<td style="text-align: right; width: 47.15pt;">
           27.9
</td>
<td style="text-align: right; width: 47.15pt;">
           19.7
</td>
<td style="text-align: right; width: 48pt;">
           19.1
</td>
<td style="text-align: right; width: 48pt;">
           18.8
</td>
<td style="text-align: right; width: 48pt;">
           13.7
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
SEHK:2331
</td>
<td style="width: 53.0pt;">
Li Ning
</td>
<td style="text-align: right; width: 54.7pt;">
              34.8
</td>
<td style="text-align: right; width: 47.15pt;">
           34.8
</td>
<td style="text-align: right; width: 47.15pt;">
           24.6
</td>
<td style="text-align: right; width: 48pt;">
           25.3
</td>
<td style="text-align: right; width: 48pt;">
           26.2
</td>
<td style="text-align: right; width: 48pt;">
           18.3
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
TSE:7936
</td>
<td style="width: 53.0pt;">
ASICS
</td>
<td style="text-align: right; width: 54.7pt;">
              26.0
</td>
<td style="text-align: right; width: 47.15pt;">
           57.9
</td>
<td style="text-align: right; width: 47.15pt;">
           17.8
</td>
<td style="text-align: right; width: 48pt;">
           20.6
</td>
<td style="text-align: right; width: 48pt;">
           37.1
</td>
<td style="text-align: right; width: 48pt;">
           13.6
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
TSE:8111
</td>
<td style="width: 53.0pt;">
Goldwin
</td>
<td style="text-align: right; width: 54.7pt;">
              27.0
</td>
<td style="text-align: right; width: 47.15pt;">
           19.9
</td>
<td style="text-align: right; width: 47.15pt;">
           16.9
</td>
<td style="text-align: right; width: 48pt;">
           18.1
</td>
<td style="text-align: right; width: 48pt;">
           13.8
</td>
<td style="text-align: right; width: 48pt;">
           11.6
</td>
</tr>
<tr>
<td style="width: 48.0pt;">
TSE:9983
</td>
<td style="width: 53.0pt;">
Fast Retailing
</td>
<td style="text-align: right; width: 54.7pt;">
              29.9
</td>
<td style="text-align: right; width: 47.15pt;">
           44.7
</td>
<td style="text-align: right; width: 47.15pt;">
           27.5
</td>
<td style="text-align: right; width: 48pt;">
           16.7
</td>
<td style="text-align: right; width: 48pt;">
           26.6
</td>
<td style="text-align: right; width: 48pt;">
           16.7
</td>
</tr>
<tr>
<td style="width: 48.0pt;"></td>
<td style="width: 53.0pt;">
Average
</td>
<td style="text-align: right; width: 54.7pt;">
              29.3 
</td>
<td style="text-align: right; width: 47.15pt;">
           37.0 
</td>
<td style="text-align: right; width: 47.15pt;">
           21.3 
</td>
<td style="text-align: right; width: 48pt;">
           20.0 
</td>
<td style="text-align: right; width: 48pt;">
           24.5 
</td>
<td style="text-align: right; width: 48pt;">
           14.8 
</td>
</tr>
</tbody>
</table>
<div class="content-caption">Source: Cap IQ</div>

Anta Sports Products (2020 HK) is a leading Chinese retailer of indoor &amp; outdoor sports footwear, apparel, and accessories carrying brands such as FILA, ANTA, Descente, KOLON Sports, Sprandi and Kingkow. Revenue has grown by 30.6% CAGR over the last five years and operating profit margins have improved from 22.7% to 25.5% over the same period. The company’s business model requires low levels of capital expenditure and working capital, resulting in a five-year free cash flow CAGR rate of 37%.

Source: Cap IQ
Such performance warrants a rich valuation. Although not cheap, ANTA Sports’ forward multiples don’t really seem to justify the company’s future potential. Currently at a 7% discount to the peer average FY 2 PE of 21.3x, we believe ANTA Sports is undervalued relative to the company's potential growth and compared to regional peers.




 


 


PE


EV/EBIT




 


 


FY 0


FY 1


FY 2


FY 0


FY 1


FY 2




SEHK:2020


ANTA Sports


              28.8


           27.9


           19.7


           19.1


           18.8


           13.7




SEHK:2331


Li Ning


              34.8


           34.8


           24.6


           25.3


           26.2


           18.3




TSE:7936


ASICS


              26.0


           57.9


           17.8


           20.6


           37.1


           13.6




TSE:8111


Goldwin


              27.0


           19.9


           16.9


           18.1


           13.8


           11.6




TSE:9983


Fast Retailing


              29.9


           44.7


           27.5


           16.7


           26.6


           16.7





Average


              29.3 


           37.0 


           21.3 


           20.0 


           24.5 


           14.8 




Source: Cap IQ

ANTA Sports Products Ltd: A Sports Uniqlo?

<div>The short notional in the market for the data released 21 April is US$33.19bn (down by US$351mm excluding FX movements and ETFs) with the largest short positions in <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1"></a><a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/kddi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:639:1">KDDI Corp (9433 JP)</a>. <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:27445:1"></a></div><div>Most shorted stocks as a percentage of free float are <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a>, <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:3700:1">Anritsu Corp (6754 JP)</a>, <a href="https://www.smartkarma.com/entities/aiming-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:27325:1">Aiming Inc (3911 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a> and <a href="https://www.smartkarma.com/entities/nitta-gelatin-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1481:1">Nitta Gelatin (4977 JP)</a> <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1"></a>while the stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/nitta-gelatin-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1481:1">Nitta Gelatin (4977 JP)</a>, <a href="https://www.smartkarma.com/entities/aruhi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:26072:1">Aruhi Corp (7198 JP)</a>, <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:2007:1">Katakura Industries (3001 JP)</a>, <a href="https://www.smartkarma.com/entities/vital-ksk-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7398:1">Vital Ksk Holdings (3151 JP)</a> and <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>.</div><div>The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:280:1">Tokyo Electron (8035 JP)</a>, <a href="https://www.smartkarma.com/entities/ms-ad-insurance-group-holdin" target="_blank" rel="noopener" data-smartkarma-citation="entities:631:1">Ms&amp;Ad Insurance Group Holdin (8725 JP)</a>, <a href="https://www.smartkarma.com/entities/suzuki-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:732:1">Suzuki Motor (7269 JP)</a> and <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18107:1">Advantest Corp (6857 JP)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12933:1">Kao Corp (4452 JP)</a>, <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:3:1">Aeon Co Ltd (8267 JP)</a> and <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5718:1">Shiseido Co Ltd (4911 JP)</a>.</div><div>Sectorally, short positions increased in Information Technology (US$329m), Financials (US$129m) and Real Estate (US$127m) while shorts decreased in Consumer Staples (US$550m) and Consumer Discretionary (US$367m).</div>

The short notional in the market for the data released 21 April is US$33.19bn (down by US$351mm excluding FX movements and ETFs) with the largest short positions in Itochu Corp (8001 JP), Fast Retailing (9983 JP), Toyota Motor (7203 JP), Canon Inc (7751 JP) and KDDI Corp (9433 JP). Most shorted stocks as a percentage of free float are Aruhi Corp (7198 JP), Anritsu Corp (6754 JP), Aiming Inc (3911 JP), Taiyo Yuden (6976 JP) and Nitta Gelatin (4977 JP) while the stocks with the highest days to cover are Nitta Gelatin (4977 JP), Aruhi Corp (7198 JP), Katakura Industries (3001 JP), Vital Ksk Holdings (3151 JP) and Itochu Corp (8001 JP).The largest increases in short notional over the week were Tokyo Electron (8035 JP), Ms&amp;Ad Insurance Group Holdin (8725 JP), Suzuki Motor (7269 JP) and Advantest Corp (6857 JP) while shorts were covered in Fast Retailing (9983 JP), Kao Corp (4452 JP), Aeon Co Ltd (8267 JP) and Shiseido Co Ltd (4911 JP).Sectorally, short positions increased in Information Technology (US$329m), Financials (US$129m) and Real Estate (US$127m) while shorts decreased in Consumer Staples (US$550m) and Consumer Discretionary (US$367m).

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/454/original/2020-04-18_16-16-49.png?1587194226" class="editor-image img-responsive" data-smartkarma-image-id="128454"></figure><div class="content-caption">Source • Japan Analytics</div>MARKING TIME - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on Wednesday and Thursday despite the relative calm and are on a path for April to equal the total purchases made in March. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/455/original/2020-04-18_17-43-44.png?1587199447" class="editor-image img-responsive" data-smartkarma-image-id="128455"></figure><div class="content-caption">Source • Japan Analytics</div>MARKING MULTIPLES - As we have been covering in our daily Results &amp; Revisions updates, forward earnings continue to decline gradually. As previously noted, the market multiple will rise over the next month as full-year forecasts for FY2021 are announced to at least the early 2020 peak of 17.6 times. This adjustment process will be complicated by a lack of initial forecasts from many leading companies and by a delay in the publication of annual yuho audited financial statements until the late summer. 'Robust' analysis will be at a premium.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/651/original/File%202020-04-20%204%2023%2024.jpeg?1587324271" class="editor-image img-responsive" data-smartkarma-image-id="128651"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/652/original/File%202020-04-20%204%2024%2019.jpeg?1587324282" class="editor-image img-responsive" data-smartkarma-image-id="128652"></figure><div class="content-caption">Source • ourworldindata.org</div>COVID CASE COUNT - Japan's COVID-19 daily case-count has trended down this week compared to the weel before and is now on a par with Sweden and Singapore. Daily fatalities are averaging double figures as this lagging statistics reflects the higher case count of two weeks ago and are still within the East Asian 'range' of 0-10 a day. New case counts of below 100 and a declining trend, as is the case in South Korea, Denmark and Austria will be required by the end of Golden Week on May 6th for Japan to consider any relaxation of its now nationwide 'state of emergency'. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/558/original/File%202020-04-19%2016%2028%2027.jpeg?1587281926" class="editor-image img-responsive" data-smartkarma-image-id="128558"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/559/original/File%202020-04-19%2016%2023%2014.jpeg?1587281952" class="editor-image img-responsive" data-smartkarma-image-id="128559"></figure><div class="content-caption">Source • ourworldindata.org</div>JAPAN'S TESTING VACUUM - We have noted the lack of testing in Japan in an earlier <a href="https://www.smartkarma.com/insights/japan-market-update-hit-the-boj-bid-and-wait-for-the-absolute-value-opportunity" target="_blank" data-smartkarma-citation="insights:37670" rel="noopener">Insight</a> and the two charts above from Oxford's Global Change Data Lab highlights Japan's outlier status in this regard and the implications for confirmed case counts and confirmed deaths. This deficiency has led many data scientists to study excess mortality rates. At present, there is insufficient data from the Health Ministry in Japan to make any valid comparisons. Based on other countries, Japan's excess mortality will likely price to be slightly higher for the over 65s and lower for everyone else. In any case, a massive testing capability will form a key component of any viable exit strategy.     <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/479/original/File%202020-04-19%206%2024%2053.jpeg?1587245112" class="editor-image img-responsive" data-smartkarma-image-id="128479"></figure><div class="content-caption">Source • stopcovid19.jp</div>OVERSHOOT - Unfortunately for patients and the government, hospitals are now full in many prefectures. Central Tokyo hospitals are turning away patients requiring ambulances to take patients to outlying parts of the prefecture - although this situation is not unusual in normal times. Despite ample time to prepare, the government has failed to provide for the 'overshoot' that they had been warning the public it was necessary to avoid. Japan also has a lower ratio of intensive care beds, (5) per 100,000 people, than many other developed countries. The previous policy of hospitalising every case, however mild, has been reversed and local governments have now requisitioned 210,000 hotel rooms to house those not in need of urgent medical intervention. While Japan's COVID-19 strategy has, so far, followed the less economically-damaging Swedish model (see below), a failure to address the hospital overshoot risks the country being forced to follow the UK's 'u-turn' into total lockdown from which exit strategies are much harder. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/650/original/2020-04-20_04-02-00.png?1587322973" class="editor-image img-responsive" data-smartkarma-image-id="128650"></figure><div class="content-caption">Source • Tokyo Metropolitan Government</div>PEAKING OUT? On Sunday, Tokyo only 107 new cases, the lowest Sunday total for three weeks and the first decline. Tokyo now has over 3,000 cases out of a population of almost 14 million. The rate of doubling is now decelerating from one week to two weeks. Meanwhile, transit through major railway stations has declined by 70-80% across Japan. A lowering of new cases next week will be crucial to keep the hospitals from overflowing and the Prime Minister's reputation from falling further.FALLOUT - PM Abe's political capital is another casualty of this disease. It has emerged that his coalition partner the lay-Buddhist Komeito party threatened to walk out if the cash-for-all policy was not implemented requiring Abe to amend a previously-agreed budget bill much to the fury of the Ministry of Finance. The latter was able to require an application process as a means of limiting the amounts dispersed. However, in a bow to the changing circumstance, this process can be conducted online without, it seems, the need for in-person hanko certification. An additional complication is that Abe has 'fallen out' with his main bureaucratic 'fixer' and the main conduit with Komeito, Chief Cabinet Secretary Suga. Abe's poll ratings will probably never recover, and only his long-cherished desire to open the Tokyo Olympics in July 20121 will keep him in office. As will be true in many countries, the COVID-19 policy post mortems will be brutal and fatal for many previously Teflon-like political careers.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/486/original/File%202020-04-18%2013%2054%2022.jpeg?1587246944" class="editor-image img-responsive" data-smartkarma-image-id="128486"></figure><div class="content-caption">Source • Agoop</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/488/original/File%202020-04-18%2013%2053%2001.jpeg?1587247186" class="editor-image img-responsive" data-smartkarma-image-id="128488"></figure><div class="content-caption">Source • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward   Orange Line = Concentration of people at 11 pm</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/490/original/File%202020-04-18%2014%2000%2004.jpeg?1587247628" class="editor-image img-responsive" data-smartkarma-image-id="128490"></figure><div class="content-caption">Source • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward  Red Line = Population earning more than ¥15m a year</div>HOTSPOTS &amp; FAT CATS - Some support for the government's policy of shutting down Tokyo's nightlife comes from data which correlates case count per Tokyo ward and population clusters in each area at 11 pm.  The correlation is much higher than both population levels and public transport transit through each ward. The second highest correlation was with income levels, suggesting that Tokyo' rich have a greater tendency to frequent bars, restaurants and other forms of evening entertainment, while no doubt considering themselves immune. This correlation has been anecdotally confirmed by the growing number of figures from the media and entertainment world who have contracted the disease and bears out the Tokyo Metropolitan Government's focus on avoiding the 3 'C's - Congregations Conversing in Confined spaces. The plug has been pulled on Tokyo's 'mizushobai' or 'water trade'.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/663/original/File%202020-04-20%205%2020%2010.jpeg?1587327650" class="editor-image img-responsive" data-smartkarma-image-id="128663"></figure><div class="content-caption">Source • Johns Hopkins CSSE</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/128/478/original/2020-04-19_06-16-22.png?1587244624" class="editor-image img-responsive" data-smartkarma-image-id="128478"></figure><div class="content-caption">Source • LockdownTV</div>PROF GIESECKE &amp; THE SWEDISH MODEL - Lastly, this <a href="https://youtu.be/bfN2JWifLCY" target="_blank" rel="noopener">video</a> of an interview with retired Swedish epidemiologist, Professor Johan Giesecke, provides an update on the policy options that governments have faced in their responses to COVID-19, the background to Sweden's policy and the difficulties of exiting from lockdown strategies. A summary of his talk is as follows:-<blockquote>
Lockdown policies are not evidence-based
The correct policy is to protect the old and the frail only - this will eventually lead to herd immunity as a by-product - the initial UK response, which was similar to Sweden's was better  - before they made a 180 degree U-turn
The UK's Imperial College paper was not very good and he has never seen an unpublished paper have so much policy impact - the paper was  too pessimistic and any such models are a dubious basis for public policy
The flattening of the curve is due to the most vulnerable dying first as much as the lockdown policy
The outcomes will eventually be similar for all countries regardless of policy pursued
Covid-19 is a mild disease similar to the flu, and it was the novelty of the disease that scared people - the fatality rate of Covid-19 is the region of 0.1%
At least 50% of the population will be shown to have already had the disease when mass antibody testing becomes available - achieving 'herd immunity'
</blockquote>In the DETAIL below, we shall explore some of the emerging themes for the post-COVID-19 world, review the results, revisions and initial forecast announcements made on Friday and, finally, look at our lists the Moving Average 'Outliers'.  The positive/neutral/negative balance for Friday's three results announcements was 1:0:2. For the 20 revisions/forecasts, the split was 7:1:12 - although two of the positive outcomes were securities brokers making initial 'forecasts' of a year-on-year return to profitability after the full-year results have been finalised. Peer Groups revising down included Advertising Services, Apparel &amp; Footwear, Retail-Apparel &amp; Footwear, Hotels &amp; Resorts, Employment &amp; Staffing, and Restaurants. Upward revisions were seen in Retail-Food &amp; Drink, Personal Products, and Public Relations.

Source • Japan AnalyticsMARKING TIME - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on Wednesday and Thursday despite the relative calm and are on a path for April to equal the total purchases made in March. Source • Japan AnalyticsMARKING MULTIPLES - As we have been covering in our daily Results &amp; Revisions updates, forward earnings continue to decline gradually. As previously noted, the market multiple will rise over the next month as full-year forecasts for FY2021 are announced to at least the early 2020 peak of 17.6 times. This adjustment process will be complicated by a lack of initial forecasts from many leading companies and by a delay in the publication of annual yuho audited financial statements until the late summer. 'Robust' analysis will be at a premium.Source • ourworldindata.orgCOVID CASE COUNT - Japan's COVID-19 daily case-count has trended down this week compared to the weel before and is now on a par with Sweden and Singapore. Daily fatalities are averaging double figures as this lagging statistics reflects the higher case count of two weeks ago and are still within the East Asian 'range' of 0-10 a day. New case counts of below 100 and a declining trend, as is the case in South Korea, Denmark and Austria will be required by the end of Golden Week on May 6th for Japan to consider any relaxation of its now nationwide 'state of emergency'. Source • ourworldindata.orgJAPAN'S TESTING VACUUM - We have noted the lack of testing in Japan in an earlier Insight and the two charts above from Oxford's Global Change Data Lab highlights Japan's outlier status in this regard and the implications for confirmed case counts and confirmed deaths. This deficiency has led many data scientists to study excess mortality rates. At present, there is insufficient data from the Health Ministry in Japan to make any valid comparisons. Based on other countries, Japan's excess mortality will likely price to be slightly higher for the over 65s and lower for everyone else. In any case, a massive testing capability will form a key component of any viable exit strategy.     Source • stopcovid19.jpOVERSHOOT - Unfortunately for patients and the government, hospitals are now full in many prefectures. Central Tokyo hospitals are turning away patients requiring ambulances to take patients to outlying parts of the prefecture - although this situation is not unusual in normal times. Despite ample time to prepare, the government has failed to provide for the 'overshoot' that they had been warning the public it was necessary to avoid. Japan also has a lower ratio of intensive care beds, (5) per 100,000 people, than many other developed countries. The previous policy of hospitalising every case, however mild, has been reversed and local governments have now requisitioned 210,000 hotel rooms to house those not in need of urgent medical intervention. While Japan's COVID-19 strategy has, so far, followed the less economically-damaging Swedish model (see below), a failure to address the hospital overshoot risks the country being forced to follow the UK's 'u-turn' into total lockdown from which exit strategies are much harder. Source • Tokyo Metropolitan GovernmentPEAKING OUT? On Sunday, Tokyo only 107 new cases, the lowest Sunday total for three weeks and the first decline. Tokyo now has over 3,000 cases out of a population of almost 14 million. The rate of doubling is now decelerating from one week to two weeks. Meanwhile, transit through major railway stations has declined by 70-80% across Japan. A lowering of new cases next week will be crucial to keep the hospitals from overflowing and the Prime Minister's reputation from falling further.FALLOUT - PM Abe's political capital is another casualty of this disease. It has emerged that his coalition partner the lay-Buddhist Komeito party threatened to walk out if the cash-for-all policy was not implemented requiring Abe to amend a previously-agreed budget bill much to the fury of the Ministry of Finance. The latter was able to require an application process as a means of limiting the amounts dispersed. However, in a bow to the changing circumstance, this process can be conducted online without, it seems, the need for in-person hanko certification. An additional complication is that Abe has 'fallen out' with his main bureaucratic 'fixer' and the main conduit with Komeito, Chief Cabinet Secretary Suga. Abe's poll ratings will probably never recover, and only his long-cherished desire to open the Tokyo Olympics in July 20121 will keep him in office. As will be true in many countries, the COVID-19 policy post mortems will be brutal and fatal for many previously Teflon-like political careers.Source • AgoopSource • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward   Orange Line = Concentration of people at 11 pmSource • @shinagawajp &gt; Blue bars = COVID-19 cases by Tokyo Ward  Red Line = Population earning more than ¥15m a yearHOTSPOTS &amp; FAT CATS - Some support for the government's policy of shutting down Tokyo's nightlife comes from data which correlates case count per Tokyo ward and population clusters in each area at 11 pm.  The correlation is much higher than both population levels and public transport transit through each ward. The second highest correlation was with income levels, suggesting that Tokyo' rich have a greater tendency to frequent bars, restaurants and other forms of evening entertainment, while no doubt considering themselves immune. This correlation has been anecdotally confirmed by the growing number of figures from the media and entertainment world who have contracted the disease and bears out the Tokyo Metropolitan Government's focus on avoiding the 3 'C's - Congregations Conversing in Confined spaces. The plug has been pulled on Tokyo's 'mizushobai' or 'water trade'.Source • Johns Hopkins CSSESource • LockdownTVPROF GIESECKE &amp; THE SWEDISH MODEL - Lastly, this video of an interview with retired Swedish epidemiologist, Professor Johan Giesecke, provides an update on the policy options that governments have faced in their responses to COVID-19, the background to Sweden's policy and the difficulties of exiting from lockdown strategies. A summary of his talk is as follows:-
Lockdown policies are not evidence-based
The correct policy is to protect the old and the frail only - this will eventually lead to herd immunity as a by-product - the initial UK response, which was similar to Sweden's was better  - before they made a 180 degree U-turn
The UK's Imperial College paper was not very good and he has never seen an unpublished paper have so much policy impact - the paper was  too pessimistic and any such models are a dubious basis for public policy
The flattening of the curve is due to the most vulnerable dying first as much as the lockdown policy
The outcomes will eventually be similar for all countries regardless of policy pursued
Covid-19 is a mild disease similar to the flu, and it was the novelty of the disease that scared people - the fatality rate of Covid-19 is the region of 0.1%
At least 50% of the population will be shown to have already had the disease when mass antibody testing becomes available - achieving 'herd immunity'
In the DETAIL below, we shall explore some of the emerging themes for the post-COVID-19 world, review the results, revisions and initial forecast announcements made on Friday and, finally, look at our lists the Moving Average 'Outliers'.  The positive/neutral/negative balance for Friday's three results announcements was 1:0:2. For the 20 revisions/forecasts, the split was 7:1:12 - although two of the positive outcomes were securities brokers making initial 'forecasts' of a year-on-year return to profitability after the full-year results have been finalised. Peer Groups revising down included Advertising Services, Apparel &amp; Footwear, Retail-Apparel &amp; Footwear, Hotels &amp; Resorts, Employment &amp; Staffing, and Restaurants. Upward revisions were seen in Retail-Food &amp; Drink, Personal Products, and Public Relations.

🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 19th April - Overshoot

Event-Driven

Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" rel="noopener" data-smartkarma-citation="entities:22909:1">Nikkei 225 (NKY INDEX)</a> but then recovered sharply as fundamentals came to the fore and investors reassessed the likelihood of large scale dividend cancellations similar to those announced in Europe.In this Insight, we look at how the dividend futures have moved in the last few weeks and estimate fair values for the Nikkei225 2020 dividend futures under different scenarios.Given the strong rally in the dividend futures, the risk reward ratio at current prices is not as compelling as it was when we wrote our <a href="https://www.smartkarma.com/insights/nikkei-225-dividend-futures-buy-the-selloff" target="_blank" rel="noopener">previous Insight</a>. We would recommend trimming long positions as the market moves higher as the easy gains have been made and upside looks limited from here.

Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the Nikkei 225 (NKY INDEX) but then recovered sharply as fundamentals came to the fore and investors reassessed the likelihood of large scale dividend cancellations similar to those announced in Europe.In this Insight, we look at how the dividend futures have moved in the last few weeks and estimate fair values for the Nikkei225 2020 dividend futures under different scenarios.Given the strong rally in the dividend futures, the risk reward ratio at current prices is not as compelling as it was when we wrote our previous Insight. We would recommend trimming long positions as the market moves higher as the easy gains have been made and upside looks limited from here.

Nikkei225 Dividend Futures: The Easy Gains Have Been Made

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)

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🇯🇵 JAPAN MARKET (& COVID-19) UPDATE 19th April - Overshoot

MARKING TIME - Japanse equities were becalmed last week, rising by 0.84%, while the Yen traded at 107 all week. The Bank of Japan bought ETFs on...

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Nikkei225 Dividend Futures: The Easy Gains Have Been Made

Since our last Insight, the Nikkei225 2020 dividend futures crashed along with the Nikkei 225 (NKY INDEX) but then recovered sharply as...

Brian Freitas

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