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

<p style="text-align: justify;">In our October 1 <em>Int’l Compass </em>we highlighted our belief that the lows were in place for this recent correction and that, combined with mostly healthy market dynamics, a bullish outlook is appropriate if the MSCI ACWI (ACWI-US) is above $77 support and, if the MSCI EM (EEM-US) is above $42.30 support. These indexes and market dynamics have only improved since October 1. As a result, our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. Below we summarize the basis for our bullish outlook. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.</p>

In our October 1 Int’l Compass we highlighted our belief that the lows were in place for this recent correction and that, combined with mostly healthy market dynamics, a bullish outlook is appropriate if the MSCI ACWI (ACWI-US) is above $77 support and, if the MSCI EM (EEM-US) is above $42.30 support. These indexes and market dynamics have only improved since October 1. As a result, our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. Below we summarize the basis for our bullish outlook. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.

Global Equity Strategy: Bullish Outlook Intact

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

<p>With the planned IPO for Kioxia being delayed for at least a few months, we wonder whether this brings Toshiba Tec more into play. As the lone listed subsidiary of Toshiba to not have its fate decided yet, Toshiba Tec is in an interesting position, especially because we consider its portfolio of products and services to be quite an interesting asset when moving into the data age.</p>

With the planned IPO for Kioxia being delayed for at least a few months, we wonder whether this brings Toshiba Tec more into play. As the lone listed subsidiary of Toshiba to not have its fate decided yet, Toshiba Tec is in an interesting position, especially because we consider its portfolio of products and services to be quite an interesting asset when moving into the data age.

Toshiba Tec – Where Is Toshiba Tec Headed?

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/994/original/Tokyo_Stock_Exchange_logo.png?1601590198" class="editor-image img-responsive" data-smartkarma-image-id="162994"></figure><p></p><p><strong>FAILOVER FAILURE</strong> - Thursday's unprecedented failure of the Tokyo Stock Exchange's arrowhead trading system developed in co-ordination with <a href="https://www.smartkarma.com/entities/fujitsu-ltd" target="_blank" data-smartkarma-citation="entities:16968:1" rel="noopener">Fujitsu (6702 JP)</a> is highly embarrassing for the newly-minted administration of Prime Minster Suga who has placed particular emphasis on improving Japan's digital capabilities. Trading will resume this morning as normal at 9 am Japan Time.</p><p><strong>PASSING THE BUCK</strong> - In the<strong> DETAIL</strong> section below, we shall provide a summary of the explanations that were offered by the senior management of <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange Group (8697 JP)</a> (JPX) at a 98 minute-long press conference that was held last night. JPX places the 'blame' for this incident squarely on Fujitsu. However, as JPX admitted, Fujitsu is 'just a vendor' and responsibility for the smooth function of the exchange's systems is the responsibility of JPX. We would also note that this is not the first time that the exchange's protocols have failed to failover and that the arrowhead system was upgraded as recently as November 5 2019. At that time the JPX press release stated:-</p><blockquote><p><span>The new version of “arrowhead” uses the existing system as a base for an upgraded technology that offers users the familiar, high speed, high-reliability experience, while delivering even greater convenience. The trading system and transaction services have been improved in order to respond to changes in the business environment and better meet the needs of users, providing stronger overall market functionality.</span></p></blockquote><p></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/995/original/File%202020-10-01%2016%2020%2047.jpeg?1601591437" class="editor-image img-responsive" data-smartkarma-image-id="162995"></figure><div class="content-caption">Source: Nikkei</div>

FAILOVER FAILURE - Thursday's unprecedented failure of the Tokyo Stock Exchange's arrowhead trading system developed in co-ordination with Fujitsu (6702 JP) is highly embarrassing for the newly-minted administration of Prime Minster Suga who has placed particular emphasis on improving Japan's digital capabilities. Trading will resume this morning as normal at 9 am Japan Time.PASSING THE BUCK - In the DETAIL section below, we shall provide a summary of the explanations that were offered by the senior management of Japan Exchange Group (8697 JP) (JPX) at a 98 minute-long press conference that was held last night. JPX places the 'blame' for this incident squarely on Fujitsu. However, as JPX admitted, Fujitsu is 'just a vendor' and responsibility for the smooth function of the exchange's systems is the responsibility of JPX. We would also note that this is not the first time that the exchange's protocols have failed to failover and that the arrowhead system was upgraded as recently as November 5 2019. At that time the JPX press release stated:-The new version of “arrowhead” uses the existing system as a base for an upgraded technology that offers users the familiar, high speed, high-reliability experience, while delivering even greater convenience. The trading system and transaction services have been improved in order to respond to changes in the business environment and better meet the needs of users, providing stronger overall market functionality.Source: Nikkei

🇯🇵 JAPAN • Fujitsu Fails to Failover > JPX Tries to Pass the Buck

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/974/original/File%202020-10-01%2015%2010%2035.jpeg?1601583635" class="editor-image img-responsive" data-smartkarma-image-id="162974"></figure><div class="content-caption">Source: NHK</div><p><strong>FAILOVER</strong><strong>FAILURE</strong> - The failure of the Fail Over system in <a href="https://www.smartkarma.com/entities/japan-exchange-group-inc" target="_blank" data-smartkarma-citation="entities:11266:1" rel="noopener">Japan Exchange (8697 JP)</a> / <a href="https://www.smartkarma.com/entities/fujitsu-ltd" target="_blank" data-smartkarma-citation="entities:16968:1" rel="noopener">Fujitsu (6702 JP)</a> 'arrowhead' trading system on Thursday morning resulted in an unprecedented full-day market suspension. The details and implication will be covered in a separate Insight; however, the embarrassment to Japan's financial system is extreme. The Chief Cabinet Secretary was particularly blunt:-</p><blockquote>
<p> Currently, the Financial Services Agency is instructing the Japan Exchange Group and the Tokyo Stock Exchange to investigate the cause and take measures for recovery, and we are working diligently to recover. I know that the inability to trade on the exchange, which is an important infrastructure of the market, limits the opportunities for trading for investors, and I think it is very regrettable.   </p>
<h3>Katō Katsunobu, Naikaku-kanbō-chōkan</h3>
<p><strong>October 1st, 2020</strong></p>
</blockquote><hr><p style="text-align: center;"><strong>• BEST &amp; WORST •</strong></p><p style="text-align: left;">The release of earnings announcements, forecasts and revisions was unaffected, and our best and worst pair is medical wear manufacturer <a href="https://www.smartkarma.com/entities/nagaileben-co-ltd" target="_blank" data-smartkarma-citation="entities:3165:1" rel="noopener">Nagaileben (7447 JP)</a> and waste management company <a href="https://www.smartkarma.com/entities/daiseki-co-ltd" target="_blank" data-smartkarma-citation="entities:2330:1" rel="noopener">Daiseki (9793 JP)</a>.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/977/original/2020-10-02_06-08-02.png?1601586653" class="editor-image img-responsive" data-smartkarma-image-id="162977"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/162/976/original/2020-10-02_06-10-05.png?1601586638" class="editor-image img-responsive" data-smartkarma-image-id="162976"></figure><div class="content-caption">Source for all charts &amp; tables unless otherwise stated: Japan Analytics</div><p></p><div><p style="text-align: center;"><strong>DAILY STATS</strong></p></div><hr><div><p style="text-align: center;"><strong>12 Quarterly Results</strong></p></div><div><ul style="list-style-type: disc;">
<li><p><strong>Results Score:</strong> 67% Positive / 10% Neutral / 33% Negative</p></li>
<li><p><strong>Average Results Score Change:</strong> +3.1 points</p></li>
<li><p><strong>Average % Change in Revenue:</strong> 3.0% Quarter YoY / +1.9% Rolling TTM YoY </p></li>
<li><p><strong>Average Operating Profit Margin Change:</strong> 0.5ppt</p></li>
<li><p><strong>Percentage Making Quarterly Losses:</strong> 0%</p></li>
</ul></div><hr><div><p style="text-align: center;"><strong>7 Annual • 5 Interim Forecasts/Revisions</strong></p></div><ul style="list-style-type: disc;">
<li><p>Annual Forecast/Revision Score: 57% Positive / 0% Neutral / 43% Negative</p></li>
<li><p>Interim Forecast/Revision Score Change: 60% Positive / 20% Neutral / 20% Negative</p></li>
<li><p>Average Forecast/Revision Score Change: +4.0 points</p></li>
</ul><div class="content-highlight"><p><strong>Although the sample size is small the 'stats' above are the best since we started this daily series. </strong></p></div>

Source: NHKFAILOVERFAILURE - The failure of the Fail Over system in Japan Exchange (8697 JP) / Fujitsu (6702 JP) 'arrowhead' trading system on Thursday morning resulted in an unprecedented full-day market suspension. The details and implication will be covered in a separate Insight; however, the embarrassment to Japan's financial system is extreme. The Chief Cabinet Secretary was particularly blunt:-
 Currently, the Financial Services Agency is instructing the Japan Exchange Group and the Tokyo Stock Exchange to investigate the cause and take measures for recovery, and we are working diligently to recover. I know that the inability to trade on the exchange, which is an important infrastructure of the market, limits the opportunities for trading for investors, and I think it is very regrettable.   
Katō Katsunobu, Naikaku-kanbō-chōkan
October 1st, 2020
• BEST &amp; WORST •The release of earnings announcements, forecasts and revisions was unaffected, and our best and worst pair is medical wear manufacturer Nagaileben (7447 JP) and waste management company Daiseki (9793 JP).Source for all charts &amp; tables unless otherwise stated: Japan AnalyticsDAILY STATS12 Quarterly Results
Results Score: 67% Positive / 10% Neutral / 33% Negative
Average Results Score Change: +3.1 points
Average % Change in Revenue: 3.0% Quarter YoY / +1.9% Rolling TTM YoY 
Average Operating Profit Margin Change: 0.5ppt
Percentage Making Quarterly Losses: 0%
7 Annual • 5 Interim Forecasts/Revisions
Annual Forecast/Revision Score: 57% Positive / 0% Neutral / 43% Negative
Interim Forecast/Revision Score Change: 60% Positive / 20% Neutral / 20% Negative
Average Forecast/Revision Score Change: +4.0 points
Although the sample size is small the 'stats' above are the best since we started this daily series. 

🇯🇵 JAPAN • Results & Revisions 10/​​​​01 - Fail Over Fail, Nagaileben, Daiseki, Kewpie

<p>Our original take on Fujitsu General was that the company was not fulfilling its potential due to a lack of scale but was excessively cheap and could attract a nice premium with the right strategic buyer for Fujitsu to sell to. Since that early December 2019 take, the stock price saw a modest 18% rally into the end of the year, a 40% collapse as COVID fears peaked and a furious 92% rally as markets rebounded and talk of higher demand for air purification systems started. In the meantime, Fujitsu continues with its rather light TOB for Fujitsu Frontech so we refresh our view on Fujitsu General below.</p>

Our original take on Fujitsu General was that the company was not fulfilling its potential due to a lack of scale but was excessively cheap and could attract a nice premium with the right strategic buyer for Fujitsu to sell to. Since that early December 2019 take, the stock price saw a modest 18% rally into the end of the year, a 40% collapse as COVID fears peaked and a furious 92% rally as markets rebounded and talk of higher demand for air purification systems started. In the meantime, Fujitsu continues with its rather light TOB for Fujitsu Frontech so we refresh our view on Fujitsu General below.

Fujitsu General – 36% Above December Levels, What’s the Trade Now?

Japan

Fujitsu Ltd manufactures semiconductor, computer, and communication equipment. The Company provides comprehensive information technology, network and telecommunication solutions, and Internet services.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Fujitsu Ltd (6702 JP)

Global Equity Strategy: Bullish Outlook Intact

Read our complete International Strategy document to find detailed comments and recommendations for each of our 12 Sectors.

Vermilion Research

Toshiba Tec – Where Is Toshiba Tec Headed?

With the planned IPO for Kioxia being delayed for at least a few months, we wonder whether this brings Toshiba Tec more into play. As the lone...

Mio Kato

🇯🇵 JAPAN • Fujitsu Fails to Failover > JPX Tries to Pass the Buck

FAILOVER FAILURE - Thu

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 10/01 - Fail Over Fail, Nagaileben, Daiseki, Kewpie

FAIL OVER -

Campbell Gunn

Fujitsu General – 36% Above December Levels, What’s the Trade Now?

Our original take on Fujitsu General was that the company was not fulfilling its potential due to a lack of scale but was excessively cheap and...

Mio Kato

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Global Equity Strategy: Bullish Outlook Intact

Read our complete International Strategy document to find detailed comments and recommendations for each of our 12 Sectors.

Vermilion Research

Toshiba Tec – Where Is Toshiba Tec Headed?

With the planned IPO for Kioxia being delayed for at least a few months, we wonder whether this brings Toshiba Tec more into play. As the lone...

Mio Kato

🇯🇵 JAPAN • Fujitsu Fails to Failover > JPX Tries to Pass the Buck

FAILOVER FAILURE - Thu

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions 10/​​​​01 - Fail Over Fail, Nagaileben, Daiseki, Kewpie

FAIL OVER -

Campbell Gunn

Fujitsu General – 36% Above December Levels, What’s the Trade Now?

Our original take on Fujitsu General was that the company was not fulfilling its potential due to a lack of scale but was excessively cheap and...

Mio Kato

🇯🇵 JAPAN • Results & Revisions 10/01 - Fail Over Fail, Nagaileben, Daiseki, Kewpie