Independent Insight Provider, Japanese equities, LightStream Research

Scott Foster

Independent Insight Provider, Japanese equities

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

<p>Keyence's operating and net profit have declined for the first time since the downturn that followed the collapse of Lehman Brothers in 2008. </p><p>In the three months to March, year-on-year sales growth dropped to 0.9%, operating profit declined by 5.7% and net profit was down 3.1%. The operating margin fell to 52.9% compared with 56.6% a year earlier. </p><p>Factors responsible for the decline in operating profit included weak demand from the electronics, machine tool and auto industries, particularly in Asia, aggravated by the trade war. Looking ahead, the quarterly data point to difficult year-on-year comparisons for the next three quarters. </p><p>The company's FY Mar-19 results were below our estimates. Starting from a lower base and in view of the negative demand trends, we have lowered our sales and profit forecast for FY Mar-20. At ¥64,220 (May 21 closing price), our new estimates yield a P/E ratio of 37x. The 5-year historical P/E range is 18x - 42x. Other valuations are also on the high side of their historical ranges.</p><p>Valuations and underlying demand trends suggest potential downside risk of 20% or more. However, the announcement of a trade deal between the U.S. and China would most likely be positive for short-term sentiment.</p>

Keyence's operating and net profit have declined for the first time since the downturn that followed the collapse of Lehman Brothers in 2008. In the three months to March, year-on-year sales growth dropped to 0.9%, operating profit declined by 5.7% and net profit was down 3.1%. The operating margin fell to 52.9% compared with 56.6% a year earlier. Factors responsible for the decline in operating profit included weak demand from the electronics, machine tool and auto industries, particularly in Asia, aggravated by the trade war. Looking ahead, the quarterly data point to difficult year-on-year comparisons for the next three quarters. The company's FY Mar-19 results were below our estimates. Starting from a lower base and in view of the negative demand trends, we have lowered our sales and profit forecast for FY Mar-20. At ¥64,220 (May 21 closing price), our new estimates yield a P/E ratio of 37x. The 5-year historical P/E range is 18x - 42x. Other valuations are also on the high side of their historical ranges.Valuations and underlying demand trends suggest potential downside risk of 20% or more. However, the announcement of a trade deal between the U.S. and China would most likely be positive for short-term sentiment.

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/347/original/2019-04-20_09-59-40.png?1555722056" class="editor-image img-responsive" data-smartkarma-image-id="85347"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>UnCh</strong> - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/405/original/2019-04-21_07-28-03.png?1555799330" class="editor-image img-responsive" data-smartkarma-image-id="85405"></figure><div class="content-caption">Source: Investing.com</div><p><strong>CURRENCY RISK?</strong> - "UnCh" also applies to <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JPY (USDJPY CURNCY)</a>  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/350/original/2019-04-20_10-21-58.png?1555723331" class="editor-image img-responsive" data-smartkarma-image-id="85350"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VTR</strong> - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/381/original/2019-04-20_14-34-11.png?1555738458" class="editor-image img-responsive" data-smartkarma-image-id="85381"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VOLUME SCORE TIMELINE</strong> - Volumes have been highest in the <strong>Internet</strong>, <strong>Retail</strong>, and<strong> Telecoms</strong> sectors, while the <strong>Materials</strong>,<strong> Transportation</strong>, <strong>Utilities</strong> and<strong> Real Estate</strong> Sectors have seen the lowest.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/352/original/2019-04-20_10-29-59.png?1555723806" class="editor-image img-responsive" data-smartkarma-image-id="85352"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>LOWS &gt; HIGHS</strong> - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/363/original/2019-04-20_12-34-06.png?1555731278" class="editor-image img-responsive" data-smartkarma-image-id="85363"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DRIFTING LOWER</strong> - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/384/original/2019-04-20_17-30-47.png?1555749055" class="editor-image img-responsive" data-smartkarma-image-id="85384"></figure><div class="content-caption">Source: Japan Analytics <p></p>
</div><p><strong>MIND THE GAP</strong> - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/435/original/File%202019-04-21%2015%2055%2018.jpeg?1555829876" class="editor-image img-responsive" data-smartkarma-image-id="85435"></figure><div class="content-caption">Source: Bank of America Merrill Lynch</div><p><strong>GLOBAL WAVE</strong> - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/378/original/2019-04-20_14-00-43.png?1555736454" class="editor-image img-responsive" data-smartkarma-image-id="85378"></figure><p><strong>FORECASTS LEADING EARNINGS LOWER</strong> - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/379/original/2019-04-20_14-04-23.png?1555736670" class="editor-image img-responsive" data-smartkarma-image-id="85379"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTERIM LEADING ANNUAL LOWER</strong> -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   </p><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/14191" target="_blank" data-smartkarma-citation="entities:14191:1">Koshidaka (2157 JP)</a>, <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, <strong>Drugstores</strong>, <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925 JP)</a>, <strong>Toyota Parts companies</strong>, and <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064 JP)</a>.</p>

Source: Japan AnalyticsUnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  Source: Investing.comCURRENCY RISK? - "UnCh" also applies to JPY (USDJPY CURNCY)  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   Source: Japan AnalyticsVTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.Source: Japan AnalyticsLOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. Source: Japan AnalyticsDRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   Source: Japan Analytics 
MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.Source: Bank of America Merrill LynchGLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.Source: Japan AnalyticsINTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Koshidaka (2157 JP), Ryohin Keikaku (7453 JP), Drugstores, Daiwa House (1925 JP), Toyota Parts companies, and Yamato Holdings (9064 JP).

🇯🇵 Japan • Fortnightly Update - "UnCh"

<p style="text-align: center;"><strong>- RELATIVE PRICE SCORE</strong> - </p><p><strong>INTRODUCTION </strong>- The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</p><p><strong>STATISTICS</strong> - Currently, of the 3,804 listed companies for which daily RPS data is available, 79 companies are 'Overbought', and 117 are 'Oversold' - 2.1% and 3.1%, respectively of the total. For the 779 companies with a market capitalisation of over ¥100b, there are 42 'Overbought' and 28 'Oversold' companies, 5.4% and 3.6%, respectively illustrating the relative strength of larger capitalisation stocks at this stage of the cycle. </p><hr><p><strong>RPS 'TOPS'</strong> - In the last two years, 438 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 45 days.  For companies with a market capitalisation higher than ¥100b, the numbers are 92 companies and 83 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/5414" target="_blank" data-smartkarma-citation="entities:5414:1">Kyudenko (1959 JP)</a>, <a href="https://www.smartkarma.com/entities/7168" target="_blank" data-smartkarma-citation="entities:7168:1">Nichirei (2871 JP)</a>. <a href="https://www.smartkarma.com/entities/15862" target="_blank" data-smartkarma-citation="entities:15862:1">Fancl (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/320" target="_blank" data-smartkarma-citation="entities:320:1">FamilyMart Uny (8028 JP)</a>, <a href="https://www.smartkarma.com/entities/8412" target="_blank" data-smartkarma-citation="entities:8412:1">Infocom Corp (4348 JP)</a>, and <a href="https://www.smartkarma.com/entities/24540" target="_blank" data-smartkarma-citation="entities:24540:1">SanBio (4592 JP)</a>. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/571/original/2019-04-10_11-06-11.png?1554863890" class="editor-image img-responsive" data-smartkarma-image-id="84571"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/572/original/2019-04-10_11-29-31.png?1554863914" class="editor-image img-responsive" data-smartkarma-image-id="84572"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/573/original/2019-04-10_11-30-53.png?1554863948" class="editor-image img-responsive" data-smartkarma-image-id="84573"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/574/original/2019-04-10_11-32-00.png?1554864056" class="editor-image img-responsive" data-smartkarma-image-id="84574"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/575/original/2019-04-10_11-34-40.png?1554864089" class="editor-image img-responsive" data-smartkarma-image-id="84575"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/576/original/2019-04-10_11-35-29.png?1554864110" class="editor-image img-responsive" data-smartkarma-image-id="84576"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-caption"><hr></div><p><strong>RPS 'BOTTOMS'</strong> - 360 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 59 days. For larger capitalisation companies, the numbers are 82 companies and 84 days. Some recent examples of positive RPS mean reversion in the last two months have been <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari (4385 JP)</a>, <a href="https://www.smartkarma.com/entities/2167" target="_blank" data-smartkarma-citation="entities:2167:1">AGC (5201 JP)</a>, and <a href="https://www.smartkarma.com/entities/26181" target="_blank" data-smartkarma-citation="entities:26181:1">Pksha Technology (3993 JP)</a>.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/581/original/2019-04-10_11-46-40.png?1554864563" class="editor-image img-responsive" data-smartkarma-image-id="84581"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/582/original/2019-04-10_11-47-16.png?1554864581" class="editor-image img-responsive" data-smartkarma-image-id="84582"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/583/original/2019-04-10_11-48-48.png?1554864598" class="editor-image img-responsive" data-smartkarma-image-id="84583"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-highlight"><p>In the <strong>DETAIL </strong>section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.</p></div>

- RELATIVE PRICE SCORE - INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. This insight updates our list of Overbought and Oversold companies, reviews the best and worst performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.STATISTICS - Currently, of the 3,804 listed companies for which daily RPS data is available, 79 companies are 'Overbought', and 117 are 'Oversold' - 2.1% and 3.1%, respectively of the total. For the 779 companies with a market capitalisation of over ¥100b, there are 42 'Overbought' and 28 'Oversold' companies, 5.4% and 3.6%, respectively illustrating the relative strength of larger capitalisation stocks at this stage of the cycle. RPS 'TOPS' - In the last two years, 438 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 45 days.  For companies with a market capitalisation higher than ¥100b, the numbers are 92 companies and 83 days - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last three months have been Kyudenko (1959 JP), Nichirei (2871 JP). Fancl (4921 JP), FamilyMart Uny (8028 JP), Infocom Corp (4348 JP), and SanBio (4592 JP). Source: Japan AnalyticsRPS 'BOTTOMS' - 360 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 59 days. For larger capitalisation companies, the numbers are 82 companies and 84 days. Some recent examples of positive RPS mean reversion in the last two months have been Mercari (4385 JP), AGC (5201 JP), and Pksha Technology (3993 JP).Source: Japan AnalyticsIn the DETAIL section below, we list the current very overbought (RPS&gt;5), too late to buy (RPS &gt;4&lt;5) and oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - April 2019

<p style="text-align: center;"><strong>- RELATIVE PRICE SCORE - </strong></p><p>The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> for <strong>Companies</strong>, <strong>+3</strong> &amp; <strong>-1.5</strong> for <strong>Peer Groups</strong> and <strong>+2</strong> and <strong>-1</strong> for<strong> Sectors</strong>. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/923/original/2019-04-03_12-00-47.png?1554260470" class="editor-image img-responsive" data-smartkarma-image-id="83923"></figure><div style="text-align: center;" class="content-caption">Source: Japan Analytics</div><p><strong>OUTLIER TRENDS </strong>- In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble'. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/083/924/original/2019-04-03_12-13-50.png?1554261675" class="editor-image img-responsive" data-smartkarma-image-id="83924"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>NEGATIVE 'SPREAD'</strong> - On a daily closing basis, the Oversold outlier percentage is currently 3.17%, the highest since December 25th 2018, despite the total market value being 14% higher than on that day. The 'spread' between Overbought and Oversold outliers is now -1.10, and has only been wider for three days at the end of last year either side of Christmas Day. Nevertheless, the Overbought percentage reached a new fifteen-year high at the end of March despite the total market value being 12.6% below the peak of January 2018. In a polarised market, the winners keep on winning, and the losers keep on losing.  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/184/original/2019-04-06_13-57-40.png?1554526675" class="editor-image img-responsive" data-smartkarma-image-id="84184"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>MARKET TIMING</strong> - Using the crossover from Net Overbought to Net Oversold has been a reasonably good market timing indicator over the last two decades and would have avoided the five-year-long slump from 2007-2012. The most recent monthly closing signal was generated in January when the total market value was ¥634t, 2.7% lower than the current level.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/185/original/2019-04-06_14-00-23.png?1554526834" class="editor-image img-responsive" data-smartkarma-image-id="84185"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>DAILY TIMING SIGNALS</strong> - Using daily closing prices but slightly wider parameters to reduce 'noise' the signals are reasonably effective. The last signal was a sell on 18th December 2018 when the total market value was ¥623b, 4.5% below the current level. Both monthly and daily indicators have large negative 'spreads' and are unlikely to generate 'buy' signals for some time. Both are also suggesting that further declines lie ahead.   </p><hr><p style="text-align: center;"><strong>- SECTORS - </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/084/040/original/2019-04-04_17-34-34.png?1554366894" class="editor-image img-responsive" data-smartkarma-image-id="84040"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>28-YEAR TIMELINE</strong> - The twenty-eight-year history of Sectors' Relative Price Score is shown above and chronicles the periodic extremes of both Overbought and Oversold and the persistence of each. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the <strong>Internet Content &amp; Services</strong> Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, three Sectors are Overbought - <strong>Consumer Services</strong>,<strong> Other Consumer Products</strong>, and <strong>Healthcare</strong>, and two Sectors are Oversold - <strong>Banks</strong> and <strong>Utilities</strong>.    </p><p>In the <strong>DETAIL</strong> section below, we provide an update on recent Sector and Peer Group trends and make some specific recommendations. A second Insight will follow looking at the Relative Price Scores for Companies. </p>

- RELATIVE PRICE SCORE - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.Source: Japan AnalyticsOUTLIER TRENDS - In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble'. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well. Source: Japan AnalyticsNEGATIVE 'SPREAD' - On a daily closing basis, the Oversold outlier percentage is currently 3.17%, the highest since December 25th 2018, despite the total market value being 14% higher than on that day. The 'spread' between Overbought and Oversold outliers is now -1.10, and has only been wider for three days at the end of last year either side of Christmas Day. Nevertheless, the Overbought percentage reached a new fifteen-year high at the end of March despite the total market value being 12.6% below the peak of January 2018. In a polarised market, the winners keep on winning, and the losers keep on losing.  Source: Japan AnalyticsMARKET TIMING - Using the crossover from Net Overbought to Net Oversold has been a reasonably good market timing indicator over the last two decades and would have avoided the five-year-long slump from 2007-2012. The most recent monthly closing signal was generated in January when the total market value was ¥634t, 2.7% lower than the current level.Source: Japan AnalyticsDAILY TIMING SIGNALS - Using daily closing prices but slightly wider parameters to reduce 'noise' the signals are reasonably effective. The last signal was a sell on 18th December 2018 when the total market value was ¥623b, 4.5% below the current level. Both monthly and daily indicators have large negative 'spreads' and are unlikely to generate 'buy' signals for some time. Both are also suggesting that further declines lie ahead.   - SECTORS - Source: Japan Analytics28-YEAR TIMELINE - The twenty-eight-year history of Sectors' Relative Price Score is shown above and chronicles the periodic extremes of both Overbought and Oversold and the persistence of each. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the Internet Content &amp; Services Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, three Sectors are Overbought - Consumer Services, Other Consumer Products, and Healthcare, and two Sectors are Oversold - Banks and Utilities.    In the DETAIL section below, we provide an update on recent Sector and Peer Group trends and make some specific recommendations. A second Insight will follow looking at the Relative Price Scores for Companies. 

🇯🇵 Japan • Relative Price Scores - Market, Sectors & Peer Groups > Extreme Negative Divergence

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

<p>In the past week, there were earnings warnings from three major players in the global semiconductor sector, including <a href="https://www.smartkarma.com/entities/191" target="_blank" data-smartkarma-citation="entities:191:1">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/13382" target="_blank" data-smartkarma-citation="entities:13382:1">Micron Technology (MU US)</a>, and <a href="https://www.smartkarma.com/entities/21653" target="_blank" data-smartkarma-citation="entities:21653:1">Infineon Technologies Ag (IFX GR)</a>. </p>
<p>In Korea, after the collapse of the talks between Trump and KJU, the biggest loser has been President Moon Jae-In whose popularity has been sinking in the past several weeks. Moon Jae-In's popularity has been sinking from the 80-90% range when he was first elected two years ago to the low-to-mid 40% range now. There has been a tremendous gain of the conservative Liberty Korea Party, led by <strong>Hwang Kyo-Ahn. </strong>Many people in Korea have become very dissatisfied with failing economic policies of the incumbent Moon Jae-In party and its excessive populism. </p>
<p>In the past week, the following reports that are relevant for Japan and Korea have received a lot of interest among Smartkarma readers:</p>
<ul>
<li><a href="https://www.smartkarma.com/insights/amarin-our-talks-with-the-ceo-an-update-on-new-trial-data-released-at-acc-conference" target="_blank" data-smartkarma-citation="insights:28682">Amarin--Our Talks With The CEO &amp; An Update on New Trial Data Released at ACC Conference</a></li>
<li><a href="https://www.smartkarma.com/insights/it-s-the-annual-tuesday-wednesday-buy-topix-trade" target="_blank" data-smartkarma-citation="insights:28815">It's The Annual Tuesday &amp; Wednesday BUY TOPIX Trade</a></li>
<li><a href="https://www.smartkarma.com/insights/nissan-atrocious-governance-should-be-rectified-before-even-thinking-of-a-merger" target="_blank" data-smartkarma-citation="insights:28857">Nissan: Atrocious Governance Should Be Rectified Before Even Thinking of a Merger</a></li>
<li><a href="https://www.smartkarma.com/insights/hitachi-bumps-yungtay-bid-to-nt-65-take-it" target="_blank" data-smartkarma-citation="insights:28769">Hitachi Bumps Yungtay Bid to NT$65. Take It.</a></li>
<li><a href="https://www.smartkarma.com/insights/kospi-200-june-2019-rebalancing-list-of-addition-deletion-candidates" target="_blank" data-smartkarma-citation="insights:28754">KOSPI 200 June 2019 Rebalancing: List of Addition/Deletion Candidates</a></li>
<li><a href="https://www.smartkarma.com/insights/samsung-electronics-voluntary-red-flag-on-1q-earnings" target="_blank" data-smartkarma-citation="insights:28826">Samsung Electronics Voluntary Red Flag on 1Q Earnings</a></li>
<li><a href="https://www.smartkarma.com/insights/the-final-countdown-between-nps-vs-korea-air-chairman-cho-yang-ho" target="_blank" data-smartkarma-citation="insights:28842">The Final Countdown Between NPS Vs Korean Air Chairman Cho Yang-Ho</a></li>
<li><a href="https://www.smartkarma.com/insights/snk-corp-ipo-preview" target="_blank" data-smartkarma-citation="insights:28845">SNK Corp IPO Preview</a></li>
</ul>

In the past week, there were earnings warnings from three major players in the global semiconductor sector, including Samsung Electronics (005930 KS), Micron Technology (MU US), and Infineon Technologies Ag (IFX GR). 
In Korea, after the collapse of the talks between Trump and KJU, the biggest loser has been President Moon Jae-In whose popularity has been sinking in the past several weeks. Moon Jae-In's popularity has been sinking from the 80-90% range when he was first elected two years ago to the low-to-mid 40% range now. There has been a tremendous gain of the conservative Liberty Korea Party, led by Hwang Kyo-Ahn. Many people in Korea have become very dissatisfied with failing economic policies of the incumbent Moon Jae-In party and its excessive populism. 
In the past week, the following reports that are relevant for Japan and Korea have received a lot of interest among Smartkarma readers:

Amarin--Our Talks With The CEO &amp; An Update on New Trial Data Released at ACC Conference
It's The Annual Tuesday &amp; Wednesday BUY TOPIX Trade
Nissan: Atrocious Governance Should Be Rectified Before Even Thinking of a Merger
Hitachi Bumps Yungtay Bid to NT$65. Take It.
KOSPI 200 June 2019 Rebalancing: List of Addition/Deletion Candidates
Samsung Electronics Voluntary Red Flag on 1Q Earnings
The Final Countdown Between NPS Vs Korean Air Chairman Cho Yang-Ho
SNK Corp IPO Preview


Smartkarma’s Week That Was in JP/​​​​​​​​KR: Semiconductor Warnings, Exit of Chairman Cho, & 청년수당

Japan

KEYENCE CORPORATION develops, manufactures, and sells sensors and measuring instruments used for factory automation (FA) and high technology hobby products. The Company's products include fiber optic sensors, photoelectric sensors, programmable logic controllers (PLC), laser scan micrometers, bar code readers, and radio-controlled model cars.

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Keyence Corp (6861 JP)

Keyence (6861 JP): Profit Down in 4Q

Keyence's operating and net profit have declined for the first time since the downturn that followed the collapse of Lehman Brothers in 2008. In...

Scott Foster

🇯🇵 Japan • Fortnightly Update - "UnCh"

UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading...

Campbell Gunn

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - April 2019

- RELATIVE PRICE SCORE - INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

🇯🇵 Japan • Relative Price Scores - Market, Sectors & Peer Groups > Extreme Negative Divergence

- RELATIVE PRICE SCORE - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the...

Campbell Gunn

Smartkarma’s Week That Was in JP/KR: Semiconductor Warnings, Exit of Chairman Cho, & 청년수당

In the past week, there were earnings warnings from three major players in the global semiconductor sector, including Samsung Electronics (005930...

Douglas Kim

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52-week Range

Market Cap (USDm)

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Keyence (6861 JP): Profit Down in 4Q

Keyence's operating and net profit have declined for the first time since the downturn that followed the collapse of Lehman Brothers in 2008. In...

Scott Foster

🇯🇵 Japan • Fortnightly Update - "UnCh"

UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading...

Campbell Gunn

🇯🇵 Japan • Relative Price Scores - Overbought & Oversold Companies - April 2019

- RELATIVE PRICE SCORE - INTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by...

Campbell Gunn

🇯🇵 Japan • Relative Price Scores - Market, Sectors & Peer Groups > Extreme Negative Divergence

- RELATIVE PRICE SCORE - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the...

Campbell Gunn

Smartkarma’s Week That Was in JP/​​​​​​​​KR: Semiconductor Warnings, Exit of Chairman Cho, & 청년수당

In the past week, there were earnings warnings from three major players in the global semiconductor sector, including Samsung Electronics (005930...

Douglas Kim

Smartkarma’s Week That Was in JP/KR: Semiconductor Warnings, Exit of Chairman Cho, & 청년수당