'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/034/original/2018-08-16_19-07-34.png?1534672507" class="editor-image img-responsive" data-smartkarma-image-id="61034"></figure><div class="content-caption">Source: Japan Analytics</div>A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our '<a href="https://www.smartkarma.com/insights/japan-most-overbought-most-oversold-the-relative-price-score" target="_blank" data-smartkarma-citation="insights:21149">Nifty 50</a>' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.<div class="content-highlight">MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.</div>SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post [6178 JP</a>]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.<div class="content-highlight">
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
</div>SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.<div class="content-highlight">
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
</div>TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/061/038/original/2018-08-19_19-33-03.png?1534674804" class="editor-image img-responsive" data-smartkarma-image-id="61038"></figure>

Source: Japan AnalyticsA GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in earnings.  However, the score has only declined by 31 basis points since last quarter showing a degree of 'stability' seen only in 2011 in recent years.  The aggregate Forecast/Revision score has also continued to decline and is now lower for the fourth straight month. As would be expected, this score is a reliable leading indicator for the Results Score and suggests further weakening in the rate of earnings growth in the months ahead.  Neither score is, as yet, suggesting a decline in earnings before the end of the fiscal year.YEN CORRELATION WEAKENING - This quarter's earnings' stability was surprising given the relative strength of the Yen compared to a year ago. In the past and even as recently as 2016, a 5 per cent year-on-year decline has resulted in negative Results Scores. The year-on-year change in now positive so any negative impact will dissipate over the next two quarters.MARKET FOLLOWS MOMENTUM LOWER - The All Market Composite peaked on 23rd January and has since fallen by 11% despite a continuation of the Bank of Japan's ETF purchasing programme. Weakening earnings momentum and the overvaluation of many of the leading stocks, as in our 'Nifty 50' portfolio, have been contributing factors. With prospects for a much weaker Yen limited by the current trade negotiations between Japan and the United States, and with global growth slowing, we expect both Results and Revision Scores to trend lower, but to end the fiscal year in positive territory. Historically, the market has not risen during periods when both the Results and Forecast/Revision Scores have been trending down.MARKET RECOMMENDATION - Within a global portfolio, we would market-weight Japanese equities with a bias towards domestic sectors and not hedge the currency exposure.SECTOR RESULTS SCORES -The good news is that only one sector, (Multi-Industry - 75% of which is Japan Post [6178 JP]) has a negative score - and its score is less negative than last quarter. Both the Media and Consumer Services sectors' scores turned positive and each increased by more than two points.  On the other hand, over half of our 29 sectors saw declining scores, although the number was lower than last quarter.  The top sectors in terms of quarter-on-quarter change were Energy, Consumer Services, Media, Information Technology and Other Commercial Products while the laggards were Non-Bank Finance, Chemicals, Construction, Machinery and Utilities. SECTOR REVISION SCORES - Five sectors have negative Forecast/Revision Scores with Utilities now joining Media, Multi-Industry, Autos and Banks from last quarter. The highest scores are in the Energy, Technology Hardware, Electrical Equipment, Retail and Information Technology sectors. Improvements of greater than one point were seen in Energy, Media and Machinery while Food, Beverages &amp; Tobacco, Chemicals, Utilities, Other Materials and Technology Hardware all lost more than one point. Overall eighteen sectors saw declines.REVISION V. RESULTS SCORES - The difference between the Results and Revision Scores is a good indicator of corporate expectations compared with the trailing-twelve-month reality. In some cases (e.g. Restaurants) the 'optimism' is due to a failure to revise forecasts in the light of weaker results. In others, such as Telecommunications, there is scope for upward revisions in the coming quarters.
THE OPTIMISTS
Restaurants • Other Materials • Electrical Equipment • Technology Hardware • Retail
THE PESSIMISTS
Banks • Autos • Telecommunications • Utilities • Media • Chemicals
SECTOR PERFORMANCE - Over the last three months, our Japan Market Composite declined by 5.8%. Only four sectors saw an increase in value led by Telecommunications, Energy, Commercial Services and Information Technology. The largest declines were in the Building Materials, Metals, Real Estate Construction and Machinery sectors. Nine sectors are now negative over one year led by Building Materials, Metals and Food, Beverages &amp; Tobacco and only eight are up in double-digits led by Services and Information Technology. For the time being, Domestic Non-Manufacturing sectors 'rules the roost' and Domestic Cyclical sectors have taken over from Global Cyclicals in the 'doghouse'.'.
SECTOR RECOMMENDATIONS
Our most-preferred sectors are currently Energy, Healthcare, Telecommunications, Other Commercial Products and Information Technology.
Least-preferred sectors are Metals, Chemicals, Machinery, Autos, Construction, Real Estate, Building Materials, Food Beverages &amp; Tobacco and Utilities.
TOP 5 LARGER PEER GROUPS - The top five Peer Groups capitalised at over ¥1 trillion are Machine Tools &amp; Presses, PC &amp; Computer Peripherals, Oil &amp; Gas Refining &amp; Marketing, Telecom Distribution Services and Sporting &amp; Outdoor Goods. The top twenty larger Peer Groups have gained 16% over one year but have declined by 4% on average the last three months.BOTTOM 5 LARGER PEER GROUPS - The bottom five Peer Groups capitalised at over ¥1 trillion are Audio/Visual Content, LCD/LED Materials &amp; Equipment, Electrical Engineering, General Contractors and Real Estate - Leasing. The bottom twenty larger Peer Groups have lost 2% over one year and 9% over the last three months. Only Security Services and Tobacco have risen since May.

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

Senior Bank Analyst - Japanese Banks, Windamee Research

J. Brian Waterhouse

Senior Bank Analyst - Japanese Banks

Windamee Research

Japanese Banks

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a> delayed the release of its 1Q FY3/2019 results by 6 days, from August 3rd until this evening.  Despite attempts by the bank to put a positive spin on the postponement, initially dismissing the 6-day delay as being for “no particular reason”, delays in releasing financial information are never a good sign, and the market reacted (unsurprisingly) negatively to the news.  And the market was right.  1Q FY3/2019 results were dreadful, and the warning signs are that there may…

Suruga Bank Ltd (8358 JP) delayed the release of its 1Q FY3/2019 results by 6 days, from August 3rd until this evening.  Despite attempts by the bank to put a positive spin on the postponement, initially dismissing the 6-day delay as being for “no particular reason”, delays in releasing financial information are never a good sign, and the market reacted (unsurprisingly) negatively to the news.  And the market was right.  1Q FY3/2019 results were dreadful, and the warning signs are that there may…

Suruga Bank (8358 JP):  Disappearing Dreams

<a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a> has announced late this afternoon that it has postponed publication of its 1Q results until Thursday August 9th.  The market had been expecting the bank to publish its 1Q results after trading hours today. While a bank spokesperson has apparently told local media outlets that there is "no special reason" for the delay, this is unlikely to sit well with investors in the wake of the Smart Days debacle (which we covered extensively in our April 20 2018 note <a href="https://www.smartkarma.com/insights/suruga-bank-8358-jp-not-so-smart-days" target="_blank" data-smartkarma-citation="insights:19508">Suruga Bank</a>…

Suruga Bank Ltd (8358 JP) has announced late this afternoon that it has postponed publication of its 1Q results until Thursday August 9th.  The market had been expecting the bank to publish its 1Q results after trading hours today. While a bank spokesperson has apparently told local media outlets that there is "no special reason" for the delay, this is unlikely to sit well with investors in the wake of the Smart Days debacle (which we covered extensively in our April 20 2018 note Suruga Bank…

Concordia Financial Group, Ltd / Equity Bottom-Up

Most foreign institutional investors will likely be unfamiliar with the name Higashi-Nippon Bank (HNPB), a small Tokyo-based secondary regional bank and one of the two commercial banks at the core of <a href="https://www.smartkarma.com/entities/22704" target="_blank" data-smartkarma-citation="entities:22704:1">Concordia Financial Group, Ltd (7186 JP)</a>, but they will almost certainly be familiar with HNPB’s other group partner and Japan’s largest regional bank, the Bank of Yokohama.However, it is the little Higashi-Nippon Bank, rather than its more famous and vastly larger partner, that has been much in the…

Most foreign institutional investors will likely be unfamiliar with the name Higashi-Nippon Bank (HNPB), a small Tokyo-based secondary regional bank and one of the two commercial banks at the core of Concordia Financial Group, Ltd (7186 JP), but they will almost certainly be familiar with HNPB’s other group partner and Japan’s largest regional bank, the Bank of Yokohama.However, it is the little Higashi-Nippon Bank, rather than its more famous and vastly larger partner, that has been much in the…

Concordia FG (7186.JP): An Embarrassment of Riches

After four straight trading days in negative territory, <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank Ltd (8358 JP)</a> finally closed the week on a positive note, rising 3.7% (or ¥34) to finish at ¥954 on notably higher volume of around 5.17mn shares.  However, before anyone reaches for the champagne in celebration, it should be noted that all bank shares ended Friday on a firmer footing thanks to a rally in the Topix index which rose 0.92% to 1,691.54, ending a fairly inauspicious week. Indeed, since May 16 2018 when the stock…

After four straight trading days in negative territory, Suruga Bank Ltd (8358 JP) finally closed the week on a positive note, rising 3.7% (or ¥34) to finish at ¥954 on notably higher volume of around 5.17mn shares.  However, before anyone reaches for the champagne in celebration, it should be noted that all bank shares ended Friday on a firmer footing thanks to a rally in the Topix index which rose 0.92% to 1,691.54, ending a fairly inauspicious week. Indeed, since May 16 2018 when the stock…

Japan

Suruga Bank Ltd. is a Shizuoka based regional bank mainly operating in the Kanto area (central eastern part of Japan) including Tokyo.  The Bank provides deposits, loans, and foreign exchange transactions.  The Suruga Bank also provides financial services such as leasing, letter of credit, and credit cards services.

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Suruga Bank Ltd (8358 JP)

Japan: Results & Revision Scores Summer 2018 Update - Market Composite, Sectors & Peer Groups

A GOOD QUARTER - The Composite Results Score has now declined for seven months in a row and is implying a slowing of the upward momentum in...

Campbell Gunn

Suruga Bank (8358 JP): Disappearing Dreams

Suruga Bank Ltd (8358 JP) delayed the release of its 1Q FY3/2019 results by 6 days, from August 3rd until this evening. Despite attempts by the...

J. Brian Waterhouse

Suruga Bank (8358 JP): Dreams Delayed

Suruga Bank Ltd (8358 JP) has announced late this afternoon that it has postponed publication of its 1Q results until Thursday August 9th. The...

J. Brian Waterhouse

Concordia FG (7186.JP): An Embarrassment of Riches

Most foreign institutional investors will likely be unfamiliar with the name Higashi-Nippon Bank (HNPB), a small Tokyo-based secondary regional...

J. Brian Waterhouse

Suruga Bank (8358.JP): Dream On

After four straight trading days in negative territory, Suruga Bank Ltd (8358 JP) finally closed the week on a positive note, rising 3.7% (or ¥34)...

J. Brian Waterhouse

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