Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

NTT (Nippon Telegraph & Telephone) / Event-Driven

<ul>
<li>The TSE launched its new cash equity market structure earlier this week. The TOPIX Index changes include a one-off FFW Methodology Review, where results were announced today. </li>
<li>The changes announced today go part-way to fixing float issues, but there will be follow-on changes in October, and one should expect companies to react with share cancellations.</li>
<li>The big gainer in this TOPIX rebal is <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone-corporation" target="_blank" data-smartkarma-citation="entities:623:1" rel="noopener">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>. There are a fair number of "losers." The 3-month total trade is about ¥2.3trln one-way.</li>
</ul>


The TSE launched its new cash equity market structure earlier this week. The TOPIX Index changes include a one-off FFW Methodology Review, where results were announced today. 
The changes announced today go part-way to fixing float issues, but there will be follow-on changes in October, and one should expect companies to react with share cancellations.
The big gainer in this TOPIX rebal is NTT (Nippon Telegraph &amp; Telephone) (9432 JP). There are a fair number of "losers." The 3-month total trade is about ¥2.3trln one-way.


The BIGLY TOPIX April 2022 Rebalance - $20bn One-Way Split Over 3 Months

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 week ended 13 December is US$27.58bn (up by US$1.74bn) 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/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/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/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/sumitomo-mitsui-financial-gr" target="_blank" rel="noopener" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a>. </div><div>Most shorted stocks as a percentage of free float are <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1">Leopalace21 Corp (8848 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/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a> and <a href="https://www.smartkarma.com/entities/anritsu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:3700:1">Anritsu Corp (6754 JP)</a> while the stocks with the highest days to cover are <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>, <a href="https://www.smartkarma.com/entities/dcm-holdings-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:13042:1">Dcm Holdings (3050 JP)</a> and <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/shoei-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15038:1"></a></div><div>The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone" target="_blank" rel="noopener" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>, <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/m3-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:13316:1">M3 Inc (2413 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>  while shorts were covered in <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-gro" target="_blank" rel="noopener" data-smartkarma-citation="entities:218:1">Mitsubishi Ufj Financial (8306 JP)</a>, <a href="https://www.smartkarma.com/entities/taisei-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:7896:1">Taisei Corp (1801 JP)</a>, <a href="https://www.smartkarma.com/entities/sumitomo-mitsui-financial-gr" target="_blank" rel="noopener" data-smartkarma-citation="entities:217:1">Sumitomo Mitsui Financial (8316 JP)</a> and <a href="https://www.smartkarma.com/entities/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a>.   <a href="https://www.smartkarma.com/entities/japan-airport-terminal-co" target="_blank" rel="noopener" data-smartkarma-citation="entities:18034:1"></a></div><div>Sectorally, short positions were increased in Communication Services (US$500mm) and Information Technology (US$344m) while shorts were covered in Financials (US$72m).</div>

The short notional in the market for the week ended 13 December is US$27.58bn (up by US$1.74bn) with the largest short positions in Itochu Corp (8001 JP), Toyota Motor (7203 JP), Taiyo Yuden (6976 JP), Canon Inc (7751 JP) and Sumitomo Mitsui Financial (8316 JP). Most shorted stocks as a percentage of free float are Leopalace21 Corp (8848 JP), Taiyo Yuden (6976 JP), Tokai Carbon (5301 JP) and Anritsu Corp (6754 JP) while the stocks with the highest days to cover are Katakura Industries (3001 JP), Vital Ksk Holdings (3151 JP), Dcm Holdings (3050 JP) and Aruhi Corp (7198 JP). The largest increases in short notional over the week were NTT (Nippon Telegraph &amp; Telephone) (9432 JP), Tokyo Electron (8035 JP), M3 Inc (2413 JP) and Shiseido Co Ltd (4911 JP)  while shorts were covered in Mitsubishi Ufj Financial (8306 JP), Taisei Corp (1801 JP), Sumitomo Mitsui Financial (8316 JP) and Tokai Carbon (5301 JP).   Sectorally, short positions were increased in Communication Services (US$500mm) and Information Technology (US$344m) while shorts were covered in Financials (US$72m).

Japan - Short Interest Rises Led By NTT, Tokyo Electron, M3 and Shiseido

<div>
The short notional in the market for the week ended 18 October is US$27.73bn (down by US$0.51bn) 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/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/kddi-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:639:1">KDDI Corp (9433 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/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a>.
Most shorted stocks as a percentage of free float are <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1">Leopalace21 Corp (8848 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/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a> and <a href="https://www.smartkarma.com/entities/nippon-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:3348:1">Nippon Carbon (5302 JP)</a> while the stocks with the highest days to cover are <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/j-trust-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:20246:1">J Trust Co Ltd (8508 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/mirait-holdings-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:7034:1">Mirait Holdings (1417 JP)</a>. 
</div><div>The largest increases in short notional over the week were <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>, <a href="https://www.smartkarma.com/entities/taisei-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:7896:1">Taisei Corp (1801 JP)</a>, <a href="https://www.smartkarma.com/entities/mazda-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:20528:1">Mazda Motor (7261 JP)</a> and <a href="https://www.smartkarma.com/entities/seiko-epson-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:16793:1">Seiko Epson (6724 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/kao-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12933:1">Kao Corp (4452 JP)</a>, <a href="https://www.smartkarma.com/entities/kirin-holdings-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:16977:1">Kirin Holdings (2503 JP)</a> and <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:12926:1">Kubota Corp (6326 JP)</a>.   <a href="https://www.smartkarma.com/entities/mitsui-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:20799:1"></a></div><div>Sectorally, shorts were covered in Consumer Staples (US$639m), Health Care (US$230m), Communication Services (US$177m) and Materials (US$145m).</div>


The short notional in the market for the week ended 18 October is US$27.73bn (down by US$0.51bn) with the largest short positions in Itochu Corp (8001 JP), Toyota Motor (7203 JP), KDDI Corp (9433 JP), Taiyo Yuden (6976 JP) and Canon Inc (7751 JP).
Most shorted stocks as a percentage of free float are Leopalace21 Corp (8848 JP), Taiyo Yuden (6976 JP), Tokai Carbon (5301 JP) and Nippon Carbon (5302 JP) while the stocks with the highest days to cover are Katakura Industries (3001 JP), J Trust Co Ltd (8508 JP),Vital Ksk Holdings (3151 JP) and Mirait Holdings (1417 JP). 
The largest increases in short notional over the week were Suzuki Motor (7269 JP), Taisei Corp (1801 JP), Mazda Motor (7261 JP) and Seiko Epson (6724 JP) while shorts were covered in Shiseido Co Ltd (4911 JP), Kao Corp (4452 JP), Kirin Holdings (2503 JP) and Kubota Corp (6326 JP).   Sectorally, shorts were covered in Consumer Staples (US$639m), Health Care (US$230m), Communication Services (US$177m) and Materials (US$145m).

Japan Shorts - Big Covering in Consumer Staples

'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)

RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. In addition, company data is cap-weight aggregated into Peer Group and Sector Relative Price Scores which can be used for allocation and timing. This insight will cover Sectors and Peer Groups; a forthcoming insight will update the list of overbought and oversold companies.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/735/original/2018-09-11SML2.png?1536816473" class="editor-image img-responsive" data-smartkarma-image-id="63735"></figure><div class="content-caption">Source: Japan Analytics</div>OVERBOUGHT &amp; OVERSOLD SECTORS - Currently, three Sectors (Commercial Services, Consumer Services and Healthcare) are overbought, and two (Banks and Utilities) are oversold in terms of Relative Price Score.<div class="content-highlight">SECTOR RECOMMENDATIONS - Our most-preferred sectors remain 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. Our sector recommendations have an implicit 4 'unit' market short by being overweight five sectors and underweight nine and have 'outperformed' (gross of implementation costs) by 11.3% over the last three months and by 3.5% over the last month.</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/737/original/2018-09-13_14-33-09.png?1536816871" class="editor-image img-responsive" data-smartkarma-image-id="63737"></figure><div class="content-caption">Source: Japan Analytics</div>OVERBOUGHT PEER GROUPS - Currently, seventeen Peer Groups are 'overbought'.  Nine Peer Groups that were overbought at the end of May are no longer so - Beers, Wines &amp; Spirits, Paints, Safety Equipment, Wholesale-Household Equipment, Wholesale-Transport Equipment, Real Estate-Other Services, Software-Accounting &amp; Finance, Accounting Services and Investment Banking Services. Four Peer Groups have become overbought in the last three months - Telecom Engineering, IT Systems-Financial, Software-Development Services and Employment &amp; Staffing Services.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/738/original/2018-09-13_14-36-04.png?1536816987" class="editor-image img-responsive" data-smartkarma-image-id="63738"></figure><div class="content-caption">Source: Japan Analytics</div>OVERSOLD PEER GROUPS - Currently ten Peer Groups are 'oversold'. The Kanto Regional Banks and Industrial REITs Peer Groups have become oversold in this period while the Kyushu Regional Banks, Retail REITs and Marine Transportation Peer Groups are no longer oversold. <div class="content-highlight">PEER GROUP RECOMMENDATIONS - Long and short recommendations for both overbought and oversold Peer Groups as well as lists of most and least preferred Peer Groups and suggested longs and shorts for some of each of those are detailed below. </div>

RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. In addition, company data is cap-weight aggregated into Peer Group and Sector Relative Price Scores which can be used for allocation and timing. This insight will cover Sectors and Peer Groups; a forthcoming insight will update the list of overbought and oversold companies.Source: Japan AnalyticsOVERBOUGHT &amp; OVERSOLD SECTORS - Currently, three Sectors (Commercial Services, Consumer Services and Healthcare) are overbought, and two (Banks and Utilities) are oversold in terms of Relative Price Score.SECTOR RECOMMENDATIONS - Our most-preferred sectors remain 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. Our sector recommendations have an implicit 4 'unit' market short by being overweight five sectors and underweight nine and have 'outperformed' (gross of implementation costs) by 11.3% over the last three months and by 3.5% over the last month.Source: Japan AnalyticsOVERBOUGHT PEER GROUPS - Currently, seventeen Peer Groups are 'overbought'.  Nine Peer Groups that were overbought at the end of May are no longer so - Beers, Wines &amp; Spirits, Paints, Safety Equipment, Wholesale-Household Equipment, Wholesale-Transport Equipment, Real Estate-Other Services, Software-Accounting &amp; Finance, Accounting Services and Investment Banking Services. Four Peer Groups have become overbought in the last three months - Telecom Engineering, IT Systems-Financial, Software-Development Services and Employment &amp; Staffing Services.Source: Japan AnalyticsOVERSOLD PEER GROUPS - Currently ten Peer Groups are 'oversold'. The Kanto Regional Banks and Industrial REITs Peer Groups have become oversold in this period while the Kyushu Regional Banks, Retail REITs and Marine Transportation Peer Groups are no longer oversold. PEER GROUP RECOMMENDATIONS - Long and short recommendations for both overbought and oversold Peer Groups as well as lists of most and least preferred Peer Groups and suggested longs and shorts for some of each of those are detailed below. 

Japan: Most Overbought and Oversold - Relative Price Score Update - Sectors & Peer Groups

<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

Japan

TAISEI CORPORATION is a general contractor operating nationwide and overseas. The Company builds residential, commercial, and institutional buildings such as condominiums and single-family houses.  Taisei also performs civil engineering works for roads.  The Company, through its subsidiaries, operates real estate, resort development, and financial businesses.

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Taisei Corp (1801 JP)

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