Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

Three days ago I wrote <a href="https://www.smartkarma.com/insights/boj-etf-buying-update" target="_blank" data-smartkarma-citation="insights:38783" rel="noopener">BOJ ETF Buying Update</a> which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the BOJ made a small clarification, or possibly amendment, to their purchasing plan. This changes the daily purchasing constituent basket slightly, favouring the Nikkei 225 vs what the market probably thought it was doing since mid-March. A quick refresher course on BOJ ETF buying constituency is below.

Three days ago I wrote BOJ ETF Buying Update which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the BOJ made a small clarification, or possibly amendment, to their purchasing plan. This changes the daily purchasing constituent basket slightly, favouring the Nikkei 225 vs what the market probably thought it was doing since mid-March. A quick refresher course on BOJ ETF buying constituency is below.

Macroeconomics

The BOJ lifted its daily ETF purchase rate on 2 March to a then-record ¥100bn in response to market weakness the previous week and Monday morning in Asia time. Two weeks later, true global central bank easing activity was launched. On 16 March, the BOJ announced Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19).As discussed in <a href="https://www.smartkarma.com/insights/japan-delta-i-the-boj-ups-etf-buying" target="_blank" data-smartkarma-citation="insights:37528" rel="noopener">JAPAN DELTA I - The BOJ Ups ETF Buying</a> this meant the BOJ would lift its ETF buying rate from ¥6 trillion a year to ¥12 trillion a year, including ¥11.7 trillion of purchases of TOPIX, Nikkei 225, and JPX Nikkei 400 ETFs.In the six weeks since then, the BOJ has purchased ¥2.0038 trillion in ETFs, and has lifted its 3-month annualised purchase rate from ¥4.8trln as of the end of February to ¥13.5trln as of the end of last week. This stretches the concept of "upper limit on annualised purchases" but the BOJ has not shown reticence to buy on weakness. An update below.

The BOJ lifted its daily ETF purchase rate on 2 March to a then-record ¥100bn in response to market weakness the previous week and Monday morning in Asia time. Two weeks later, true global central bank easing activity was launched. On 16 March, the BOJ announced Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19).As discussed in JAPAN DELTA I - The BOJ Ups ETF Buying this meant the BOJ would lift its ETF buying rate from ¥6 trillion a year to ¥12 trillion a year, including ¥11.7 trillion of purchases of TOPIX, Nikkei 225, and JPX Nikkei 400 ETFs.In the six weeks since then, the BOJ has purchased ¥2.0038 trillion in ETFs, and has lifted its 3-month annualised purchase rate from ¥4.8trln as of the end of February to ¥13.5trln as of the end of last week. This stretches the concept of "upper limit on annualised purchases" but the BOJ has not shown reticence to buy on weakness. An update below.

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/terumo-corp" target="_blank" data-smartkarma-citation="entities:6708:1" rel="noopener">Terumo Corp (4543 JP)</a> provides innovative medical solutions through its extensive business portfolio which ranges from vascular intervention and cardio-surgical solutions, blood transfusion and cell therapy technology and other medical products essential for daily clinical practice.</li>
<li>It was reported by several news media outlets that Terumo’s blood purification and oxygenation system has been approved by the US FDA to treat patients with COVID-19.</li>
<li>Nikkei also reported that the Japanese government has decided to provide subsidies to companies that increase production of these heart-lung machines used to treat severe pneumonia in coronavirus infected patients.</li>
<li>In this insight, we discuss the company’s ECMO business alongside its other business segments, outlook and the valuation of the company.</li>
<li>We expect the company’s largest business segment, Cardiac and Vascular to see strong growth over the next couple of years driven by steady growth in demand for cardiac and vascular products globally. At the same time, we expect Terumo’s continued launch of new products to further support the growth of the segment.</li>
<li>We expect Terumo’s other two businesses, Hospital and Blood Company to continue to perform steadily over the forecast period.</li>
</ul>



Terumo Corp (4543 JP) provides innovative medical solutions through its extensive business portfolio which ranges from vascular intervention and cardio-surgical solutions, blood transfusion and cell therapy technology and other medical products essential for daily clinical practice.
It was reported by several news media outlets that Terumo’s blood purification and oxygenation system has been approved by the US FDA to treat patients with COVID-19.
Nikkei also reported that the Japanese government has decided to provide subsidies to companies that increase production of these heart-lung machines used to treat severe pneumonia in coronavirus infected patients.
In this insight, we discuss the company’s ECMO business alongside its other business segments, outlook and the valuation of the company.
We expect the company’s largest business segment, Cardiac and Vascular to see strong growth over the next couple of years driven by steady growth in demand for cardiac and vascular products globally. At the same time, we expect Terumo’s continued launch of new products to further support the growth of the segment.
We expect Terumo’s other two businesses, Hospital and Blood Company to continue to perform steadily over the forecast period.


Terumo: Not Just an Opportune COVID Play but a Business with Solid Long-Term Prospects

In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of dollars, credit spreads exploded, 'risk-free' rate curves steepened dramatically, investment funds blew up, the very structure of money markets was briefly in question. Central banks around the world have acted in coordinated fashion to stem the tide of panic. The US Fed has stepped in with QE Forever, providing trillions of dollars of balance sheet and funding to stabilise systemic risk, and governments have announced trillions of dollars of stimulus packages to try to cushion economies from short-term restrictive social policies meant to stem the slow the spread of COVID-19 and lessen long-term economic damage from loss of life and work.Amidst this, the Nikkei 225/TOPIX ratio has gone through something of a rough patch. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/379/original/Screenshot%202020-03-29%20at%206.18.38%20PM.png?1585477145" class="editor-image img-responsive" data-smartkarma-image-id="125379"></figure>There is (obviously) a forest-for-the-trees argument to be made here. I'll stipulate that. But investors are expected to do their job come inclement weather, global pestilence, pandemic, or war - that is their job as stewards. Right now, an enormous part of that is second-guessing what other investors will do. This insight is a walk through the conditions which enabled and perhaps prompted the wild swings in some of the major constituents in Nikkei 225 and what caused the major swings in Nikkei vs. TOPIX.

In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of dollars, credit spreads exploded, 'risk-free' rate curves steepened dramatically, investment funds blew up, the very structure of money markets was briefly in question. Central banks around the world have acted in coordinated fashion to stem the tide of panic. The US Fed has stepped in with QE Forever, providing trillions of dollars of balance sheet and funding to stabilise systemic risk, and governments have announced trillions of dollars of stimulus packages to try to cushion economies from short-term restrictive social policies meant to stem the slow the spread of COVID-19 and lessen long-term economic damage from loss of life and work.Amidst this, the Nikkei 225/TOPIX ratio has gone through something of a rough patch. There is (obviously) a forest-for-the-trees argument to be made here. I'll stipulate that. But investors are expected to do their job come inclement weather, global pestilence, pandemic, or war - that is their job as stewards. Right now, an enormous part of that is second-guessing what other investors will do. This insight is a walk through the conditions which enabled and perhaps prompted the wild swings in some of the major constituents in Nikkei 225 and what caused the major swings in Nikkei vs. TOPIX. 

Breaking Down Wild Nikkei 225 Component Moves

'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/000/116/740/original/2020-02-07_03-39-22.png?1581019080" class="editor-image img-responsive" data-smartkarma-image-id="116740"></figure><div class="content-caption">Source • Japan Analytics</div>INTO THE 'RED' - As predicted, our Results Score dipped into negative territory yesterday, declining by 56 basis points to -0.21. Of the 65 large-cap results, only ten companies had positive qoq changes in Results Score, while seventeen saw double-digit declines. <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> did well to limit its quarterly year-on-year changes in Revenue and OP to -3%, and they are forecasting similar declines against TTM numbers for the full year. The Forecast/Revision Score added six basis points driven primarily by <a href="https://www.smartkarma.com/entities/shiseido-co-ltd" target="_blank" data-smartkarma-citation="entities:5718:1" rel="noopener">Shiseido (4911 JP)</a> overly optimistic initial forecast for FY2020. 'Mr Market' meanwhile is content to bid up share prices to close to the recent highs, and 8% below the January 2018 peak, when the Results Score was 7.54. <hr>• SECTOR TIMELINE •<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/116/741/original/2020-02-07_03-45-05.png?1581019946" class="editor-image img-responsive" data-smartkarma-image-id="116741"></figure><div class="content-caption">Source • Japan Analytics</div>SECTOR TIMELINE - The majority of Sectors saw lower Results &amp; Revision Scores yesterday, with Food, Beverages &amp; Tobacco being the exception due to <a href="https://www.smartkarma.com/entities/japan-tobacco-inc" target="_blank" data-smartkarma-citation="entities:13498:1" rel="noopener">Japan Tobacco (2914 JP)</a>'s stable topline performance and better-than-expected 2020 forecast. <a href="https://www.smartkarma.com/entities/mitsubishi-heavy-industries" target="_blank" data-smartkarma-citation="entities:13613:1" rel="noopener">Mitsubishi Heavy Industries (7011 JP)</a> decline into the red at the OP level and full-year downward revision took the Machinery Sector lower, while <a href="https://www.smartkarma.com/entities/seibu-holdings-inc" target="_blank" data-smartkarma-citation="entities:458:1" rel="noopener">Seibu (9024 JP)</a> was the negative driver for Multi-Industry. <a href="https://www.smartkarma.com/entities/terumo-corp" target="_blank" data-smartkarma-citation="entities:6708:1" rel="noopener">Terumo (4543 JP)</a> and <a href="https://www.smartkarma.com/entities/olympus-corp" target="_blank" data-smartkarma-citation="entities:356:1" rel="noopener">Olympus (7733 JP)</a> fuelled the decline in Healthcare and <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">Fujifilm (4901 JP)</a> did the same for Technology Hardware.

Source • Japan AnalyticsINTO THE 'RED' - As predicted, our Results Score dipped into negative territory yesterday, declining by 56 basis points to -0.21. Of the 65 large-cap results, only ten companies had positive qoq changes in Results Score, while seventeen saw double-digit declines. Toyota Motor (7203 JP) did well to limit its quarterly year-on-year changes in Revenue and OP to -3%, and they are forecasting similar declines against TTM numbers for the full year. The Forecast/Revision Score added six basis points driven primarily by Shiseido (4911 JP) overly optimistic initial forecast for FY2020. 'Mr Market' meanwhile is content to bid up share prices to close to the recent highs, and 8% below the January 2018 peak, when the Results Score was 7.54. • SECTOR TIMELINE •Source • Japan AnalyticsSECTOR TIMELINE - The majority of Sectors saw lower Results &amp; Revision Scores yesterday, with Food, Beverages &amp; Tobacco being the exception due to Japan Tobacco (2914 JP)'s stable topline performance and better-than-expected 2020 forecast. Mitsubishi Heavy Industries (7011 JP) decline into the red at the OP level and full-year downward revision took the Machinery Sector lower, while Seibu (9024 JP) was the negative driver for Multi-Industry. Terumo (4543 JP) and Olympus (7733 JP) fuelled the decline in Healthcare and Fujifilm (4901 JP) did the same for Technology Hardware. 

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 6th February ▲ 2914 4911 6406 ▼ 9024 4901 7951

Japan

TERUMO CORPORATION is a manufacturer and supplier of pharmaceuticals and medical tools and equipment.  The Company's products include health foods, transfusion and infusion equipment, disposable medical supply, clinical testing systems, artificial organs, and electronic thermometers.  Terumo markets the products through its subsidiaries and sales offices in the US, Europe, and Asia.

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Terumo Corp (4543 JP)

BOJ ETF Buying Composition Clarified

Three days ago I wrote BOJ ETF Buying Update which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the...

Travis Lundy

BOJ ETF Buying Update

The BOJ lifted its daily ETF purchase rate on 2 March to a then-record ¥100bn in response to market weakness the previous week and Monday morning...

Travis Lundy

Terumo: Not Just an Opportune COVID Play but a Business with Solid Long-Term Prospects

Terumo Corp (4543 JP) provides innovative medical solutions through its extensive business portfolio which ranges from vascular intervention and...

Shifara Samsudeen, ACMA, CGMA

Breaking Down Wild Nikkei 225 Component Moves

In the past 4 weeks we have seen substantial disruption in global markets. Total equity market cap across the world is down tens of trillions of...

Travis Lundy

🇯🇵 JAPAN • Results & Revisions Daily Roundup - 6th February ▲ 2914 4911 6406 ▼ 9024 4901 7951

INTO THE 'RED' - As predicted, our Results Score dipped into negative territory yesterday, declining by 56 basis points to -0.21. Of the 65...

Campbell Gunn

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