Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

<ul>
<li>We continue to recommend a tactical overweight to defensives (Staples, Health Care, and Utilities) as the MSCI ACWI (ACWI-US) tests the top-end of our anticipated 2023 trading range at $93.</li>
<li>We also remain overweight Europe, Japan, and India, where a lot more than just defensives continue to outperform.</li>
<li>Actionable Themes: Consumer Discretionary and Defensives, Mainly in Japan and Europe</li>
</ul>


We continue to recommend a tactical overweight to defensives (Staples, Health Care, and Utilities) as the MSCI ACWI (ACWI-US) tests the top-end of our anticipated 2023 trading range at $93.
We also remain overweight Europe, Japan, and India, where a lot more than just defensives continue to outperform.
Actionable Themes: Consumer Discretionary and Defensives, Mainly in Japan and Europe


Remain Overweight Japan, Europe, & India; Buys in Discretionary and Defensives W/ Japan/Europe Focus

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>The increase in the number of companies adopting restricted stock is a positive development, but the bias toward fixed remuneration and the non-disclosure of individual director compensation are unsolved issues.</li>
<li>It's ironic that 90% investors see ROE as equal to or lower than the cost of capital, while 93% companies know their cost of capital but only 2.3% disclose it.</li>
<li>If affiliated companies with 20% shareholdings are included, there are still large number of companies covered (36.7% in the prime market), and "parent-subsidiary listings" continue to be a hot topic.</li>
</ul>


The increase in the number of companies adopting restricted stock is a positive development, but the bias toward fixed remuneration and the non-disclosure of individual director compensation are unsolved issues.
It's ironic that 90% investors see ROE as equal to or lower than the cost of capital, while 93% companies know their cost of capital but only 2.3% disclose it.
If affiliated companies with 20% shareholdings are included, there are still large number of companies covered (36.7% in the prime market), and "parent-subsidiary listings" continue to be a hot topic.


Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/rakuten-group-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a> is looking to raise around US$2.4bn by selling shares via a Japanese Public Offering and an International Offering as well as through a third-party allotment.</li>
<li>The stock has already dropped 13.7% in the last couple of days on large volumes as the rumours of the offering started to swirl.</li>
<li>The offering prices late next week and passive trackers will be buying stock once the stock settles and this will provide support in the near-term.</li>
</ul>



Rakuten (4755 JP) is looking to raise around US$2.4bn by selling shares via a Japanese Public Offering and an International Offering as well as through a third-party allotment.
The stock has already dropped 13.7% in the last couple of days on large volumes as the rumours of the offering started to swirl.
The offering prices late next week and passive trackers will be buying stock once the stock settles and this will provide support in the near-term.


Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In

<ul>
<li>Revisions to the Corporate Governance Code have increased the ratio of independent directors, and more companies have established voluntary nominating and compensation committees.</li>
<li>On the other hand, the transition to a Company with US type 3 committees and an independent director chairing the board of directors has been slow in coming.</li>
<li>Substantive improvements regarding the transition to a company with an audit committee and the establishment of a voluntary nominating and compensation committee should be carefully examined.</li>
</ul>


Revisions to the Corporate Governance Code have increased the ratio of independent directors, and more companies have established voluntary nominating and compensation committees.
On the other hand, the transition to a Company with US type 3 committees and an independent director chairing the board of directors has been slow in coming.
Substantive improvements regarding the transition to a company with an audit committee and the establishment of a voluntary nominating and compensation committee should be carefully examined.


Company with US Type of 3 Committees and Independent Director Chairing BOD Is the Litmus Test

<ul>
<li>Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.</li>
<li>Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.</li>
<li>TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.</li>
</ul>


Many companies have low valuations due to the fact that not few managers are concerned about maintaining public listing with the idea of prioritizing it over growth in shareholder interests.
Many companies only minimally respond to formally aligning board practices with the criteria of the Corporate Governance Code, and very few are creating value through advancing their corporate governance initiatives.
TSE data shows that OP Margin is neutral and Asset Turnover and Financial Leverage are both negative for ROE, so immediate share repurchases are the effective way in raising ROE.


Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

Remain Overweight Japan, Europe, & India; Buys in Discretionary and Defensives W/ Japan/Europe Focus

We continue to recommend a tactical overweight to defensives as $ACWI tests the top-end of our anticipated 2023 trading range at $93. Remain...

Vermilion Research

Overseas Investor Engagement Plays a Significant Role in Substantive Governance Enhancements

I would like to discuss the outline of the second half of "TSE Listed Companies Corporate Governance White Paper 2023" published by the TSE on...

Metrical Inc

Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In

Rakuten is looking to raise US$2.45bn via a Japanese, International and third-party offering. The stock has dropped 13.7% in the last 2 days and...

Brian Freitas

Company with US Type of 3 Committees and Independent Director Chairing BOD Is the Litmus Test

I woulds like to discuss the outline of the first half of "TSE Listed Companies Corporate Governance White Paper 2023" published by the TSE on...

Metrical Inc

Evaluate Not Only Board Practices, but Also Key Actions to See if They Are Leading to Value Creation

I would like to discuss the issues on the April 4 Nikkei article, "Number of Companies with P/B of Less Than One Times Doubles: Governance Reforms...

Metrical Inc