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 number of companies that meet the requirement has increased since the listing criteria for prime market specified specific numbers. However, the majority of companies have managed to meet 30%.</li>
<li>It's clear that once the numerical criteria for board diversity as well as ％ independent directors were specified, it would have gone all the way. But this couldn't be done.</li>
<li>It is concerned that Japanese companies may be distancing themselves from the need to listen to a wide range of opinions and create new value.</li>
</ul>


The number of companies that meet the requirement has increased since the listing criteria for prime market specified specific numbers. However, the majority of companies have managed to meet 30%.
It's clear that once the numerical criteria for board diversity as well as ％ independent directors were specified, it would have gone all the way. But this couldn't be done.
It is concerned that Japanese companies may be distancing themselves from the need to listen to a wide range of opinions and create new value.


Can Companies Barely Meet Independent Director Requirement and Shy Away from Diversity Create Value?

<ul>
<li>It shows that many companies still do not recognize the importance of diversity and that the hiring of women independent directors is merely a numbers game.</li>
<li>In Japan, there is the belief that a close-knit organization is more effective in achieving its goals, and there is a practice of excluding different opinions by emphasizing homogeneity.</li>
<li>In addition to the repeated disregard for women's rights, the deep-seated problem of accepting this disregard is the reason diversity has not truly progressed.</li>
</ul>


It shows that many companies still do not recognize the importance of diversity and that the hiring of women independent directors is merely a numbers game.
In Japan, there is the belief that a close-knit organization is more effective in achieving its goals, and there is a practice of excluding different opinions by emphasizing homogeneity.
In addition to the repeated disregard for women's rights, the deep-seated problem of accepting this disregard is the reason diversity has not truly progressed.


More Companies Are Hiring Women Directors, but to Solve the Fundamental Problem of Diversity

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

<ul>
<li>The theme we have seen over the past four weeks is an increasing number of indexes reversing 4-10-month downtrends and/or breaking above important resistance levels, with no failed breakouts.</li>
<li>We continue to believe that global equities are going through a bottoming process, but the real test will come during the eventual pullback, which we believe we are now experiencing.</li>
<li>We are watching to see whether these breakout levels and important moving averages (e.g., 50-day MAs) will hold.</li>
</ul>


The theme we have seen over the past four weeks is an increasing number of indexes reversing 4-10-month downtrends and/or breaking above important resistance levels, with no failed breakouts.
We continue to believe that global equities are going through a bottoming process, but the real test will come during the eventual pullback, which we believe we are now experiencing.
We are watching to see whether these breakout levels and important moving averages (e.g., 50-day MAs) will hold.


Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples

<ul>
<li>The listing criteria regarding trading volume is much simpler than other criteria. It's clear that an average daily trading value of 20 million yen isn't sufficient liquidity for many investors.</li>
<li>Many companies that fail to meet listing standards have low expectations for future cash flows, which leads to low valuations and is the reason for sluggish trading volume.</li>
<li>Keeping these companies in prime market is expected to lead to more focus on this issue, as the gap between these companies and their exact opposites will widen further.</li>
</ul>


The listing criteria regarding trading volume is much simpler than other criteria. It's clear that an average daily trading value of 20 million yen isn't sufficient liquidity for many investors.
Many companies that fail to meet listing standards have low expectations for future cash flows, which leads to low valuations and is the reason for sluggish trading volume.
Keeping these companies in prime market is expected to lead to more focus on this issue, as the gap between these companies and their exact opposites will widen further.


Interest Will Be Focused on when the TSE Will Begin Cleaning up the Prime Market

<ul>
<li>For the majority of companies applying the measures, the market capitalization in circulation is less than 10 billion yen, which is the reason for not meeting the listing criteria.</li>
<li>The only solution to this problem is to raise the stock price, which can only be done either by improving profits or by raising the expectation on the future profits.</li>
<li>It won't be long before the time comes when the criteria will be questioned in the first place, whether tradable market capitalization of 10 billion yen is sufficiently liquid investment.</li>
</ul>


For the majority of companies applying the measures, the market capitalization in circulation is less than 10 billion yen, which is the reason for not meeting the listing criteria.
The only solution to this problem is to raise the stock price, which can only be done either by improving profits or by raising the expectation on the future profits.
It won't be long before the time comes when the criteria will be questioned in the first place, whether tradable market capitalization of 10 billion yen is sufficiently liquid investment.


The Time Is Not Far off when the Prime Market Listing Criteria Itself Will Be Questioned

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)

Can Companies Barely Meet Independent Director Requirement and Shy Away from Diversity Create Value?

I will discuss about the issues like % independent directors and board diversity raised in Nikkei article, "70% of companies meet the requirement...

Metrical Inc

More Companies Are Hiring Women Directors, but to Solve the Fundamental Problem of Diversity

I would like to discussed the Nikkei article on women directors. Although the number of female directors is increasing, it seems that a lot of...

Metrical Inc

Japan Among the Latest to Break Out; Buy Ideas in Growth/Cyclicals and Consumer Staples

Japan is the latest major country to break out, and we are buyers. Japan continues to be considerably further along in the bottoming process...

Vermilion Research

Interest Will Be Focused on when the TSE Will Begin Cleaning up the Prime Market

I would like to discuss the Nikkei article regarding "companies that fail to meet the trading volume criteria of the TSE Prime Market."

Metrical Inc

The Time Is Not Far off when the Prime Market Listing Criteria Itself Will Be Questioned

I would like to discuss the issues on the Nikkei article, "Transitional measures applied to 80% of companies failing to meet standards."

Metrical Inc