'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. 

Quantitative Analysis

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/347/original/2019-04-20_09-59-40.png?1555722056" class="editor-image img-responsive" data-smartkarma-image-id="85347"></figure><div class="content-caption">Source: Japan Analytics</div>UnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/405/original/2019-04-21_07-28-03.png?1555799330" class="editor-image img-responsive" data-smartkarma-image-id="85405"></figure><div class="content-caption">Source: Investing.com</div>CURRENCY RISK? - "UnCh" also applies to <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1">JPY (USDJPY CURNCY)</a>  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/350/original/2019-04-20_10-21-58.png?1555723331" class="editor-image img-responsive" data-smartkarma-image-id="85350"></figure><div class="content-caption">Source: Japan Analytics</div>VTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/381/original/2019-04-20_14-34-11.png?1555738458" class="editor-image img-responsive" data-smartkarma-image-id="85381"></figure><div class="content-caption">Source: Japan Analytics</div>VOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/352/original/2019-04-20_10-29-59.png?1555723806" class="editor-image img-responsive" data-smartkarma-image-id="85352"></figure><div class="content-caption">Source: Japan Analytics</div>LOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/363/original/2019-04-20_12-34-06.png?1555731278" class="editor-image img-responsive" data-smartkarma-image-id="85363"></figure><div class="content-caption">Source: Japan Analytics</div>DRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/384/original/2019-04-20_17-30-47.png?1555749055" class="editor-image img-responsive" data-smartkarma-image-id="85384"></figure><div class="content-caption">Source: Japan Analytics 
</div>MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/435/original/File%202019-04-21%2015%2055%2018.jpeg?1555829876" class="editor-image img-responsive" data-smartkarma-image-id="85435"></figure><div class="content-caption">Source: Bank of America Merrill Lynch</div>GLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/378/original/2019-04-20_14-00-43.png?1555736454" class="editor-image img-responsive" data-smartkarma-image-id="85378"></figure>FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/379/original/2019-04-20_14-04-23.png?1555736670" class="editor-image img-responsive" data-smartkarma-image-id="85379"></figure><div class="content-caption">Source: Japan Analytics</div>INTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/14191" target="_blank" data-smartkarma-citation="entities:14191:1">Koshidaka (2157 JP)</a>, <a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>, Drugstores, <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925 JP)</a>, Toyota Parts companies, and <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064 JP)</a>.

Source: Japan AnalyticsUnCh - Japanese equities are unchanged in US dollar terms over both three and six months. The Bank of Japan has intervened on 42 of the 121 trading days since October 22nd or an average of 1.6 times a week as foreigners remain underweight. As corporate results and macro data continue to disappoint, the outlook for the market is muted ahead of the upcoming ten-day holiday which combines the traditional Golden Week holidays with the accession of the new Emperor and the beginning of the Reiwa era (令和時代).  Source: Investing.comCURRENCY RISK? - "UnCh" also applies to JPY (USDJPY CURNCY)  Implied volatility for 9-month USDJPY options reached a new 25-year low last week of 6.11. The previous two lows were in 2006 and 2015 and were followed by periods of sustained Yen strength. The equity market currently appears to be discounting precisely the opposite.   Source: Japan AnalyticsVTR - The ratio of the value of stocks traded to the total market value continues to decline. The average for 2019 is 11% below that for the same period last year and is unchanged at 39bps in each month year-to-date.Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volumes have been highest in the Internet, Retail, and Telecoms sectors, while the Materials, Transportation, Utilities and Real Estate Sectors have seen the lowest.Source: Japan AnalyticsLOWS &gt; HIGHS - With a deficit of positive news at the individual company level, the number of new 52-week highs has exceeded the number of new 52-week lows on only one-third of the last 31 trading days. Source: Japan AnalyticsDRIFTING LOWER - TTM and Forecasts Aggregate Operating and Net Income continue to drift lower ahead of the full-year results for March year-end companies which are due in a more-concentrated-than-usual period either side of the long break.   Source: Japan Analytics 
MIND THE GAP - Based on our Scoring methodology for aggregate Results &amp; Revisions, the 'gap' between total market value and earnings momentum is now as wide as at the two previous 'peaks' in January 2018 and September 2018.Source: Bank of America Merrill LynchGLOBAL WAVE - The market is implying that the earnings cycle is close to a bottom which is in accord with BAML's Global Earnings Revision Ratio having ticked up last month for the first time in 14 months. BAML has yet to call a Trough in their Global Wave and, were they to do so, such a Trough would be the first above '50' since 2006.FORECASTS LEADING EARNINGS LOWER - Separating our the Results Score and the Forecast &amp; Revision Score, the latter is continuing to lead the former to the downside, although both Scores are in aggregate still positive. Reported earnings and forecasts are still growing year-on-year; however, the momentum is slowing rapidly.Source: Japan AnalyticsINTERIM LEADING ANNUAL LOWER -  Between February and September in each year, there is a statistically significant number of Interim Forecasts that they can be compared to the Annual Forecasts with which they are combined to derive the score in the previous chart. Interim Forecasts are often prepared by the divisional heads are not accorded the same 'reverence' as the Annual Forecasts. As a result, the Interim numbers offer a good leading indicator of short-term trends. In recent weeks, the aggregate Interim Forecast/Revision Score has turned sharply lower and is now at the lowest point in almost two years.   In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Koshidaka (2157 JP), Ryohin Keikaku (7453 JP), Drugstores, Daiwa House (1925 JP), Toyota Parts companies, and Yamato Holdings (9064 JP).

🇯🇵 Japan • Fortnightly Update - "UnCh"

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/962/original/BANNER-LOGISTICS-FINAL.png?1547911683" class="editor-image img-responsive" data-smartkarma-image-id="75962"></figure>
Tracking Traffic/Chinese Express &amp; Logistics is the hub for our research on China's express parcels and logistics sectors. Tracking Traffic/Chinese Express &amp; Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes. 
This month's issue covers the following topics:
<div>
<ol>
<li>
December express parcel pricing fell by over 9% Y/Y. Average pricing per express parcel fell by 9.1% Y/Y, the worst decline since Q216 (excluding January/February figures distorted by the Lunar New Year holiday). </li>
<li>
Express parcel revenue growth remained well below 20% last month. Weak pricing dragged sector revenue growth down to 17% in December, the 4th consecutive month of sub-20% growth. </li>
<li>
Intra-city pricing (ie, local delivery) was strong in 2018. Relative to weak inter-city pricing (down 3.1% Y/Y in 2018), pricing for intra-city express shipments was firm, rising by 0.1% last year. In fact, average pricing for intra-city express shipments has risen in four of the last five years. </li>
<li>
Underlying domestic transport demand remained firm in December. Although demand for inter-city express shipments appears to be moderating (from high levels), underlying transportation activity in December remained firm. The three modes of freight transport we track (rail, highway, air) in aggregate rose 6.6% Y/Y in December, even as the growth of air freight slowed.  </li>
</ol>
</div>
We retain a negative view of China's express industry's fundamentals: demand growth is slowing and pricing for inter-city shipments appears to be falling faster than costs can be cut, leading to margin compression.


Tracking Traffic/Chinese Express &amp; Logistics is the hub for our research on China's express parcels and logistics sectors. Tracking Traffic/Chinese Express &amp; Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes. 
This month's issue covers the following topics:



December express parcel pricing fell by over 9% Y/Y. Average pricing per express parcel fell by 9.1% Y/Y, the worst decline since Q216 (excluding January/February figures distorted by the Lunar New Year holiday). 

Express parcel revenue growth remained well below 20% last month. Weak pricing dragged sector revenue growth down to 17% in December, the 4th consecutive month of sub-20% growth. 

Intra-city pricing (ie, local delivery) was strong in 2018. Relative to weak inter-city pricing (down 3.1% Y/Y in 2018), pricing for intra-city express shipments was firm, rising by 0.1% last year. In fact, average pricing for intra-city express shipments has risen in four of the last five years. 

Underlying domestic transport demand remained firm in December. Although demand for inter-city express shipments appears to be moderating (from high levels), underlying transportation activity in December remained firm. The three modes of freight transport we track (rail, highway, air) in aggregate rose 6.6% Y/Y in December, even as the growth of air freight slowed.  


We retain a negative view of China's express industry's fundamentals: demand growth is slowing and pricing for inter-city shipments appears to be falling faster than costs can be cut, leading to margin compression. 

TRACKING TRAFFIC/Chinese Express & Logistics: Inter-City Pricing -9.1% | But Freight Activity Stable

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/064/356/original/BANNER-LOGISTICS-FINAL.png?1537355010" class="editor-image img-responsive" data-smartkarma-image-id="64356"></figure>Tracking Traffic/Chinese Express &amp; Logistics is the hub for our research on China's express parcels and logistics sectors. Tracking Traffic/Chinese Express &amp; Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes. All told, this issue of Tracking Traffic/Chinese Express &amp; Logistics includes data from over a dozen distinct sources.This month's issue covers the following topics:<ol>
<li>
Express parcels momentum continued to worsen in August. Express sector revenue growth fell to just 20.9% Y/Y in August. Sector revenue continues to trail the growth of online retail activity in China.  </li>
<li>
For some companies, express parcels pricing declined sharply last month. Overall, average pricing for the express sector declined by 3.8% Y/Y in August, but double-digit declines at two listed express companies suggest weak market conditions for inter-city express shipments last month.</li>
<li>
Underlying transportation demand in China remained solid last month. Rail, highway, and air freight demand expanded by about 6.4% in aggregate in August, a bit better than the 6.2% growth recorded in H118.</li>
<li>
<a href="https://www.smartkarma.com/entities/22799" target="_blank" data-smartkarma-citation="entities:22799:1">China Logistics Property Holdings (1589 HK)</a> remains undervalued. Its narrow focus on modern Chinese warehouse space and strategic a relationship with <a href="https://www.smartkarma.com/entities/446" target="_blank" data-smartkarma-citation="entities:446:1">Jd.Com Inc (Adr) (JD US)</a> make China Logistics Property Holdings our top pick in China's logistics sector. We remain negative on the express sector.</li>
</ol>

Tracking Traffic/Chinese Express &amp; Logistics is the hub for our research on China's express parcels and logistics sectors. Tracking Traffic/Chinese Express &amp; Logistics features analysis of monthly Chinese express and logistics data, notes from our conversations with industry players, and links to company and thematic notes. All told, this issue of Tracking Traffic/Chinese Express &amp; Logistics includes data from over a dozen distinct sources.This month's issue covers the following topics:

Express parcels momentum continued to worsen in August. Express sector revenue growth fell to just 20.9% Y/Y in August. Sector revenue continues to trail the growth of online retail activity in China.  

For some companies, express parcels pricing declined sharply last month. Overall, average pricing for the express sector declined by 3.8% Y/Y in August, but double-digit declines at two listed express companies suggest weak market conditions for inter-city express shipments last month.

Underlying transportation demand in China remained solid last month. Rail, highway, and air freight demand expanded by about 6.4% in aggregate in August, a bit better than the 6.2% growth recorded in H118.

China Logistics Property Holdings (1589 HK) remains undervalued. Its narrow focus on modern Chinese warehouse space and strategic a relationship with Jd.Com Inc (Adr) (JD US) make China Logistics Property Holdings our top pick in China's logistics sector. We remain negative on the express sector.


TRACKING TRAFFIC/Chinese Express & Logistics: Express Momentum Wanes | Pricing Tumbles | Buy CLPH!

Thematic (Sector/Industry)

TATTERED - After rising 1.6% in four days at the start of the week before last, our Market Composite then fell by 3%, ended the period down 1.3% and only 1% above the one-year 'low' of March 23rd 2018. Japanese equities are currently trading on a trailing-twelve-month (TTM) earnings multiple of just 13.9x - a three-year low. Of the factors driving prices lower, we highlight 'Trust' and 'Trade' and focus on <a href="https://www.smartkarma.com/entities/23714" target="_blank" data-smartkarma-citation="entities:23714:1">Tateru (1435)</a> and <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank (8358)</a> concerning the former.OUTLOOK - The rally we envisaged based on recent volume patterns lasted only for a week. The market is now overdue a bounce, at least in terms of the five-day relative strength index. Further, seasonality trends - <a href="https://www.smartkarma.com/insights/japan-seasonality-sell-in-july-and-say-goodbye-please-come-back-on-culture-day" target="_blank" data-smartkarma-citation="insights:23682">Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day"</a> - favour a rising equity market and weaker Yen into the end of the month, absent any adverse developments on the trade front.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/063/229/original/2018-09-08_21-25-10.png?1536481486" class="editor-image img-responsive" data-smartkarma-image-id="63229"></figure><div class="content-caption">Source: Japan Analytics</div>SECTOR RECOMMENDATIONS - Our sector recommendations have an implicit 3 'unit' market short by being overweight five sectors and underweight eight and have 'outperformed' by 2.3% over two weeks and by 12.3% over the last three months. COMPANIES - Our results and revision and stock performance reviews contain short comments on <a href="https://www.smartkarma.com/entities/3294" target="_blank" data-smartkarma-citation="entities:3294:1">Pigeon Corp (7956)</a> <a href="https://www.smartkarma.com/entities/4508" target="_blank" data-smartkarma-citation="entities:4508:1">Sekisui House (1928)</a> <a href="https://www.smartkarma.com/entities/11074" target="_blank" data-smartkarma-citation="entities:11074:1">Takara (2531)</a> <a href="https://www.smartkarma.com/entities/391" target="_blank" data-smartkarma-citation="entities:391:1">Sharp (6753)</a> <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman (7564)</a> <a href="https://www.smartkarma.com/entities/9145" target="_blank" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301)</a> <a href="https://www.smartkarma.com/entities/237" target="_blank" data-smartkarma-citation="entities:237:1">Daiwa House (1925)</a> <a href="https://www.smartkarma.com/entities/4481" target="_blank" data-smartkarma-citation="entities:4481:1">Shin Etsu Chemical (4063)</a> <a href="https://www.smartkarma.com/entities/379" target="_blank" data-smartkarma-citation="entities:379:1">Sumco (3436)</a> <a href="https://www.smartkarma.com/entities/280" target="_blank" data-smartkarma-citation="entities:280:1">Tokyo Electron (8035)</a> <a href="https://www.smartkarma.com/entities/2" target="_blank" data-smartkarma-citation="entities:2:1">Yamato Holdings (9064)</a> and <a href="https://www.smartkarma.com/entities/22772" target="_blank" data-smartkarma-citation="entities:22772:1">LINE (3938)</a>.

TATTERED - After rising 1.6% in four days at the start of the week before last, our Market Composite then fell by 3%, ended the period down 1.3% and only 1% above the one-year 'low' of March 23rd 2018. Japanese equities are currently trading on a trailing-twelve-month (TTM) earnings multiple of just 13.9x - a three-year low. Of the factors driving prices lower, we highlight 'Trust' and 'Trade' and focus on Tateru (1435) and Suruga Bank (8358) concerning the former.OUTLOOK - The rally we envisaged based on recent volume patterns lasted only for a week. The market is now overdue a bounce, at least in terms of the five-day relative strength index. Further, seasonality trends - Japan: Seasonality - "Sell in July and Say Goodbye...Please Come Back on Culture Day" - favour a rising equity market and weaker Yen into the end of the month, absent any adverse developments on the trade front.Source: Japan AnalyticsSECTOR RECOMMENDATIONS - Our sector recommendations have an implicit 3 'unit' market short by being overweight five sectors and underweight eight and have 'outperformed' by 2.3% over two weeks and by 12.3% over the last three months. COMPANIES - Our results and revision and stock performance reviews contain short comments on Pigeon Corp (7956) Sekisui House (1928) Takara (2531) Sharp (6753) Workman (7564) Tokai Carbon (5301) Daiwa House (1925) Shin Etsu Chemical (4063) Sumco (3436) Tokyo Electron (8035) Yamato Holdings (9064) and LINE (3938).

<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

Yamato Holdings Co., Ltd. mainly provides door-to-door parcel delivery services. The Company has developed a nationwide delivery system specializing in time-specified delivery. Yamato Holdings offers moving services and other comprehensive transportation services including logistics services for both domestic and overseas customers as well as financial and autoworks services.

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Yamato Holdings (9064 JP)

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