Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>Yaskawa's order momentum has peaked. On a constant currency basis, orders growth was -6% sequentially</li>
<li>Margins for the key Motion Control segment were 160bps lower in the quarter compared to a year ago</li>
<li>A minor revision down relies on aggressive FX assumptions for the 2H. We feel there is another downgrade to come. Stay Bearish</li>
</ul>


Yaskawa's order momentum has peaked. On a constant currency basis, orders growth was -6% sequentially
Margins for the key Motion Control segment were 160bps lower in the quarter compared to a year ago
A minor revision down relies on aggressive FX assumptions for the 2H. We feel there is another downgrade to come. Stay Bearish


Yaskawa (6506 JP) | Constant Currency Concerns

Thematic (Sector/Industry)

<ul>
<li>We share weekly commentaries on stocks in our coverage that had a good or bad week </li>
<li>Fast Retailing was the standout performer, trading up 11% this week</li>
<li>Wooden spoons for Money Forward and Yaskawa, both lower after reporting earnings</li>
</ul>


We share weekly commentaries on stocks in our coverage that had a good or bad week 
Fast Retailing was the standout performer, trading up 11% this week
Wooden spoons for Money Forward and Yaskawa, both lower after reporting earnings


Japan Stock Commentary | Uniqlo, Yaskawa and Money Forward

<ul>
<li>Q1 OP +8%, but core OP (pre-adjustments) fell 18% YoY on significant decline in profitability </li>
<li>Bulls may point to the surprising strength in orders, but the boost from China re-opening and weaker yen are not reflective of the underlying outlook</li>
<li>We think Yaskawa will be hard-pressed to make full year guidance of ¥72b. Stay bearish for now</li>
</ul>


Q1 OP +8%, but core OP (pre-adjustments) fell 18% YoY on significant decline in profitability 
Bulls may point to the surprising strength in orders, but the boost from China re-opening and weaker yen are not reflective of the underlying outlook
We think Yaskawa will be hard-pressed to make full year guidance of ¥72b. Stay bearish for now


Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

<ul>
<li>Stay short ahead of Q1 results. Full year guidance remains too high and will likely be cut later this year</li>
<li>Yaskawa remains a cyclical stock that correlates with the SOX index - higher interest rates are impacting valuation multiples</li>
<li>We see 20% downside risk towards 3x price to book</li>
</ul>


Stay short ahead of Q1 results. Full year guidance remains too high and will likely be cut later this year
Yaskawa remains a cyclical stock that correlates with the SOX index - higher interest rates are impacting valuation multiples
We see 20% downside risk towards 3x price to book


Yaskawa (6506) | Further 20% Downside on Higher Rate Cycle

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

Quantitative Analysis

<ul>
<li>We look at short interest across Hong Kong, Japan, Korea and Taiwan in April to identify stocks/sectors that have seen the largest changes in each market.</li>
<li>Korea and Taiwan are showing a clear divergence with short notional increasing as the market moves lower, indicative of new shorts being initiated.</li>
<li>
<a href="https://www.smartkarma.com/entities/china-merchants-bank-co-ltd-3388a037-4214-4997-b45d-520518cfdb57" target="_blank" data-smartkarma-citation="entities:10987:1" rel="noopener">China Merchants Bank H (3968 HK)</a> has seen the largest short covering as the stock has tumbled in the last couple of weeks.</li>
</ul>


We look at short interest across Hong Kong, Japan, Korea and Taiwan in April to identify stocks/sectors that have seen the largest changes in each market.
Korea and Taiwan are showing a clear divergence with short notional increasing as the market moves lower, indicative of new shorts being initiated.

China Merchants Bank H (3968 HK) has seen the largest short covering as the stock has tumbled in the last couple of weeks.


Asia Short Interest: Large Moves in April

Japan

YASKAWA Electric Corporation manufactures and markets servomotors, controllers, inverters, and industrial robots.  The Company's products include spindle controllers, computerized numerical control (CNC) systems, and system engineering.

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Yaskawa Electric (6506 JP)

Yaskawa (6506 JP) | Constant Currency Concerns

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Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

We remain Bearish on Yaskawa. Although headline Q1 earnings and orders looked OK, we think underlying trends are weaker. We expect a downward...

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Yaskawa (6506) | Further 20% Downside on Higher Rate Cycle

Yaskawa rallied +9% off the lows made in early May, on hopes for a normalization in China post COVID-19 lockdown. However, we believe that global...

Mark Chadwick

Asia Short Interest: Large Moves in April

Short notional in Korea and Taiwan has been increasing as the market has been moving lower. Shorts on China Merchant Bank have been covered in...

Brian Freitas

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