'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

<p><strong>SHORT-LIVED</strong> - The much-lauded 'breakout' in the <a href="https://www.smartkarma.com/entities/22909" target="_blank" data-smartkarma-citation="entities:22909:1">Nikkei 225 (NKY INDEX)</a> at the end of last month proved to be short-lived. As measured by Total Market Value in Yen (TMV), the market peaked at ¥726.7t on 25th September, revisited that level in 2nd October and promptly fell by 8% in eight days. Despite a modest recovery towards the end of last week, TMV is now 6.5% lower year-to-date and down 1.3% over one year.  Although the TMV has, so far, held above ¥665t - the lower bound of the nine-month trading range - in US$ terms, last week saw a break below US$6t to a new one-year low. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/245/original/2018-10-21_10-24-24.png?1540085075" class="editor-image img-responsive" data-smartkarma-image-id="67245"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>SPIKED</strong> - As highlighted in our last update <a href="https://www.smartkarma.com/insights/japan-fortnightly-update-celebration" target="_blank" data-smartkarma-citation="insights:24383">Celebration</a>, both the 5-Day Relative Strength Index and 25-Day Toraku were signalling caution, which proved to be correct. Having peaked at its highest level in a year, on Monday, the former registered its second-lowest reading in over three years, while the latter has reverted to a neutral reading. In addition, the 52-week New High minus New Low indicator saw its third-lowest reading in three years. While these indicators suggest a possible short-term rebound ahead, they have yet to show the degree of capitulation indicative of a change in market trend which continues to be range-bound. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/246/original/2018-10-21_10-51-59.png?1540086749" class="editor-image img-responsive" data-smartkarma-image-id="67246"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/249/original/2018-10-21_10-52-14.png?1540087713" class="editor-image img-responsive" data-smartkarma-image-id="67249"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/250/original/2018-10-21_11-07-45.png?1540087729" class="editor-image img-responsive" data-smartkarma-image-id="67250"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>CHEAPER YET</strong> - The 333 earnings revisions and 437 results announcements since 24th September have had almost no impact on aggregate TTM and Forecast Net and Operating Income - the exception being a 0.15% decline in Forecast Operating Income. TTM Net Income remains 4% higher than Forecast Net Income and offers scope for some upward revisions as half-year results for March year-end companies are announced over the next four weeks. The current TTM PER is at a three-year low of 14 times and also offers a degree of support. However, should the first-half results confirm the caution inherent in current forecasts, further market weakness is likely.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/253/original/2018-10-21_11-46-25.png?1540090011" class="editor-image img-responsive" data-smartkarma-image-id="67253"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>WEAKER ¥ TO CURTAIL NEGATIVE EARNINGS MOMENTUM </strong>- The Japan Analytics' Results and Revision Scores measure the cap-weighted momentum of earnings results and forecasts/revisions for all listed companies. Both scores have been in decline since peaking in January 2018 and October 2017, respectively. Historically, one of the principal drivers of earnings has been the change in the US$/¥ exchange rate lagged six months. The recent peak in the Yen coincided with the March fiscal year-end and explains the cautious initial forecasts for the current year. The ¥10 downwards swing in the last six months boosted Q1 results and will do so again for the first half results. A recovery in earnings momentum would be a positive surprise an would provide some upside to the market.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/259/original/2018-10-21_13-22-32.png?1540095762" class="editor-image img-responsive" data-smartkarma-image-id="67259"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/067/260/original/2018-10-21_13-23-52.png?1540095850" class="editor-image img-responsive" data-smartkarma-image-id="67260"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-highlight"><p><strong>OUTLOOK</strong> - The 'dip' we expected after the September breakout was more severe than anticipated due to the confluence of some external factors. Local macroeconomic indicators are still far from positive. Industrial production is flatlining, and current trends in the German auto sector does not bode well for Japanese auto manufacturing. Higher wage incomes have been matched by food and energy price inflation and consumers have so far preferred to save rather than spend ahead of next year's 2% rise in the consumption tax. As usual, the results and revisions announced over the next four weeks will be the primary driver of stock returns and, with the market neither overbought nor overvalued, there is scope for some upside. Nevertheless, given the continuing macro concerns, the best-expected outcome is that the market stays within its nine-month trading range.  </p></div>

SHORT-LIVED - The much-lauded 'breakout' in the Nikkei 225 (NKY INDEX) at the end of last month proved to be short-lived. As measured by Total Market Value in Yen (TMV), the market peaked at ¥726.7t on 25th September, revisited that level in 2nd October and promptly fell by 8% in eight days. Despite a modest recovery towards the end of last week, TMV is now 6.5% lower year-to-date and down 1.3% over one year.  Although the TMV has, so far, held above ¥665t - the lower bound of the nine-month trading range - in US$ terms, last week saw a break below US$6t to a new one-year low. Source: Japan AnalyticsSPIKED - As highlighted in our last update Celebration, both the 5-Day Relative Strength Index and 25-Day Toraku were signalling caution, which proved to be correct. Having peaked at its highest level in a year, on Monday, the former registered its second-lowest reading in over three years, while the latter has reverted to a neutral reading. In addition, the 52-week New High minus New Low indicator saw its third-lowest reading in three years. While these indicators suggest a possible short-term rebound ahead, they have yet to show the degree of capitulation indicative of a change in market trend which continues to be range-bound. Source: Japan AnalyticsCHEAPER YET - The 333 earnings revisions and 437 results announcements since 24th September have had almost no impact on aggregate TTM and Forecast Net and Operating Income - the exception being a 0.15% decline in Forecast Operating Income. TTM Net Income remains 4% higher than Forecast Net Income and offers scope for some upward revisions as half-year results for March year-end companies are announced over the next four weeks. The current TTM PER is at a three-year low of 14 times and also offers a degree of support. However, should the first-half results confirm the caution inherent in current forecasts, further market weakness is likely.Source: Japan AnalyticsWEAKER ¥ TO CURTAIL NEGATIVE EARNINGS MOMENTUM - The Japan Analytics' Results and Revision Scores measure the cap-weighted momentum of earnings results and forecasts/revisions for all listed companies. Both scores have been in decline since peaking in January 2018 and October 2017, respectively. Historically, one of the principal drivers of earnings has been the change in the US$/¥ exchange rate lagged six months. The recent peak in the Yen coincided with the March fiscal year-end and explains the cautious initial forecasts for the current year. The ¥10 downwards swing in the last six months boosted Q1 results and will do so again for the first half results. A recovery in earnings momentum would be a positive surprise an would provide some upside to the market.   Source: Japan AnalyticsOUTLOOK - The 'dip' we expected after the September breakout was more severe than anticipated due to the confluence of some external factors. Local macroeconomic indicators are still far from positive. Industrial production is flatlining, and current trends in the German auto sector does not bode well for Japanese auto manufacturing. Higher wage incomes have been matched by food and energy price inflation and consumers have so far preferred to save rather than spend ahead of next year's 2% rise in the consumption tax. As usual, the results and revisions announced over the next four weeks will be the primary driver of stock returns and, with the market neither overbought nor overvalued, there is scope for some upside. Nevertheless, given the continuing macro concerns, the best-expected outcome is that the market stays within its nine-month trading range.  

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

<p>Japan’s jewellery retailers have had a dreary decade, forced to slash stores and brands in order to stop the flow of red ink, There is some optimism now, though, as the sales fall looks to have bottomed-out and profitability has greatly improved. The only real growth last year came from Milk, an SPA retailer with a clear target and strong brand focus, showing what the market demands.</p>

Japan’s jewellery retailers have had a dreary decade, forced to slash stores and brands in order to stop the flow of red ink, There is some optimism now, though, as the sales fall looks to have bottomed-out and profitability has greatly improved. The only real growth last year came from Milk, an SPA retailer with a clear target and strong brand focus, showing what the market demands.

Falling Sales Continue for Japanese Jewellery Retailers Except for Milk and As-Me Estelle

Japan

Yondoshi Holdings Inc. is a wholesaler primarily of practical clothing. The Company operates direct sales stores through subsidiaries.  F&A AQUA also wholesales men's and women's apparel.

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Yondoshi Holdings (8008 JP)

Japan Fortnightly Update: Spiked

SHORT-LIVED - The much-lauded 'breakout' in the Nikkei 225 (NKY INDEX) at the end of last month proved to be short-lived. As measured by Total...

Campbell Gunn

Falling Sales Continue for Japanese Jewellery Retailers Except for Milk and As-Me Estelle

Japan’s jewellery retailers have had a dreary decade, forced to slash stores and brands in order to stop the flow of red ink, There is some...

Michael Causton

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