Category

ESG

Apr 18
0

Daily Brief ESG: The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders

The Solution to Better Corporate Governance Is to Reduce the # of Companies with Large Shareholders

By Aki Matsumoto

  • Since “profitability of capital” like ROE or ROIC cannot create value in mid-to-long-term without improvement, the fact that ROE has stalled is a cause for concern for future stock prices.
  • The slow growth in Net Profit Margin and the sluggish improvement in Asset Turnover and Financial Leverage indicate that it is still holding too much cash, cross-held shares, etc. 
  • Nearly half of all listed companies are companies with major shareholders of 20% or more, which is an obstacle to improving corporate governance.

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Apr 16
0

Daily Brief ESG: Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English?

Doesn’t Cooperation Rather than Competition Slow the Pace of Improvement in Disclosure in English?

By Aki Matsumoto

  • TSE officially announced that it will request prime market listed companies to simultaneously disclose two documents, financial statements and timely disclosure information, in Japanese and English from April 2025.”
  • Given the characteristics of Japanese companies, which tend to implement only minimum requirements, few companies will engage in English language disclosure in their annual securities reports, which wasn’t explicitly stated.
  • Rather than improving the quality of the market to make it easier for global investors to trade, TSE has set efforts targets to match the speed of the slowest ship.

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Apr 14
0

Daily Brief ESG: Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?

Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?

By Aki Matsumoto

  • Since 2020, there has been a divergence between P/B and TOPIX movements, complicating matters for listed companies that have been asked to raise their P/Bs.
  • Expectations are high for a rise in ROE, which has a certain correlation with nominal GDP, which is also increasingly correlated with TOPIX, as deflation exits.
  • If price pass-through fails, escaping deflation may not lead directly to higher profit margins. If profit margin increase is insufficient, reducing cash on hand is essential to increase ROE.

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Apr 12
0

Daily Brief ESG: How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE? and more

By | Daily Briefs, ESG

In today’s briefing:

  • How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?

How Long Will the Escape from Deflation Be a Greater Factor in Stock Price Rises than ROE?

By Aki Matsumoto

  • Net profit per listed company increased 4.4 times over the 33 years from 1989 to 2023, which means only a modest 4.5% annual growth.
  • The reason why ROE has been sluggish since FY 2005 is due to the slow growth of Net Profit Margin, the decline of Asset Turnover, and the flat financial leverage.
  • When the escape from deflation becomes a reality, the key is to have products ready to pass on prices, and defense by cash alone is not sufficient for this purpose.

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Apr 10
0

Daily Brief ESG: In Correlation with TOPIX and more

By | Daily Briefs, ESG

In today’s briefing:

  • In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020

In Correlation with TOPIX, Nominal GDP Has Become Even Higher, While P/B Has Been Scarce Since 2020

By Aki Matsumoto

  • Nominal GDP grew 1.8% from 2012 to 2017, higher than the annual average over the past 33 years, in anticipation of an escape from deflation, but TOPIX gains have stalled.
  • Nominal GDP from 2021 to 2023 will grow 3.8% per year, far above the average of the past 33 years, and the correlation with TOPIX is even higher.
  • With average P/B showing little correlation with TOPIX after 2020, expanding nominal earnings without losing out to rising prices seems to be a more important factor for stock price appreciation.

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Apr 08
0

Daily Brief ESG: ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders and more

By | Daily Briefs, ESG

In today’s briefing:

  • ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders

ETFs Held by BOJ with No Prospect of Sale Are Unfortunate for Shareholders

By Aki Matsumoto

  • ETF sale is pie in the sky if the dividend income from ETFs held by BOJ is used to cover the interest payments associated with lifting of negative interest rates.
  • ETFs held by the Bank of Japan, which account for 7% of prime market capitalization, are actually reducing the number of actual tradable shares and hindering trading liquidity.
  • Furthermore, ETFs held by BOJ, which don’t indicate their intention to be shareholders, may be voting in favor of the company’s proposal as new silent shareholders in place of cross-shareholdings.

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Apr 06
0

Daily Brief ESG: Will the TSE’s Convoy System Work? and more

By | Daily Briefs, ESG

In today’s briefing:

  • Will the TSE’s Convoy System Work?

Will the TSE’s Convoy System Work?

By Aki Matsumoto

  • While more companies should include the cost of capital in their disclosures, investors are demanding that management present specific solutions discussed by the board of directors to solve their company’s problems.
  • Many companies with high foreign shareholding disclose their own management strategies, while companies without high foreign shareholding tend to lack the ability to think of measures to increase profitability.
  • The TSE’s newly established department supports such companies to ensure that all listed companies are not left behind, but that seems to go against the quality of the market.

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Apr 04
0

Daily Brief ESG: The Rising Number of Young People Unmarried Is the Cause of Low Birthrate. What Should Companies Do? and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Rising Number of Young People Unmarried Is the Cause of Low Birthrate. What Should Companies Do?

The Rising Number of Young People Unmarried Is the Cause of Low Birthrate. What Should Companies Do?

By Aki Matsumoto

  • The essence of the declining birthrate problem is the increasing number of young people who aren’t getting married, but the government has been mismatched in focusing support on married couples.
  • Since the reasons for unwillingness to marry are “financial reasons” for men and “limitation of activities and time” for women, along with increased income, child-rearing and housework shouldn’t burden women.
  • Companies should shift to business model that allows them to raise profit margins without resorting to cost-cutting, raise employee salaries, and create work environment that supports child-rearing and family responsibilities.

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Apr 02
0

Daily Brief ESG: Solving the Issue of Increasing Trading Liquidity in Japanese Stocks Is More Than Analyst Coverage.. and more

By | Daily Briefs, ESG

In today’s briefing:

  • Solving the Issue of Increasing Trading Liquidity in Japanese Stocks Is More Than Analyst Coverage..

Solving the Issue of Increasing Trading Liquidity in Japanese Stocks Is More Than Analyst Coverage..

By Aki Matsumoto

  • Market structure is the main factor hindering trading liquidity. In addition to the cross-holdings that remain, ETFs held by the Bank of Japan cast a shadow over trading liquidity.
  • Companies are key on this issue. In addition to accelerating to reducte cross-shareholdings, English-language disclosure of annual securities reports, which are in high demand by long-term investors, should be promoted.
  • If long-term overseas investors get serious about investing in Japanese equities, the increase in trading liquidity in Japanese equities will be sustainable, and broker coverage will naturally expand.

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Apr 01
0

Daily Brief ESG: The Good Case Companies Had More Opportunities to Reflect on Cost of Capital and Return on Capital and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Good Case Companies Had More Opportunities to Reflect on Cost of Capital and Return on Capital

The Good Case Companies Had More Opportunities to Reflect on Cost of Capital and Return on Capital

By Aki Matsumoto

  • Characteristic of companies TSE introduced as good disclosure examples is that they include more companies with a high foreign ownership and those that pay relatively close attention to cash allocation.
  • Not all companies that are good examples have increased their valuations noticeably compared to before TSE market restructuring, but TSE has chosen them based on the content of their initiatives.
  • These companies didn’t create their cash allocation policies abruptly, but had more opportunities to think through cost of capital, return on capital and stock price through engagements with overseas investors.

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