In today’s briefing:
- Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- Takeda: Guidance Lowered Due to Setbacks in Clinical Trials but Pipeline Development Continues
- Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted
- Japanese Banks – Stay the Bullish Course
- Remain Overweight and Add Exposure to Japan; Buys in Insurance, Services, Tech, Staples, Utilities
Japan Post Bank (7182) October TOPIX FFW Upweight Upon Us
- Japan Post Bank (7182 JP) gets a dramatic upweight in TOPIX on Monday 30 October. There is a LOT of stock to buy. Call it US$2.2bn.
- Shares have to come from someplace. Basically it will all come from retail or from those who pre-positioned themselves in the stock (buying from retail). Some could come from short-sellers.
- The stock WAS not cheap vs regional banks (what I see as their best set of comps) and the Q2 Unrealised Loss on Securities has ballooned. But care is needed.
Takeda: Guidance Lowered Due to Setbacks in Clinical Trials but Pipeline Development Continues
- Takeda’s 2QFY03/2024 revenues increased 4.1% YoY beating consensus estimates by 6%. However, Takeda reported an operating loss of ¥49.3bn for the quarter due to impairment losses.
- As we expected, recent setback in some of Takeda’s clinical trials have led to write-downs and triggered a downward revision to full-year profit guidance.
- There has been excessive price reaction to these setbacks, however, Takeda continues to progress with its pipeline development with some newly launched drugs showing great potential.
Misumi Group (9962 JP): Weak Sales in September, but Most Bad News Discounted
- Total sales remained weak in September, dropping 3.5% YoY. In 1H of FY Mar-24, sales were down 4.3%. Month-to-month, though, they have been trending sideways.
- Die Components have been holding up best, followed by Factory Automation. The VONA e-commerce business has been more volatile, but still shows a lack of traction.
- Operating profit dropped 31% in 1H, but management is guiding for a 23% increase in 2H. This looks optimistic, but most of the bad news should be in the price.
Japanese Banks – Stay the Bullish Course
- So far in 4Q23, Japanese banks’ share prices have registered a mixed performance, in part due to the unsettled global market conditions; yet the Japanese bond yield curve keeps steepening
- We assess the top twelve Japanese commercial banks by market capitalisation, and we believe that Japanese banks remain good value with, a rare thing, improving fundamentals
- Ahead of the September results, we stick with our buys on Resona, Mizuho and SMFG; Resona has lagged deserving to re-rate further, and we add Hachijuni to our buy list
Remain Overweight and Add Exposure to Japan; Buys in Insurance, Services, Tech, Staples, Utilities
- The MSCI ACWI index (ACWI-US) continues to test major support at $90.50-$91.50, though no decisive break yet; as long as this support area holds, we remain constructive on global equities.
- MSCI EM (EEM-US) continues to test $37 support, while MSCI ACWI ex-US (ACWX-US) and EAFE (EFA-US) are testing supports at $45 and $65-$66, respectively
- Remain overweight and add exposure to Japan; the TOPIX remains in a 1.5-year RS uptrend (vs. MSCI ACWI), and continues to hold above 5-month support at 2200-2215
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