In today’s briefing:
- Ohayo Japan | Mind the Futures Gap
- Banking on the BoJ
- Have the Rules for Bottom Fishing Changed?
- A Rare Surge in China’s Stock Market – But, This Is Not a Bull Market
- Short Note: China Property – Guangzhou/Shenzhen/Shanghai Loosen the Property Sector – Buy Now!
Ohayo Japan | Mind the Futures Gap
- Stocks ended the week on a positive note, despite mixed performance on Friday, as investors focused on a key inflation report
- Japan’s incoming Prime Minister Shigeru Ishiba advocates for accommodative monetary policy to support economic recovery, despite previous criticism of aggressive easing
- Sumitomo Metal Mining will establish a mass production line for SiC substrates by FY2025, investing tens of billions of yen
Banking on the BoJ
- New LDP leader and Japanese PM favours interest rate normalisation
- This supports our outlook for a strengthening JPY against the USD
- The Japanese central bank may now face pressure to raise rates
Have the Rules for Bottom Fishing Changed?
- The median stock in our Dogs of Topix basket outperformed the median stock in the Topix 400 by 4% through Sept 2024.
- This is below the average of 7% achieved by such stocks over the past 9 years, but it was a much tougher stretch than it looked.
- Do we need to re-think? Much can be learned comparing the outperformers, whose median return was +34%, compared to the underperformers, which declined 23%.
A Rare Surge in China’s Stock Market – But, This Is Not a Bull Market
- The stimulus policy this time is more to convey a signal that “China will resolutely defend the bottom of the stock market”, and more importantly, complete the pricing of important assets.
- When global central banks really need to address US’ soaring debt risk,the process of reassessing the dollar’s status as a currency begins,which is the logic behind RMB’s rally/gold’s record highs.
- The optimal solution to the dollar problem is a global depression, and China will not be immune. So, the current rally in stock market may not be sustainable.
Short Note: China Property – Guangzhou/Shenzhen/Shanghai Loosen the Property Sector – Buy Now!
- Over the weekend, Shanghai, Shenzhen and Guangzhou, 3 of the 4 tier-1 cities, announced policy to loosen and support the property market
- China property stocks are very policy-driven. We think there will be more policies to be announced. Hence it is not too late to chase the rally
- We think COLI 688 HK, Longfor 960 HK and Sunac 1918 HK offer attractive upside and decent risk-reward profile
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