Brief Japan: 🇯🇵 Japan: Winter Peer Group Results & Revision Scores – Contrarian Buys & Sells/Peak & Ex-Growth and more

In this briefing:

1. 🇯🇵 Japan: Winter Peer Group Results & Revision Scores – Contrarian Buys & Sells/Peak & Ex-Growth
2. Japan Consumer Markets: Stimulus Package to Offset Consumption Tax Rise

1. 🇯🇵 Japan: Winter Peer Group Results & Revision Scores – Contrarian Buys & Sells/Peak & Ex-Growth

– PEER GROUP SCORE MATRIX –

INTRODUCTION – Following on from our review of the Market Composite and Sectors, this Insight will cover the cap-weighted Results & Revision Scores for the 328 Peer Groups that comprise our 30 Sectors providing greater depth to our analysis of current business trends.  Peer Group definitions reflect both standard SIC/GICS classifications as well as local market conventions. The number of constituents and market capitalisation for each Peer Group varies widely. 

RRS/RPS SCORE MATRIX – Combining our Results & Revision Scores (RRS) with each Peer Group’s Relative Price Score (RPS) allows a classification of our Peer Group universe into four quadrants –

• ‘Contrarian Buy‘  > Low RRS & Low RPS 
• ‘Contrarian Sell’ > High RRS & High RPS
• Peak Growth‘ > High RRS & Low RPS
• ‘Ex-Growth/Turnaround‘ > Low RRS & High RPS

THE ‘QUADRANTS’ – In the two ‘Contrarian‘ quadrants, the market is aligned with the current earnings momentum of the Peer Groups suggesting opportunities exist only for those willing or brave enough to take a contrarian view.  For ‘Peak Growth‘ Peer Groups, the market is calling for a downturn in momentum that has yet to be reflected in quarterly earnings. Where the cycle is more prolonged than expected, there are often opportunities for short-term rebounds in what are normally relatively-inexpensive companies. The ‘Ex-Growth‘ quadrant often consists of former ‘Contrarian Sell‘s where the market is reluctant to acknowledge that the cycle has turned. This quadrant can also contain ‘Turnarounds‘ – formerly ‘Contrarian Buys‘ where the market is correctly anticipating a change in fortunes.    

2. Japan Consumer Markets: Stimulus Package to Offset Consumption Tax Rise

Government plans to manage the effects of the consumption tax increase of 2% to 10%, due in October, continue to develop.

As in 2014 when sales tax rose from 5% to 8%, companies are nervous that the increase will lead to a significant downturn in consumption, and the government is chafing under pressure, both from businesses and the opposition.

The latest idea is to pump more money into the economy, while at the same time insisting that Japan’s massive debt levels will fall, partly thanks to stimulus from Japan’s new free trade deal with the EU and its role in the TPP.