Brief Japan: Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround? and more

In this briefing:

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
2. Komatsu, HCM and CAT Tactical Recovery Targets and Macro Pivot Support
3. BoJ Steps in as ECB Exits
4. Japan Department Store Apparel Sales Down 35% in a Decade

1. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?

Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.

The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.

2. Komatsu, HCM and CAT Tactical Recovery Targets and Macro Pivot Support

We thought a technical view on these counters would help clarify where tactical rally targets come into play as well as more important macro support levels where a basing process is expected to begin.

Key resistance points can be used as short zones with key pivots stops and limit levels that reign in risk.

All three stocks display varying degrees of a macro descending corrective wedge formations that have yet to fully mature. 

CAT stands out as the more buoyant of the group and faces its own set of upside pivot resistance points with solid macro support to work with on weakness.

We wanted to fold in a technical view with Mio Kato, CFA and his insight Komatsu, HCM, CAT: The Stock Punishment Does Not Match the Outlook Deterioration Crime . This group may be ahead of the earnings curve and why we may see more gas in a corrective bounce cycle (CB easy policy and the hunt for value may be part of the rally) before more pressure points are hit to re test macro support targets.

3. BoJ Steps in as ECB Exits

By Shweta Singh, Managing Director Global Macro

• Global central banks turning dovish
• But BoJ maybe the only DM central bank ‘properly’ injecting liquidity this year
• European debt – including Italian BTPs – could benefit the most  

4. Japan Department Store Apparel Sales Down 35% in a Decade

Last month, the Japan Department Store Association (JDSA) announced a 1.1% drop in sales at department stores for calendar year 2018, with sales also down 0.8% on a same-store basis.

This was a reasonable result in a year when there were many store closures, both permanent and temporary, and slow traffic due to extreme weather events, and of course the background trend of an ageing consumer base.

However, the underlying trend remains clear: apparel sales continue to fall, down more than a third in a decade. Meanwhile, cosmetics has seen its share of sales double.

Since apparel accounts for 30% of department store sales on average and as much as 50% for regional stores, this is a serious weakness. With competition from speciality chains and online intensifying yet further and department stores themselves cutting space for apparel, there is unlikely to be any respite.

For this reason, and with further store closures planned in the next few years, the department store sector will continue to contract.