In this briefing:
- Sony Corp: Key Takeaways from Our Recent Meeting with IR Team
- What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
- Toyota: Hitting the Hybrid Accelerator and Towing Suzuki and Mazda in Its Wake
- Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
- Japanese Banks: Beyond the Ides of March
1. Sony Corp: Key Takeaways from Our Recent Meeting with IR Team
This article is a round up of the key takeaways from our recent meeting with Sony’s IR team. Our main focus was on the PlayStation and subsequent hardware and software developments, the company’s mobile phones business unit, the pictures unit as well as the semiconductor business.
- In the gaming segment, Sony doesn’t see Stadia as a threat since Sony mainly caters to the core gaming segment. Sony does not expect cloud gaming to offer the same quality that consoles offer to core gamers anytime soon. For the time being, Stadia will most likely appeal to casual gamers.
- In the pictures segment, Sony is developing a Spider-Verse sequel. A definite release date is yet to be confirmed, however, looking at the first movie’s success, we can expect a similar result for the sequel upon release.
- The company also plans to hold onto its mobile communications segment even though it is expected to make losses in FY03/19 as well. For Sony, this segment is crucial in developing 5G technologies.
- In the semiconductors segment, Sony expects a demand hike from the number of cameras used per phone. This is in spite of the mobile phone market itself slowing down. Sony expects to increase the ASPs of these sensors going forward as well.
2. What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States. Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress.
3. Toyota: Hitting the Hybrid Accelerator and Towing Suzuki and Mazda in Its Wake
The Nikkei announced this morning that Toyota Motor (7203 JP) was considering opening up its portfolio of hybrid patents for outside use, possibly for free.
We recently visited Toyota at its Toyota city headquarters and spent some time discussing this very topic. We believe this move is being made with an eye towards China in particular and to an extent the US. We would also highlight the continuing development of Toyota’s relationship with Suzuki. As the automakers move slowly towards what is likely to be an eventual union, the sharing of hybrid technology with Suzuki could have a significant impact on the medium-term prospects of both automakers.
4. Monthly Geopolitical Comment: Markets Are Still Waiting for the Result of US-China Trade Talks
The future of the US and China relationship remains the most significant geopolitical and economic issue watched by the markets. While the markets prefer to focus on the positives, the eventual outcome of the talks may yet prove disappointing. Meanwhile, a rift is emerging among EU members who have diverging attitudes to cooperation with China. Authorities in Turkey have again spooked investors with their ham-fisted approach to markets. In Ukraine, comedian Zelensky has won in the first round of the presidential poll. In India, sabre-rattling continues ahead of parliamentary elections despite the de-escalation of tensions with neighbouring Pakistan.
5. Japanese Banks: Beyond the Ides of March
“Beware the Ides of March”: the soothsayer’s repeated warning to ancient Rome’s most famous emperor in William Shakespeare’s play ‘Julius Caesar’. Caesar ignores the warning and is assassinated later that day by his colleagues on the steps of the Senate. We have been warning investors in Japanese bank stocks for the last few years to “beware the Ides of March”, advising them to be very underweight in the sector (or preferably out of the sector entirely) by 15 March each year to avoid the risk of incurring a similar fate at the hands of their investment colleagues as befell Julius Caesar on 15 March 44BC. We are now well past the Ides of March and, true to form, the sector has already peaked and lost momentum after a brief post-Santa rally. ‘Caveat emptor! (May the buyer beware!)’ remains our Caesarean soothsayer warning to would-be investors in Japanese bank stocks in 2019.
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