IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Ebang International Holdings I / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/27247" target="_blank" data-smartkarma-citation="entities:27247:1">Ebang (EBANG HK)</a> is a Chinese designer of bitcoin mining machines which are sold under the Ebit brand. Ebang refiled its draft prospectus with HKEX on 20 December 2018, but the IPO plans of cryptocurrency related companies are in a state of flux. Last week, the CEO of the Hong Kong Exchanges and Clearing, said that companies seeking to go public in Hong Kong should show consistency in their business models, in response to questions about the IPO applications of <a href="https://www.smartkarma.com/entities/27408" target="_blank" data-smartkarma-citation="entities:27408:1">Bitmain Technologies Ltd (1374554D CH)</a>, <a href="https://www.smartkarma.com/entities/27054" target="_blank" data-smartkarma-citation="entities:27054:1">Canaan Inc. (CANAAN HK)</a> and Ebang.<div class="content-highlight">While 1H18 results were strong, Ebang cautions that it experienced significant decreases in revenue and gross profit for 3Q18 compared to 2Q18. In the absence of any 3Q18 financial metrics, we scrutinised the financial accounts to find clues on the extent of the slowdown. Our analysis of the financial accounts' leading indicators points to a rapid slowdown.</div>

Ebang (EBANG HK) is a Chinese designer of bitcoin mining machines which are sold under the Ebit brand. Ebang refiled its draft prospectus with HKEX on 20 December 2018, but the IPO plans of cryptocurrency related companies are in a state of flux. Last week, the CEO of the Hong Kong Exchanges and Clearing, said that companies seeking to go public in Hong Kong should show consistency in their business models, in response to questions about the IPO applications of Bitmain Technologies Ltd (1374554D CH), Canaan Inc. (CANAAN HK) and Ebang.While 1H18 results were strong, Ebang cautions that it experienced significant decreases in revenue and gross profit for 3Q18 compared to 2Q18. In the absence of any 3Q18 financial metrics, we scrutinised the financial accounts to find clues on the extent of the slowdown. Our analysis of the financial accounts' leading indicators points to a rapid slowdown.

Ebang IPO Preview: Balance Sheet Indicators Point to a Significant Slowdown

Equity Analyst, LightStream Research

Supun Walpola

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

The year 2018 was not the brightest for cryptocurrencies; <a href="https://www.smartkarma.com/entities/25895" target="_blank" data-smartkarma-citation="entities:25895:1">Bitcoin (XBTUSD CURNCY)</a> fell around 70% during 2018 and top altcoins like <a href="https://www.smartkarma.com/entities/25896" target="_blank" data-smartkarma-citation="entities:25896:1">Ethereum (ETH BGN CURNCY)</a>, Ripple and Bitcoin Cash were also down around 80%, 85% and 95% respectively during last year. While it is difficult to pinpoint a single reason for this, a number of factors including, rising security concerns, increased scrutiny, failed institutional support and Bitcoin Cash hash wars have collectively contributed to this bearish sentiment in the cryptocurrency markets last year.
In this note we take a look at several top cryptocurrency and blockchain developments from last year, to see how they would fare going into 2019.
This is a collaborative report between <a href="https://www.smartkarma.com/profiles/342" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> and myself.

The year 2018 was not the brightest for cryptocurrencies; Bitcoin (XBTUSD CURNCY) fell around 70% during 2018 and top altcoins like Ethereum (ETH BGN CURNCY), Ripple and Bitcoin Cash were also down around 80%, 85% and 95% respectively during last year. While it is difficult to pinpoint a single reason for this, a number of factors including, rising security concerns, increased scrutiny, failed institutional support and Bitcoin Cash hash wars have collectively contributed to this bearish sentiment in the cryptocurrency markets last year.
In this note we take a look at several top cryptocurrency and blockchain developments from last year, to see how they would fare going into 2019.
This is a collaborative report between Douglas Kim and myself. 

This Week in Blockchain & Cryptos: A Bitcoin Reversal; More Red Flags for Bitmain

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Equity Bottom-Up

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/074/071/original/2018-12-28_11-57-31.png?1545965862" class="editor-image img-responsive" data-smartkarma-image-id="74071"></figure>
Source: Japan Analytics
</div>
THE <a href="https://www.smartkarma.com/entities/13631" target="_blank" data-smartkarma-citation="entities:13631:1">GMO INTERNET (9449 JP)</a> STORY - GMO internet (GMO-i) has attracted much attention in the last eighteen months from an unusual trinity of value, activist and ‘cryptocurrency’ equity investors.
<ul class="">
<li>
VALUE- Many traditional, but mostly foreign, value investors have seen the persistent negative difference between GMO-i’s market capitalisation and the value of the company’s holdings in its eight listed consolidated subsidiaries as an opportunity to invest in GMO-i with a considerable ‘margin of safety’.</li>
<li>
ACTIVIST - Since July 2017, the activist investor, Oasis, has waged a so-far-unsuccessful campaign with the aim of improving GMO’s corporate governance, removing takeover defences, addressing a 'secularly undervalued stock price we are not able to tolerate' (sic), and redefining the role and influence of the company’s Chairman, President, Representative Director and largest shareholder, Masatoshi Kumagai.</li>
<li>'CRYPTO!' - In December 2017, GMO-i committed to spending more than ¥35b or 10% of non-current assets. The aim was threefold: to set up a bitcoin ‘mining’ headquarters in Switzerland (with the ‘mining’ operations being carried out at an undisclosed location in Scandinavia), to develop proprietary state-of-the-art 7nm-node 'mining chips', and, in due course, to sell GMO-branded and developed ‘mining’ machines. The move was hailed in the ‘crypto’ fraternity as GMO-i became the largest non-Chinese and the first well-established Internet conglomerate to make a major investment in ‘cryptocurrency’ infrastructure.</li>
</ul>
OUTSTANDING - Following the December 2017 announcement, trading volumes spiked into ‘Overtraded’ territory - as measured by our Volume Score. Many investors saw GMO-i shares as a safer way of gaining exposure to 'cryptocurrencies', even as the price of bitcoin began to subside. By early June 2018, GMO-i’s shares had reached a closing price of ¥3,020: up 157% from the low of the prior year and outperforming TOPIX by 135%. Whatever the primary driver of this outstanding performance, each of our trio of investor groups no doubt felt vindicated in their approach to the stock.
CRYPTO CLOSURE - On December 25th 2018, GMO-i’s shares reached a new 52-week low of ¥1,325, a decline of 56% from the June high. Year to date, GMO-i shares have now declined by 31%, underperforming TOPIX by nine percentage points. On the same day, GMO-i <a href="https://ir.gmo.jp/en/pdf/irlibrary/gmo_disclose_info20181225_e.pdf" target="_blank">announced</a> that the company would post an extraordinary ¥35.5b loss for the fourth quarter, incurring an impairment loss of ¥11.5b in relation to the closure of the Swiss ‘mining’ headquarters and a loss of ¥24b to cover the closure of the ‘mining chip' and 'mining machine' development, manufacturing and sales businesses. GMO-i will continue to ‘mine’ bitcoin from its Tokyo headquarters and intends to relocate the 'mining' centre from Scandinavia to (sic) 'a region that will allow us to secure cleaner and less expensive power supply, but we have not yet decided the details’. Unlisted subsidiary GMO Coin's 'cryptocurrency' exchange will also continue to operate, and the previously-announced plans to launch a ¥-based ‘stablecoin’ in 2019 will proceed. In the two trading days following this announcement, the shares have recovered 13% to ¥1,505. 
RAIDING THE LISTCO PIGGY BANK - As we shall relate, this is the second time since listing that GMO-i has written off a significant new business venture which the company had commenced only a short time before. In both cases, the company was forced to sell stakes in its listed consolidated subsidiaries to offset the resulting losses. On this occasion, the sale of shares in <a href="https://www.smartkarma.com/entities/22762" target="_blank" data-smartkarma-citation="entities:22762:1">GMO Financial (7177 JP)</a> (GMO-F) on September 25 2018, and <a href="https://www.smartkarma.com/entities/1492" target="_blank" data-smartkarma-citation="entities:1492:1">GMO Payment Gateway (3769 JP)</a> (GMO-PG) on December 17 2018, raised a combined ¥55.6b and, after the deduction of the yet-to-be-determined tax on the realised gains, should more than offset the ‘crypto’ losses. <a href="https://ir.gmo.jp/en/pdf/irlibrary/gmo_disclose_info20181225_2e.pdf" target="_blank">According </a>to CFO Yasuda, any surplus from this exercise will be used to pay down debt. Also discussed below and in keeping with this GMO-i ‘MO’, in 2015, the company twice sold shares in its listed subsidiaries to ‘smooth out' less-than-desirable operating results.
<div class="content-highlight">
In the DETAIL section below we will cover the following topics:-
I: THE GMO-i TRACK RECORD - TOP-DOWN v. BOTTOM UP
<ul>
<li>BOTTOM LINE No. 1: NET INCOME</li>
<li>BOTTOM LINE No.2 - COMPREHENSIVE INCOME</li>
</ul>
II: THE GMO-i BUSINESS MODEL - THROWING JELLY AT THE WALL
III: THE GMO-i BALANCE SHEET - NOT SO HAPPY RETURNS
IV: THE GMO-i CASH FLOW - DEBT-FUNDED CASH PILE
V: THE GMO-i VALUATION - TWO METHODS &gt; SAME RESULT
<ul>
<li>VALUATION METHOD No.1 - THE 'LISTCO DISCOUNT'</li>
<li>VALUATION METHOD No.2 - RESIDUAL INCOME</li>
</ul>
</div>
<div class="content-highlight">
CONCLUSION - For those unable or unwilling to read further, we conclude that GMO-i 'rump' is a grossly-overrated business. Despite having started and spun off several valuable GMO Group entities, CEO Kumagai bears responsibility for two decades of serial and very poorly-timed ‘mal-investments’. As a result, the stock market has, except for the ‘cryptocurrency’-induced frenzy of the first six months of 2018, historically not accorded GMO-i any premium for future growth, and has correctly looked beyond the ‘siren song’ of the ‘HoldCo discount’. According to the two valuation methodologies described below, the company is, however, fairly valued at the current share price of ¥1,460. Investors looking for a return to the market-implied 3% perpetual growth rate of mid–2018 are likely to be as disappointed as those wishing for BTC to triple from here.
</div>



Source: Japan Analytics

THE GMO INTERNET (9449 JP) STORY - GMO internet (GMO-i) has attracted much attention in the last eighteen months from an unusual trinity of value, activist and ‘cryptocurrency’ equity investors.


VALUE- Many traditional, but mostly foreign, value investors have seen the persistent negative difference between GMO-i’s market capitalisation and the value of the company’s holdings in its eight listed consolidated subsidiaries as an opportunity to invest in GMO-i with a considerable ‘margin of safety’.

ACTIVIST - Since July 2017, the activist investor, Oasis, has waged a so-far-unsuccessful campaign with the aim of improving GMO’s corporate governance, removing takeover defences, addressing a 'secularly undervalued stock price we are not able to tolerate' (sic), and redefining the role and influence of the company’s Chairman, President, Representative Director and largest shareholder, Masatoshi Kumagai.
'CRYPTO!' - In December 2017, GMO-i committed to spending more than ¥35b or 10% of non-current assets. The aim was threefold: to set up a bitcoin ‘mining’ headquarters in Switzerland (with the ‘mining’ operations being carried out at an undisclosed location in Scandinavia), to develop proprietary state-of-the-art 7nm-node 'mining chips', and, in due course, to sell GMO-branded and developed ‘mining’ machines. The move was hailed in the ‘crypto’ fraternity as GMO-i became the largest non-Chinese and the first well-established Internet conglomerate to make a major investment in ‘cryptocurrency’ infrastructure.

OUTSTANDING - Following the December 2017 announcement, trading volumes spiked into ‘Overtraded’ territory - as measured by our Volume Score. Many investors saw GMO-i shares as a safer way of gaining exposure to 'cryptocurrencies', even as the price of bitcoin began to subside. By early June 2018, GMO-i’s shares had reached a closing price of ¥3,020: up 157% from the low of the prior year and outperforming TOPIX by 135%. Whatever the primary driver of this outstanding performance, each of our trio of investor groups no doubt felt vindicated in their approach to the stock.
CRYPTO CLOSURE - On December 25th 2018, GMO-i’s shares reached a new 52-week low of ¥1,325, a decline of 56% from the June high. Year to date, GMO-i shares have now declined by 31%, underperforming TOPIX by nine percentage points. On the same day, GMO-i announced that the company would post an extraordinary ¥35.5b loss for the fourth quarter, incurring an impairment loss of ¥11.5b in relation to the closure of the Swiss ‘mining’ headquarters and a loss of ¥24b to cover the closure of the ‘mining chip' and 'mining machine' development, manufacturing and sales businesses. GMO-i will continue to ‘mine’ bitcoin from its Tokyo headquarters and intends to relocate the 'mining' centre from Scandinavia to (sic) 'a region that will allow us to secure cleaner and less expensive power supply, but we have not yet decided the details’. Unlisted subsidiary GMO Coin's 'cryptocurrency' exchange will also continue to operate, and the previously-announced plans to launch a ¥-based ‘stablecoin’ in 2019 will proceed. In the two trading days following this announcement, the shares have recovered 13% to ¥1,505. 
RAIDING THE LISTCO PIGGY BANK - As we shall relate, this is the second time since listing that GMO-i has written off a significant new business venture which the company had commenced only a short time before. In both cases, the company was forced to sell stakes in its listed consolidated subsidiaries to offset the resulting losses. On this occasion, the sale of shares in GMO Financial (7177 JP) (GMO-F) on September 25 2018, and GMO Payment Gateway (3769 JP) (GMO-PG) on December 17 2018, raised a combined ¥55.6b and, after the deduction of the yet-to-be-determined tax on the realised gains, should more than offset the ‘crypto’ losses. According to CFO Yasuda, any surplus from this exercise will be used to pay down debt. Also discussed below and in keeping with this GMO-i ‘MO’, in 2015, the company twice sold shares in its listed subsidiaries to ‘smooth out' less-than-desirable operating results.

In the DETAIL section below we will cover the following topics:-
I: THE GMO-i TRACK RECORD - TOP-DOWN v. BOTTOM UP

BOTTOM LINE No. 1: NET INCOME
BOTTOM LINE No.2 - COMPREHENSIVE INCOME

II: THE GMO-i BUSINESS MODEL - THROWING JELLY AT THE WALL
III: THE GMO-i BALANCE SHEET - NOT SO HAPPY RETURNS
IV: THE GMO-i CASH FLOW - DEBT-FUNDED CASH PILE
V: THE GMO-i VALUATION - TWO METHODS &gt; SAME RESULT

VALUATION METHOD No.1 - THE 'LISTCO DISCOUNT'
VALUATION METHOD No.2 - RESIDUAL INCOME



CONCLUSION - For those unable or unwilling to read further, we conclude that GMO-i 'rump' is a grossly-overrated business. Despite having started and spun off several valuable GMO Group entities, CEO Kumagai bears responsibility for two decades of serial and very poorly-timed ‘mal-investments’. As a result, the stock market has, except for the ‘cryptocurrency’-induced frenzy of the first six months of 2018, historically not accorded GMO-i any premium for future growth, and has correctly looked beyond the ‘siren song’ of the ‘HoldCo discount’. According to the two valuation methodologies described below, the company is, however, fairly valued at the current share price of ¥1,460. Investors looking for a return to the market-implied 3% perpetual growth rate of mid–2018 are likely to be as disappointed as those wishing for BTC to triple from here.


GMO Internet (9447 JP) - Grossly or Modestly Overrated?

Shifara Samsudeen, FCMA, CGMA

GMO Internet is currently trading at JPY1,485 per share which is just 7.6% above its 12-month low of JPY1,380 per share. The Group’s share price reached an all-time high of JPY3,020 in June 2018, however, it has declined by more than 50% since then following the company’s poor performance in its cryptocurrency and mining related segment led by stagnant crypto prices coupled with negative news on issues concerning advertising fraud in its Online Advertising &amp; Media segment. This was further exacerbated by news that there will be delays in shipments of two bitcoin mining rig lines with refunds already issued in November. However, we believe, the downside is limited as the weaknesses of its crypto related business will weigh little on the consolidated earnings of the business. GMO’s business is structured in a way that its two main segments, namely, the Internet Infrastructure and Online Advertising and Media businesses are not prone to much volatility with recurring revenues. Therefore, we believe the negativity surrounding the company is exhausted and we expect the company to continue its strong growth trajectory.

GMO Internet is currently trading at JPY1,485 per share which is just 7.6% above its 12-month low of JPY1,380 per share. The Group’s share price reached an all-time high of JPY3,020 in June 2018, however, it has declined by more than 50% since then following the company’s poor performance in its cryptocurrency and mining related segment led by stagnant crypto prices coupled with negative news on issues concerning advertising fraud in its Online Advertising &amp; Media segment. This was further exacerbated by news that there will be delays in shipments of two bitcoin mining rig lines with refunds already issued in November. However, we believe, the downside is limited as the weaknesses of its crypto related business will weigh little on the consolidated earnings of the business. GMO’s business is structured in a way that its two main segments, namely, the Internet Infrastructure and Online Advertising and Media businesses are not prone to much volatility with recurring revenues. Therefore, we believe the negativity surrounding the company is exhausted and we expect the company to continue its strong growth trajectory.

GMO Internet Inc. – Limited Downside as Crypto Business Weighs Little on Consolidated Performance

Quantitative Analysis

MARKET COMPOSITEMARKET MOVING AVERAGES - As a prelude to our usual review of stock moving average outliers, we shall look at the current trend in the market aggregate moving averages as well as trends within our 30 market sectors. Our analysis will use a weighted composite of the 5, 20, 60, 120, and 240-day moving average, weighted to give each period approximately equal representation, and both the market value and stock count percentages are shown.   <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/517/original/2018-12-09_12-08-03.png?1544324897" class="editor-image img-responsive" data-smartkarma-image-id="72517"></figure><div class="content-caption">Source: Japan Analytics</div>BOTTOM ZONE - As of Friday's close, only 23% by number and 31% by value of Japanese stocks were trading above their composite moving averages. Although both scores are above the low of October 29th, the next few trading days should see a return into the sub-twenty per cent 'buying zone' last visited two years ago. As we have been emphasising in our commentary recently, the decisive low in this market cycle still lies ahead.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/518/original/2018-12-09_12-09-47.png?1544325008" class="editor-image img-responsive" data-smartkarma-image-id="72518"></figure><div class="content-caption">Source: Japan Analytics</div>BREAKING NOT BAD ENOUGH - As a measure of market 'distress' which can often signal important turning points, the percentage of stocks breaking above or below their moving averages is a useful indicator.  The 'Breaking Bad' percentage reached 11% on December 4th, the tenth-lowest reading in three years. A level of below '-15' is normally a good entry point.   <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/519/original/2018-12-09_12-21-10.png?1544325701" class="editor-image img-responsive" data-smartkarma-image-id="72519"></figure><div class="content-caption">Source: Japan Analytics</div>BREAKING BOTH - Adding the Breaking Above and Breaking Below percentages together provides a more straightforward view of the 15% threshold that has marked previous short and medium-term turning points.<hr> SECTORS<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/521/original/2018-12-09_13-17-48.png?1544329081" class="editor-image img-responsive" data-smartkarma-image-id="72521"></figure>SECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days are all, predictably, domestic and defensive - Food, Beverages &amp; Tobacco, Healthcare, Restaurants, REITs, Information Technology and Utilities. Equally predictable are our bottom half-dozen - Banks, Autos, Metals, Electrical Equipment, Chemicals and Building Materials. The 'sparklines' in the table show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative 'crossovers'. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/524/original/2018-12-09_13-37-19.png?1544330257" class="editor-image img-responsive" data-smartkarma-image-id="72524"></figure><div class="content-caption">Source: Japan Analytics</div>SECTOR MOVING AVERAGE RELATIVE TIMELINE - Charting the relative-to-market weighted composite over time illustrates the sector divergences which, in the case of REITs can be very pronounced. The nest tow charts show only the most and least-correlated in terms of moving average divergence. The former are the sectors to take positions in for maximum sector-relative-to market 'bang for your buck'. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/525/original/2018-12-09_13-46-12.png?1544330788" class="editor-image img-responsive" data-smartkarma-image-id="72525"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/526/original/2018-12-09_13-46-45.png?1544330835" class="editor-image img-responsive" data-smartkarma-image-id="72526"></figure><div class="content-caption">Source: Japan Analytics</div><hr>COMPANIESCOMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, out moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen in future. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/072/530/original/2018-12-09_14-26-34.png?1544333203" class="editor-image img-responsive" data-smartkarma-image-id="72530"></figure><div class="content-caption">Source: Japan Analytics</div>THE 100% CLUB - As of Friday 7th, there were 43 extreme positive outliers and 30 extreme negative outliers. Again, the relatively low number of extreme negative outliers suggests that the decisive low lies ahead. <div class="content-highlight">In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. </div>

MARKET COMPOSITEMARKET MOVING AVERAGES - As a prelude to our usual review of stock moving average outliers, we shall look at the current trend in the market aggregate moving averages as well as trends within our 30 market sectors. Our analysis will use a weighted composite of the 5, 20, 60, 120, and 240-day moving average, weighted to give each period approximately equal representation, and both the market value and stock count percentages are shown.   Source: Japan AnalyticsBOTTOM ZONE - As of Friday's close, only 23% by number and 31% by value of Japanese stocks were trading above their composite moving averages. Although both scores are above the low of October 29th, the next few trading days should see a return into the sub-twenty per cent 'buying zone' last visited two years ago. As we have been emphasising in our commentary recently, the decisive low in this market cycle still lies ahead.Source: Japan AnalyticsBREAKING NOT BAD ENOUGH - As a measure of market 'distress' which can often signal important turning points, the percentage of stocks breaking above or below their moving averages is a useful indicator.  The 'Breaking Bad' percentage reached 11% on December 4th, the tenth-lowest reading in three years. A level of below '-15' is normally a good entry point.   Source: Japan AnalyticsBREAKING BOTH - Adding the Breaking Above and Breaking Below percentages together provides a more straightforward view of the 15% threshold that has marked previous short and medium-term turning points. SECTORSSECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days are all, predictably, domestic and defensive - Food, Beverages &amp; Tobacco, Healthcare, Restaurants, REITs, Information Technology and Utilities. Equally predictable are our bottom half-dozen - Banks, Autos, Metals, Electrical Equipment, Chemicals and Building Materials. The 'sparklines' in the table show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative 'crossovers'. Source: Japan AnalyticsSECTOR MOVING AVERAGE RELATIVE TIMELINE - Charting the relative-to-market weighted composite over time illustrates the sector divergences which, in the case of REITs can be very pronounced. The nest tow charts show only the most and least-correlated in terms of moving average divergence. The former are the sectors to take positions in for maximum sector-relative-to market 'bang for your buck'. Source: Japan AnalyticsCOMPANIESCOMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, out moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen in future. Source: Japan AnalyticsTHE 100% CLUB - As of Friday 7th, there were 43 extreme positive outliers and 30 extreme negative outliers. Again, the relatively low number of extreme negative outliers suggests that the decisive low lies ahead. In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. 

Japan: Moving Average Outliers - Market, Sectors & Stocks - Hoshizaki, Sumco & Sharp

Japan

GMO Internet Group, Inc. provides internet related services to its corporate customers. The company offers domain, server, security and settlement services through its "WEB Infrastructure & EC" business, and assists companies in attracting web users through its "Internet Media" business. GMO Internet Group conducts businesses in Japan.

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GMO Internet Group (9449 JP)

Ebang IPO Preview: Balance Sheet Indicators Point to a Significant Slowdown

Ebang (EBANG HK) is a Chinese designer of bitcoin mining machines which are sold under the Ebit brand. Ebang refiled its draft prospectus with HKEX...

Arun George

This Week in Blockchain & Cryptos: A Bitcoin Reversal; More Red Flags for Bitmain

The year 2018 was not the brightest for cryptocurrencies; Bitcoin (XBTUSD CURNCY) fell around 70% during 2018 and top altcoins like Ethereum (ETH...

Supun Walpola

GMO Internet (9447 JP) - Grossly or Modestly Overrated?

THE GMO INTERNET (9449 JP) STORY - GMO internet (GMO-i) has attracted much attention in the last eighteen months from an unusual trinity of value,...

Campbell Gunn

GMO Internet Inc. – Limited Downside as Crypto Business Weighs Little on Consolidated Performance

GMO Internet is currently trading at JPY1,485 per share which is just 7.6% above its 12-month low of JPY1,380 per share. The Group’s share price...

Shifara Samsudeen, FCMA, CGMA

Japan: Moving Average Outliers - Market, Sectors & Stocks - Hoshizaki, Sumco & Sharp

MARKET COMPOSITEMARKET MOVING AVERAGES - As a prelude to our usual review of stock moving average outliers, we shall look at the current trend in...

Campbell Gunn

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