'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. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/994/original/2020-03-21_07-26-58.png?1584743238" class="editor-image img-responsive" data-smartkarma-image-id="123994"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>TAKE PROFITS</strong> - Japanese equities, as measured by the TOPIX Index, rose by 1.7% over the last week in Yen terms and fell by only 0.86% in US dollars, while <a href="https://www.smartkarma.com/entities/ishares-msci-acwi-etf" target="_blank" data-smartkarma-citation="entities:24402:1" rel="noopener">ACWI (ACWI US)</a> fell by 13.6%. The 1% gain on Thursday was aided by the Bank of Japan US$1.8 billion purchase of ETFs which represented 4.3% of the value traded in TOPIX and is 80% of the average monthly total of such purchases over the last nine years. We expect the central bank to be in the market again at a similar level of commitment on Monday. We would use such generosity to now reduce exposure to Japan.</p><div class="content-highlight"><p>In the<strong> DETAIL</strong> section below, we cover the outlook for a more prolonged Covid-19 bear market in Japan and suggest levels at which the market might offer some absolute value, hopefully within the next eighteen months.</p></div><blockquote><p><strong>If there is no market economy, then the stock market is in a sense largely irrelevant at this time, although we would not close it either since it does give people something to do that does generate some information and some amount of GDP and income - Andrew Hunt</strong></p></blockquote>

Source • Japan AnalyticsTAKE PROFITS - Japanese equities, as measured by the TOPIX Index, rose by 1.7% over the last week in Yen terms and fell by only 0.86% in US dollars, while ACWI (ACWI US) fell by 13.6%. The 1% gain on Thursday was aided by the Bank of Japan US$1.8 billion purchase of ETFs which represented 4.3% of the value traded in TOPIX and is 80% of the average monthly total of such purchases over the last nine years. We expect the central bank to be in the market again at a similar level of commitment on Monday. We would use such generosity to now reduce exposure to Japan.In the DETAIL section below, we cover the outlook for a more prolonged Covid-19 bear market in Japan and suggest levels at which the market might offer some absolute value, hopefully within the next eighteen months.If there is no market economy, then the stock market is in a sense largely irrelevant at this time, although we would not close it either since it does give people something to do that does generate some information and some amount of GDP and income - Andrew Hunt

🇯🇵 JAPAN MARKET UPDATE • Hit the BoJ Bid and Wait for the Absolute Value Opportunity

<div><p style="text-align: center;"><strong> • RELATIVE PRICE SCORE - COMPANIES •</strong></p></div><div>
<strong>RELATIVE PRICE SCORE OUTLIERS </strong>- The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.</div><div></div><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/886/original/2020-03-02_09-36-07.png?1583109407" class="editor-image img-responsive" data-smartkarma-image-id="120886"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERBOUGHT MEAN REVERSION</strong> - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are <a href="https://www.smartkarma.com/entities/systena-corp" target="_blank" data-smartkarma-citation="entities:20438:1" rel="noopener">Systena (2317 JP)</a> which was Very Overbought two quarters ago, <a href="https://www.smartkarma.com/entities/kotobuki-spirits-co-ltd" target="_blank" data-smartkarma-citation="entities:20062:1" rel="noopener">Kotobuki Spirits (2222 JP)</a>, <a href="https://www.smartkarma.com/entities/toei-co-ltd" target="_blank" data-smartkarma-citation="entities:15379:1" rel="noopener">Toei (9605 JP)</a>, and the amusement park operator <a href="https://www.smartkarma.com/entities/fuji-kyuko-co-ltd" target="_blank" data-smartkarma-citation="entities:1305:1" rel="noopener">Fuji Kyuko (9010 JP)</a>, which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/120/887/original/2020-03-02_09-42-41.png?1583109791" class="editor-image img-responsive" data-smartkarma-image-id="120887"></figure><div class="content-caption">Source • Japan Analytics</div>
<p><strong>OVERSOLD MEAN REVERSION</strong> - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari (4385 JP)</a> which we suggested was <em>'due for another bounce</em>' in our December Insight. Otherwise, <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a>, <a href="https://www.smartkarma.com/entities/chugoku-electric-power-co" target="_blank" data-smartkarma-citation="entities:16243:1" rel="noopener">Chugoku Electric Power (9504 JP)</a>, <a href="https://www.smartkarma.com/entities/tv-asahi-holdings-corp" target="_blank" data-smartkarma-citation="entities:8830:1" rel="noopener">Tv Asahi (9409 JP)</a>, and <a href="https://www.smartkarma.com/entities/suntory-beverage-food-ltd" target="_blank" data-smartkarma-citation="entities:8218:1" rel="noopener">Suntory Beverage &amp; Food (2587 JP)</a> all saw substantial recoveries.</p>
</div><div></div><div><div class="content-highlight"><p>Following on from our previous Insight <a href="https://www.smartkarma.com/insights/japan-march-sector-peer-group-relative-price-scores" target="_blank" data-smartkarma-citation="insights:36972" rel="noopener">March Sector &amp; Peer Group Relative Price Scores -</a>  which covered Sectors and Peer Groups, in the<strong> DETAIL </strong>section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.</p></div></div>

 • RELATIVE PRICE SCORE - COMPANIES •
RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices over the last 28 years and 24 months, respectively. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can reveal attractive trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months.
Source • Japan Analytics
OVERBOUGHT MEAN REVERSION - Examples of larger-cap companies that have reverted from being Overbought in the last quarter are Systena (2317 JP) which was Very Overbought two quarters ago, Kotobuki Spirits (2222 JP), Toei (9605 JP), and the amusement park operator Fuji Kyuko (9010 JP), which began to mean-revert well before the emergence of Covid-19. The average decline from their peak of these stocks is 34%, which compares with an 11% decline for the market overall.
Source • Japan Analytics
OVERSOLD MEAN REVERSION - The four large caps that have reverted from being Oversold have outperformed by over 20% on average, led by Mercari (4385 JP) which we suggested was 'due for another bounce' in our December Insight. Otherwise, Japan Post Bank (7182 JP), Chugoku Electric Power (9504 JP), Tv Asahi (9409 JP), and Suntory Beverage &amp; Food (2587 JP) all saw substantial recoveries.
Following on from our previous Insight March Sector &amp; Peer Group Relative Price Scores -  which covered Sectors and Peer Groups, in the DETAIL section below, we update our list of Overbought and Oversold large-cap companies (market capitalisation over ¥100b) with the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4.5) and Oversold (RPS &lt;-2) companies, as well as the largest positive and negative 3-month Changes in RPS adding some stock-specific comments in each category.

🇯🇵 JAPAN • March Company Relative Price Scores - Playing the Extremes

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

<p><a href="https://www.smartkarma.com/entities/alphamab-co-ltd" target="_blank" data-smartkarma-citation="entities:28213:1" rel="noopener">Alphamab Co Ltd (1728643D CH)</a> is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of biologics for oncology. It has launched a Hong Kong IPO to raise up to HK$1.83 billion ($234 million). </p><div class="content-highlight"><p>The core product is KN046, and along with KN026 are the two drug candidates which are likely to be launched in the next 3-4 years. Overall, we believe that the key products have strong prospects and Alphamab’s cash burn is manageable. </p></div>

Alphamab Co Ltd (1728643D CH) is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of biologics for oncology. It has launched a Hong Kong IPO to raise up to HK$1.83 billion ($234 million). The core product is KN046, and along with KN026 are the two drug candidates which are likely to be launched in the next 3-4 years. Overall, we believe that the key products have strong prospects and Alphamab’s cash burn is manageable. 

Alphamab Oncology IPO Initiation: Clear Diagnosis

Shanghai Henlius Biotech  / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (1566213D HK)</a> is a biopharmaceutical company and a non-wholly owned subsidiary of <a href="https://www.smartkarma.com/entities/shanghai-fosun-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:8045:1" rel="noopener">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a>, a 61% shareholder. In July 2019, Henlius resubmitted its application to list on the Hong Kong Stock Exchange to raise a rumoured $500 million.</p><div class="content-highlight"><p>Henlius’ core products include commercialised and near-commercial stage biosimilars. In China, Henlius’ core products will address four out of the top five largest biosimilars by forecasted sales revenue from 2023 to 2030, according to Frost &amp; Sullivan. Overall, we believe that most of the core products have strong prospects.</p></div>

Shanghai Henlius Biotech (1566213D HK) is a biopharmaceutical company and a non-wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group) (2196 HK), a 61% shareholder. In July 2019, Henlius resubmitted its application to list on the Hong Kong Stock Exchange to raise a rumoured $500 million.Henlius’ core products include commercialised and near-commercial stage biosimilars. In China, Henlius’ core products will address four out of the top five largest biosimilars by forecasted sales revenue from 2023 to 2030, according to Frost &amp; Sullivan. Overall, we believe that most of the core products have strong prospects.

Shanghai Henlius Biotech IPO Initiation: Going Large

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/728/original/2019-03-02_20-40-55.png?1551526871" class="editor-image img-responsive" data-smartkarma-image-id="80728"></figure><p>Source: Japan Analytics</p>
</div><p><strong>LIQUIDITY RULES - </strong>Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the strongest in over two years, and much of this 'boom' is flowing into risk assets. Large-scale repatriation of offshore funds by US companies has also helped boost the US dollar against the yen. <strong>The Market Composite responded by rising 2.3% over the last two weeks, although only by 1% in US dollar terms.</strong></p><p><strong>WEAK MACRO</strong> - Net exports and higher inventories offset private investment and consumption during the fourth quarter, resulting in flat GDP growth year-on-year. January industrial production fell to the lowest level in 30 months, and, with the manufacturing PMI nearing 50, the prospect is for further weakness this quarter. Inventories continue to rise and, in North Asia, to levels last seen in 2005. Combined with the sharp fall in exports in Japan, Korea and Taiwan, export pricing in back in deflationary territory, putting further upward pressure on real interest rates.  Meanwhile, January retail sales saw the largest month-on-month decline in over three years as department stores saw fewer Chinese tourists over the New Year.  <strong>Equity markets are living on 'borrowed time'.  </strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/722/original/2019-03-02_18-02-59.png?1551517390" class="editor-image img-responsive" data-smartkarma-image-id="80722"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/724/original/2019-03-02_18-07-56.png?1551517689" class="editor-image img-responsive" data-smartkarma-image-id="80724"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/729/original/2019-03-02_20-41-51.png?1551526925" class="editor-image img-responsive" data-smartkarma-image-id="80729"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>HOLD FOR NOW</strong> - This bear market rally is two months old and is maturing. The Value Traded ratio is below trend again, the RSI is neutral, and the Toraku is signalling caution. We expect another month of liquidity/weak Yen-driven strength before the economic realities begin to prevail.</p><p><strong>MARKET/SECTOR STRATEGY-</strong> We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the <strong>Information Technology</strong>, <strong>Internet</strong>,<strong> Media</strong>, <strong>Transportation, Healthcare</strong> and <strong>Telecommunications</strong> sectors. We would avoid or short the financial sectors <strong>Banks</strong>, <strong>Non-Bank Finance</strong> and <strong>Multi-Industry.</strong> We would underweight the <strong>Auto</strong>,<strong> Retail</strong> and <strong>Other Consumer Products</strong> sectors as consumer spending contracts further in the US, Europe, China and Japan. </p><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/10020" target="_blank" data-smartkarma-citation="entities:10020:1">Sakai Moving Service (9039 JP)</a>, <a href="https://www.smartkarma.com/entities/20269" target="_blank" data-smartkarma-citation="entities:20269:1">Sumitomo Chemical (4005 JP)</a>, <a href="https://www.smartkarma.com/entities/8431" target="_blank" data-smartkarma-citation="entities:8431:1">Parco (8251 JP)</a>, <a href="https://www.smartkarma.com/entities/4489" target="_blank" data-smartkarma-citation="entities:4489:1">Chugai Pharmaceutical (4519 JP)</a>, <a href="https://www.smartkarma.com/entities/14674" target="_blank" data-smartkarma-citation="entities:14674:1">Nichias (5393 JP)</a>, <a href="https://www.smartkarma.com/entities/27043" target="_blank" data-smartkarma-citation="entities:27043:1">Raksul (4384 JP)</a>, <a href="https://www.smartkarma.com/entities/10503" target="_blank" data-smartkarma-citation="entities:10503:1">Daito Trust (1878 JP)</a>, and <a href="https://www.smartkarma.com/entities/14502" target="_blank" data-smartkarma-citation="entities:14502:1">Benefit One (2412 JP)</a>.   </p>


Source: Japan Analytics
LIQUIDITY RULES - Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the strongest in over two years, and much of this 'boom' is flowing into risk assets. Large-scale repatriation of offshore funds by US companies has also helped boost the US dollar against the yen. The Market Composite responded by rising 2.3% over the last two weeks, although only by 1% in US dollar terms.WEAK MACRO - Net exports and higher inventories offset private investment and consumption during the fourth quarter, resulting in flat GDP growth year-on-year. January industrial production fell to the lowest level in 30 months, and, with the manufacturing PMI nearing 50, the prospect is for further weakness this quarter. Inventories continue to rise and, in North Asia, to levels last seen in 2005. Combined with the sharp fall in exports in Japan, Korea and Taiwan, export pricing in back in deflationary territory, putting further upward pressure on real interest rates.  Meanwhile, January retail sales saw the largest month-on-month decline in over three years as department stores saw fewer Chinese tourists over the New Year.  Equity markets are living on 'borrowed time'.  Source: Japan AnalyticsHOLD FOR NOW - This bear market rally is two months old and is maturing. The Value Traded ratio is below trend again, the RSI is neutral, and the Toraku is signalling caution. We expect another month of liquidity/weak Yen-driven strength before the economic realities begin to prevail.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, Transportation, Healthcare and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry. We would underweight the Auto, Retail and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and Japan. In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Sakai Moving Service (9039 JP), Sumitomo Chemical (4005 JP), Parco (8251 JP), Chugai Pharmaceutical (4519 JP), Nichias (5393 JP), Raksul (4384 JP), Daito Trust (1878 JP), and Benefit One (2412 JP).   

🇯🇵 Japan • Fortnightly Update - Liquidity Rules

United States

Roche Holding AG develops and manufactures pharmaceutical and diagnostic products. The Company produces prescription drugs in the areas of cardiovascular, infectious, autoimmune, respiratory diseases, dermatology, metabolic disorders, oncology, transplantation, and the central nervous system. Roche Holding serves customers worldwide.

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Roche Holding (ROG SW)

🇯🇵 JAPAN MARKET UPDATE • Hit the BoJ Bid and Wait for the Absolute Value Opportunity

TAKE PROFITS - Japanese equities, as measured by the TOPIX Index, rose by 1.7% over the last week in Yen terms and fell by only 0.86% in US...

Campbell Gunn

🇯🇵 JAPAN • March Company Relative Price Scores - Playing the Extremes

• RELATIVE PRICE SCORE - COMPANIES • RELATIVE PRICE SCORE OUTLIERS - The Relative Price Score (RPS) is a measure of price performance relative to...

Campbell Gunn

Alphamab Oncology IPO Initiation: Clear Diagnosis

Alphamab Co Ltd (1728643D CH) is a pre-revenue biotech company with a focus on research and development, manufacturing and commercialisation of...

Arun George

Shanghai Henlius Biotech IPO Initiation: Going Large

Shanghai Henlius Biotech (1566213D HK) is a biopharmaceutical company and a non-wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group)...

Arun George

🇯🇵 Japan • Fortnightly Update - Liquidity Rules

LIQUIDITY RULES - Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the...

Campbell Gunn

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