'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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)

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE OUTLIERS •</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/304/original/2021-01-18_07-21-17.png?1611015356" class="editor-image img-responsive" data-smartkarma-image-id="183304"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/305/original/2021-01-19_09-18-35.png?1611015525" class="editor-image img-responsive" data-smartkarma-image-id="183305"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div></section><p><strong>POLES APART</strong><strong>&amp; ECHOES OF 2000</strong>- As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold (Relative Price Score &lt;-2.0) and those that are OverBought (RPS &gt; 4.0) remains at extreme levels as does the spread in terms of market weight. 7.2% of listed companies are Oversold; while 2.2% are OverBought, but the latter account for 13.7% of market value; the former just 5.4%. The last time both pairs of metrics were at these levels was the 2000 technology bubble.</p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/321/original/2021-01-19_10-25-51.png?1611019564" class="editor-image img-responsive" data-smartkarma-image-id="183321"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/323/original/2021-01-19_10-27-10.png?1611019660" class="editor-image img-responsive" data-smartkarma-image-id="183323"></figure></section><p><strong>BLOW OUT</strong> - As was the case in 2000, the total number of Sectors either OverBought or Oversold is also at an extreme level having peaked at 13 in December. This number has been exceeded only twice in the last fifty years  - in December 1999 (16) and February 2000 (14).   </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/363/original/2021-01-19_12-45-46.png?1611027961" class="editor-image img-responsive" data-smartkarma-image-id="183363"></figure></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/367/original/2021-01-19_13-09-06.png?1611029374" class="editor-image img-responsive" data-smartkarma-image-id="183367"></figure></section><div><p>In the<strong> DETAIL</strong> section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific recommendations.</p></div><div><div><div class="content-highlight"><p><strong>THE JAPAN ANALYTICS RELATIVE PRICE SCORE</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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,919 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.</p></div></div></div>

• RELATIVE PRICE SCORE OUTLIERS •Source for all charts &amp; tables: Japan AnalyticsPOLES APART&amp; ECHOES OF 2000- As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold (Relative Price Score &lt;-2.0) and those that are OverBought (RPS &gt; 4.0) remains at extreme levels as does the spread in terms of market weight. 7.2% of listed companies are Oversold; while 2.2% are OverBought, but the latter account for 13.7% of market value; the former just 5.4%. The last time both pairs of metrics were at these levels was the 2000 technology bubble.BLOW OUT - As was the case in 2000, the total number of Sectors either OverBought or Oversold is also at an extreme level having peaked at 13 in December. This number has been exceeded only twice in the last fifty years  - in December 1999 (16) and February 2000 (14).   In the DETAIL section below, we provide an update on  Sector, Peer Group and individual company Relative Price Score trends and outliers and make some stock-specific recommendations.THE JAPAN ANALYTICS RELATIVE PRICE SCORE -  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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,919 currently-listed Companies is cap-weight-aggregated into Relative Price Scores for our 328 Peer Groups and 30 Sectors. The Overbought and Oversold outlier 'thresholds are set' at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors, respectively. These thresholds equate with the top and bottom percentiles of over 3.2 million observations.

🇯🇵 JAPAN • January Relative Price Scores -  Actionable Mean Reversion Trades

HK/China Equity Long-Short

Osbert Tang, CFA

<p>China's aerospace and defense industry offers unique investment opportunity to investors, but due to its high sensitivity, all major companies involved are listed as A-shares in either the Shanghai or the Shenzhen Stock Exchanges only.  With the rise in global geopolitical tension, increase in the civilian uses of defense technology, the government's support of the industry and the potential for further asset injection and restructuring of the listed companies, we are positive on the outlook of the sector.</p><p>While there are risks in the investment in this industry of national importance, we believe that they are outweighed by the potential returns. Among the MSCI China A-share constituents in the sector, we prefer <a href="https://www.smartkarma.com/entities/avic-shenyang-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:12150:1" rel="noopener">Avic Shenyang Aircraft (600760 CH)</a> and <a href="https://www.smartkarma.com/entities/aecc-aviation-power-co-ltd" target="_blank" data-smartkarma-citation="entities:2461:1" rel="noopener">AECC Aviation Power (600893 CH)</a>. These are then followed by <a href="https://www.smartkarma.com/entities/avic-aircraft-co-ltd" target="_blank" data-smartkarma-citation="entities:15174:1" rel="noopener">Avic Aircraft Co Ltd A (000768 CH)</a> and <a href="https://www.smartkarma.com/entities/china-spacesat-co-ltd-a" target="_blank" data-smartkarma-citation="entities:6142:1" rel="noopener">China Spacesat Co Ltd A (600118 CH)</a>, respectively. However, we ranked <a href="https://www.smartkarma.com/entities/china-avionics-systems-coltd" target="_blank" data-smartkarma-citation="entities:11393:1" rel="noopener">China Avionics Systems Co (600372 CH)</a> as the least attractive play among the five stocks. </p><h2>What's Original?</h2><p>This Smartkarma Original covers the opportunities and risks for the sector by looking at the recent geopolitical developments, including the US-China political and trade tension, and their implications on the future development of China's defense spending and the market outlook of the aerospace and defense industry. We analyse the revenue and margin drivers, provide global comparison and present our views on the A-share aerospace &amp; defense companies. We also look from the perspectives of potential asset restructuring and industry consolidation given the many unlisted central State-owned enterprises (SOEs) involved in this business and the numerous listed companies under these SOEs. In addition, we address the background and characteristics of the aerospace &amp; defense central SOEs (unlisted parents of these listed companies) as they are essential to the understanding of the listed companies. </p>

China's aerospace and defense industry offers unique investment opportunity to investors, but due to its high sensitivity, all major companies involved are listed as A-shares in either the Shanghai or the Shenzhen Stock Exchanges only.  With the rise in global geopolitical tension, increase in the civilian uses of defense technology, the government's support of the industry and the potential for further asset injection and restructuring of the listed companies, we are positive on the outlook of the sector.While there are risks in the investment in this industry of national importance, we believe that they are outweighed by the potential returns. Among the MSCI China A-share constituents in the sector, we prefer Avic Shenyang Aircraft (600760 CH) and AECC Aviation Power (600893 CH). These are then followed by Avic Aircraft Co Ltd A (000768 CH) and China Spacesat Co Ltd A (600118 CH), respectively. However, we ranked China Avionics Systems Co (600372 CH) as the least attractive play among the five stocks. What's Original?This Smartkarma Original covers the opportunities and risks for the sector by looking at the recent geopolitical developments, including the US-China political and trade tension, and their implications on the future development of China's defense spending and the market outlook of the aerospace and defense industry. We analyse the revenue and margin drivers, provide global comparison and present our views on the A-share aerospace &amp; defense companies. We also look from the perspectives of potential asset restructuring and industry consolidation given the many unlisted central State-owned enterprises (SOEs) involved in this business and the numerous listed companies under these SOEs. In addition, we address the background and characteristics of the aerospace &amp; defense central SOEs (unlisted parents of these listed companies) as they are essential to the understanding of the listed companies. 

China Aerospace & Defense A Shares: An In-Depth Walkthrough

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

<ul>
<li>
<em><strong>Increasing Systemic Risks:</strong></em>Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.</li>
<li> <em><strong>Global Recession Already Underway:</strong></em> A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  </li>
<li><p><em><strong>Financial Stability Called Into Question:</strong></em>The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   </p></li>
</ul>



Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility, which likely is the new normal given issues Quant Funds, illiquidity, the lack of US preparation and global leadership, and the corporate bond market are all becoming systemic risks.
 Global Recession Already Underway: A global recession is already well underway, which should worsen given how much this pandemic is having on consumer confidence.  
Financial Stability Called Into Question:The global market rout is calling financial stability into question. This crisis of confidence and increased likelihood of waterfall of losses that will make for a VERY toxic cocktail – especially considering that many names are still not profitable on an operating basis.   


Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Douglas Research Advisory

Event-Driven

Korea Aerospace Industries / Event-Driven

<ul>
<li>It has been reported that Hanwha Group affiliates including Hanwha Aerospace, Hanwha Systems, and Aero USA purchased a combined amount of 4.99% stake in Korea Aerospace Industries.</li>
<li>We estimate about 60-70%+ probability that KAI could be privatized in the next 3-5 years.</li>
<li><em><strong>If Hanwha Group acquires the controlling stake in KAI, this could be a major positive move for the Hanwha Group's efforts to accelerate the creation of Korea SpaceX. </strong></em></li>
</ul>


It has been reported that Hanwha Group affiliates including Hanwha Aerospace, Hanwha Systems, and Aero USA purchased a combined amount of 4.99% stake in Korea Aerospace Industries.
We estimate about 60-70%+ probability that KAI could be privatized in the next 3-5 years.
If Hanwha Group acquires the controlling stake in KAI, this could be a major positive move for the Hanwha Group's efforts to accelerate the creation of Korea SpaceX. 


Hanwha Group's Purchase of 4.99% Stake in Korea Aerospace Industries (KAI): Step 1 of Privatization?

Alpha-Centric ESG Research

Kyle Rudden

<p>ESG short selling – i.e., shorting based on ESG metrics and catalysts – isn't new, but is undergoing a radical evolution. Short-term ESG trading opportunities are a new reality. Traditional ESG funds are breaking etiquette and mimicking hedge fund long/short strategies. Hedge fund heavyweights are here, some betting against ESG <em>itself</em>, as if ESG is overvalued or ripe for a catalytic correction.</p><p>Originally, my plan was to address ESG short selling in different report, on another topic. However, a recent <a href="https://www.gpif.go.jp/en/topics/Suspension_of_Stock_Lending_Activities.pdf" target="_blank" rel="noopener">decision</a> by Japan's Government Pension Investment Fund sparked a firestorm around the age-old ESG short-selling debate – whether shorting is ideologically at odds with ESG, responsible, sustainable, social, ethical, green, moral, or whatever-you-want-to-call-it investing.</p><p>I feel the ESG community (and media) shot a wooden duck by sprinting down the same tired ethics path with blinders on, re-hashing increasingly antiquated arguments and ignoring more important trends in ESG short selling. The ethics of short selling still matter, but such a myopic focus is naïve to, or perhaps in denial of, fundamental changes to the ESG landscape over the last few years.</p><p>Thus, I wanted to share my thoughts sooner rather than later. This was to be a brief critique of the recent ruckus over ESG short selling. Clearly, it snowballed. I stopped before descending the rabbit hole from which I'd never emerge (ESG long/short back tests and walk forwards). Still, this evolved into a deeper dive into ESG short selling and hedge funds. There are seven sections, which:</p><ol>
<li>Articulate my rationale for having a contrarian (bullish) imperative on an innately bearish topic</li>
<li>Summarise GPIF's decision to suspend stock lending and opine on its broader ESG implications</li>
<li>Explain why and how I think securities lending, shorting selling, and ESG can peacefully coexist</li>
<li>Highlight three broad trends that are enabling and driving changes in ESG-driven short selling</li>
<li>Note how ESG mutual funds are shorting as a turbocharged ESG screen ("long virtue, short sin")</li>
<li>Discuss the recent influx of hedge fund assets into the ESG arena, including several key nuances</li>
<li>Illustrate how hedge funds are shorting ESG "greenwashing" and/or arbitraging dodgy ESG data</li>
</ol><p>Conventional wisdom is that ESG investing is a long-term, long-only, buy-and-hold game. That is still largely the case, but the range of potential ESG investment horizons is widening. For the first time in my eleven years of ESG investment research, I can envision shorter-term, trading-oriented ESG opinions as a complement to long-term biased ESG research. We'll see where this leads.</p>

ESG short selling – i.e., shorting based on ESG metrics and catalysts – isn't new, but is undergoing a radical evolution. Short-term ESG trading opportunities are a new reality. Traditional ESG funds are breaking etiquette and mimicking hedge fund long/short strategies. Hedge fund heavyweights are here, some betting against ESG itself, as if ESG is overvalued or ripe for a catalytic correction.Originally, my plan was to address ESG short selling in different report, on another topic. However, a recent decision by Japan's Government Pension Investment Fund sparked a firestorm around the age-old ESG short-selling debate – whether shorting is ideologically at odds with ESG, responsible, sustainable, social, ethical, green, moral, or whatever-you-want-to-call-it investing.I feel the ESG community (and media) shot a wooden duck by sprinting down the same tired ethics path with blinders on, re-hashing increasingly antiquated arguments and ignoring more important trends in ESG short selling. The ethics of short selling still matter, but such a myopic focus is naïve to, or perhaps in denial of, fundamental changes to the ESG landscape over the last few years.Thus, I wanted to share my thoughts sooner rather than later. This was to be a brief critique of the recent ruckus over ESG short selling. Clearly, it snowballed. I stopped before descending the rabbit hole from which I'd never emerge (ESG long/short back tests and walk forwards). Still, this evolved into a deeper dive into ESG short selling and hedge funds. There are seven sections, which:
Articulate my rationale for having a contrarian (bullish) imperative on an innately bearish topic
Summarise GPIF's decision to suspend stock lending and opine on its broader ESG implications
Explain why and how I think securities lending, shorting selling, and ESG can peacefully coexist
Highlight three broad trends that are enabling and driving changes in ESG-driven short selling
Note how ESG mutual funds are shorting as a turbocharged ESG screen ("long virtue, short sin")
Discuss the recent influx of hedge fund assets into the ESG arena, including several key nuances
Illustrate how hedge funds are shorting ESG "greenwashing" and/or arbitraging dodgy ESG data
Conventional wisdom is that ESG investing is a long-term, long-only, buy-and-hold game. That is still largely the case, but the range of potential ESG investment horizons is widening. For the first time in my eleven years of ESG investment research, I can envision shorter-term, trading-oriented ESG opinions as a complement to long-term biased ESG research. We'll see where this leads.

United States

The Boeing Company, together with its subsidiaries, develops, produces, and markets commercial jet aircraft, as well as provides related support services to the commercial airline industry worldwide.  The Company also researches, develops, produces, modifies, and supports information, space, and defense systems, including military aircraft, helicopters and space and missile systems.

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Boeing Co (BA US)

🇯🇵 JAPAN • January Relative Price Scores - Actionable Mean Reversion Trades

As the Japanese equity market continues to rise the 'spread' between the percentage of listed companies that are OverSold and those that are...

Campbell Gunn

China Aerospace & Defense A Shares: An In-Depth Walkthrough

China's aerospace and defense industry offers unique investment opportunity to investors, but due to its high sensitivity, all major companies...

Osbert Tang, CFA

Toxic Cocktail

Increasing Systemic Risks:Events are moving quickly and the fluidity of this pandemic has created a destructive amount of market volatility,...

Thomas J. Monaco

Hanwha Group's Purchase of 4.99% Stake in Korea Aerospace Industries (KAI): Step 1 of Privatization?

On 16 June, it was reported that Hanwha Group companies raised stake in Korea Aerospace Industries (047810 KS) (KAI) to 9.04%, from 4.99%...

Douglas Kim

They're Here: ESG Short Sellers

ESG short selling – i.e., shorting based on ESG metrics and catalysts – isn't new, but is undergoing a radical evolution. Short-term ESG trading...

Kyle Rudden

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