Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

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.

Equity Bottom-Up

The online Tokyo Game Show over the weekend featured some strong interest in both Capcom and Koei-Tecmo and lent support to a continued positive stance on Nintendo. While there was nothing exceptionally surprising, some of the nuances of the new information provided were interesting and point to a well-defined third-party strategy and buy-in for the Switch.

The online Tokyo Game Show over the weekend featured some strong interest in both Capcom and Koei-Tecmo and lent support to a continued positive stance on Nintendo. While there was nothing exceptionally surprising, some of the nuances of the new information provided were interesting and point to a well-defined third-party strategy and buy-in for the Switch.

Tokyo Game Show – Capcom and Koei-Tecmo Presentations Look Good for Themselves and for Nintendo

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

Quantitative Analysis

<div>
• RELATIVE PRICE SCORE •
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/735/original/2020-09-23_11-03-49.png?1600826665" class="editor-image img-responsive" data-smartkarma-image-id="160735"></figure><div class="content-caption">Source for all charts &amp; tables: Japan Analytics</div>
<a href="https://www.dropbox.com/s/6h3m1giwbtzcupg/2020-09-23_11-03-49.png?dl=0" target="_blank" rel="noopener">PEAK OUTLIER</a> - Since the onset of  COVID-19 in March, the degree of polarisation in the Japanese equity market as measured by our Relative Price Score [definition below] has increased significantly. Although only 3.1% and 5.1% of listed companies are Overbought and Oversold, respectively, their market weight represented is 10.8% and 6.2%. Such extreme outlier weightings have not occurred since the technology 'bubble' of 2000, and, since then, only during the 2008/9 financial crisis. Investors have increasingly held and bid up perceived long-term domestic non-manufacturing 'winners' without much regard for valuation while discarding Japan's manufacturers, and transportation, utility and energy companies as well as insurers and banks.  
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/736/original/2020-09-23_11-11-07.png?1600827080" class="editor-image img-responsive" data-smartkarma-image-id="160736"></figure>
</div>SECTOR TIMELINE - The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 Technology 'bubble' to the REIT and Real Estate peak of 2013/14, the Healthcare and FB&amp;T market of 2016/17. On the downside, there is greater Oversold 'persistence' in the Energy, Banks, Multi-Industry ( <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post (6178 JP))</a>  and Utilities Sectors. Currently, nine Sectors are Overbought, and four are Oversold - thirty-year and twenty-year highs, respectively.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/160/741/original/2020-09-23_11-39-24.png?1600828791" class="editor-image img-responsive" data-smartkarma-image-id="160741"></figure>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 comments.<div class="content-highlight">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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,883 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.</div>


• RELATIVE PRICE SCORE •
Source for all charts &amp; tables: Japan Analytics
PEAK OUTLIER - Since the onset of  COVID-19 in March, the degree of polarisation in the Japanese equity market as measured by our Relative Price Score [definition below] has increased significantly. Although only 3.1% and 5.1% of listed companies are Overbought and Oversold, respectively, their market weight represented is 10.8% and 6.2%. Such extreme outlier weightings have not occurred since the technology 'bubble' of 2000, and, since then, only during the 2008/9 financial crisis. Investors have increasingly held and bid up perceived long-term domestic non-manufacturing 'winners' without much regard for valuation while discarding Japan's manufacturers, and transportation, utility and energy companies as well as insurers and banks.  

SECTOR TIMELINE - The twenty-eight-year history of Sector Relative Price Scores illustrates the ebbs and flows of investment themes in the market, from the 2000 Technology 'bubble' to the REIT and Real Estate peak of 2013/14, the Healthcare and FB&amp;T market of 2016/17. On the downside, there is greater Oversold 'persistence' in the Energy, Banks, Multi-Industry ( Japan Post (6178 JP))  and Utilities Sectors. Currently, nine Sectors are Overbought, and four are Oversold - thirty-year and twenty-year highs, respectively.  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 comments.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 on a comparable scale, 'Overbought' and 'Oversold' outliers and short-term changes in scoring can offer some trading opportunities. The data for all 3,883 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 • September Relative Price Scores - Profiting from Outlier Mean Reversion

Microsoft surprised pretty much everyone with a purchase of ZeniMax studios just a day prior to the start of pre-orders for its next gen Xbox. ZeniMax was reportedly purchased for $7.5bn after Microsoft’s bid for TikTok failed and raises both the quantity and quality of Xbox’s first party games. We examine the implications below.

Microsoft surprised pretty much everyone with a purchase of ZeniMax studios just a day prior to the start of pre-orders for its next gen Xbox. ZeniMax was reportedly purchased for $7.5bn after Microsoft’s bid for TikTok failed and raises both the quantity and quality of Xbox’s first party games. We examine the implications below.

Sony – How Much Does Microsoft’s ZeniMax Purchase Change the Console Outlook?

Capcom announced two Monster Hunter games for the Switch at yesterday’s Nintendo Direct Partner Showcase. Monster Hunter Rise is looking like a big potential catalyst for Capcom with a 26 Mar 2021 launch while Monster Hunter Stories Two is likely to contribute some moderate sales later that year. In addition to these titles from Capcom, Nintendo also announced nine other quality titles from a variety of other publishers though none of them are likely to have quite the impact of Monster Hunter.

Capcom announced two Monster Hunter games for the Switch at yesterday’s Nintendo Direct Partner Showcase. Monster Hunter Rise is looking like a big potential catalyst for Capcom with a 26 Mar 2021 launch while Monster Hunter Stories Two is likely to contribute some moderate sales later that year. In addition to these titles from Capcom, Nintendo also announced nine other quality titles from a variety of other publishers though none of them are likely to have quite the impact of Monster Hunter.

Monster Hunter – Catalyst for Capcom, Start of 3rd Party Wave for Nintendo

Capcom remains one of our top picks within the gaming sector and withing Japan. In this note we examine the company’s upcoming titles and discuss our expectations for their impact on Capcom’s potential for long-term profit growth.

Capcom remains one of our top picks within the gaming sector and withing Japan. In this note we examine the company’s upcoming titles and discuss our expectations for their impact on Capcom’s potential for long-term profit growth.

Japan

CAPCOM CO., LTD. develops consumer video game software.  The Company also develops, manufactures, markets, and leases arcade game machines.  Capcom also operates amusement facilities.

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Capcom Co Ltd (9697 JP)

Tokyo Game Show – Capcom and Koei-Tecmo Presentations Look Good for Themselves and for Nintendo

The online Tokyo Game Show over the weekend featured some strong interest in both Capcom and Koei-Tecmo and lent support to a continued positive...

Mio Kato

🇯🇵 JAPAN • September Relative Price Scores - Profiting from Outlier Mean Reversion

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

Campbell Gunn

Sony – How Much Does Microsoft’s ZeniMax Purchase Change the Console Outlook?

Microsoft surprised pretty much everyone with a purchase of ZeniMax studios just a day prior to the start of pre-orders for its next gen Xbox....

Mio Kato

Monster Hunter – Catalyst for Capcom, Start of 3rd Party Wave for Nintendo

Capcom announced two Monster Hunter games for the Switch at yesterday’s Nintendo Direct Partner Showcase. Monster Hunter Rise is looking like a big...

Mio Kato

Capcom – Update On the Game Lineup

Capcom remains one of our top picks within the gaming sector and withing Japan. In this note we examine the company’s upcoming titles and discuss...

Mio Kato

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