'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. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/001/original/2019-07-13_16-16-31.png?1563002212" class="editor-image img-responsive" data-smartkarma-image-id="93001"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/005/original/2019-07-13_16-25-24.png?1563002742" class="editor-image img-responsive" data-smartkarma-image-id="93005"></figure>Source: Japan Analytics
</div>MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/020/original/2019-07-14_06-28-16.png?1563053334" class="editor-image img-responsive" data-smartkarma-image-id="93020"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/024/original/2019-07-14_06-45-29.png?1563054338" class="editor-image img-responsive" data-smartkarma-image-id="93024"></figure> Source: Japan Analytics</div>VALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/025/original/2019-07-14_06-47-40.png?1563054585" class="editor-image img-responsive" data-smartkarma-image-id="93025"></figure> Source: Japan Analytics</div>TORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/026/original/2019-07-14_06-54-51.png?1563054906" class="editor-image img-responsive" data-smartkarma-image-id="93026"></figure> Source: Japan Analytics</div>VOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/028/original/2019-07-14_07-31-40.png?1563057109" class="editor-image img-responsive" data-smartkarma-image-id="93028"></figure> Source: Japan Analytics</div>3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha (3391 JP), </a><a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a><a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">, and </a><a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson (2651 JP)</a>. Electrical Equipment has suffered from weakness in component stocks <a href="https://www.smartkarma.com/entities/alps-alpine-co-ltd" target="_blank" data-smartkarma-citation="entities:12001:1" rel="noopener">Alps Alpine (6770 JP)</a> (-38% over one year), <a href="https://www.smartkarma.com/entities/murata-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:11649:1" rel="noopener">Murata (6981 JP)</a> (see <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s <a href="https://www.smartkarma.com/insights/murata-mfg-6981-jp-buy-on-decline-for-the-long-term" target="_blank" data-smartkarma-citation="insights:30919" rel="noopener">(Buy on Decline for the Long Term</a>), and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a>, while <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a>, <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, and <a href="https://www.smartkarma.com/entities/komatsu-ltd" target="_blank" data-smartkarma-citation="entities:8416:1" rel="noopener">Komatsu (6301 JP)</a> have weighed on the Machinery Sector.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/031/original/2019-07-14_07-44-47.png?1563057897" class="editor-image img-responsive" data-smartkarma-image-id="93031"></figure></figure> Source: Japan Analytics</div>SECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (<a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">OBIC (4684 JP)</a>, Other Commerical Products (<a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya Corp (7741 JP)</a>, and Commercial Services (<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit 6098 JP).</a> We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (<a href="https://www.smartkarma.com/entities/nippon-steel-sumitomo-metal-corp" target="_blank" data-smartkarma-citation="entities:961:1" rel="noopener">Nippon Steel &amp; Sumitomo Metal (5401 JP)</a>) <div class="content-highlight">In the DETAIL section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a>, <a href="https://www.smartkarma.com/entities/daiseki-co-ltd" target="_blank" data-smartkarma-citation="entities:2330:1" rel="noopener">Daiseki (9793 JP), </a><a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP), </a><a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a>, <a href="https://www.smartkarma.com/entities/sekisui-house-ltd" target="_blank" data-smartkarma-citation="entities:4508:1" rel="noopener">Sekisui House (1928 JP)</a>, <a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a>, and <a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">Obic (4684 JP)</a>.</div>


Source: Japan Analytics
MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.
 Source: Japan AnalyticsVALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. 
 Source: Japan AnalyticsTORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  
 Source: Japan AnalyticsVOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.
 Source: Japan Analytics3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores Welcia (3141 JP) and Tsuruha (3391 JP), Fast Retailing (9983 JP), and Lawson (2651 JP). Electrical Equipment has suffered from weakness in component stocks Alps Alpine (6770 JP) (-38% over one year), Murata (6981 JP) (see Scott Foster's (Buy on Decline for the Long Term), and Taiyo Yuden (6976 JP), while SMC (6273 JP), Fanuc (6954 JP), and Komatsu (6301 JP) have weighed on the Machinery Sector.
 Source: Japan AnalyticsSECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (OBIC (4684 JP), Other Commerical Products (Hoya Corp (7741 JP), and Commercial Services (Recruit 6098 JP). We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (Nippon Steel &amp; Sumitomo Metal (5401 JP)) In the DETAIL section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous two weeks, as well as adding some brief comments on Welcia (3141 JP), Daiseki (9793 JP), Yaskawa Electric (6506 JP), Pola Orbis (4927 JP), Sekisui House (1928 JP), Keyence (6861 JP), Japan Post Insurance (7181 JP), and Obic (4684 JP).

🇯🇵 JAPAN • Market Update - Levitating on Thin Air

Cross Asset Strategy

TW3 NORTH ASIA 10-16TH JUNESmartkarma's North Asian Insight providers were overwhelmingly bullish this week. In the Event-Driven space, <a href="https://www.smartkarma.com/profiles/sanghyun-park" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> provided an update on the Nexon Sale, and <a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415">Michael Causton</a> gave an excellent overview of the M&amp;A permutations for Japan's listed Drugstore companies. <a href="https://www.smartkarma.com/profiles/douglas-kim" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> reviews SKC's purchase of KCFT and suggests that the SK Group appears intent on making more big M&amp;A deals where it wants to have a leading presence - in this case in vertically integrating the lithium-ion batteries/components/materials.  Also in Korea, KCGI's move on Hanjin Kal is running into funding problems, while a 3% stake has recently by purchased by Goldman Sachs, with the rumoured end-buyer being Delta Airlines.  Only one IPO was commented on - <a href="https://www.smartkarma.com/profiles/oshadhi-kumarasiri" target="_blank" data-smartkarma-citation="accounts:3584">Oshadhi Kumarasiri</a> casts a dubious eye over the upcoming <a href="https://www.smartkarma.com/entities/shinnihonseiyaku-co-ltd" target="_blank" data-smartkarma-citation="entities:28122:1">Shin-nihon-seiyaku Co Ltd (4931 JP)</a> deal and suggests that management maybe selling out ahead of the peaking of the company main, and so-far only brand, Perfect One.Bullish Equity Bottom-Up comments were published on <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1">Nissan (7201 JP)</a>, <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1">Renesas Electronics (6723 JP)</a>, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1">Hitachi (6501 JP)</a>, <a href="https://www.smartkarma.com/entities/modec-inc" target="_blank" data-smartkarma-citation="entities:2840:1">Modec(6269 JP)</a>, <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1">Nintendo (7974 JP)</a>, and <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1">Life (8194 JP)</a>. Only <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a> saw (another) bearish call.Bullish Thematic &amp; Strategy Insights were released on Japanese Telcos from <a href="https://www.smartkarma.com/profiles/kirk-boodry" target="_blank" data-smartkarma-citation="accounts:1920">Kirk Boodry</a> - highlighting another regulatory-driven boost for Rakuten, while <a href="https://www.smartkarma.com/profiles/sanghyun-park" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> delved into the murky world of high-speed trading (HST) in Korea where Citadel and Merrill Lynch have made some controversial moves. In Japan, HST has recently been regulated with all operators required to establish an onshore entity or appoint a local agent and meet stringent reporting requirements governing their trading activities. Perhaps Korea should follow this example? Lastly, this author updated his Relative Price Score data, although these Insights are not summarised below.  <hr><div class="content-highlight">EVENT DRIVEN: BULLISH</div><a href="https://www.smartkarma.com/insights/nexon-sale-current-status-checkup" target="_blank" data-smartkarma-citation="insights:30312">Nexon Sale: Current Status Checkup</a><a href="https://www.smartkarma.com/insights/drug-fuelled-marriages-and-macho-shachos-in-japan" target="_blank" data-smartkarma-citation="insights:30346">Drug-Fuelled Marriages and Macho Shachos in Japan</a><a href="https://www.smartkarma.com/insights/korea-m-a-spotlight-skc-acquires-kcft-for-1-billion" target="_blank" data-smartkarma-citation="insights:30396">Korea M&amp;A Spotlight: SKC Acquires KCFT for $1 Billion</a><div style="text-align: center;" class="content-highlight">EVENT DRIVEN: BEARISH</div><a href="https://www.smartkarma.com/insights/hanjin-kal-special-situation-kcgi-s-takeover-attempt-is-tougher-than-previously-appeared" target="_blank" data-smartkarma-citation="insights:30150">Hanjin Kal Special Situation: KCGI's Takeover Is Tougher than Previously Appeared</a><div style="text-align: center;" class="content-highlight">IPOs &amp; PLACEMENTS: BEARISH</div><a href="https://www.smartkarma.com/insights/shinnihonseiyaku-ipo-perfect-one-not-so-perfect-afterall" target="_blank" data-smartkarma-citation="insights:30407">Shinnihonseiyaku IPO: Perfect One, Not So Perfect Afterall</a><div style="text-align: center;" class="content-highlight">EQUITY BOTTOM UP: BULLISH</div><a href="https://www.smartkarma.com/insights/nissan-chances-of-the-alliance-surviving-have-dimmed-greatly" target="_blank" data-smartkarma-citation="insights:30324">Nissan: Chances of the Alliance Surviving Have Dimmed Greatly</a><a href="https://www.smartkarma.com/insights/renesas-factory-automation-and-aircon-inventory-adjustments-to-take-time" target="_blank" data-smartkarma-citation="insights:30342">Renesas: Factory Automation and Aircon Inventory Adjustments to Take Time</a><a href="https://www.smartkarma.com/insights/rakuten-pay-tops-the-japanese-cashless-war" target="_blank" data-smartkarma-citation="insights:30358">Rakuten Pay Winning the Japanese Cashless War</a>? <a href="https://www.smartkarma.com/insights/hitachi-ltd-6501-jp-share-price-up-on-restructuring-news" target="_blank" data-smartkarma-citation="insights:30304">Hitachi Ltd. (6501 JP): Share Price Up on Restructuring News</a><a href="https://www.smartkarma.com/insights/modec-on-track-to-win-roughly-half-of-its-bids" target="_blank" data-smartkarma-citation="insights:30377">MODEC: On Track to Win Roughly Half of Its Bids</a><a href="https://www.smartkarma.com/insights/switch-production-to-move-outside-of-china-stock-plunges-following-dull-e3-presentation" target="_blank" data-smartkarma-citation="insights:30385">Switch Production to Move From China; Nintendo Plunges After Dull E3 Presentation</a><a href="https://www.smartkarma.com/insights/life-corp-ties-with-amazon-japan" target="_blank" data-smartkarma-citation="insights:30388">Life Corp Ties with Amazon Japan</a><div style="text-align: center;" class="content-highlight">EQUITY BOTTOM UP: BEARISH</div><a href="https://www.smartkarma.com/insights/zozo-the-underlying-operating-metrics-worry-us" target="_blank" data-smartkarma-citation="insights:30391">Zozo: The Underlying Operating Metrics Worry Us</a><div class="content-highlight">THEMATIC &amp; STRATEGY: BULLISH</div><a href="https://www.smartkarma.com/insights/japan-telcos-regulator-to-lower-cap-for-early-mobile-contract-cancellation-positive-for-rakuten" target="_blank" data-smartkarma-citation="insights:30315">Japan Telcos - Lower Cap for Early Cancellation: Positive for Rakuten</a><a href="https://www.smartkarma.com/insights/algorithm-trading-on-kosdaq-citadel-fund-case-checkup" target="_blank" data-smartkarma-citation="insights:30334">Algorithm Trading on KOSDAQ: Citadel Fund Case Checkup</a><div style="text-align: center;" class="content-highlight">THEMATIC &amp; STRATEGY: BEARISH</div><a href="https://www.smartkarma.com/insights/japan-june-relative-price-scores-market-sectors-peer-groups-more-of-the-same" target="_blank" data-smartkarma-citation="insights:30323">🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same</a><a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393">🇯🇵 Japan • Relative Price Scores - Overbought &amp; Oversold Companies - June 2019</a>

TW3 NORTH ASIA 10-16TH JUNESmartkarma's North Asian Insight providers were overwhelmingly bullish this week. In the Event-Driven space, Sanghyun Park provided an update on the Nexon Sale, and Michael Causton gave an excellent overview of the M&amp;A permutations for Japan's listed Drugstore companies. Douglas Kim reviews SKC's purchase of KCFT and suggests that the SK Group appears intent on making more big M&amp;A deals where it wants to have a leading presence - in this case in vertically integrating the lithium-ion batteries/components/materials.  Also in Korea, KCGI's move on Hanjin Kal is running into funding problems, while a 3% stake has recently by purchased by Goldman Sachs, with the rumoured end-buyer being Delta Airlines.  Only one IPO was commented on - Oshadhi Kumarasiri casts a dubious eye over the upcoming Shin-nihon-seiyaku Co Ltd (4931 JP) deal and suggests that management maybe selling out ahead of the peaking of the company main, and so-far only brand, Perfect One.Bullish Equity Bottom-Up comments were published on Nissan (7201 JP), Renesas Electronics (6723 JP), Rakuten (4755 JP), Hitachi (6501 JP), Modec(6269 JP), Nintendo (7974 JP), and Life (8194 JP). Only ZOZO (3092 JP) saw (another) bearish call.Bullish Thematic &amp; Strategy Insights were released on Japanese Telcos from Kirk Boodry - highlighting another regulatory-driven boost for Rakuten, while Sanghyun Park delved into the murky world of high-speed trading (HST) in Korea where Citadel and Merrill Lynch have made some controversial moves. In Japan, HST has recently been regulated with all operators required to establish an onshore entity or appoint a local agent and meet stringent reporting requirements governing their trading activities. Perhaps Korea should follow this example? Lastly, this author updated his Relative Price Score data, although these Insights are not summarised below.  EVENT DRIVEN: BULLISHNexon Sale: Current Status CheckupDrug-Fuelled Marriages and Macho Shachos in JapanKorea M&amp;A Spotlight: SKC Acquires KCFT for $1 BillionEVENT DRIVEN: BEARISHHanjin Kal Special Situation: KCGI's Takeover Is Tougher than Previously AppearedIPOs &amp; PLACEMENTS: BEARISHShinnihonseiyaku IPO: Perfect One, Not So Perfect AfterallEQUITY BOTTOM UP: BULLISHNissan: Chances of the Alliance Surviving Have Dimmed GreatlyRenesas: Factory Automation and Aircon Inventory Adjustments to Take TimeRakuten Pay Winning the Japanese Cashless War? Hitachi Ltd. (6501 JP): Share Price Up on Restructuring NewsMODEC: On Track to Win Roughly Half of Its BidsSwitch Production to Move From China; Nintendo Plunges After Dull E3 PresentationLife Corp Ties with Amazon JapanEQUITY BOTTOM UP: BEARISHZozo: The Underlying Operating Metrics Worry UsTHEMATIC &amp; STRATEGY: BULLISHJapan Telcos - Lower Cap for Early Cancellation: Positive for RakutenAlgorithm Trading on KOSDAQ: Citadel Fund Case CheckupTHEMATIC &amp; STRATEGY: BEARISH🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same🇯🇵 Japan • Relative Price Scores - Overbought &amp; Oversold Companies - June 2019

🇰🇷 🇯🇵 That Was The Week That Was North Asia - 10-16th June 2019 @Smartkarma

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Event-Driven

The Japanese drugstore sector has been consolidating fast for a decade led by <a href="https://www.smartkarma.com/entities/aeon-co-ltd" target="_blank" data-smartkarma-citation="entities:3:1">Aeon's (8267 JP)</a> Welcia subsidiary, <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1">Tsuruha Holdings (3391 JP)</a> and <a href="https://www.smartkarma.com/entities/sundrug-co-ltd" target="_blank" data-smartkarma-citation="entities:12615:1">Sundrug Co Ltd (9989 JP)</a>, which have taken the top three spots in the sector ahead of the long-time leader, <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co" target="_blank" data-smartkarma-citation="entities:2259:1">Matsumotokiyoshi Holdings Co (3088 JP)</a>.
Last month the latter tried to retake its pole position by opening negotiations to buy seventh-ranked <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1">Cocokara Fine (3098 JP)</a>. A few days later, however, sixth-ranked <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1">Sugi Holdings (7649 JP)</a> began its own negotiations, creating an unusual situation where two companies are publicly bidding for the same target.
(For details on the deal and the likely implications for respective share prices etc, as always I defer to <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25">Travis Lundy</a> who has an excellent analysis on this in his Insight <a href="https://www.smartkarma.com/insights/cocokara-fine-cocokara" target="_blank">here</a>).
A deal with Cocokara Fine is crucial for Matsumotokiyoshi. If it succeeds, it will again lead the sector with a business a third bigger than the current leader. If it fails to woo the smaller firm and Sugi succeeds, however, Matsumotokiyoshi will have fallen from sector leader to the sixth position in three years and will likely want to start wooing current third-ranked player <a href="https://www.smartkarma.com/entities/sundrug-co-ltd" target="_blank" data-smartkarma-citation="entities:12615:1">Sundrug Co Ltd (9989 JP)</a>. It may even try and negotiate a partial merger with Tsuruha if it doesn't want to be left behind in what will likely become a sector dominated by three or four major retail groups in the next five years.
Whatever the outcome of the Cocokara Fine deal, further consolidation will occur in Japan's drugstore sector and M&amp;A will be a key strategy to make this happen.

The Japanese drugstore sector has been consolidating fast for a decade led by Aeon's (8267 JP) Welcia subsidiary, Tsuruha Holdings (3391 JP) and Sundrug Co Ltd (9989 JP), which have taken the top three spots in the sector ahead of the long-time leader, Matsumotokiyoshi Holdings Co (3088 JP).
Last month the latter tried to retake its pole position by opening negotiations to buy seventh-ranked Cocokara Fine (3098 JP). A few days later, however, sixth-ranked Sugi Holdings (7649 JP) began its own negotiations, creating an unusual situation where two companies are publicly bidding for the same target.
(For details on the deal and the likely implications for respective share prices etc, as always I defer to Travis Lundy who has an excellent analysis on this in his Insight here).
A deal with Cocokara Fine is crucial for Matsumotokiyoshi. If it succeeds, it will again lead the sector with a business a third bigger than the current leader. If it fails to woo the smaller firm and Sugi succeeds, however, Matsumotokiyoshi will have fallen from sector leader to the sixth position in three years and will likely want to start wooing current third-ranked player Sundrug Co Ltd (9989 JP). It may even try and negotiate a partial merger with Tsuruha if it doesn't want to be left behind in what will likely become a sector dominated by three or four major retail groups in the next five years.
Whatever the outcome of the Cocokara Fine deal, further consolidation will occur in Japan's drugstore sector and M&amp;A will be a key strategy to make this happen.

Drug-Fuelled Marriages and Macho Shachos* in Japan

- MARKET COMPOSITE -<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/436/original/2019-03-10_11-07-01.png?1552183736" class="editor-image img-responsive" data-smartkarma-image-id="81436"></figure><div style="text-align: center;" class="content-caption">Source: Japan Analytics</div><div>
SOUTHBOUND - The upside we anticipated two weeks ago turned out to be only ¥6t before the harsh realities of some weak macro data intervened and sent the market 3% lower over the last two trading days suggesting the bear market rally is now over. After peaking at 48%, the market-value-based percentage above the weighted sum of moving averages has now retreated to 33%. </div><hr>- SECTORS - <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/437/original/2019-03-10_11-38-43.png?1552185548" class="editor-image img-responsive" data-smartkarma-image-id="81437"></figure><div style="text-align: left;" class="content-caption">
LEGEND: The 'sparklines' 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.</div>SECTOR BREAKDOWN - The top six sectors remain domestic and defensive and are unchanged from two weeks ago with REITs, the clear leader. Equally predictable is the bottom half-dozen - Banks, Non-Bank Finance, Retail, Autos, and Metals remain from two weeks ago, with Machinery replacing Construction. Banks stay at the bottom, and the sector had its largest volume 'day' as measured by our Volume Score since September 21st, 2018 on Friday although many other sectors were 'active.' <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/440/original/2019-03-10_11-54-26.png?1552186476" class="editor-image img-responsive" data-smartkarma-image-id="81440"></figure><div class="content-caption">Source: Japan Analytics</div><hr>- COMPANIES -COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's 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. <div class="content-highlight">
In the DETAIL section below, we highlight the current top and bottom twenty-five large 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.
Our most extreme positive outlier two weeks ago, <a href="https://www.smartkarma.com/entities/26181" target="_blank" data-smartkarma-citation="entities:26181:1">Pksha Technology (3993 JP)</a> declined by 8% and 'tops' our most negative two-week change list, while the most negative outlier <a href="https://www.smartkarma.com/entities/24540" target="_blank" data-smartkarma-citation="entities:24540:1">SanBio (4592 JP)</a> rose by 3%. <a href="https://www.smartkarma.com/entities/8244" target="_blank" data-smartkarma-citation="entities:8244:1">Leopalace21 (8848 JP)</a> which was also featured recovered by 9%.
<a href="https://www.smartkarma.com/entities/2709" target="_blank" data-smartkarma-citation="entities:2709:1">AnGes (4563 JP)</a> is currently the most extreme large cap positive outlier having peaked at '492' on 26th February up from a 'trough' of -132 in December. Biotechnology peer <a href="https://www.smartkarma.com/entities/24540" target="_blank" data-smartkarma-citation="entities:24540:1">SanBio (4592 JP)</a> is, for the third time this year, the most extreme negative outlier, having topped the 13th January and 24th February positive outlier lists and is another 'round-tripper'. 
</div><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/441/original/2019-03-10_12-13-00.png?1552187591" class="editor-image img-responsive" data-smartkarma-image-id="81441"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/081/442/original/2019-03-10_12-17-48.png?1552187878" class="editor-image img-responsive" data-smartkarma-image-id="81442"></figure>Source: Japan Analytics
</div>

- MARKET COMPOSITE -Source: Japan Analytics
SOUTHBOUND - The upside we anticipated two weeks ago turned out to be only ¥6t before the harsh realities of some weak macro data intervened and sent the market 3% lower over the last two trading days suggesting the bear market rally is now over. After peaking at 48%, the market-value-based percentage above the weighted sum of moving averages has now retreated to 33%. - SECTORS - 
LEGEND: The 'sparklines' 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.SECTOR BREAKDOWN - The top six sectors remain domestic and defensive and are unchanged from two weeks ago with REITs, the clear leader. Equally predictable is the bottom half-dozen - Banks, Non-Bank Finance, Retail, Autos, and Metals remain from two weeks ago, with Machinery replacing Construction. Banks stay at the bottom, and the sector had its largest volume 'day' as measured by our Volume Score since September 21st, 2018 on Friday although many other sectors were 'active.' Source: Japan Analytics- COMPANIES -COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's 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 the DETAIL section below, we highlight the current top and bottom twenty-five large 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.
Our most extreme positive outlier two weeks ago, Pksha Technology (3993 JP) declined by 8% and 'tops' our most negative two-week change list, while the most negative outlier SanBio (4592 JP) rose by 3%. Leopalace21 (8848 JP) which was also featured recovered by 9%.
AnGes (4563 JP) is currently the most extreme large cap positive outlier having peaked at '492' on 26th February up from a 'trough' of -132 in December. Biotechnology peer SanBio (4592 JP) is, for the third time this year, the most extreme negative outlier, having topped the 13th January and 24th February positive outlier lists and is another 'round-tripper'. 

Source: Japan Analytics


🇯🇵 Japan: Moving Average Outliers - AnGes, SanBio, Adastria, AIN, Sumco & Benefit One

Thematic (Sector/Industry)

The drugstore sector has been the fastest growing retail sector after e-commerce in the last decade, boosted by the popularity of Japanese toiletry and cosmetics brands among tourists and the push for market share by leading players.Drugstores already account for 40% of cosmetics sales and their share of other key categories is growing, even in food, with some chains already selling enough food to qualify as top 20 supermarkets (in 2017, 26.2% of drugstore sales came from food).Future profit growth will be determined by prescription services, food and M&amp;A, with all of the leading firms racing to build capacity.

The drugstore sector has been the fastest growing retail sector after e-commerce in the last decade, boosted by the popularity of Japanese toiletry and cosmetics brands among tourists and the push for market share by leading players.Drugstores already account for 40% of cosmetics sales and their share of other key categories is growing, even in food, with some chains already selling enough food to qualify as top 20 supermarkets (in 2017, 26.2% of drugstore sales came from food).Future profit growth will be determined by prescription services, food and M&amp;A, with all of the leading firms racing to build capacity.

Japan

COSMOS Pharmaceutical Corporation operates drug stores based in Kyushu. The Company sells daily necessities such as drug medicines, foodstuffs, and alcoholic beverages.

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Cosmos Pharmaceutical (3349 JP)

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