Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. </li>
<li>These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.</li>
<li>Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.</li>
</ul>


Commodities (ex. precious metals) and global yields are on the rise as the US dollar (DXY) deteriorates. Additionally, EM equities (EEM-US) display a bullish RS reversal relative to MSCI ACWI. 
These are all important risk-on signals for global equities that continue to support our neutral yet constructive outlook. We expect more consolidation and mixed markets ahead.
Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a shift in favor of value.


Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Renesas Electronics / Equity Capital Markets

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:<ul>
<li dir="ltr" aria-level="1">US$2.8bn bn in 2017 <a href="https://www.smartkarma.com/insights/renesas-electronics-placement-additional-thoughts-on-valuation-flotation-and-ownership" target="_blank" rel="noopener">Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership</a></li>
<li dir="ltr" aria-level="1">US$2.4bn in 2018 <a href="https://www.smartkarma.com/insights/renesas-placement-tighter-effective-discount-and-placement-overhangs-but-statistic-supports-a-bid" target="_blank" rel="noopener">Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid</a></li>
</ul>In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares.The current deal would be of somewhat similar size as two of the past deals that we have covered for Renesas:
US$2.8bn bn in 2017 Renesas Electronics Placement: Additional Thoughts on Valuation, Flotation, and Ownership
US$2.4bn in 2018 Renesas Placement: Tighter Effective Discount and Placement Overhangs but Statistic Supports a Bid
In this insight, we'll run the deal through our ECM framework and talk about deal dynamics.

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Fintech & EM-focused Analyst, KT Capital Group

Alec Tseung

Fintech & EM-focused Analyst

Thematic (Sector/Industry)

This Original aims to identify the key investment opportunities among the listed brokers in the three major East Asian countries - China, Japan, and Korea. By looking at the development of the brokerage sectors in these three countries, we observe a general trend where upstart online brokers first compete against the more established brokers based on their cost and technological advantages. This then pushes the more established brokers to either focus on more lucrative wholesale businesses or adopt and invest in tech initiatives in order to stay competitive in the retail market.After further establishing themselves in the retail market, these upstart online brokers then also diversify and expand into the more lucrative wealth/asset management or even wholesale businesses.  By gauging at which phase the broker is in this cycle, investors can have a good understanding of its future outlook.In our opinion, Korean brokers currently offer the best value, while the Chinese pure-play online brokers offer the highest growth potential. As such, our pecking order, in terms of investment attractiveness, is <a href="https://www.smartkarma.com/entities/kiwoom-securities-co-ltd" target="_blank" data-smartkarma-citation="entities:20418:1" rel="noopener">Kiwoom Securities (039490 KS)</a>, <a href="https://www.smartkarma.com/entities/east-money-information-co-a" target="_blank" data-smartkarma-citation="entities:8075:1" rel="noopener">East Money Information Co A (300059 CH)</a>, <a href="https://www.smartkarma.com/entities/futu-holdings-ltd" target="_blank" data-smartkarma-citation="entities:27858:1" rel="noopener">Futu Holdings Ltd (FUTU US)</a>, <a href="https://www.smartkarma.com/entities/monex-group-inc" target="_blank" data-smartkarma-citation="entities:14211:1" rel="noopener">Monex Group Inc (8698 JP)</a> / <a href="https://www.smartkarma.com/entities/huatai-securities-co-ltd-h" target="_blank" data-smartkarma-citation="entities:449:1" rel="noopener">Huatai Securities Co Ltd (H) (6886 HK)</a>.  <h2>What is Original?</h2>In this Original, we look into the competitive landscape of the brokerage sectors in China, Japan, and Korea. 55 listed brokers from these three countries are included in this Original as the company universe for regression analysis. Among them, a total of 8 brokers are chosen, with their company profiles separately presented, to further showcase and contrast the impact of competition and technological disruption. Based on this, a pecking order is then developed, both on a country and a company basis.

This Original aims to identify the key investment opportunities among the listed brokers in the three major East Asian countries - China, Japan, and Korea. By looking at the development of the brokerage sectors in these three countries, we observe a general trend where upstart online brokers first compete against the more established brokers based on their cost and technological advantages. This then pushes the more established brokers to either focus on more lucrative wholesale businesses or adopt and invest in tech initiatives in order to stay competitive in the retail market.After further establishing themselves in the retail market, these upstart online brokers then also diversify and expand into the more lucrative wealth/asset management or even wholesale businesses.  By gauging at which phase the broker is in this cycle, investors can have a good understanding of its future outlook.In our opinion, Korean brokers currently offer the best value, while the Chinese pure-play online brokers offer the highest growth potential. As such, our pecking order, in terms of investment attractiveness, is Kiwoom Securities (039490 KS), East Money Information Co A (300059 CH), Futu Holdings Ltd (FUTU US), Monex Group Inc (8698 JP) / Huatai Securities Co Ltd (H) (6886 HK).  What is Original?In this Original, we look into the competitive landscape of the brokerage sectors in China, Japan, and Korea. 55 listed brokers from these three countries are included in this Original as the company universe for regression analysis. Among them, a total of 8 brokers are chosen, with their company profiles separately presented, to further showcase and contrast the impact of competition and technological disruption. Based on this, a pecking order is then developed, both on a country and a company basis.

Asian Brokers: A Competition Between Value and Growth

'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.

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

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

Equity Bottom-Up

<ul><li>
Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period. Outperformance was across the board on transaction revenues, which improved JOY 5.1 bn (28.7%); standouts during the period were derivatives trading which increased JPY 2.3 bn (79.3%) and cash equities trading which increased JPY 1.3 bn or 21.0%; and </li></ul><ul><li>
Lowering Guidance:April derivative volumes  are tracking 61% lower MOM and cash equities volumes are tracking 35%. With that, JSX is guiding for an 11% YOY decline in FY 2020 net income reflecting a forecasted 2% lower top line, and 5% higher operating expenses.</li></ul>


Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period. Outperformance was across the board on transaction revenues, which improved JOY 5.1 bn (28.7%); standouts during the period were derivatives trading which increased JPY 2.3 bn (79.3%) and cash equities trading which increased JPY 1.3 bn or 21.0%; and 
Lowering Guidance:April derivative volumes  are tracking 61% lower MOM and cash equities volumes are tracking 35%. With that, JSX is guiding for an 11% YOY decline in FY 2020 net income reflecting a forecasted 2% lower top line, and 5% higher operating expenses.

Japan Exchange – Nice Way to End The Year

Japan

Daiwa Securities Group Inc. is a holding company. The Group provides a comprehensive financial services including dealing, brokerage, underwriting, and distribution of securities.  Other services are research & systems development, custody service, and asset management. Daiwa has subsidiaries in US, Europe, Asia, and Middle East.

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Daiwa Securities Group (8601 JP)

Value Sectors Take The Lead On Rising Global Yields; Buying Energy and Financials

Two Sectors that stand to benefit most from rising rates include Energy and Financials. We recommend adding exposure to these Sectors as we see a...

Vermilion Research

Renesas Placement - Very Well Flagged, past Deals Have Done Well but Large Size Warrants Correction

Renesas, along with INCJ, aims to raise around US$3.4bn via selling a mix of primary and secondary shares. The current deal would be of somewhat...

Sumeet Singh

Asian Brokers: A Competition Between Value and Growth

The Original looks into the current competitive landscape of the brokerage sectors in China, Japan, and Korea, with a view to developing a list of...

Alec Tseung

🇯🇵 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

Japan Exchange – Nice Way to End The Year

Strong FY 4Q19 To End Year: Japan Exchange (JSX) reported a strong FY 4Q19 result of JPY 14.3 bnm increasing JPY 2.6 bn (22.2%) linked period....

Thomas J. Monaco

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52-week Range

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