'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

INTRODUCTION - Following on from our <a href="https://www.smartkarma.com/insights/japan-summer-results-revisions-market-composite-sectors-third-down" target="_blank" data-smartkarma-citation="insights:31759" rel="noopener">Insight</a> of last week covering the Market Composite &amp; Sector Aggregate Results and Results &amp; Revision Scores, this Insight will look at the cap-weighted Summer Results &amp; Revision Scores for the 321 Peer Groups that comprise our 29 Sectors and provide greater depth to our analysis of current business trends.  Peer Group definitions reflect both standard SIC/GICS classifications as well as local market conventions. The number of constituents and market capitalisation for each Peer Group varies widely.  As an introduction, we review below the best and worst-fifteen larger Peer Groups in terms of cumulative Results &amp; Revision Score, Volatility and Volatility-Adjusted Scores over the last fourteen years, following the widespread adoption of quarterly reporting.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/305/original/2019-08-20_15-07-54.png?1566281290" class="editor-image img-responsive" data-smartkarma-image-id="96305"></figure>
<div class="content-caption">Source: Japan Analytics</div>
CUMULATIVE TOP 15 - Only one manufacturing Peer Group makes the list - Motors (<a href="https://www.smartkarma.com/entities/nidec-corp" target="_blank" data-smartkarma-citation="entities:7245:1" rel="noopener">Nidec Corp (6594 JP)</a> although it has lost ground in the last year - with Retail (5) and Internet (3) Sector Peer Groups making up the majority. Welfare Services (mostly daycare services for children) has seen the best long-term track record; however, the largest company by market cap, Welbe (6556 JP) is only ¥50b, and the Peer Group has been volatile and underperformed as a result of initial overvaluation at IPO. Investment Banking Services (<a href="https://www.smartkarma.com/entities/nihon-m-a-center-inc" target="_blank" data-smartkarma-citation="entities:17616:1" rel="noopener">Nihon M&amp;A Center (2127 JP)</a> &amp; <a href="https://www.smartkarma.com/entities/m-a-capital-partners-co-ltd" target="_blank" data-smartkarma-citation="entities:10401:1" rel="noopener">M&amp;A Capital Partners (6080 JP)</a>) has been the best-performing financial-related Peer Group over the period, in contrast to the brokerage business, as shown below, and is the fastest-growing if the top fifteen.  Among the Retail Peer Groups, Home Furnishing (<a href="https://www.smartkarma.com/entities/nitori-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20386:1" rel="noopener">Nitori (9843 JP)) </a>is powering ahead, but Pharmacies<a href="https://www.smartkarma.com/entities/ain-pharmaciez-inc" target="_blank" data-smartkarma-citation="entities:9313:1" rel="noopener">(Ain (9627 JP))</a> peaked over a year ago. Amongst the Internet Sector Groups, it pays to have Commercial end-users or to sell the 'picks and shovels'.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/312/original/2019-08-20_15-30-32.png?1566282642" class="editor-image img-responsive" data-smartkarma-image-id="96312"></figure>
<div class="content-caption">Source: Japan Analytics</div>
CUMULATIVE BOTTOM 15 - The worst business in Japan over the last fifteen years in terms of business performance has been Online Securities Broking, closely followed by five Regional Bank Peer Groups.  The Steel sector has two Peer Groups on the list, as does Media with Broadcasting and Audio/Visual Content<a href="https://www.smartkarma.com/entities/toho-co-ltd" target="_blank" data-smartkarma-citation="entities:7806:1" rel="noopener">(Toho (9602 JP)</a>/<a href="https://www.smartkarma.com/entities/toei-co-ltd" target="_blank" data-smartkarma-citation="entities:15379:1" rel="noopener">Toei (9605 JP)</a>) highlighting that Japan is not immune to the global trend away from the consumption of traditional forms of entertainment. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/315/original/2019-08-20_15-43-50.png?1566283445" class="editor-image img-responsive" data-smartkarma-image-id="96315"></figure>
<div class="content-caption">Source: Japan Analytics</div>

VOLATILITY BEST 15 - The least volatile Scores are, as would be expected clustered around the provision of food, personal and household products with Drugstores being the clear 'leader'. Medical Labs &amp; Testing Services has lost ground in recent years due to the poor performance of <a href="https://www.smartkarma.com/entities/miraca-holdings-inc" target="_blank" data-smartkarma-citation="entities:16580:1" rel="noopener">Miraca (4544 JP)</a>, while Printing &amp; Packaging Materials (<a href="https://www.smartkarma.com/entities/fuji-seal-international-inc" target="_blank" data-smartkarma-citation="entities:8723:1" rel="noopener">Fuji Seal (7864 JP) </a>) has gained the most.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/316/original/2019-08-20_15-50-09.png?1566283823" class="editor-image img-responsive" data-smartkarma-image-id="96316"></figure>
<div class="content-caption">Source: Japan Analytics</div>
VOLATILITY WORST 15 - Machinery (5) and Financial Services (3) Sector Peer Groups make up more than half of the most-volatile list. There have been three cyclical downturns in the last fourteen years - 2008/9, 2012/13, and 2016/17, with 2019/20 more than likely to be the next. Factory Automation Equipment (<a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a> is close to the low point of the last two cycles but well above that of 2008/9 as is the case for Securities Brokerage. Construction Machinery, Power &amp; Hand Tools, Carbon &amp; Graphite Products, SPE &amp; PCB Production Equipment, and Passive Components are only just beginning to 'rollover'. It is interesting to note the cyclicality of Venture Capital (<a href="https://www.smartkarma.com/entities/jafco-co-ltd" target="_blank" data-smartkarma-citation="entities:8848:1" rel="noopener">JAFCO(8595 JP))</a> in Japan.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/318/original/2019-08-20_16-17-31.png?1566285467" class="editor-image img-responsive" data-smartkarma-image-id="96318"></figure>
<div class="content-caption">Source: Japan Analytics</div>
VOLATILITY-ADJUSTED TOP 15 - The best volatility adjusted Peer Groups in Japan over the last fourteen years are all in non-manufacturing Sectors, with Retail contributing five Peer Groups, including three of the top five. Transportation &amp; Logistics, Healthcare and the Internet Sector add two apiece. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/319/original/2019-08-20_16-22-39.png?1566285775" class="editor-image img-responsive" data-smartkarma-image-id="96319"></figure>
<div class="content-caption">Source: Japan Analytics</div>
VOLATILITY-ADJUSTED BOTTOM 15 - The performance hall of shame has three brokerage-related Peer Groups (woe is the sell-side in Japan), but just two Machinery Sector  Peer Groups. Musical Instruments (<a href="https://www.smartkarma.com/entities/yamaha-corp" target="_blank" data-smartkarma-citation="entities:17841:1" rel="noopener">Yamaha (7951 JP))</a> and Steel Producers appear overdue cyclical downturns.
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/096/322/original/2019-08-20_16-34-57.png?1566286513" class="editor-image img-responsive" data-smartkarma-image-id="96322"></figure>
Source: Japan Analytics
</div>
SCORE/VOLATILITY MATRIX - A scatter plot of average Results &amp; Revision Score (RRS) and Volatility shows Factory Automation Equipment as the most volatile large Peer Group but with a below-average RRS. Machine Tools &amp; Presses are evenly-balanced between risk and reward, while the 'lay-up' Peer Group for the last fourteen years has been Drugstores. 

<div class="content-highlight">
In the DETAIL section below, we list the top and bottom twenty Peer Groups ranked by Results &amp; Revision Score and the top and bottom twenty most-changed over the last three months as well the most optimistic and most pessimistic.  
</div>

INTRODUCTION - Following on from our Insight of last week covering the Market Composite &amp; Sector Aggregate Results and Results &amp; Revision Scores, this Insight will look at the cap-weighted Summer Results &amp; Revision Scores for the 321 Peer Groups that comprise our 29 Sectors and provide greater depth to our analysis of current business trends.  Peer Group definitions reflect both standard SIC/GICS classifications as well as local market conventions. The number of constituents and market capitalisation for each Peer Group varies widely.  As an introduction, we review below the best and worst-fifteen larger Peer Groups in terms of cumulative Results &amp; Revision Score, Volatility and Volatility-Adjusted Scores over the last fourteen years, following the widespread adoption of quarterly reporting.

Source: Japan Analytics
CUMULATIVE TOP 15 - Only one manufacturing Peer Group makes the list - Motors (Nidec Corp (6594 JP) although it has lost ground in the last year - with Retail (5) and Internet (3) Sector Peer Groups making up the majority. Welfare Services (mostly daycare services for children) has seen the best long-term track record; however, the largest company by market cap, Welbe (6556 JP) is only ¥50b, and the Peer Group has been volatile and underperformed as a result of initial overvaluation at IPO. Investment Banking Services (Nihon M&amp;A Center (2127 JP) &amp; M&amp;A Capital Partners (6080 JP)) has been the best-performing financial-related Peer Group over the period, in contrast to the brokerage business, as shown below, and is the fastest-growing if the top fifteen.  Among the Retail Peer Groups, Home Furnishing (Nitori (9843 JP)) is powering ahead, but Pharmacies(Ain (9627 JP)) peaked over a year ago. Amongst the Internet Sector Groups, it pays to have Commercial end-users or to sell the 'picks and shovels'.

Source: Japan Analytics
CUMULATIVE BOTTOM 15 - The worst business in Japan over the last fifteen years in terms of business performance has been Online Securities Broking, closely followed by five Regional Bank Peer Groups.  The Steel sector has two Peer Groups on the list, as does Media with Broadcasting and Audio/Visual Content(Toho (9602 JP)/Toei (9605 JP)) highlighting that Japan is not immune to the global trend away from the consumption of traditional forms of entertainment. 

Source: Japan Analytics

VOLATILITY BEST 15 - The least volatile Scores are, as would be expected clustered around the provision of food, personal and household products with Drugstores being the clear 'leader'. Medical Labs &amp; Testing Services has lost ground in recent years due to the poor performance of Miraca (4544 JP), while Printing &amp; Packaging Materials (Fuji Seal (7864 JP) ) has gained the most.

Source: Japan Analytics
VOLATILITY WORST 15 - Machinery (5) and Financial Services (3) Sector Peer Groups make up more than half of the most-volatile list. There have been three cyclical downturns in the last fourteen years - 2008/9, 2012/13, and 2016/17, with 2019/20 more than likely to be the next. Factory Automation Equipment (Fanuc (6954 JP) is close to the low point of the last two cycles but well above that of 2008/9 as is the case for Securities Brokerage. Construction Machinery, Power &amp; Hand Tools, Carbon &amp; Graphite Products, SPE &amp; PCB Production Equipment, and Passive Components are only just beginning to 'rollover'. It is interesting to note the cyclicality of Venture Capital (JAFCO(8595 JP)) in Japan.

Source: Japan Analytics
VOLATILITY-ADJUSTED TOP 15 - The best volatility adjusted Peer Groups in Japan over the last fourteen years are all in non-manufacturing Sectors, with Retail contributing five Peer Groups, including three of the top five. Transportation &amp; Logistics, Healthcare and the Internet Sector add two apiece. 

Source: Japan Analytics
VOLATILITY-ADJUSTED BOTTOM 15 - The performance hall of shame has three brokerage-related Peer Groups (woe is the sell-side in Japan), but just two Machinery Sector  Peer Groups. Musical Instruments (Yamaha (7951 JP)) and Steel Producers appear overdue cyclical downturns.


Source: Japan Analytics

SCORE/VOLATILITY MATRIX - A scatter plot of average Results &amp; Revision Score (RRS) and Volatility shows Factory Automation Equipment as the most volatile large Peer Group but with a below-average RRS. Machine Tools &amp; Presses are evenly-balanced between risk and reward, while the 'lay-up' Peer Group for the last fourteen years has been Drugstores. 


In the DETAIL section below, we list the top and bottom twenty Peer Groups ranked by Results &amp; Revision Score and the top and bottom twenty most-changed over the last three months as well the most optimistic and most pessimistic.  


🇯🇵 JAPAN • Summer Results & Revision Scores - Peer Groups

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 market responded favourably to <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc Corp (6954 JP)</a>'s 29 Jul results despite the company's downward revision as the stock rose 3.1% the next day. While the 1Q OP decline of -47.5% YoY was less severe than -57.4% 1H decline the company was guiding for, Fanuc nevertheless revised down full year guidance by -5.8% at the OP level and revenue guidance by -2.4%. Fanuc's OP guidance is typically so conservative that it can safely be ignored but we believe the revenue guidance downgrade is significant.

The market responded favourably to Fanuc Corp (6954 JP)'s 29 Jul results despite the company's downward revision as the stock rose 3.1% the next day. While the 1Q OP decline of -47.5% YoY was less severe than -57.4% 1H decline the company was guiding for, Fanuc nevertheless revised down full year guidance by -5.8% at the OP level and revenue guidance by -2.4%. Fanuc's OP guidance is typically so conservative that it can safely be ignored but we believe the revenue guidance downgrade is significant.

Fanuc: Recovery Strength or Lack Thereof Is a Risk. 2.6x PB for a Single Digit Roe Is Too

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/809/original/2019-08-04_13-24-01.png?1564892655" class="editor-image img-responsive" data-smartkarma-image-id="94809"></figure><div class="content-caption">Source: Japan Analytics</div>SOUTHBOUND - Two weeks into the announcements of the June quarter-end period, it is clear that the momentum of Japanese listed corporate earnings is still heading lower. Since July 22nd, 1,216 or 32% of companies have reported results and 292 forecast revisions have been announced. The Japan Analytics Results &amp; Revision Score reached a new 28-month low on Friday of 1.43, a decline of 78% from the current cycle peak of 6.50 on 16th November 2017. The correlation between the Score and the Market Capitalisation of listed companies excluding REITs is 0.77, and the Score is more of a leading or co-incident than lagging indicator.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/810/original/2019-08-04_13-32-15.png?1564893149" class="editor-image img-responsive" data-smartkarma-image-id="94810"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/812/original/2019-08-04_13-39-03.png?1564893556" class="editor-image img-responsive" data-smartkarma-image-id="94812"></figure><div class="content-caption">Source: Japan Analytics</div>BREAKDOWN - The Results &amp; Revision Score is a weighted sum of three components, the Results Score, the Annual Forecast/Revision Score and the Interim Forecast/Revision Score, with the last of these only being applicable for nine months of each year. The two Forecast/Revision Scores are, as would be expected., leading indicators for the Results Score. The current quarter's Results Scor decline already exceeds the previous quarter's more-benign decline which also saw an increase in the Annual Forecast/Revision Score as the majority of companies 'rolled' their forecast ahead by one year. In contrast, the forecasts for the Interim period which for most companies ends next month were the most pessimistic since April 2016 and the mostly first-quarter results are confirming the early caution. In addition, full-year forecasts are also being downgraded and are at the lowest level for three months.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/094/816/original/2019-08-04_13-44-46.png?1564893904" class="editor-image img-responsive" data-smartkarma-image-id="94816"></figure><div class="content-caption">Source: Japan Analytics</div>YEN DRIVER - The key driver of the Results &amp; Revision Score has been the year-on-year change in the US dollar/Yen exchange rate lagged by six months. The major turning points in <a href="https://www.smartkarma.com/entities/22826" target="_blank" data-smartkarma-citation="entities:22826:1" rel="noopener">JUSDJPY CURNCY</a> over the last twelve years highlighted above line up well with changes in the direction of earnings momentum as represented by the Results &amp; Revision Score. With the Yen having reverted to a period of strengthening in recent weeks, the trend in the Score will be downwards over the next six months, which will be reflected in due course by the market.    <div class="content-highlight">In the DETAIL section below, we update our Market Composite Results Timeline, Sector and Peer Group Results &amp; Revision Scores, Sector Performance and Valuation and look at the best and worst large-cap individual company results over the last two weeks. In the meantime, we lighten the mood with a classic Allman Brother track featuring the incomparable Dicky Betts.</div><center></center><div class="content-caption">The Allman Brothers Band - Southbound - 1/16/1982 - University Of Florida Bandshell</div>

Source: Japan AnalyticsSOUTHBOUND - Two weeks into the announcements of the June quarter-end period, it is clear that the momentum of Japanese listed corporate earnings is still heading lower. Since July 22nd, 1,216 or 32% of companies have reported results and 292 forecast revisions have been announced. The Japan Analytics Results &amp; Revision Score reached a new 28-month low on Friday of 1.43, a decline of 78% from the current cycle peak of 6.50 on 16th November 2017. The correlation between the Score and the Market Capitalisation of listed companies excluding REITs is 0.77, and the Score is more of a leading or co-incident than lagging indicator.Source: Japan AnalyticsBREAKDOWN - The Results &amp; Revision Score is a weighted sum of three components, the Results Score, the Annual Forecast/Revision Score and the Interim Forecast/Revision Score, with the last of these only being applicable for nine months of each year. The two Forecast/Revision Scores are, as would be expected., leading indicators for the Results Score. The current quarter's Results Scor decline already exceeds the previous quarter's more-benign decline which also saw an increase in the Annual Forecast/Revision Score as the majority of companies 'rolled' their forecast ahead by one year. In contrast, the forecasts for the Interim period which for most companies ends next month were the most pessimistic since April 2016 and the mostly first-quarter results are confirming the early caution. In addition, full-year forecasts are also being downgraded and are at the lowest level for three months.Source: Japan AnalyticsYEN DRIVER - The key driver of the Results &amp; Revision Score has been the year-on-year change in the US dollar/Yen exchange rate lagged by six months. The major turning points in JUSDJPY CURNCY over the last twelve years highlighted above line up well with changes in the direction of earnings momentum as represented by the Results &amp; Revision Score. With the Yen having reverted to a period of strengthening in recent weeks, the trend in the Score will be downwards over the next six months, which will be reflected in due course by the market.    In the DETAIL section below, we update our Market Composite Results Timeline, Sector and Peer Group Results &amp; Revision Scores, Sector Performance and Valuation and look at the best and worst large-cap individual company results over the last two weeks. In the meantime, we lighten the mood with a classic Allman Brother track featuring the incomparable Dicky Betts.The Allman Brothers Band - Southbound - 1/16/1982 - University Of Florida Bandshell

🇯🇵 Japan • Summer Results & Revisions First Cut - Southbound

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

The Japan Exchange Group (JPX) publishes a daily report that details the short sell activity by market participants. JPX aggregates broker short sell reports and discloses information such as the short sale positions and the names of the investors whose short sale positions reach 0.5% of the outstanding shares. Here is some information on short positions for the week ended 26 July.The short notional in the market for the week ended 26 July is US$24.25bn with the largest short names being <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, <a href="https://www.smartkarma.com/entities/itochu-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18448:1">Itochu Corp (8001 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:1:1">Canon Inc (7751 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a> and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a>. Most shorted stocks as a percentage of free float are Amazia Inc, <a href="https://www.smartkarma.com/entities/leopalace21-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:8244:1">Leopalace21 Corp (8848 JP)</a>, <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a> and <a href="https://www.smartkarma.com/entities/tokai-carbon-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a> while the stocks with the highest days to cover are <a href="https://www.smartkarma.com/entities/vital-ksk-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:7398:1">Vital Ksk Holdings (3151 JP)</a>, <a href="https://www.smartkarma.com/entities/mirait-holdings-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:7034:1">Mirait Holdings (1417 JP)</a>, <a href="https://www.smartkarma.com/entities/katakura-industries-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:2007:1">Katakura Industries (3001 JP)</a> and <a href="https://www.smartkarma.com/entities/zenkoku-hosho-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:5537:1">Zenkoku Hosho (7164 JP)</a>.The largest increases in short notional over the week were <a href="https://www.smartkarma.com/entities/nippon-telegraph-telephone" target="_blank" rel="noopener" data-smartkarma-citation="entities:623:1">NTT (Nippon Telegraph &amp; Telephone) (9432 JP)</a>, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:752:1">Fanuc Corp (6954 JP)</a> and <a href="https://www.smartkarma.com/entities/bandai-namco-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:13435:1">Bandai Namco Holdings (7832 JP)</a> while shorts were covered in <a href="https://www.smartkarma.com/entities/ricoh-co-ltd" target="_blank" rel="noopener" data-smartkarma-citation="entities:15359:1">Ricoh Co Ltd (7752 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" rel="noopener" data-smartkarma-citation="entities:18107:1">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-gro" target="_blank" rel="noopener" data-smartkarma-citation="entities:218:1">Mitsubishi Ufj Financial (8306 JP)</a> and <a href="https://www.smartkarma.com/entities/sbi-holdings-inc" target="_blank" rel="noopener" data-smartkarma-citation="entities:10928:1">Sbi Holdings (8473 JP)</a>.

The Japan Exchange Group (JPX) publishes a daily report that details the short sell activity by market participants. JPX aggregates broker short sell reports and discloses information such as the short sale positions and the names of the investors whose short sale positions reach 0.5% of the outstanding shares. Here is some information on short positions for the week ended 26 July.The short notional in the market for the week ended 26 July is US$24.25bn with the largest short names being Toyota Motor (7203 JP), Itochu Corp (8001 JP), Canon Inc (7751 JP), Fast Retailing (9983 JP) and Taiyo Yuden (6976 JP). Most shorted stocks as a percentage of free float are Amazia Inc, Leopalace21 Corp (8848 JP), Taiyo Yuden (6976 JP) and Tokai Carbon (5301 JP) while the stocks with the highest days to cover are Vital Ksk Holdings (3151 JP), Mirait Holdings (1417 JP), Katakura Industries (3001 JP) and Zenkoku Hosho (7164 JP).The largest increases in short notional over the week were NTT (Nippon Telegraph &amp; Telephone) (9432 JP), Fast Retailing (9983 JP), Fanuc Corp (6954 JP) and Bandai Namco Holdings (7832 JP) while shorts were covered in Ricoh Co Ltd (7752 JP), Advantest Corp (6857 JP), Mitsubishi Ufj Financial (8306 JP) and Sbi Holdings (8473 JP).  

Short Sell Reporting - Insights for the Week Ended July 26

<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

Japan

FANUC CORPORATION manufactures factory automation (FA) systems and equipments, and robots. The Company's products include computerized numerically-controlled (CNC) equipment, servo motors, laser systems, industrial robots, wire-cut electric discharge machines, and CNC drill.  Fanuc participates in a joint venture with General Electric in the FA field.

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Fanuc Corp Unsp Adr (FANUY US)

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