'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

MOVING AVERAGE OUTLIERS - Our moving average outlier indicator uses a weighted sum of the share price relative to the 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 future. POSITIVE MOVING AVERAGE OUTLIERS 28TH OCTOBER - Of the positive outlier identified last week, <a href="https://www.smartkarma.com/entities/8467" target="_blank" data-smartkarma-citation="entities:8467:1">Workman (7564 JP)</a> has since declined by 3% and is still overbought with a Relative Price Score of 4.65. The interim results released on 6th November show a slowing of earnings momentum scoring '4' compared to a score of '9' the previous quarter. We continue to advise profit taking. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/069/394/original/2018-11-11_15-13-17.png?1541916831" class="editor-image img-responsive" data-smartkarma-image-id="69394"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/069/395/original/2018-11-11_15-14-13.png?1541916865" class="editor-image img-responsive" data-smartkarma-image-id="69395"></figure><div class="content-caption">Source: Japan Analytics</div>NEGATIVE MOVING AVERAGE OUTLIERS 28TH OCTOBER - <a href="https://www.smartkarma.com/entities/9990" target="_blank" data-smartkarma-citation="entities:9990:1">Shima Seiki (6222 JP)</a> which was the most extreme negative outlier recovered 9% but is still the third-most oversold large cap. Of our so=called 'Fallen Angels', <a href="https://www.smartkarma.com/entities/4126" target="_blank" data-smartkarma-citation="entities:4126:1">Lasertec (6920 JP)</a> rose by 25% after good results and <a href="https://www.smartkarma.com/entities/9145" target="_blank" data-smartkarma-citation="entities:9145:1">Tokai Carbon (5301 JP)</a> recovered by 13%. Both remain overbought are likely to peak out in terms of their share price in the next few months. Of the other Fallen Angels, the best performance was from <a href="https://www.smartkarma.com/entities/14527" target="_blank" data-smartkarma-citation="entities:14527:1">Ulvac (6728 JP)</a> which rose 20%, and the worst was <a href="https://www.smartkarma.com/entities/15801" target="_blank" data-smartkarma-citation="entities:15801:1">Nippon Gas (8174 JP)</a> which rose 8%. <a href="https://www.smartkarma.com/entities/379" target="_blank" data-smartkarma-citation="entities:379:1">Sumco (3436 JP)</a> had the second-best two-week performance after <a href="https://www.smartkarma.com/entities/18107" target="_blank" data-smartkarma-citation="entities:18107:1">Advantest (6857 JP)</a> rising by 26% as it Q3 results were very strong, and their initial full-year forecast suggest FYOP will be 10% above TTM OP.  Our two 'bounce-but-fully-priced' stocks <a href="https://www.smartkarma.com/entities/13316" target="_blank" data-smartkarma-citation="entities:13316:1">M3 (2413 JP)</a> and <a href="https://www.smartkarma.com/entities/3294" target="_blank" data-smartkarma-citation="entities:3294:1">Pigeon (7956 JP)</a> rose by 3% and 11%, respectively although they remain 'Fully Priced'. <a href="https://www.smartkarma.com/entities/109" target="_blank" data-smartkarma-citation="entities:109:1">Idemitsu Kosan (5019 JP)</a> was unchanged over the period.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/069/396/original/2018-11-11_15-39-17.png?1541918405" class="editor-image img-responsive" data-smartkarma-image-id="69396"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/069/397/original/2018-11-11_15-39-55.png?1541918418" class="editor-image img-responsive" data-smartkarma-image-id="69397"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-highlight">In the DETAIL section below, we highlight the current top and bottom twenty-five larger 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. </div>

MOVING AVERAGE OUTLIERS - Our moving average outlier indicator uses a weighted sum of the share price relative to the 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 future. POSITIVE MOVING AVERAGE OUTLIERS 28TH OCTOBER - Of the positive outlier identified last week, Workman (7564 JP) has since declined by 3% and is still overbought with a Relative Price Score of 4.65. The interim results released on 6th November show a slowing of earnings momentum scoring '4' compared to a score of '9' the previous quarter. We continue to advise profit taking. Source: Japan AnalyticsNEGATIVE MOVING AVERAGE OUTLIERS 28TH OCTOBER - Shima Seiki (6222 JP) which was the most extreme negative outlier recovered 9% but is still the third-most oversold large cap. Of our so=called 'Fallen Angels', Lasertec (6920 JP) rose by 25% after good results and Tokai Carbon (5301 JP) recovered by 13%. Both remain overbought are likely to peak out in terms of their share price in the next few months. Of the other Fallen Angels, the best performance was from Ulvac (6728 JP) which rose 20%, and the worst was Nippon Gas (8174 JP) which rose 8%. Sumco (3436 JP) had the second-best two-week performance after Advantest (6857 JP) rising by 26% as it Q3 results were very strong, and their initial full-year forecast suggest FYOP will be 10% above TTM OP.  Our two 'bounce-but-fully-priced' stocks M3 (2413 JP) and Pigeon (7956 JP) rose by 3% and 11%, respectively although they remain 'Fully Priced'. Idemitsu Kosan (5019 JP) was unchanged over the period.Source: Japan AnalyticsIn the DETAIL section below, we highlight the current top and bottom twenty-five larger 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. 

Japan: Moving Average Outliers - Results Driven

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Friday night after the close, the TSE <a href="https://www.jpx.co.jp/english/news/1044/20181005-01.html" target="_blank">announced</a> the changes to the revisions to the <a href="https://www.jpx.co.jp/english/markets/indices/topix/tvdivq00000030ne-att/e_mei_12_size.pdf" target="_blank">constituents</a> of the TOPIX New Index Series (i.e. the sub-series of TOPIX (Core 30, Large 70, TOPIX 100, Mid 400, etc). The TSE also released FFWs for companies which have their fiscal year-ends in the first calendar quarter of the year, as described in the <a href="https://www.jpx.co.jp/english/markets/indices/line-up/files/e_ref_1_FFW.pdf" target="_blank">TOPIX Free Float Weight Calculation Methodology</a> file, which is an appendix to the <a href="https://www.jpx.co.jp/english/markets/indices/topix/tvdivq00000030ne-att/e_cal_3_topix.pdf" target="_blank">TOPIX Index Guidebook</a> (most recent version 23 July 2018 at time of writing). 
The five biggest changes on the buy side are not a surprise. The largest INCREASE in dollar value of index weight will be <a href="https://www.smartkarma.com/entities/359" target="_blank" data-smartkarma-citation="entities:359:1">Japan Post Holdings (6178 JP)</a>. This was discussed in the aftermath of the offering last September (in the discussion section after followups with the TSE, and their own changes to treatment). See <a href="https://www.smartkarma.com/insights/japan-post-offer-details-surprises-and-fun-and-ding-games" target="_blank" data-smartkarma-citation="insights:13881">Japan Post: Offer Details, Surprises, and Fun And/-Ding Games</a>. In that situation, the TSE increased the number of shares to which the old FFW was applied, but waited until this year to apply a new FFW. Other changes such as <a href="https://www.smartkarma.com/entities/15915" target="_blank" data-smartkarma-citation="entities:15915:1">Asahi Intecc (7747 JP)</a>, <a href="https://www.smartkarma.com/entities/623" target="_blank" data-smartkarma-citation="entities:623:1">Ntt (Nippon Telegraph &amp; Telephone) (9432 JP)</a>, <a href="https://www.smartkarma.com/entities/7463" target="_blank" data-smartkarma-citation="entities:7463:1">Marubeni Corp (8002 JP)</a>, and <a href="https://www.smartkarma.com/entities/17153" target="_blank" data-smartkarma-citation="entities:17153:1">Yakult Honsha (2267 JP)</a> round out the top five and were all well-signalled. 
The largest DECREASE in dollar terms is <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>, which sees its FFW coefficient drop from 0.60 to 0.55. This means that the number of shares included in the TOPIX-calculated free float weight will be 163.15mm shares fewer. Based on the estimates in <a href="https://www.smartkarma.com/insights/japan-passive-who-owns-what" target="_blank" data-smartkarma-citation="insights:22315">JAPAN PASSIVE:  Who Owns What?</a>, that means a sell of approximately ¥170bn.
The top 20 sells in dollar terms are all a one-notch drop in FFW coefficient. That means that some of them may be a surprise. 
The largest three impacts in day count (based on 3mo average volume) in terms of buying are <a href="https://www.smartkarma.com/entities/8174" target="_blank" data-smartkarma-citation="entities:8174:1">Nagawa Co Ltd (9663 JP)</a>, <a href="https://www.smartkarma.com/entities/16395" target="_blank" data-smartkarma-citation="entities:16395:1">Advan Co Ltd (7463 JP)</a>, and <a href="https://www.smartkarma.com/entities/2119" target="_blank" data-smartkarma-citation="entities:2119:1">Tosho Printing (7913 JP)</a> but the amounts are small. The largest sells in terms of ADV are <a href="https://www.smartkarma.com/entities/9104" target="_blank" data-smartkarma-citation="entities:9104:1">Nissan Shatai (7222 JP)</a>, <a href="https://www.smartkarma.com/entities/12698" target="_blank" data-smartkarma-citation="entities:12698:1">Toc Co Ltd (8841 JP)</a>, and <a href="https://www.smartkarma.com/entities/16825" target="_blank" data-smartkarma-citation="entities:16825:1">Asunaro Aoki Construction (1865 JP)</a>.  In general, the top 30-50 names in terms of impact are all small dollar amounts. 
All told, the trade, combined with a couple of inclusions, looks to be something like ¥1.1trln a side, with a reverse-funding trade of ¥300bn or so.
And in any list of 700 changes, there will be some interesting situations to take advantage of, for everyone. Contact in PMs for a full spreadsheet.

Friday night after the close, the TSE announced the changes to the revisions to the constituents of the TOPIX New Index Series (i.e. the sub-series of TOPIX (Core 30, Large 70, TOPIX 100, Mid 400, etc). The TSE also released FFWs for companies which have their fiscal year-ends in the first calendar quarter of the year, as described in the TOPIX Free Float Weight Calculation Methodology file, which is an appendix to the TOPIX Index Guidebook (most recent version 23 July 2018 at time of writing). 
The five biggest changes on the buy side are not a surprise. The largest INCREASE in dollar value of index weight will be Japan Post Holdings (6178 JP). This was discussed in the aftermath of the offering last September (in the discussion section after followups with the TSE, and their own changes to treatment). See Japan Post: Offer Details, Surprises, and Fun And/-Ding Games. In that situation, the TSE increased the number of shares to which the old FFW was applied, but waited until this year to apply a new FFW. Other changes such as Asahi Intecc (7747 JP), Ntt (Nippon Telegraph &amp; Telephone) (9432 JP), Marubeni Corp (8002 JP), and Yakult Honsha (2267 JP) round out the top five and were all well-signalled. 
The largest DECREASE in dollar terms is Toyota Motor (7203 JP), which sees its FFW coefficient drop from 0.60 to 0.55. This means that the number of shares included in the TOPIX-calculated free float weight will be 163.15mm shares fewer. Based on the estimates in JAPAN PASSIVE:  Who Owns What?, that means a sell of approximately ¥170bn.
The top 20 sells in dollar terms are all a one-notch drop in FFW coefficient. That means that some of them may be a surprise. 
The largest three impacts in day count (based on 3mo average volume) in terms of buying are Nagawa Co Ltd (9663 JP), Advan Co Ltd (7463 JP), and Tosho Printing (7913 JP) but the amounts are small. The largest sells in terms of ADV are Nissan Shatai (7222 JP), Toc Co Ltd (8841 JP), and Asunaro Aoki Construction (1865 JP).  In general, the top 30-50 names in terms of impact are all small dollar amounts. 
All told, the trade, combined with a couple of inclusions, looks to be something like ¥1.1trln a side, with a reverse-funding trade of ¥300bn or so.
And in any list of 700 changes, there will be some interesting situations to take advantage of, for everyone. Contact in PMs for a full spreadsheet.

Japan

GOLDWIN INC. manufactures and markets sportswear for skiing, snowboarding, soccer, tennis, swimming, and other outdoor activities.

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Goldwin Inc (8111 JP)

Japan: Moving Average Outliers - Results Driven

MOVING AVERAGE OUTLIERS - Our moving average outlier indicator uses a weighted sum of the share price relative to the 5-day, 20-day, 60-day, 120...

Campbell Gunn

TOPIX FFW Changes for October 2018

Friday night after the close, the TSE announced the changes to the revisions to the constituents of the TOPIX New Index Series (i.e. the sub-series...

Travis Lundy

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