'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. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/157/original/File%202020-03-28%2015%2042%2009.jpeg?1585378270" class="editor-image img-responsive" data-smartkarma-image-id="125157"></figure><div class="content-caption">Source • Mainichi Photography</div>STAY AT HOME (PLEASE) - With the 2020 Olympics now destined for 2021, the authorities can focus on containing Covid-19 which continues to spread in Tokyo.  Governor Koike and the Governors of the surrounding prefectures have responded to the recent growth in cases in the metropolis by requesting that citizens stay at home this weekend. Parks and many shops and restaurants have closed, and inclement weather (it is snowing across most of the Kanto plain this Sunday) has resulted in a high degree of compliance.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/263/original/File%202020-03-29%206%2035%2050.jpeg?1585431441" class="editor-image img-responsive" data-smartkarma-image-id="125263"></figure><div class="content-caption">Source • aatishb.com</div>CATCHING UP - Without the implementation of the measures adopted in China and South Korea, Japan is now moving more in line with the global trends shown above in terms of log-scale incremental rate of change. Sixty-three new cases were reported on Saturday, the largest single-day total to date. Over half of the new cases were in the 'Longevity General Hospital' in Taito Ward, taking the total for the capital to 362. For Japan as a whole, the total one cases for Saturday was 194 a 68% one-day increase. Covid-19 fatalities increased by six to 53.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/264/original/File%202020-03-29%206%2037%2003.jpeg?1585431468" class="editor-image img-responsive" data-smartkarma-image-id="125264"></figure><div class="content-caption">Source • aatishb.com</div>THE SWEDISH MODEL - PM Abe is concerned that a full societal 'lockdown' would damage the economy and has yet to invoke his newly-minted emergency powers - which, in any case, do not provide for such a measure. For now, Japan is following Sweden's social experiment of permitting life to go on as usual as much as possible. Both countries have been criticised for their 'novel' approach; however, their trajectories are noticeably different from the US and Italy. Let us hope than Japan's remarkably low-incidence of, and CFR from, Covid-19 infection can hold.CORONA 'SHOKKU' - At a press conference yesterday Abe pledged to introduce an economic package that would exceed Japan's response to the "Lehman Shock" with a particular focus on SMEs and distressed households. The details are to be announced in the next ten days.RATIONING BOOK - In other news, Kinokuniya bookstore in Tokyo is limiting purchases of the now-existential necessity Camus' The Plague' to one per person.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/256/original/2020-03-28_08-20-51.png?1585429894" class="editor-image img-responsive" data-smartkarma-image-id="125256"></figure><div class="content-caption">Source • Japan Analytics</div>PULLING OUT ALL THE STOPS - On Thursday the Bank of Japan's ETF purchase programme constituted 6% of Value Traded as the total interventions this month now total ¥1.3 trillion has recovered 18% from the last weeks' low and is 'only' 16% below the December high. Our Results Score is now negative, and the Forecast/Revision Score will follow next week. With over 3 billion people around the world in some form of social isolation, we expect both of our Scores to reach new five year lows by May and for equities to follow, despite Governor Kuroda's machinations.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/260/original/2020-03-29_06-20-04.png?1585430434" class="editor-image img-responsive" data-smartkarma-image-id="125260"></figure><div class="content-caption">Source • Japan Analytics</div>NO MAN'S LAND - As Aggregate TTM and Forecast Operating and Net Income head lower, the last week's bear-market-bounce has taken multiples back towards the long-term averages. With 3 quarters of results before a possible cycle low, Japanese equities are stuck in no man's land, neither overvalued not undervalued.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/158/original/2020-03-28_15-56-17.png?1585378601" class="editor-image img-responsive" data-smartkarma-image-id="125158"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/305/original/2020-03-29_08-40-46.png?1585438866" class="editor-image img-responsive" data-smartkarma-image-id="125305"></figure><div class="content-caption">Source • Japan Analytics</div>FRIDAY 27th MARCH - Friday saw six companies reporting results, of which two - <a href="https://www.smartkarma.com/entities/jastec-co-ltd" target="_blank" data-smartkarma-citation="entities:9201:1" rel="noopener">Jastec (9717 JP)</a>- and<a href="https://www.smartkarma.com/entities/niitaka-co-ltd" target="_blank" data-smartkarma-citation="entities:4911:1" rel="noopener">Niitaka (4465 JP)</a> had positive scores. Fifteen companies revised their forecasts, and one - <a href="https://www.smartkarma.com/entities/imv-corp" target="_blank" data-smartkarma-citation="entities:14159:1" rel="noopener">IMV (7760 JP)</a> withdrew its forecast entirely. In terms of our scoring system, the ratio of positive to negative 'scores' was 6:10, with <a href="https://www.smartkarma.com/entities/jfe-holdings-inc" target="_blank" data-smartkarma-citation="entities:210:1" rel="noopener">JFE (5411 JP)</a> being the largest negative-scoring company. High-tech lamp maker <a href="https://www.smartkarma.com/entities/ushio-inc" target="_blank" data-smartkarma-citation="entities:6640:1" rel="noopener">Ushio (6925 JP)</a> cut its forecast for Operating Income to ¥6b - which would be the lowest outcome since 1994 and implies a fourth-quarter operating loss of ¥0.35b.<a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony (6758 JP)</a>announced that its forecasts made in February are now likely to be revised down and that the company may not be able to release FY2020 earnings as scheduled on 30th April due to delays in accounting procedures. <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>has shut down two plants in Japan, reflecting a weaker sales outlook.

Source • Mainichi PhotographySTAY AT HOME (PLEASE) - With the 2020 Olympics now destined for 2021, the authorities can focus on containing Covid-19 which continues to spread in Tokyo.  Governor Koike and the Governors of the surrounding prefectures have responded to the recent growth in cases in the metropolis by requesting that citizens stay at home this weekend. Parks and many shops and restaurants have closed, and inclement weather (it is snowing across most of the Kanto plain this Sunday) has resulted in a high degree of compliance.Source • aatishb.comCATCHING UP - Without the implementation of the measures adopted in China and South Korea, Japan is now moving more in line with the global trends shown above in terms of log-scale incremental rate of change. Sixty-three new cases were reported on Saturday, the largest single-day total to date. Over half of the new cases were in the 'Longevity General Hospital' in Taito Ward, taking the total for the capital to 362. For Japan as a whole, the total one cases for Saturday was 194 a 68% one-day increase. Covid-19 fatalities increased by six to 53.Source • aatishb.comTHE SWEDISH MODEL - PM Abe is concerned that a full societal 'lockdown' would damage the economy and has yet to invoke his newly-minted emergency powers - which, in any case, do not provide for such a measure. For now, Japan is following Sweden's social experiment of permitting life to go on as usual as much as possible. Both countries have been criticised for their 'novel' approach; however, their trajectories are noticeably different from the US and Italy. Let us hope than Japan's remarkably low-incidence of, and CFR from, Covid-19 infection can hold.CORONA 'SHOKKU' - At a press conference yesterday Abe pledged to introduce an economic package that would exceed Japan's response to the "Lehman Shock" with a particular focus on SMEs and distressed households. The details are to be announced in the next ten days.RATIONING BOOK - In other news, Kinokuniya bookstore in Tokyo is limiting purchases of the now-existential necessity Camus' The Plague' to one per person.Source • Japan AnalyticsPULLING OUT ALL THE STOPS - On Thursday the Bank of Japan's ETF purchase programme constituted 6% of Value Traded as the total interventions this month now total ¥1.3 trillion has recovered 18% from the last weeks' low and is 'only' 16% below the December high. Our Results Score is now negative, and the Forecast/Revision Score will follow next week. With over 3 billion people around the world in some form of social isolation, we expect both of our Scores to reach new five year lows by May and for equities to follow, despite Governor Kuroda's machinations.Source • Japan AnalyticsNO MAN'S LAND - As Aggregate TTM and Forecast Operating and Net Income head lower, the last week's bear-market-bounce has taken multiples back towards the long-term averages. With 3 quarters of results before a possible cycle low, Japanese equities are stuck in no man's land, neither overvalued not undervalued.  Source • Japan AnalyticsFRIDAY 27th MARCH - Friday saw six companies reporting results, of which two - Jastec (9717 JP)- andNiitaka (4465 JP) had positive scores. Fifteen companies revised their forecasts, and one - IMV (7760 JP) withdrew its forecast entirely. In terms of our scoring system, the ratio of positive to negative 'scores' was 6:10, with JFE (5411 JP) being the largest negative-scoring company. High-tech lamp maker Ushio (6925 JP) cut its forecast for Operating Income to ¥6b - which would be the lowest outcome since 1994 and implies a fourth-quarter operating loss of ¥0.35b.Sony (6758 JP)announced that its forecasts made in February are now likely to be revised down and that the company may not be able to release FY2020 earnings as scheduled on 30th April due to delays in accounting procedures. Honda Motor (7267 JP)has shut down two plants in Japan, reflecting a weaker sales outlook.

🇯🇵 JAPAN • Revisions & Results Alert - 27th March - A Weekend at Home with the Swedish Model

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

<div>
As discussed in <a href="https://www.smartkarma.com/insights/japan-delta-iii-the-annual-topix-dividend-trade" target="_blank" data-smartkarma-citation="insights:37694" rel="noopener">JAPAN DELTA III - The Annual TOPIX Dividend Trade</a>, the absolute returns on these days show significant divergence around the year-end. 
It is definitely worth your while looking into the risk. 
For arbitrageurs, this year's dividends may be fraught with greater risk than usual, suggesting that EFPs will trade on less favorable terms to those using futures to hedge than normal. 
This insight looks at indices relative to each other, the performance of Small vs Large, Small In Index vs Small Out of Index, Value vs Growth, etc. 
The data is really interesting, and worthwhile knowing.
</div><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 124px;"><h2>The Series So Far...</h2></td></tr>
<tr>
<td style="width: 124px;">Date</td>
<td style="width: 580px;">Title</td>
</tr>
<tr>
<td style="width: 124px;">18-Mar-2020</td>
<td style="width: 580px;">
<a href="https://www.smartkarma.com/insights/japan-delta-i-the-boj-ups-etf-buying" target="_blank" data-smartkarma-citation="insights:37528" rel="noopener">JAPAN DELTA I - The BOJ Ups ETF Buying</a> </td>
</tr>
<tr>
<td style="width: 124px;">19-Mar-2020</td>
<td style="width: 580px;">
<a href="https://www.smartkarma.com/insights/japan-delta-ii-foreigners-and-trust-banks-a-wildcard" target="_blank" data-smartkarma-citation="insights:37590" rel="noopener">JAPAN DELTA II - Foreigners And Trust Banks a WildCard</a> </td>
</tr>
<tr>
<td style="width: 124px;">23-Mar-2020</td>
<td style="width: 580px;">
<a href="https://www.smartkarma.com/insights/japan-delta-iii-the-annual-topix-dividend-trade" target="_blank" data-smartkarma-citation="insights:37694" rel="noopener">JAPAN DELTA III - The Annual TOPIX Dividend Trade</a> </td>
</tr>
<tr>
<td style="width: 124px;">24-Mar-2020</td>
<td style="width: 580px;">
<a href="https://www.smartkarma.com/insights/japan-delta-iv-is-the-gpif-in-buying" target="_blank" data-smartkarma-citation="insights:37730" rel="noopener">JAPAN DELTA IV - Is The GPIF In Buying?</a> </td>
</tr>
</tbody></table>


As discussed in JAPAN DELTA III - The Annual TOPIX Dividend Trade, the absolute returns on these days show significant divergence around the year-end. 
It is definitely worth your while looking into the risk. 
For arbitrageurs, this year's dividends may be fraught with greater risk than usual, suggesting that EFPs will trade on less favorable terms to those using futures to hedge than normal. 
This insight looks at indices relative to each other, the performance of Small vs Large, Small In Index vs Small Out of Index, Value vs Growth, etc. 
The data is really interesting, and worthwhile knowing.

The Series So Far...

Date
Title


18-Mar-2020

JAPAN DELTA I - The BOJ Ups ETF Buying 


19-Mar-2020

JAPAN DELTA II - Foreigners And Trust Banks a WildCard 


23-Mar-2020

JAPAN DELTA III - The Annual TOPIX Dividend Trade 


24-Mar-2020

JAPAN DELTA IV - Is The GPIF In Buying? 



JAPAN DELTA V - MOAR Meaningful March-End Div Trade Data

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.

Event-Driven

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due to relative value unwinds that were being rushed for completion prior to the long weekend. This morning the skews are reversing and with Nikkei now outperforming Topix (+02.7% vs. -0.87% at the time of this writing) we believe this opportunity is being realised quickly. Our thoughts on next steps below.

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei. Given extreme looking skews even in individual names it does not seem unreasonable that some relative value fund(s) are exiting positions aggressively prior to what could be a key long weekend for Japan with potentially heavy volatility on Monday. We examine some striking performance discrepancies below.

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

<blockquote>
Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19)
Global financial and capital markets have been unstable, with growing uncertainties over the global economy due mainly to the impact of the outbreak of COVID-19. Under the circumstances, Japan's economic activity has been weak recently (see Attachment). In addition, financial conditions have become less accommodative, as seen partly in corporate financing such as the financial positions of small and medium-sized firms.
Given these developments, the Bank of Japan judged it appropriate to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of Japanese government bonds (JGBs) and the U.S. dollar funds-supplying operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The Bank will take these measures with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms' and households' sentiment from deteriorating.
</blockquote>To further those goals, the BOJ decided to...<ol>
<li>
Provide ample yen funds through further JGB buying, and through other measures described in #2-3. As for U.S. dollar liquidity, coordinated with the Bank of Canada (BOC), the Bank of England (BOE), the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank (SNB), regarding the U.S. dollar funds-supplying operations, the Bank made public today to lower the loan rate by 0.25 percent and offer U.S. dollars weekly 2 with an 84-day maturity, in addition to the 1-week maturity operations currently offered. </li>
<li>
Introduction of the Special Funds-Supplying Operations to Facilitate Corporate Financing regarding the Novel Coronavirus (COVID-19).  <ol>
<li>The Bank decided to provide loans against corporate debt (of about 8 trillion yen as of end-February 2020) as collateral at the interest rate of 0 percent with maturity up to one year. Twice as much as the amount outstanding of the loans will be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank. This operation will be conducted until the end of September 2020.</li>
<li>Increase in purchases of CP and corporate bonds The Bank decided, by a unanimous vote, to increase the upper limit to purchase CP and corporate bonds by 2 trillion yen in total and conduct purchases with the upper limit of their amounts outstanding of about 3.2 trillion yen and about 4.2 trillion yen, respectively. The additional purchases will continue until the end of September 2020</li>
</ol>
</li>
<li>
Do more Active ETF and JREIT Buying: The Bank decided, by a unanimous vote, to actively purchase ETFs and J-REITs for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about 12 trillion yen and about 180 billion yen, respectively.</li>
</ol>After the BOJ announced this, the market fell. Some of this increase was expected because of various local media commentary by informed sources, suggesting the BOJ was considering measures like this. The reason the market fell was likely profit-taking - a sell-the-news phenomenon.The other possible reason for selling was disappointment that the new level of ETF buying was not made permanent.Those who are "disappointed" by this are mistaken.The BOJ will buy at that increased rate as long as it needs to supply funds to the market. If the market doesn't go up, they will likely keep on buying "for the time being." If the market goes up, then the program has been a success. Understanding the practical impacts is important. That's discussed below.


Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19)
Global financial and capital markets have been unstable, with growing uncertainties over the global economy due mainly to the impact of the outbreak of COVID-19. Under the circumstances, Japan's economic activity has been weak recently (see Attachment). In addition, financial conditions have become less accommodative, as seen partly in corporate financing such as the financial positions of small and medium-sized firms.
Given these developments, the Bank of Japan judged it appropriate to enhance monetary easing through (1) the further ample supply of funds by conducting various operations including purchases of Japanese government bonds (JGBs) and the U.S. dollar funds-supplying operations, (2) measures to facilitate corporate financing including the introduction of a new operation, and (3) active purchases of exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs). The Bank will take these measures with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets, thereby preventing firms' and households' sentiment from deteriorating.
To further those goals, the BOJ decided to...

Provide ample yen funds through further JGB buying, and through other measures described in #2-3. As for U.S. dollar liquidity, coordinated with the Bank of Canada (BOC), the Bank of England (BOE), the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank (SNB), regarding the U.S. dollar funds-supplying operations, the Bank made public today to lower the loan rate by 0.25 percent and offer U.S. dollars weekly 2 with an 84-day maturity, in addition to the 1-week maturity operations currently offered. 

Introduction of the Special Funds-Supplying Operations to Facilitate Corporate Financing regarding the Novel Coronavirus (COVID-19).  
The Bank decided to provide loans against corporate debt (of about 8 trillion yen as of end-February 2020) as collateral at the interest rate of 0 percent with maturity up to one year. Twice as much as the amount outstanding of the loans will be included in the Macro Add-on Balances in current accounts held by financial institutions at the Bank. This operation will be conducted until the end of September 2020.
Increase in purchases of CP and corporate bonds The Bank decided, by a unanimous vote, to increase the upper limit to purchase CP and corporate bonds by 2 trillion yen in total and conduct purchases with the upper limit of their amounts outstanding of about 3.2 trillion yen and about 4.2 trillion yen, respectively. The additional purchases will continue until the end of September 2020



Do more Active ETF and JREIT Buying: The Bank decided, by a unanimous vote, to actively purchase ETFs and J-REITs for the time being so that their amounts outstanding will increase at annual paces with the upper limit of about 12 trillion yen and about 180 billion yen, respectively.
After the BOJ announced this, the market fell. Some of this increase was expected because of various local media commentary by informed sources, suggesting the BOJ was considering measures like this. The reason the market fell was likely profit-taking - a sell-the-news phenomenon.The other possible reason for selling was disappointment that the new level of ETF buying was not made permanent.Those who are "disappointed" by this are mistaken.The BOJ will buy at that increased rate as long as it needs to supply funds to the market. If the market doesn't go up, they will likely keep on buying "for the time being." If the market goes up, then the program has been a success. Understanding the practical impacts is important. That's discussed below.

Japan

Honda Motor Co., Ltd. develops, manufactures, and distributes motorcycles, automobiles, and power products such as generators and farm machinery. The Company also operates a financial credit business. Honda Motor has manufacturing facilities in the US, Canada, the UK, France, Italy, Spain, Brazil, Mexico, India, and Thailand.

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Honda Motor (7267 JP)

🇯🇵 JAPAN • Revisions & Results Alert - 27th March - A Weekend at Home with the Swedish Model

STAY AT HOME (PLEASE) - With the 2020 Olympics now destined for 2021, the authorities can focus on containing Covid-19 which continues to spread in...

Campbell Gunn

JAPAN DELTA V - MOAR Meaningful March-End Div Trade Data

As discussed in JAPAN DELTA III - The Annual TOPIX Dividend Trade, the absolute returns on these days show significant divergence around the...

Travis Lundy

Japan Long Weekend Portfolio Blowout Theme Is Working Quickly

On Thursday we highlighted a number of stock pairs that had seen extreme levels of relative performance dislocations, speculating that this was due...

Mio Kato

What Is Getting Blown Out of Portfolios Before the Long Weekend in Japan?

We previously highlighted the strong skew between names which have a heavy weighting in Topix vs. those which have a heavy weighting in the Nikkei....

Mio Kato

JAPAN DELTA I - The BOJ Ups ETF Buying

Enhancement of Monetary Easing in Light of the Impact of the Outbreak of the Novel Coronavirus (COVID-19) Global financial and capital markets...

Travis Lundy

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