'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/000/125/889/original/2020-04-01_12-59-11.png?1585713567" class="editor-image img-responsive" data-smartkarma-image-id="125889"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>DIVIDENDS AT RISK</strong> - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following <a href="https://www.smartkarma.com/entities/hsbc-holdings-plc" target="_blank" data-smartkarma-citation="entities:516:1" rel="noopener">HSBC (5 HK) </a>and <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/125/899/original/2020-04-01_13-47-18.png?1585716458" class="editor-image img-responsive" data-smartkarma-image-id="125899"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>30% HAIRCUT</strong> - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/905/original/2020-04-07_13-29-26.png?1586233784" class="editor-image img-responsive" data-smartkarma-image-id="126905"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>WHO'S CUTTING NEXT?</strong> - Some serial dividend 'cutters', like <a href="https://www.smartkarma.com/entities/nipro-corp" target="_blank" data-smartkarma-citation="entities:18346:1" rel="noopener">Nipro (8086 JP)</a> above, have already announced a cut for the fiscal year just ended. In the<strong> DETAIL</strong> section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.</p>

Source • Japan AnalyticsDIVIDENDS AT RISK - As noted in our daily Results &amp; Revisions Updates in the last few days, Japanese companies are starting to shore up their cash flow but cutting or eliminating their dividends. Following HSBC (5 HK) and Standard Chartered (STAN LN) moves on April 1st, a wave of similar moves is expected in Japan. Although dividends are thought to be very 'sticky' in this market,  on average,  of the 75% of non-financial companies that pay dividends, 14% reduce their payouts each year. In FY2009 and FY2010, this ratio rose to one-third.Source • Japan Analytics30% HAIRCUT - The 'stickiness' of Japanese dividends is clear from the trends in absolute values. The total amount of cash dividends paid by non-financial companies declined by 30% from 2008 to 2010 or by ¥1.8 trillion. Since the 2010 'low', total cash dividends paid by these companies have increased by 168% to ¥11.8 trillion, a 'trailing yield' of 2.4%. A 30% dividend haircut to ¥8.3 trillion would reduce the yield on current market cap to 1.7%, slightly above the 2010 low of 1.63%.Source • Japan AnalyticsWHO'S CUTTING NEXT? - Some serial dividend 'cutters', like Nipro (8086 JP) above, have already announced a cut for the fiscal year just ended. In the DETAIL section below, we shall attempt to highlight those larger (Market Cap &gt; ¥50b) companies with the greatest risk of having to cut their dividends.

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/035/original/2020-03-15_07-07-04.png?1584223644" class="editor-image img-responsive" data-smartkarma-image-id="123035"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>RELATIVE VALUE</strong> - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The<strong> -0.57% daily average rate of decline</strong> over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our <a href="https://www.smartkarma.com/insights/japan-market-update-opportunity-knocks" target="_blank" data-smartkarma-citation="insights:37049" rel="noopener">Opportunity Knocks?</a> Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. <strong>Japanese equities now offer attractive relative value and should outperform over the coming months.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/034/original/2020-03-15_06-53-01.png?1584222882" class="editor-image img-responsive" data-smartkarma-image-id="123034"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/036/original/2020-03-15_07-18-49.png?1584224347" class="editor-image img-responsive" data-smartkarma-image-id="123036"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/037/original/2020-03-15_07-23-55.png?1584224666" class="editor-image img-responsive" data-smartkarma-image-id="123037"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>IT'S DIFFERENT THIS TIME</strong> - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been <strong>four days in the last twenty-eight years</strong> with worse 56-day rates of decline - all in October 2008. <strong>All four days provided fearless investors with excellent medium-term gains.</strong> Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the <em>Covid-19 recession</em> on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on<a href="https://www.smartkarma.com/insights/japan-who-s-swimming-naked-part-2-altman-z-score" target="_blank" data-smartkarma-citation="insights:37316" rel="noopener"> Who’s Swimming Naked?</a> cover those companies to which this does not apply. <strong>Overall</strong>, <strong>for Japan at least, it is different this time.</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/039/original/File%202020-03-15%203%2024%2020.jpeg?1584225464" class="editor-image img-responsive" data-smartkarma-image-id="123039"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/040/original/File%202020-03-15%203%2026%2031.jpeg?1584225508" class="editor-image img-responsive" data-smartkarma-image-id="123040"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/041/original/File%202020-03-15%207%2044%2021.jpeg?1584225894" class="editor-image img-responsive" data-smartkarma-image-id="123041"></figure><p></p><div class="content-caption">Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]</div><p><strong>CONTAINING COVID</strong> - According to <a href="https://ourworldindata.org/coronavirus" target="_blank" rel="noopener">data</a> from the peerless <strong>Global Change Data Lab</strong> at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/123/038/original/2020-03-15_07-34-05.png?1584225268" class="editor-image img-responsive" data-smartkarma-image-id="123038"></figure><div class="content-caption">Source • oann.com</div><p><strong>KEEP CALM AND CARRY ON -</strong> Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them <em>sine populo</em>. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. </p><p><strong>A COVID-19 WORLD</strong> - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      </p><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this<strong> once-in-a-decade</strong> opportunity to buy high-quality Japanese companies at attractive prices.</p></div>

Source • Japan AnalyticsRELATIVE VALUE - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The -0.57% daily average rate of decline over the last three months has only been exceeded on 32 of the 10,142 days since March 1979, eight of which occurred in 1990, with the balance in 2008. From the January 23rd 2018 peak of 1,911, the index has fallen by 34% and is within 3% of our target (expressed in terms of Total Market Value ex REITs) outlined in our Opportunity Knocks? Insight published on 1st March. The market is also within 5% of the TOPIX low of 1,196 of 12th February 2016, which we expect will provide some short-term support. Although Japan and many other developed world economies are now in recession, markets do not fall in a straight line forever. Japanese equities now offer attractive relative value and should outperform over the coming months.Source • Japan AnalyticsIT'S DIFFERENT THIS TIME - Most bear markets in Japan have coincided with periods of Yen strength, including the 29% 2015/16 decline when the currency strengthened by 19%. Repeating the rate of decline analysis above, in US dollar terms there have only been four days in the last twenty-eight years with worse 56-day rates of decline - all in October 2008. All four days provided fearless investors with excellent medium-term gains. Although this increase in market volatility may be less welcome for international investors in Japanese equities, the impact of the Covid-19 recession on the Japanese economy will be more muted. Also, the 48% collapse in the oil price year-to-date will help offset the negative impact of the October 2019 increase in the consumption tax and the decline in export sales in Europe. Lastly, we would suggest that the much-derided net cash that Japanese corporates 'hoard' for rainy days such as these, should delay the need for increases in credit lines. Our recent series of Insights on Who’s Swimming Naked? cover those companies to which this does not apply. Overall, for Japan at least, it is different this time.Source • Max Roser, Hannah Ritchie and Esteban Ortiz-Ospina (2020) - "Coronavirus Disease (COVID-19) – Research and Statistics". Published online at OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/coronavirus' [Online Resource]CONTAINING COVID - According to data from the peerless Global Change Data Lab at Oxford University, Japan has, (except for the unfortunate passengers and crew on the Diamond Princess cruise ship), managed to contain Covid-19 better than any other large nation. While, there is some scepticism that this outcome could be a result of under-testing to avoid cancellation of the Olympic Games; nevertheless, the recorded cases fatality rate in a country with an above-average age profile is surprisingly low.  Currently, the daily increase in active Covid-19 cases in Japan is less than one hundred and was only seventeen on March 15th. The cumulative number of confirmed Covid-19 fatalities is 24, of which two occurred yesterday. The confirmed number of cases per 100,000 population is 0.65, which compares with 19.5 in South Korea, 16.5 in Italy and 12 in Iran. Source • oann.comKEEP CALM AND CARRY ON - Last night's press conference by Prime Minister Abe was in stark contrast to the sombre tone to those of Prime Minister Johnson of the United Kingdom and the tragicomic ramblings of the US President. Having received the legislative powers to declare a state of emergency, Abe declined at this stage to invoke any social restrictions beyond the already-announced school closures. As in the UK, sporting authorities are cancelling events or holding them sine populo. Japan's long obsession with cleanliness, the culture of bowing as a greeting and readiness to conform have served to 'flatten the curve'. The increased focus on such practices has also resulted in a very low incidence of seasonal influenza this year. Japan also has significantly lower levels of air pollution compared to China, Iran and northern Italy, a  factor that has become a factor in fatality rates, especially amongst the elderly. Although internal travel and restaurant patronage have sharply declined in Japan, shops are open and are well-stocked (except for now-rationed paper products) and 'free movement' with slightly-greater-than-normal social distancing is the norm. Whatever the motivations may be regarding the Olympics and Abe's legacy, Japan is unwilling to force the economy into the economic depression that would be the result of prolonged lockdown. A COVID-19 WORLD - This 'keep-calm-carry-on' model of a Covid-19-prevalent world (as is also seen in Singapore and Taiwan) will eventually have to be applied globally. These countries rapid transition to the new 'Covid-19 world' should result in better short-term outcomes for these economies.  The UK is currently being criticised for attempting to follow a version of this model, and may eventually have to go against the advice of its epidemiologists. Fortunately, for now, the general public are giving the UK government the benefit of the doubt. There will be a sharp divergence in the medium-term economic outlooks for countries taking these two 'paths' with those that are over-reacting paying a heavy price. While this does not bode well for the Eurozone, East Asia, including Japan, should emerge in better shape in this new 'viral' world.      In the DETAIL section below, we shall review a number of our favourite market indicators, recent sector performance and make some recommendations as to how to harness this once-in-a-decade opportunity to buy high-quality Japanese companies at attractive prices.

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

Quantitative Analysis

<ul>
<li>We analyzed the changes in margin trading positions of JPX stocks as of Jun 12th. The aggregated net margin trading position is USD29,582m.</li>
<li>We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.</li>
<li>We highlight net margin buy/sell changes in Kioxia, Disco, Advantest, Lasertec, Skylark, Murata Manufacturing, Iida, JX Advanced Metals, Hitachi, McDonald's.</li>
</ul>


We analyzed the changes in margin trading positions of JPX stocks as of Jun 12th. The aggregated net margin trading position is USD29,582m.
We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.
We highlight net margin buy/sell changes in Kioxia, Disco, Advantest, Lasertec, Skylark, Murata Manufacturing, Iida, JX Advanced Metals, Hitachi, McDonald's.


JPX Margin Trading Weekly (Jun 12th): Kioxia, Disco, Advantest, Lasertec, Skylark, Iida, Hitachi

<ul>
<li>We analyzed the changes in margin trading positions of JPX stocks as of May 22nd. The aggregated net margin trading position is USD28,591m.</li>
<li>We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.</li>
<li>We highlight net margin buy/sell changes in Kioxia, Fujikura, Mitsubishi UFJ Financial, SoftBank, Tokyo Kiraboshi Financial, Advantest, Fast Retailing, Sumitomo Mitsui Financial, Furukawa Electric, Mizuho Financial.</li>
</ul>


We analyzed the changes in margin trading positions of JPX stocks as of May 22nd. The aggregated net margin trading position is USD28,591m.
We tabulate league tables for top/bottom net long/short of margin trading by value, net margin buy as multiple of ADT.
We highlight net margin buy/sell changes in Kioxia, Fujikura, Mitsubishi UFJ Financial, SoftBank, Tokyo Kiraboshi Financial, Advantest, Fast Retailing, Sumitomo Mitsui Financial, Furukawa Electric, Mizuho Financial.


JPX Margin Trading Weekly (May 22nd): Kioxia, Fujikura, Mitsubishi UFJ Financial, SoftBank

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

TSE Tokyo Price Index TOPIX / Technical Analysis

<p style="text-align: justify;">Japanese Diversified Industrials are particularly attractive and actionable in spite of the recent global selloff in equities<em>.</em> In this report we focus on six stocks with the best setups in the Group: Mitsubishi Corporation (8058-JP), DAIKIN INDUSTRIES, LTD. (6367-JP), Mitsubishi Heavy Industries, Ltd. (7011-JP), IHI Corporation (7013-JP), Hitachi Metals, Ltd. (5486-JP), and Sojitz Corp. (2768-JP). Add exposure.</p>

Japanese Diversified Industrials are particularly attractive and actionable in spite of the recent global selloff in equities. In this report we focus on six stocks with the best setups in the Group: Mitsubishi Corporation (8058-JP), DAIKIN INDUSTRIES, LTD. (6367-JP), Mitsubishi Heavy Industries, Ltd. (7011-JP), IHI Corporation (7013-JP), Hitachi Metals, Ltd. (5486-JP), and Sojitz Corp. (2768-JP). Add exposure.

Japan

IHI Corporation manufactures heavy machinery. The Company produces aircraft jet engines, rocket propulsion systems, and ships for military and commercial use. Ishikawajima-Harima also constructs petroleum refineries and nuclear power plants.

Price Gauge
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IHI Corp (7013 JP)

🇯🇵 JAPAN • Dividends At Risk - The Serial 'Cutters'

DIVIDENDS AT RISK - As noted in our daily Results & Revisions Updates in the last few days, Japanese companies are starting to shore up their...

Campbell Gunn

🇯🇵 JAPAN MARKET UPDATE • Relative Value: Short-Term Buy On Japanese Equities

RELATIVE VALUE - Since the recent peak of December 17th, the TOPIX Index has fallen by 28% in 56 trading days. The -0.57% daily average rate of...

Campbell Gunn

JPX Margin Trading Weekly (Jun 12th): Kioxia, Disco, Advantest, Lasertec, Skylark, Iida, Hitachi

We analyzed JPX margin trading positions report for the past week and highlighted Kioxia, Disco, Advantest, Lasertec, Skylark, Murata...

Ke Yan, CFA, FRM

JPX Margin Trading Weekly (May 22nd): Kioxia, Fujikura, Mitsubishi UFJ Financial, SoftBank

We analyzed JPX margin trading positions report for the past week and highlighted Kioxia (285A JP), Fujikura (5803 JP), Mitsubishi UFJ Financial...

Ke Yan, CFA, FRM

Buy: Japanese Diversified Industrials

Japanese Diversified Industrials are particularly attractive and actionable in spite of the recent global selloff in equities. In this report we...

Vermilion Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)