'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/000/118/403/original/2020-02-18_08-44-22.png?1581983074" class="editor-image img-responsive" data-smartkarma-image-id="118403"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/404/original/2020-02-18_08-42-56.png?1581983098" class="editor-image img-responsive" data-smartkarma-image-id="118404"></figure><div class="content-caption">Source • Japan Analytics</div>THREE-YEAR LOW - With <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone (5108 JP)</a>'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/405/original/2020-02-18_09-29-28.png?1581985792" class="editor-image img-responsive" data-smartkarma-image-id="118405"></figure><div class="content-caption">Source • Japan Analytics</div>LEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-<ul>
<li>Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.</li>
<li>The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.</li>
<li>The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.</li>
<li>
All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.
<hr>
• SECTOR SCORES •
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/118/410/original/2020-02-18_09-55-29.png?1581987489" class="editor-image img-responsive" data-smartkarma-image-id="118410"></figure><div class="content-caption">Source • Japan Analytics</div>
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 
</li>
</ul>

Source • Japan AnalyticsTHREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our Results Sore - the lowest since March 2017.  In contrast, the Forecast/Revision Score reached a three-month high as the 470 companies with December year-ends put an optimistic gloss on their medium-term outlook. As we have noted in our recent daily roundups, a normal precondition for a cycle low is for the Forecast/Revision Score to rise above the Results Score. Forecast/Revision Score peaks and troughs usually occur one to two quarters ahead of those for the Results Score.  Covid-19's impact will likely see the 2016 'playbook' repeated next quarter with a lower Results Score and a 'sideways' Forecast/Results Score. The Results Score cycle low point will be reached with the mostly-interim results to be released in six months. Source • Japan AnalyticsLEADING INDICATOR - By including several momentum factors into our Scoring (see below), we can provide a better indication of future business conditions. Indeed there is a 0.83 correlation between the Cabinet Office's Business Condition Leading Indicator and the Forecast/Revision Score. Reported earnings, as well as company forecasts, are lagging indicators and, as shown in Part 1 of this Insight. Both data series peaked one year after our Scores and the market peaked in early 2018. SCORING METHODOLOGY - For those new to these Insights, we briefly recap our scoring methodology below:-
Results Scores are calculated using the most recent eight quarters of company data for Revenues, Operating Income and Operating Margin and, for each, measure the rate, degree and consistency of change. The Results Score has a maximum of +30 and a minimum of -30 for each period. Our data series commences from the time a particular company issues quarterly results. The sample size becomes significant from March 2005.
The Forecast/Revision Score is based on both Annual and Interim period company forecasts and compares changes from previous forecasts as well as against the trailing twelve-month (TTM) or previous first-half results, with annual forecasts being double-weighted. This Score also has a maximum of +30 and a minimum of -30 for each period.  For this series, our data samples start from August 2008.
The combined Results &amp; Revision Score (RRS) is the average of the Results Score and the Forecasts/Revision Score.

All company Scores are then cap-weight-aggregated into Sector, Peer Group and Market Composite Scores for which the seventeen-year monthly and two-year daily track records are shown above. Only currently listed-companies are covered in the aggregate Scores, and the Total Market Capitalisation excludes delisted entities. REITs are not included.

• SECTOR SCORES •
Source • Japan Analytics
In the DETAIL Section below, we provide a detailed breakdown of our RRS Scoring for Sectors, Peer Groups and individual companies, highlighting this quarter's 'winners' and 'losers'. The chart above shows a  seventeen-year 'timeline' of the cap-weight-aggregated Sector RRS Scores and the ebbs and flows around the business cycles. The Metals Sector is the most volatile on the downside and has yet to 'bottom' this cycle. Technology Hardware appears to have already rebounded; however, Covid-19 suggests this Sector may relapse. On the upside, the Information Technology Sector has replaced the Internet and Telecoms Sectors as the contra-cyclical 'champion'. 



🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

Alpha-Centric ESG Research

Kyle Rudden

Hong Kong Exchanges and Clearing (388 HK)

"You can't have your cake and eat it too."
In other words, you can't have something both ways.
Variants of this idiomatic proverb appear across language and culture.
For the French, it's about the butter, "You can't have butter and a smile from the milkmaid." The Spanish lament because they "can't be both at mass and in the procession." And leave it to the Italians to come up with "You can't have a barrel full of wine, and the wife drunk."
They have a shared message; one about trade-offs. And in ESG investing, there is an omnipresent specter of trade-offs. Sometimes real, often imagined, but always there. Especially the trade-off between ESG Alpha (making money) and ESG Impact (doing good).
In reality, alpha and impact needn't be mutually exclusive, and are in fact quite interdependent. However, temporal disconnects between nearer-term alpha goals and the longer-term nature of impact outcomes are common, and can put silly ideas in one's head.
"You can't have your alpha, and impact too."
Or can you? Financial exchange stocks represent a rare opportunity where those interests – ESG Alpha and ESG Impact – are more closely aligned. Fundamentally, strategically, and temporally.
This Insight is a first step in examining exchange stocks as an actionable ESG theme, and starts the inquisition by sorting out the leaders and laggards in ESG performance and proliferation. Consider the following as a rough summary/outline of this report:
<ul>
<li>Global sustainability is driving ESG adoption and private-sector capital is its vehicle</li>
<li>Financial exchanges, uniquely located at the crossroads of capital, are behind the wheel</li>
<li>ESG integration by exchanges helps investors mitigate risks and identify opportunities</li>
<li>Asia Pacific exchanges (HKEX, BSE, JPX, SGX) dominate capital markets ESG leadership</li>
</ul>

 "You can't have your cake and eat it too."
In other words, you can't have something both ways.
Variants of this idiomatic proverb appear across language and culture.
For the French, it's about the butter, "You can't have butter and a smile from the milkmaid." The Spanish lament because they "can't be both at mass and in the procession." And leave it to the Italians to come up with "You can't have a barrel full of wine, and the wife drunk."
They have a shared message; one about trade-offs. And in ESG investing, there is an omnipresent specter of trade-offs. Sometimes real, often imagined, but always there. Especially the trade-off between ESG Alpha (making money) and ESG Impact (doing good).
In reality, alpha and impact needn't be mutually exclusive, and are in fact quite interdependent. However, temporal disconnects between nearer-term alpha goals and the longer-term nature of impact outcomes are common, and can put silly ideas in one's head.
"You can't have your alpha, and impact too."
Or can you? Financial exchange stocks represent a rare opportunity where those interests – ESG Alpha and ESG Impact – are more closely aligned. Fundamentally, strategically, and temporally.
This Insight is a first step in examining exchange stocks as an actionable ESG theme, and starts the inquisition by sorting out the leaders and laggards in ESG performance and proliferation. Consider the following as a rough summary/outline of this report:

Global sustainability is driving ESG adoption and private-sector capital is its vehicle
Financial exchanges, uniquely located at the crossroads of capital, are behind the wheel
ESG integration by exchanges helps investors mitigate risks and identify opportunities
Asia Pacific exchanges (HKEX, BSE, JPX, SGX) dominate capital markets ESG leadership


Asia Exchanges Lead in ESG: HKEX, JPX, SGX

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Yesterday after the close, <a href="https://www.smartkarma.com/entities/olympus-corp" target="_blank" data-smartkarma-citation="entities:356:1" rel="noopener">Olympus Corp (7733 JP)</a> announced that <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a> had approached Olympus saying it wished to sell its 68,975,800 shares (5.05% of shares out) in Olympus. One can argue about timing, but this is an...<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/484/original/Screenshot%202019-08-30%20at%201.56.35%20AM.png?1567101427" class="editor-image img-responsive" data-smartkarma-image-id="97484"></figure>Olympus responded by saying that it would by buy back up to 85,000,000 shares in a ToSTNeT-3 buyback this morning between 8:00-8:45am local time (7:00:7:45pm US E.S.T., 7:00-7:45am Hong Kong Time) at yesterday's close of ¥1,165/share. This is a pretty good response by Olympus.Discussion of process, liquidity provision, possible reaction, and implications below.

Yesterday after the close, Olympus Corp (7733 JP) announced that Sony Corp (6758 JP) had approached Olympus saying it wished to sell its 68,975,800 shares (5.05% of shares out) in Olympus. One can argue about timing, but this is an...Olympus responded by saying that it would by buy back up to 85,000,000 shares in a ToSTNeT-3 buyback this morning between 8:00-8:45am local time (7:00:7:45pm US E.S.T., 7:00-7:45am Hong Kong Time) at yesterday's close of ¥1,165/share. This is a pretty good response by Olympus.Discussion of process, liquidity provision, possible reaction, and implications below.

SONY's Good Governance Sale: The OLYMPUS (7733) ToSTNeT-3 Buyback

Late in October 2018, various Chinese media sources reported that the Shanghai Stock Exchange and the Tokyo Stock Exchange operated by <a href="https://www.smartkarma.com/entities/11266" target="_blank" data-smartkarma-citation="entities:11266:1">Japan Exchange Group (8697 JP)</a> were planning on cross-listing ETFs, with the deal cemented when Japan Prime Minister Abe met with Chinese President Xi Jinping in what was the first official visit by a Japanese PM to China in seven years.That was the MOU. Early last week there were news articles previewing the news, and a couple of days ago we got an <a href="https://www.jpx.co.jp/english/corporate/news/news-releases/0060/b5b4pj000002sy9v-att/outline01.pdf" target="_blank">announcement</a> from the TSE with a small description of the agreement signed (with no small ceremony in Shanghai). <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/085/751/original/Screenshot%202019-04-24%20at%204.55.56%20PM.png?1556096179" class="editor-image img-responsive" data-smartkarma-image-id="85751"></figure><div style="text-align: left;" class="content-caption">data source: JPX announcement</div>The basic construct of how a China-based investor would see it is that an ETF would be listed in Shanghai - let's call it the Shanghai Nomura TOPIX ETF - and that ETF would put at least 90% of its AUM in an ETF already listed on the Tokyo Stock Exchange - say <a href="https://www.smartkarma.com/entities/22657" target="_blank" data-smartkarma-citation="entities:22657:1">Nomura ETF Topix (1306 JP)</a>.The China-based investor trading on the Shanghai Stock Exchange would simply buy shares in this "Shanghai Nomura TOPIX ETF" (which is used as hypothetical example) using RMB in their account. The Shanghai Nomura TOPIX ETF would trade in RMB prices all day long, tracking the RMB-denominated performance of the TOPIX Index, more or less. When the Shanghai investor wanted to buy more, they'd spend RMB to buy a Chinese ETF holding a Japanese ETF. When they sell, they will get RMB back. For a potential Japanese investor, they could buy a TSE-traded Japanese jurisdiction ETF which held a Chinese ETF, and they'd get yen pricing in a domestic brokerage account, Japanese-language documentation and support, but underlying Shanghai index exposure.The actual dynamics of how this will work is interesting, and tells you a bit about how this might work compared to how the Hong Kong-Shanghai Connect worked in its early stages.It is not clear when this link will open, but Japanese articles out prior to the official announcement suggested that because all the MOUs between the relevant oversight bodies have been signed, the link will be operational "this year" and possibly as early as May 2019.

Late in October 2018, various Chinese media sources reported that the Shanghai Stock Exchange and the Tokyo Stock Exchange operated by Japan Exchange Group (8697 JP) were planning on cross-listing ETFs, with the deal cemented when Japan Prime Minister Abe met with Chinese President Xi Jinping in what was the first official visit by a Japanese PM to China in seven years.That was the MOU. Early last week there were news articles previewing the news, and a couple of days ago we got an announcement from the TSE with a small description of the agreement signed (with no small ceremony in Shanghai). data source: JPX announcementThe basic construct of how a China-based investor would see it is that an ETF would be listed in Shanghai - let's call it the Shanghai Nomura TOPIX ETF - and that ETF would put at least 90% of its AUM in an ETF already listed on the Tokyo Stock Exchange - say Nomura ETF Topix (1306 JP).The China-based investor trading on the Shanghai Stock Exchange would simply buy shares in this "Shanghai Nomura TOPIX ETF" (which is used as hypothetical example) using RMB in their account. The Shanghai Nomura TOPIX ETF would trade in RMB prices all day long, tracking the RMB-denominated performance of the TOPIX Index, more or less. When the Shanghai investor wanted to buy more, they'd spend RMB to buy a Chinese ETF holding a Japanese ETF. When they sell, they will get RMB back. For a potential Japanese investor, they could buy a TSE-traded Japanese jurisdiction ETF which held a Chinese ETF, and they'd get yen pricing in a domestic brokerage account, Japanese-language documentation and support, but underlying Shanghai index exposure.The actual dynamics of how this will work is interesting, and tells you a bit about how this might work compared to how the Hong Kong-Shanghai Connect worked in its early stages.It is not clear when this link will open, but Japanese articles out prior to the official announcement suggested that because all the MOUs between the relevant oversight bodies have been signed, the link will be operational "this year" and possibly as early as May 2019.

Japan & China Cross-Listing of ETFs Could Be Interesting

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Morningstar and PitchBook hosted the 10th annual Management Behind the Moat Conference in Chicago on Nov. 7 and 8, offering our institutional clients an opportunity to engage with the management of 49 public companies we think have structural competitive advantages, or economic moats, as well as two private companies worth watching. This report distills the highlights from company presentations. A roster of all companies that participated in the conference, including those that held one-on-one meetings with investors, can be found on Page 2 of the attached document.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/069/790/original/img%201.JPG?1542165661" class="editor-image img-responsive" data-smartkarma-image-id="69790"></figure>

Morningstar and PitchBook hosted the 10th annual Management Behind the Moat Conference in Chicago on Nov. 7 and 8, offering our institutional clients an opportunity to engage with the management of 49 public companies we think have structural competitive advantages, or economic moats, as well as two private companies worth watching. This report distills the highlights from company presentations. A roster of all companies that participated in the conference, including those that held one-on-one meetings with investors, can be found on Page 2 of the attached document.

Morningstar Management Behind the Moat 2018: Conference Highlights

Japan

Japan Exchange Group Inc is the holding company created through the merger of Tokyo Stock Exchange Group, Inc and Osaka Securities Exchange Co., Ltd. The group provides and operates a marketplace for the trading of equities, futures, and options. The Group manages the trading, as well as administers listed stocks and registered members.

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Japan Exchange Group (8697 JP)

🇯🇵 JAPAN • IT’S A WRAP! Part 2: 2020-Q1 Results & Revision Scores

THREE-YEAR LOW - With Bridgestone (5108 JP)'s results and revision now added, our final tally for this season is a 196 basis point decline in our...

Campbell Gunn

Asia Exchanges Lead in ESG: HKEX, JPX, SGX

"You can't have your cake and eat it too." In other words, you can't have something both ways. Variants of this idiomatic proverb appear across...

Kyle Rudden

SONY's Good Governance Sale: The OLYMPUS (7733) ToSTNeT-3 Buyback

Yesterday after the close, Olympus Corp (7733 JP) announced that Sony Corp (6758 JP) had approached Olympus saying it wished to sell its 68,975,800...

Travis Lundy

Japan & China Cross-Listing of ETFs Could Be Interesting

Late in October 2018, various Chinese media sources reported that the Shanghai Stock Exchange and the Tokyo Stock Exchange operated by Japan...

Travis Lundy

Morningstar Management Behind the Moat 2018: Conference Highlights

Morningstar and PitchBook hosted the 10th annual Management Behind the Moat Conference in Chicago on Nov. 7 and 8, offering our institutional...

Morningstar, Inc.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)