'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/848/original/2020-05-12_05-39-47.png?1589229610" class="editor-image img-responsive" data-smartkarma-image-id="132848"></figure><div class="content-caption">Source • Japan Analytics</div>NEW INTERIM LOW - As we have noted in earlier Insights in this series, only half of the companies with March year-ends are issuing forecasts for the current year. Of those that do, two-thirds are also providing forecasts for the six months to September 2020. As was the case in 2019, our Interim data series is a clear signal of the depth of this recession.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/853/original/2020-05-12_06-49-09.png?1589233760" class="editor-image img-responsive" data-smartkarma-image-id="132853"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/854/original/2020-05-12_06-49-50.png?1589233810" class="editor-image img-responsive" data-smartkarma-image-id="132854"></figure><div class="content-caption">Source • Japan Analytics</div>In the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-<ul>
<li>The balance between positive/neutral/negative of the 238 results announcements was 103:17:118. The average change in Results Score was -0.8.</li>
<li>For the 137 revisions/initial forecasts, the split was 46:12:79, and the average Revision Score was -5.4. Of the 183 companies declaring full-year results, 52% made forecasts for the current year.</li>
<li>263 will announce on Monday, the largest of which by market capitalisation will be <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a>, <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>, and <a href="https://www.smartkarma.com/entities/daikin-industries-ltd" target="_blank" data-smartkarma-citation="entities:16696:1" rel="noopener">Daikin (6367 JP)</a>.</li>
<li>Monday's 'best' and 'worst' scoring results were from  <a href="https://www.smartkarma.com/entities/nissin-foods-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12548:1" rel="noopener">Nissin Foods (2897 JP)</a>  and amusement centre operator <a href="https://www.smartkarma.com/entities/round-one-corp" target="_blank" data-smartkarma-citation="entities:7057:1" rel="noopener">Round One (4680 JP)</a>, respectively. </li>
</ul>

Source • Japan AnalyticsNEW INTERIM LOW - As we have noted in earlier Insights in this series, only half of the companies with March year-ends are issuing forecasts for the current year. Of those that do, two-thirds are also providing forecasts for the six months to September 2020. As was the case in 2019, our Interim data series is a clear signal of the depth of this recession.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies yesterday:-
The balance between positive/neutral/negative of the 238 results announcements was 103:17:118. The average change in Results Score was -0.8.
For the 137 revisions/initial forecasts, the split was 46:12:79, and the average Revision Score was -5.4. Of the 183 companies declaring full-year results, 52% made forecasts for the current year.
263 will announce on Monday, the largest of which by market capitalisation will be Toyota Motor (7203 JP), Honda Motor (7267 JP), and Daikin (6367 JP).
Monday's 'best' and 'worst' scoring results were from  Nissin Foods (2897 JP)  and amusement centre operator Round One (4680 JP), respectively. 


🇯🇵 JAPAN • Results & Revisions 11th May - Nissin, Seria, Mitsubishi Electric, Asahi Group

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/350/original/2020-05-10_07-41-07.png?1589064097" class="editor-image img-responsive" data-smartkarma-image-id="132350"></figure><div class="content-caption">Source • Japan Analytics</div>HERD IMMUNITY - The market 'herd' continues to be immune to the siren song of earnings announcements. In last week's two reporting days, aggregate trailing operating income declined by ¥400 billion, while the current year forecast was trimmed by ¥800 billion. The respective numbers for net income were ¥600 billion and ¥200 billion - the latter being flattering in its 'deception' as the figure includes three net-income 'heavy' sogo-shosha. We expect a PER 'breakout' to above 18x in the coming week.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/351/original/2020-05-10_08-08-43.png?1589065754" class="editor-image img-responsive" data-smartkarma-image-id="132351"></figure><div class="content-caption">Source • Japan Analytics</div>INTERIM LEADING THE WAY - Our Results and Revisions scoring methodology tracks both Interim and Annual forecasts with the former signalling the direction of the latter. For some companies such as <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/jcu-corp" target="_blank" data-smartkarma-citation="entities:16229:1" rel="noopener">JCU (4975 JP)</a> and <a href="https://www.smartkarma.com/entities/zenkoku-hosho-co-ltd" target="_blank" data-smartkarma-citation="entities:5537:1" rel="noopener">Zenkoku Hosho (7164 JP)</a>, the Interim forecast is sufficiently pessimistic as to taint the reliability of the annual forecast. Our Interim Score will reach a new ten-year low this week; the Annual Score did so last month. We do not expect the COVID-19 earnings cycle to bottom until the January/February's mostly third-quarter results announcements.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/366/original/2020-05-10_09-01-50.png?1589068924" class="editor-image img-responsive" data-smartkarma-image-id="132366"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/132/367/original/2020-05-10_09-00-50.png?1589068939" class="editor-image img-responsive" data-smartkarma-image-id="132367"></figure><div class="content-caption">Source • Japan Analytics</div><div class="content-caption"></div>In the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies on Friday. The balance between positive/neutral/negative of the 211 results announcements was 90:27:107. The average change in Score was -1. For the 131 revisions/initial forecasts, the split was 43:4:84  and the average Score was -5. Of the 155 companies declaring full-year results, 49% made interim and annual forecasts for the current year. Two hundred thirty-three companies will announce on Monday, the largest of which by market capitalisation will be <a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a>, <a href="https://www.smartkarma.com/entities/mitsubishi-electric-corp" target="_blank" data-smartkarma-citation="entities:11171:1" rel="noopener">Mitsubishi Electric (6503 JP)</a>, and <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone (5108 JP)</a>. Friday's 'best' and worst scoring results were from <a href="https://www.smartkarma.com/entities/chiyoda-corp" target="_blank" data-smartkarma-citation="entities:6232:1" rel="noopener">Chiyoda (6366 JP)</a> and <a href="https://www.smartkarma.com/entities/keihan-electric-railway-co" target="_blank" data-smartkarma-citation="entities:6120:1" rel="noopener">Keihan Electric Railway (9045 JP)</a>, although the former is below our cap cut-off for our tables below. For more, see <a href="https://www.smartkarma.com/profiles/mio-kato-cfa" target="_blank" data-smartkarma-citation="accounts:713" rel="noopener">Mio Kato</a>'s results update <a href="https://www.smartkarma.com/insights/chiyoda-gross-margin-disappoints-but-sg-a-control-continues" target="_blank" data-smartkarma-citation="insights:39166" rel="noopener">Chiyoda – Gross Margin Disappoints but SG&amp;A Control Continues</a>.

Source • Japan AnalyticsHERD IMMUNITY - The market 'herd' continues to be immune to the siren song of earnings announcements. In last week's two reporting days, aggregate trailing operating income declined by ¥400 billion, while the current year forecast was trimmed by ¥800 billion. The respective numbers for net income were ¥600 billion and ¥200 billion - the latter being flattering in its 'deception' as the figure includes three net-income 'heavy' sogo-shosha. We expect a PER 'breakout' to above 18x in the coming week.Source • Japan AnalyticsINTERIM LEADING THE WAY - Our Results and Revisions scoring methodology tracks both Interim and Annual forecasts with the former signalling the direction of the latter. For some companies such as Fancl (4921 JP), JCU (4975 JP) and Zenkoku Hosho (7164 JP), the Interim forecast is sufficiently pessimistic as to taint the reliability of the annual forecast. Our Interim Score will reach a new ten-year low this week; the Annual Score did so last month. We do not expect the COVID-19 earnings cycle to bottom until the January/February's mostly third-quarter results announcements.Source • Japan AnalyticsIn the DETAIL below, we shall review the results, revisions and initial forecast announcements made by larger-cap (¥75b+) companies on Friday. The balance between positive/neutral/negative of the 211 results announcements was 90:27:107. The average change in Score was -1. For the 131 revisions/initial forecasts, the split was 43:4:84  and the average Score was -5. Of the 155 companies declaring full-year results, 49% made interim and annual forecasts for the current year. Two hundred thirty-three companies will announce on Monday, the largest of which by market capitalisation will be Softbank Corp (9434 JP), Mitsubishi Electric (6503 JP), and Bridgestone (5108 JP). Friday's 'best' and worst scoring results were from Chiyoda (6366 JP) and Keihan Electric Railway (9045 JP), although the former is below our cap cut-off for our tables below. For more, see Mio Kato's results update Chiyoda – Gross Margin Disappoints but SG&amp;A Control Continues. 

🇯🇵 JAPAN • Results & Revisions Update 8th May - Lion, PPI, Hoya, Sogo Shosha, NEC

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. The management of the GPIF has made remarkable strides in recent years, moving towards market targets for returns of all assets (no more FILP bonds), creating a win-win profitability structure for active managers on multi-year mandates (up to five to seven years it seems), and demanding accountability on stewardship policies and efforts. In March 2010, the GPIF lowered its domestic bond portfolio bogey from 67% to 60% (which was good because it was already there),  and raised its domestic equity, foreign bond, and foreign equity allocation mix midpoints to 12%/11%/12% from 11%/8%/9%. Short Term Assets were set at 5%. In June 2013, they realized they needed to be more aggressive, and so the GPIF spent more than a year studying the problem, having experts in, looking at allocation mixes and trying to be more professional about assessing their liability profile and curve, and decided in October 2014 to implement a much different mix, moving domestic bonds to 35% ±10%, domestic equities to 25% ±9%, foreign bonds to 15% ±4%, and foreign equities to 25% ±8%. There was no bogey for Short Term Assets, but that was assumed to be wrapped up in the domestic bonds portion as a concept.That meant buying equities, and they did.They had already been buying and by the time they announced the new policy in October 2014 officially, they had already gone through the old limits on domestic equities and were at 18.2% (the old upper limit was 18.0%). It took them until March 2015 to get to 22%, and by June they were at 23.4%. Basically, they then let it ride, with some small changes here and there. The big changes were constant reductions in the domestic bond allocation. However in FY15 (year to March 2016) there was an episode of equity buying. That is probably something those interested in flows should study now. The GPIF is currently said to be in the process of conducting an Investment Policy Review. The lead-up to this has seen a number of changes which hint at what could come.<ol>
<li>
The GPIF has become very ESG-focussed. Some of that is the G portion where they talk about being long-term investors, and they have made it mandatory for their investment managers to have a stewardship policy and report on how they execute that policy. They are also looking very much at the longer-term, and CIO Mizuno has blasted short-sellers and any number of other market participants for being short-term (I had issues with a bunch of the comments reported in the FT so got a <a href="https://ftalphaville.ft.com/2020/01/14/1579000419000/The-GPIF-and-the-complexity-of-stewardship/" target="_blank" rel="noopener">letter to Alphaville</a> published - Thanks Jamie!).</li>
<li>The GPIF has started looking at real estate.</li>
<li>
The GPIF has decided that foreign credit which is yen-hedged can be put into the domestic bonds allocation bucket. This means a higher allocation to foreign issuer risk than the old limit.</li>
<li>
The GPIF has stopped lending stocks. This reduces fee income to passive portfolios (foreign equity, as domestic equity lending has never been done, or at least not in many, many years) but it means more pressure on company management.</li>
<li>
The GPIF has changed the way contracts work for active managers. The base concept, according to interviews and articles, is that the active manager gets the same very low management fee on AUM as a passive manager does, but the active manager shares in the upside over the life of the contract, which will be "one market cycle" (i.e. five years, or seven years, or whatever they settle on with the GPIF). This should, ceteris paribus, lead to further outperformance. </li>
</ol>All of these things would, in my mind, point to a higher domestic equity allocation, a higher foreign bond allocation, and a shift to more active management and less passive management in domestic equities (last year the split was 90% passive 10% active). But there are shorter-term factors investors should be looking at. More discussion below.

The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. The management of the GPIF has made remarkable strides in recent years, moving towards market targets for returns of all assets (no more FILP bonds), creating a win-win profitability structure for active managers on multi-year mandates (up to five to seven years it seems), and demanding accountability on stewardship policies and efforts. In March 2010, the GPIF lowered its domestic bond portfolio bogey from 67% to 60% (which was good because it was already there),  and raised its domestic equity, foreign bond, and foreign equity allocation mix midpoints to 12%/11%/12% from 11%/8%/9%. Short Term Assets were set at 5%. In June 2013, they realized they needed to be more aggressive, and so the GPIF spent more than a year studying the problem, having experts in, looking at allocation mixes and trying to be more professional about assessing their liability profile and curve, and decided in October 2014 to implement a much different mix, moving domestic bonds to 35% ±10%, domestic equities to 25% ±9%, foreign bonds to 15% ±4%, and foreign equities to 25% ±8%. There was no bogey for Short Term Assets, but that was assumed to be wrapped up in the domestic bonds portion as a concept.That meant buying equities, and they did.They had already been buying and by the time they announced the new policy in October 2014 officially, they had already gone through the old limits on domestic equities and were at 18.2% (the old upper limit was 18.0%). It took them until March 2015 to get to 22%, and by June they were at 23.4%. Basically, they then let it ride, with some small changes here and there. The big changes were constant reductions in the domestic bond allocation. However in FY15 (year to March 2016) there was an episode of equity buying. That is probably something those interested in flows should study now. The GPIF is currently said to be in the process of conducting an Investment Policy Review. The lead-up to this has seen a number of changes which hint at what could come.

The GPIF has become very ESG-focussed. Some of that is the G portion where they talk about being long-term investors, and they have made it mandatory for their investment managers to have a stewardship policy and report on how they execute that policy. They are also looking very much at the longer-term, and CIO Mizuno has blasted short-sellers and any number of other market participants for being short-term (I had issues with a bunch of the comments reported in the FT so got a letter to Alphaville published - Thanks Jamie!).
The GPIF has started looking at real estate.

The GPIF has decided that foreign credit which is yen-hedged can be put into the domestic bonds allocation bucket. This means a higher allocation to foreign issuer risk than the old limit.

The GPIF has stopped lending stocks. This reduces fee income to passive portfolios (foreign equity, as domestic equity lending has never been done, or at least not in many, many years) but it means more pressure on company management.

The GPIF has changed the way contracts work for active managers. The base concept, according to interviews and articles, is that the active manager gets the same very low management fee on AUM as a passive manager does, but the active manager shares in the upside over the life of the contract, which will be "one market cycle" (i.e. five years, or seven years, or whatever they settle on with the GPIF). This should, ceteris paribus, lead to further outperformance. 
All of these things would, in my mind, point to a higher domestic equity allocation, a higher foreign bond allocation, and a shift to more active management and less passive management in domestic equities (last year the split was 90% passive 10% active). But there are shorter-term factors investors should be looking at. More discussion below.

<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.

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.
Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.
We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.
We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.
We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties. In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still cannot fathom how bad this crisis will be. We were worried on the local outbreak outside China and here we are, the outbreaks in the US, Italy, France, Germany, Spain, and Iran; away from Asia where it all started.
Though we heard it could take anywhere from 12-18 months to develop the vaccine and the situation in China is improving, the situation in the western hemisphere is no nowhere near the peak. Assuming China has gone over the peak in 2 months (mid-January to mid-March) and it will take the western hemisphere and Iran to go over the peak in exactly the same duration, 2 months is a long time and anything can happen, in our view. Then after mid-May when the “carpet bombing” will have finished, we still need to re-assess the damage which could take months to know factually. The two unknowns are (1) how bad the infection would be in the US and Europe, given the level of unpreparedness, and (2) how much damage this virus will be on the global economy.
We are of the opinion that the damage will be very difficult to gauge as the proportion of the virus infection has never happened in recent history. We are of the opinion that COVID-19 fears will be here to stay until the vaccine is successfully developed. The return of COVID-19 in September after the summer in northern hemisphere cannot be ruled out.
We believe central banks are seeing what we see and will come out with more quantitative easing measures and fiscal stimulus in such a large scale, following the US Federal Reserve (Fed) and Bank of England’s recent 50-bp cut. A failure to stimulate the global economy at the scale of Lehman default crisis in September 2008 could see a further adjustment, in our view. What makes it harder for central banks this time around is that consumer confidence is affected by the fear of infection and death caused by COVID-19 which money cannot help alleviate. As a result, the failure to reassure public safety will make the QE or the fiscal stimulus package ineffective, in our judgment.
We are bracing for a global recession this year and expect volatility to persist for another 2 months as a result of pandemic conditions in the US and Europe. We do not believe risky assets should be accumulated at the time of this report on too many uncertainties. In the longer run, lower oil prices on Saudi-Russia conflict will benefit Asia as a net oil importer. We expect further spread widening for emerging markets bonds as defaults are expected to rise significantly.

Japan

Mitsubishi Electric Corporation develops, manufactures, and markets electronic equipment.  The Company's products include industrial machinery, heavy electric machinery, data communications systems, electronic devices, and consumer electronics.

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Mitsubishi Electric (6503 JP)

🇯🇵 JAPAN • Results & Revisions 11th May - Nissin, Seria, Mitsubishi Electric, Asahi Group

NEW INTERIM LOW - As we have noted in earlier Insights in this series, only half of the companies with March year-ends are issuing forecasts for...

Campbell Gunn

🇯🇵 JAPAN • Results & Revisions Update 8th May - Lion, PPI, Hoya, Sogo Shosha, NEC

HERD IMMUNITY - The market 'herd' continues to be immune to the siren song of earnings announcements. In last week's two reporting days, aggregate...

Campbell Gunn

JAPAN DELTA IV - Is The GPIF In Buying?

The GPIF is the world's largest pension fund at what was $1.6 trillion-plus at the end of December 2019. The management of the GPIF has made...

Travis Lundy

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

Market Monitor: Friday 13th Pandemic

A month after we pointed out the risk emanating from the new strain of a Corona virus (COVID-19) to the global economic recovery, the market still...

Bondcritic

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