'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/175/original/2019-09-29_05-54-31.png?1569704091" class="editor-image img-responsive" data-smartkarma-image-id="100175"></figure></div><div class="content-caption">Source: Japan Analytics</div><p><strong>TAKE PROFITS</strong> - The 'breakout' rally above the 50-day moving average over the last thirteen trading days has added 8% to total market value and has been driven by ample liquidity, stronger US$, a lack of developments in global trade talks and more dove-like utterances and stances from the Federal Reserve and European Central Bank, respectively. With the US Treasury about to restore its cash balance (through large T-bill offerings) by over US$250 billion, the US monetary base could contract by over 5% in the next quarter. Markets will face a stiff headwind and, with business conditions moving from bad to worse and central banks limited in the scope of further comment/action, the fourth quarter could be as perilous as the third quarter was benign.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/176/original/2019-09-29_07-49-09.png?1569710965" class="editor-image img-responsive" data-smartkarma-image-id="100176"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/177/original/2019-09-29_08-01-13.png?1569711690" class="editor-image img-responsive" data-smartkarma-image-id="100177"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/178/original/2019-09-29_08-09-38.png?1569712198" class="editor-image img-responsive" data-smartkarma-image-id="100178"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-caption"></div><p><strong>PEAK ACTION</strong> - Both the 5-day <strong>Relative Strength Index</strong> and the 25-day <strong>Toraku Index</strong> have pulled back from extreme levels from which further upside is typically limited. In a similar vein, the 52 Week New Highs - New Lows reached a 20-month high of 141 on Thursday suggesting a peak in this bear market rally.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/179/original/2019-09-29_08-29-33.png?1569713388" class="editor-image img-responsive" data-smartkarma-image-id="100179"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>VOLUME SCORE TIMELINE</strong> - Volume peaked on 13th September at the highest level of any day this year and, as of Friday, is still above the fourth-month average. Favoured Sectors continue to be non-manufacturing, especially the Internet, IT, Commercial Services and REITs Sectors. Volume is weakest in the Metals, Machinery, Technology Hardware Sectors, but also now in the 'China-related' Other Consumer Products Sector. The Bank of Japan resumed ETF purchases on Friday after an eighteen-trading day hiatus.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/180/original/2019-09-29_12-35-13.png?1569728129" class="editor-image img-responsive" data-smartkarma-image-id="100180"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>3-MONTH SECTOR CONTRIBUTION</strong> - Relief over the apparent conclusion of Japan/US trade talks without any tariffs on Japan's <strong>Auto</strong> sector resulted in a 22 bps return contribution from the Sector; we would take profits on the conclusion of the final deal as global sales trends remain dire.  The <strong>Telecommunications</strong> Sector's underperformance reflects the 16% decline in <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a> over the period for reasons well-documented on this platform.  The other outperforming Sectors are mostly in domestic non-manufacturing, but <strong>Technology Hardware</strong> continues to defy underlying current business conditions, as we shall discuss below.  <strong>Retail</strong> stocks are benefiting from positive sentiment to the short-term stimulus, although the early results from the Sector, many of whose leading companies will report second-quarter results over the next two weeks, suggest this optimism is, perhaps, misplaced. Lastly, the <strong>Banks</strong> Sector appears to have reached a short-term nadir and rose by 1.6% over the period.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/182/original/2019-09-29_12-57-32.png?1569729476" class="editor-image img-responsive" data-smartkarma-image-id="100182"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>SECTOR SCORE MATRIX - </strong>Our Sector Score matrix spreads all 30 Sectors by Relative Price Score and Results &amp; Revisions Score where the extreme outliers are denoted as <strong>Contrarian Sell</strong>, <strong>Contrarian Buy</strong>, <strong>Unrequited Growth</strong>, and <strong>Ex-Growth</strong>. The Information Technology Sector is the only 'Contrarian Sell', and we note that the Sector declined by 0.7% over the last three months. <strong>Consumer Services</strong> is the most Overbought Sector, mostly due to the continuing out-performance of <a href="https://www.smartkarma.com/entities/oriental-land-co-ltd" target="_blank" data-smartkarma-citation="entities:13517:1" rel="noopener">Oriental Land (4661 JP)</a> - now the fifth-most Overbought mega-cap. <strong>Banks</strong> are no longer a 'Contrarian Buy', while, as noted in our last Update, <strong>Metals</strong> remain the value investor pick, and saw at least one broker upgrade <a href="https://www.smartkarma.com/entities/nippon-steel-corporation" target="_blank" data-smartkarma-citation="entities:961:1" rel="noopener">Nippon Steel (5401 JP)</a> last week.    </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/201/original/2019-09-30_04-51-12.png?1569786797" class="editor-image img-responsive" data-smartkarma-image-id="100201"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/100/202/original/2019-09-30_04-57-34.png?1569787075" class="editor-image img-responsive" data-smartkarma-image-id="100202"></figure><div class="content-caption">Source: Japan Analytics</div><div class="content-caption"></div><p><strong>RESULTS &amp; REVISIONS SCORE</strong> - As we head into the next results 'season' it is instructive to note that earnings momentum is still negative and our Results &amp; Revision Score is at its lowest point since April 2017. The Series correlates well with the Cabinet Office's Leading Indicator which as of July reached a new 'post-GFC' low. Japanese listed corporated have done well to preserve their earnings power in harsh global conditions. We are about to discover how much of this is due to spending brought forward ahead of next month's consumption tax increase. </p><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous three months.</p></div>

Source: Japan AnalyticsTAKE PROFITS - The 'breakout' rally above the 50-day moving average over the last thirteen trading days has added 8% to total market value and has been driven by ample liquidity, stronger US$, a lack of developments in global trade talks and more dove-like utterances and stances from the Federal Reserve and European Central Bank, respectively. With the US Treasury about to restore its cash balance (through large T-bill offerings) by over US$250 billion, the US monetary base could contract by over 5% in the next quarter. Markets will face a stiff headwind and, with business conditions moving from bad to worse and central banks limited in the scope of further comment/action, the fourth quarter could be as perilous as the third quarter was benign.Source: Japan AnalyticsPEAK ACTION - Both the 5-day Relative Strength Index and the 25-day Toraku Index have pulled back from extreme levels from which further upside is typically limited. In a similar vein, the 52 Week New Highs - New Lows reached a 20-month high of 141 on Thursday suggesting a peak in this bear market rally.   Source: Japan AnalyticsVOLUME SCORE TIMELINE - Volume peaked on 13th September at the highest level of any day this year and, as of Friday, is still above the fourth-month average. Favoured Sectors continue to be non-manufacturing, especially the Internet, IT, Commercial Services and REITs Sectors. Volume is weakest in the Metals, Machinery, Technology Hardware Sectors, but also now in the 'China-related' Other Consumer Products Sector. The Bank of Japan resumed ETF purchases on Friday after an eighteen-trading day hiatus.Source: Japan Analytics3-MONTH SECTOR CONTRIBUTION - Relief over the apparent conclusion of Japan/US trade talks without any tariffs on Japan's Auto sector resulted in a 22 bps return contribution from the Sector; we would take profits on the conclusion of the final deal as global sales trends remain dire.  The Telecommunications Sector's underperformance reflects the 16% decline in Softbank Group (9984 JP) over the period for reasons well-documented on this platform.  The other outperforming Sectors are mostly in domestic non-manufacturing, but Technology Hardware continues to defy underlying current business conditions, as we shall discuss below.  Retail stocks are benefiting from positive sentiment to the short-term stimulus, although the early results from the Sector, many of whose leading companies will report second-quarter results over the next two weeks, suggest this optimism is, perhaps, misplaced. Lastly, the Banks Sector appears to have reached a short-term nadir and rose by 1.6% over the period.   Source: Japan AnalyticsSECTOR SCORE MATRIX - Our Sector Score matrix spreads all 30 Sectors by Relative Price Score and Results &amp; Revisions Score where the extreme outliers are denoted as Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth. The Information Technology Sector is the only 'Contrarian Sell', and we note that the Sector declined by 0.7% over the last three months. Consumer Services is the most Overbought Sector, mostly due to the continuing out-performance of Oriental Land (4661 JP) - now the fifth-most Overbought mega-cap. Banks are no longer a 'Contrarian Buy', while, as noted in our last Update, Metals remain the value investor pick, and saw at least one broker upgrade Nippon Steel (5401 JP) last week.    Source: Japan AnalyticsRESULTS &amp; REVISIONS SCORE - As we head into the next results 'season' it is instructive to note that earnings momentum is still negative and our Results &amp; Revision Score is at its lowest point since April 2017. The Series correlates well with the Cabinet Office's Leading Indicator which as of July reached a new 'post-GFC' low. Japanese listed corporated have done well to preserve their earnings power in harsh global conditions. We are about to discover how much of this is due to spending brought forward ahead of next month's consumption tax increase. In the DETAIL section below, we will review Sector performance, scores and valuation in more detail, as well as Company Results &amp; Revisions and individual stock performance over the previous three months.

🇯🇵 JAPAN • Market Update - Take Profits

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE</strong> •</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/178/original/2019-09-06_09-42-35.png?1567730614" class="editor-image img-responsive" data-smartkarma-image-id="98178"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>INTRODUCTION </strong>- The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. <a href="https://www.smartkarma.com/entities/lasertec-corp" target="_blank" data-smartkarma-citation="entities:4126:1" rel="noopener">Lasertec (6920 JP)</a> has just joined <a href="https://www.smartkarma.com/entities/goldwin-inc" target="_blank" data-smartkarma-citation="entities:410:1" rel="noopener">Goldwin (8111 JP)</a> in being only the second large-cap RPS 'ten-baggers' in the last twenty years. </p><div class="content-highlight"><p><strong>This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.</strong></p></div><div></div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/046/original/2019-09-05_12-46-46.png?1567655232" class="editor-image img-responsive" data-smartkarma-image-id="98046"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>STATISTICS</strong> - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.</p><hr><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE 'TOPS' •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/055/original/2019-09-05_13-06-30.png?1567656423" class="editor-image img-responsive" data-smartkarma-image-id="98055"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>RPS 'TOPS'</strong> - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.</p><p><strong>RPS NEGATIVE MEAN REVERSION</strong> - Some examples of RPS mean reversion in the last three months have been <a href="https://www.smartkarma.com/entities/suzuken-co-ltd" target="_blank" data-smartkarma-citation="entities:14996:1" rel="noopener">Suzuken (9987 JP)</a>, <a href="https://www.smartkarma.com/entities/infomart-corp" target="_blank" data-smartkarma-citation="entities:1301:1" rel="noopener">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/nichirei-corp" target="_blank" data-smartkarma-citation="entities:7168:1" rel="noopener">Nichirei (2871 JP)</a>, and <a href="https://www.smartkarma.com/entities/fancl-corp" target="_blank" data-smartkarma-citation="entities:15862:1" rel="noopener">Fancl (4921 JP)</a>. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/096/original/2019-09-05_16-25-39.png?1567668352" class="editor-image img-responsive" data-smartkarma-image-id="98096"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/097/original/2019-09-05_16-27-09.png?1567668441" class="editor-image img-responsive" data-smartkarma-image-id="98097"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/098/original/2019-09-05_16-28-42.png?1567668548" class="editor-image img-responsive" data-smartkarma-image-id="98098"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/099/original/2019-09-05_16-30-29.png?1567668640" class="editor-image img-responsive" data-smartkarma-image-id="98099"></figure><div class="content-caption">Source: Japan Analytics</div><hr><p style="text-align: center;"><strong>• RELATIVE PRICE SCORE 'BOTTOMS' •</strong></p><div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/056/original/2019-09-05_13-12-52.png?1567656806" class="editor-image img-responsive" data-smartkarma-image-id="98056"></figure><div class="content-caption">Source: Japan Analytics</div>
</div><p><strong>RPS 'BOTTOMS'</strong> - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the<strong> REITs</strong> Sector and the continuing demise of <strong>Regional Banks</strong>.</p><p><strong>RPS POSITIVE MEAN REVERSION</strong> - Some recent examples of positive RPS mean reversions are <a href="https://www.smartkarma.com/entities/otsuka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:12292:1" rel="noopener">Otsuka Holdings (4578 JP) </a>and <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a>.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/100/original/2019-09-05_16-35-47.png?1567668972" class="editor-image img-responsive" data-smartkarma-image-id="98100"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/098/102/original/2019-09-05_16-36-50.png?1567669047" class="editor-image img-responsive" data-smartkarma-image-id="98102"></figure><div class="content-caption">Source: Japan Analytics</div><p>As we noted in our June <a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393" rel="noopener">Insight: -</a></p><blockquote><p><strong><a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE (3938 JP)</a></strong>- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and <strong>the company is now the most-Oversold non-financial large-cap over one year,</strong> there are no fundamental reasons to own the shares.   </p></blockquote><p>In the <strong>DETAIL </strong>section below, we list the current<strong> Very Overbought (RPS&gt;5</strong>), <strong>Too-Late-To-Buy (RPS &gt;4&lt;5)</strong> and <strong>Oversold (RPS &lt;-2)</strong> stocks as well as the most substantial three-month positive and negative changes in RPS.</p>

• RELATIVE PRICE SCORE •Source: Japan AnalyticsINTRODUCTION - The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are thus on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company outlier thresholds are set at +4 &amp; -2 and equate to the top and bottom first-to-second percentiles of historical observations from which mean reversion takes a matter of months. RPS outliers with a Score of greater than 10.0 are rare outside of the 2000 tech 'bubble'. Lasertec (6920 JP) has just joined Goldwin (8111 JP) in being only the second large-cap RPS 'ten-baggers' in the last twenty years. This insight updates our list of Overbought and Oversold companies, reviews the best and worst-performing companies in terms of RPS over the last three months and adds some specific comments on stocks on each category.Source: Japan AnalyticsSTATISTICS - Currently, of the 3,706 listed companies for which monthly RPS data is available, 81 companies are 'Overbought', and 133 are 'Oversold' - 2.45% and 3.8%, respectively of the total. For the 737 companies with a market capitalisation of over ¥100b, there are 44 'Overbought' and 37 'Oversold' companies, 6% and 5%, respectively.• RELATIVE PRICE SCORE 'TOPS' •Source: Japan AnalyticsRPS 'TOPS' - In the last two years, 388 companies have achieved an RPS of '4' or more and the average Overbought 'persistence' is 42 days. 1.26% of the total of 1.94 million traded stock days were by companies with an RPS of over 4. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 74 days - demonstrating the superior persistence of large capitalisation companies in this regard. The chart above highlights the track record of all 95 large caps which are some point were Overbought in the last twenty-four months and illustrates the extreme outlier status of Goldwin and Lasertec.RPS NEGATIVE MEAN REVERSION - Some examples of RPS mean reversion in the last three months have been Suzuken (9987 JP), Infomart (2492 JP), Nichirei (2871 JP), and Fancl (4921 JP). Source: Japan Analytics• RELATIVE PRICE SCORE 'BOTTOMS' •
Source: Japan Analytics
RPS 'BOTTOMS' - 259 companies have seen their RPS fall to '-2' or below in the last two years, and the average Oversold 'persistence' is 83 days. 1.46% of the total of 1.94 million traded stock days were by companies with an RPS of less than -2.  For larger capitalisation companies, the numbers are 79 companies and 94 days. The chart above highlights the track record of the 79 large caps which are some point were Oversold in the last twenty-four months and illustrates the strong recovery in the REITs Sector and the continuing demise of Regional Banks.RPS POSITIVE MEAN REVERSION - Some recent examples of positive RPS mean reversions are Otsuka Holdings (4578 JP) and LINE (3938 JP).Source: Japan AnalyticsAs we noted in our June Insight: -LINE (3938 JP)- Line has performed poorly since being featured in last year's Sohn Conference and has had negative and worsening Operating Income for each of the previous five quarters. Although there is a possibility of a double-bottom RPS 'bounce' and the company is now the most-Oversold non-financial large-cap over one year, there are no fundamental reasons to own the shares.   In the DETAIL section below, we list the current Very Overbought (RPS&gt;5), Too-Late-To-Buy (RPS &gt;4&lt;5) and Oversold (RPS &lt;-2) stocks as well as the most substantial three-month positive and negative changes in RPS.

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 2: Companies

<p style="text-align: center;"><strong>• RELATIVE PRICE SCORE •</strong></p><p>The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at<strong> +4</strong> &amp; <strong>-2</strong> for <strong>Companies</strong>, <strong>+3</strong> &amp; <strong>-1.5</strong> for <strong>Peer Groups</strong> and <strong>+2</strong> and <strong>-1</strong> for <strong>Sectors</strong>. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/661/original/2019-09-02_10-54-04.png?1567389310" class="editor-image img-responsive" data-smartkarma-image-id="97661"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/664/original/2019-09-02_10-56-43.png?1567389423" class="editor-image img-responsive" data-smartkarma-image-id="97664"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/676/original/2019-09-02_11-21-41.png?1567390923" class="editor-image img-responsive" data-smartkarma-image-id="97676"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>OUTLIER TRENDS </strong>- In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble' when the combined total of Overbought and Oversold percentages reached over three times the current level.. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/672/original/2019-09-02_11-13-07.png?1567390420" class="editor-image img-responsive" data-smartkarma-image-id="97672"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>NEGATIVE 'SPREADS'</strong> - On a daily closing basis, the Oversold outlier percentage is currently 3.83%, having peaked at 4.06% on 29th August. The Overbought outlier percentage peaked at 2.73% on 26th August and is now at 2.45%. The negative 'spread' is currently -1.38%, having reached -1.59% on 29th August which compares with -1.34 at the recent market low point on December 25th 2018, and -1.26 on 29th January. In this distorted and polarised market, the winners keep on winning, and the losers keep on losing, but the Total Market Value is now out of 'sync' with the spread and should correct to the downside.</p><hr><p style="text-align: center;"><strong>• SECTORS •</strong></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/097/677/original/2019-09-02_11-30-46.png?1567391475" class="editor-image img-responsive" data-smartkarma-image-id="97677"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>SECTOR 28-YEAR TIMELINE</strong> - The 28-year Sector Relative Price Score Timeline chronicles the periodic extremes of both Overbought and Oversold Sectors. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the <strong>Internet</strong> Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, five Sectors are Overbought - <strong>Consumer Services</strong>, <strong>Healthcare</strong>, <strong>Other Consumer Products</strong>,<strong> Information Technology</strong>, and <strong>Other Commercial Products</strong>. Four Sectors are Oversold - <strong>Banks</strong>,<strong> Multi-Industry</strong>, <strong>Utilities</strong>, and<strong> Energy</strong>.    </p><div class="content-highlight"><p>In the <strong>DETAIL</strong> section below, we provide an update on recent Sector and Peer Group trends. A second Insight will follow looking at the September Relative Price Scores for Companies. </p></div>

• RELATIVE PRICE SCORE •The Relative Price Score (RPS) is a measure of stock price performance relative to TOPIX calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are put on a comparable scale, 'Overbought' and 'Oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. Company data is cap-weight-aggregated into 328 Peer Group and 30 Sector Relative Price Scores. Outlier thresholds are set at +4 &amp; -2 for Companies, +3 &amp; -1.5 for Peer Groups and +2 and -1 for Sectors. These thresholds equate with the top and bottom first-to-second percentiles of historical observations from which mean reversion normally takes only a few months.Source: Japan AnalyticsOUTLIER TRENDS - In the past, increases in the percentage of companies that are either Overbought or Oversold has been a useful indicator of market trends with a rising number of Overbought outliers being bullish and an increasing number of Oversold outliers being bearish and the crossovers between the numbers of each offering market timing signals.  The current situation where both sets of outliers are rising has only occurred once before in the last 30 years - in 1999/2000 shortly before the peak of the 'tech bubble' when the combined total of Overbought and Oversold percentages reached over three times the current level.. We attribute some of the market's distortions to the Bank of Japan's market activities and the increase in algorithmic trading. Whatever the cause, repeating the 2000 tech bubble playbook is unlikely to end well.Source: Japan AnalyticsNEGATIVE 'SPREADS' - On a daily closing basis, the Oversold outlier percentage is currently 3.83%, having peaked at 4.06% on 29th August. The Overbought outlier percentage peaked at 2.73% on 26th August and is now at 2.45%. The negative 'spread' is currently -1.38%, having reached -1.59% on 29th August which compares with -1.34 at the recent market low point on December 25th 2018, and -1.26 on 29th January. In this distorted and polarised market, the winners keep on winning, and the losers keep on losing, but the Total Market Value is now out of 'sync' with the spread and should correct to the downside.• SECTORS •Source: Japan AnalyticsSECTOR 28-YEAR TIMELINE - The 28-year Sector Relative Price Score Timeline chronicles the periodic extremes of both Overbought and Oversold Sectors. Only seventeen Sectors have been Overbought during this period for a total of 546 months of which half were before 2001. The average Overbought persistence is 4.3 months or 3.4 months excluding the Internet Sector.  Only fourteen Sectors have been Oversold since 1992 for a total of 243 months of which 55% were before 2001. The average Oversold persistence is 5.7 months although this has risen to 7.5 months since 2001. Currently, five Sectors are Overbought - Consumer Services, Healthcare, Other Consumer Products, Information Technology, and Other Commercial Products. Four Sectors are Oversold - Banks, Multi-Industry, Utilities, and Energy.    In the DETAIL section below, we provide an update on recent Sector and Peer Group trends. A second Insight will follow looking at the September Relative Price Scores for Companies. 

🇯🇵 Japan • September Relative Price Scores - Life at the Poles Part 1

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>Yesterday <a href="https://www.smartkarma.com/entities/nomura-research-institute-lt" target="_blank" data-smartkarma-citation="entities:18129:1">Nomura Research Institute Lt (4307 JP)</a> announced a Tender Offer to buy back 101.9mm shares for ¥160 billion. Those who know the stock know that price doesn't work, but it does when the Tender Offer is scheduled to start July 1 after a 3:1 stock split executed at the end of this month.</p><p>It is a big buyback, at 13.52% of shares.  And it is a Tender Offer, so as is my wont, I have some thoughts. First and foremost: it's not for you.</p><p>The tender offer is going to be launched at ¥1570/share which was a 9.25% discount to yesterday's split-adjusted close of ¥1730. That would give investors a free put option but there are other reasons why it won't work for the vast majority of investors even should the stock plummet.</p><p>In many buybacks, there is a market impact. Not here. </p><p>In many situations where the erstwhile one-time parent sells down a stake, it increases the float. Not here. </p><p>But this situation IS interesting. On a pro-forma basis it leads to a net debt position for the company for only the second time in its listed history (the first being during the GFC).</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/090/608/original/Screenshot%202019-06-19%20at%2011.33.02%20AM.png?1560915201" class="editor-image img-responsive" data-smartkarma-image-id="90608"></figure><div class="content-caption">data source: capitalIQ, Quiddity</div><p></p><p></p><hr><div style="text-align: left;" class="content-caption"><em>For other insights on Japanese Tender Offers please check the list of Japan-related Event-Driven insights <a href="https://www.smartkarma.com/insights?collection=all-insights&amp;filters=countries%3AJapan%7Cverticals%3A29" target="_blank">here</a>. As a reference to Japan M&amp;A rules and practices, and rules regarding Tender Offers, please see the <a href="https://www.smartkarma.com/insights/quiddity-japan-m-a-guide-2019" target="_blank" data-smartkarma-citation="insights:28911">Quiddity Japan M&amp;A Guide 2019</a>.</em></div>

Yesterday Nomura Research Institute Lt (4307 JP) announced a Tender Offer to buy back 101.9mm shares for ¥160 billion. Those who know the stock know that price doesn't work, but it does when the Tender Offer is scheduled to start July 1 after a 3:1 stock split executed at the end of this month.It is a big buyback, at 13.52% of shares.  And it is a Tender Offer, so as is my wont, I have some thoughts. First and foremost: it's not for you.The tender offer is going to be launched at ¥1570/share which was a 9.25% discount to yesterday's split-adjusted close of ¥1730. That would give investors a free put option but there are other reasons why it won't work for the vast majority of investors even should the stock plummet.In many buybacks, there is a market impact. Not here. In many situations where the erstwhile one-time parent sells down a stake, it increases the float. Not here. But this situation IS interesting. On a pro-forma basis it leads to a net debt position for the company for only the second time in its listed history (the first being during the GFC).data source: capitalIQ, QuiddityFor other insights on Japanese Tender Offers please check the list of Japan-related Event-Driven insights here. As a reference to Japan M&amp;A rules and practices, and rules regarding Tender Offers, please see the Quiddity Japan M&amp;A Guide 2019.

Nomura Research Tender Buyback - 14% Additional EPS Accretion

<p>Yesterday after the close, <a href="https://www.smartkarma.com/entities/nomura-holdings-inc" target="_blank" data-smartkarma-citation="entities:742:1">Nomura Holdings (8604 JP)</a> announced its Board of Directors had approved a <a href="https://www.nomuraholdings.com/news/nr/holdings/20190618/20190618_a.pdf" target="_blank">buyback program</a> to buy up to ¥150bn and up to 300 million shares.</p><p>The period eligible for execution of the buyback will run from 19 June 2019 through 31 March 2020, though the trust agreement enabling the execution has not been signed as of the board announcement. I would not expect it to take long. Nomura has been buying back shares most every year for many years. </p><p>300 million shares is 8.6% of shares outstanding and 9.06% of shares out ex-Treasury shares.</p><p>This is larger than previous buybacks and is done for obvious reasons. The broker's shares are trading a few percent off a 6+ year low, and at 0.43x tangible book. The shares are in the doldrums as full-service brokers worldwide suffer from the ongoing move to passive, ongoing difficult trading conditions in bonds and credit, and the ever-increasing competition for deals. This past year the broker suffered its first annual pre-tax loss since the massive write-downs and markdowns suffered in the year to March 2009. This came as asset management and retail brokerage business saw pre-tax income drop in half from ¥169bn to ¥84bn, but the institutional securities business saw pre-tax income drop from +¥100bn to - ¥111bn, and other expenses hit (including a ¥19.8bn settlement with the DOJ and ¥12bn of associated legal costs, an ¥11bn loss on <a href="https://www.smartkarma.com/entities/mebuki-financial-group-inc" target="_blank" data-smartkarma-citation="entities:10048:1">Mebuki Financial Group (7167 JP)</a> and a little more here and there on cross-holding impairments).</p><p>Nomura Holdings may be in the dumps, but the situation is worth a cursory look at least. </p>

Yesterday after the close, Nomura Holdings (8604 JP) announced its Board of Directors had approved a buyback program to buy up to ¥150bn and up to 300 million shares.The period eligible for execution of the buyback will run from 19 June 2019 through 31 March 2020, though the trust agreement enabling the execution has not been signed as of the board announcement. I would not expect it to take long. Nomura has been buying back shares most every year for many years. 300 million shares is 8.6% of shares outstanding and 9.06% of shares out ex-Treasury shares.This is larger than previous buybacks and is done for obvious reasons. The broker's shares are trading a few percent off a 6+ year low, and at 0.43x tangible book. The shares are in the doldrums as full-service brokers worldwide suffer from the ongoing move to passive, ongoing difficult trading conditions in bonds and credit, and the ever-increasing competition for deals. This past year the broker suffered its first annual pre-tax loss since the massive write-downs and markdowns suffered in the year to March 2009. This came as asset management and retail brokerage business saw pre-tax income drop in half from ¥169bn to ¥84bn, but the institutional securities business saw pre-tax income drop from +¥100bn to - ¥111bn, and other expenses hit (including a ¥19.8bn settlement with the DOJ and ¥12bn of associated legal costs, an ¥11bn loss on Mebuki Financial Group (7167 JP) and a little more here and there on cross-holding impairments).Nomura Holdings may be in the dumps, but the situation is worth a cursory look at least. 

Japan

Nomura Research Institute, Ltd. provides information technology, research, consulting, and analyzing for business strategy decision-making.  The Company also provides application software for system operation services.

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Nomura Research Institute (4307 JP)

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