Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

TSE Tokyo Price Index TOPIX / Technical Analysis

Continue to favor EAFE over EM. As long as the U.S. dollar remains elevated, we believe  developed international (EAFE) will remain in a leadership position relative to EM (MSCI EM). In this report we highlight actionable set ups within Japan, Switzerland and Australia. Within Japanese Sectors, we focus on opportunities within Technology, Financials, Health Care, and Staples. We also highlight attractive setups within European/UK Sectors, including Health Care, Industrials, Staples and Utilities.

Continue to favor EAFE over EM. As long as the U.S. dollar remains elevated, we believe  developed international (EAFE) will remain in a leadership position relative to EM (MSCI EM). In this report we highlight actionable set ups within Japan, Switzerland and Australia. Within Japanese Sectors, we focus on opportunities within Technology, Financials, Health Care, and Staples. We also highlight attractive setups within European/UK Sectors, including Health Care, Industrials, Staples and Utilities.

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels, leaving us squarely in the neutral camp. We believe the aforementioned major global indexes are likely to remain below resistance or have limited upside unless and until we see more definitive signs of bottoming within cyclical value areas of the market. In this report we recap important technical levels for the major indexes and highlight actionable set-ups within the utilities, travel and leisure and consumer staples industries.

At this point in time the major global indexes (MSCI ACWI, ACWI ex-US, EAFE, EM) have failed to break above their respective resistance levels, leaving us squarely in the neutral camp. We believe the aforementioned major global indexes are likely to remain below resistance or have limited upside unless and until we see more definitive signs of bottoming within cyclical value areas of the market. In this report we recap important technical levels for the major indexes and highlight actionable set-ups within the utilities, travel and leisure and consumer staples industries.

Global Equity Strategy: Squarely in the Neutral Camp

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

A couple of minutes before the AM session close yesterday, the Nikkei Inc released a <a href="https://www.nikkei.com/article/DGXMZO48537880U9A810C1I00000/" target="_blank" rel="noopener">story</a> saying that the Special Committee formed to help <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">cocokara Fine (3098 JP)</a> management decide whether to enter merger talks with <a href="https://www.smartkarma.com/entities/matsumotokiyoshi-holdings-co" target="_blank" data-smartkarma-citation="entities:2259:1" rel="noopener">Matsumotokiyoshi Holdings Co (3088 JP)</a> (commonly known as "MatsuKiyo") or with <a href="https://www.smartkarma.com/entities/sugi-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:9255:1" rel="noopener">Sugi Holdings (7649 JP)</a> has decided to go with MatsuKiyo. The cocokara Board of Directors looked at the same information and inputs, and they agreed with the panel that the synergy effect was greater if they joined with MatsumotoKiyoshi. cocokara shares immediately popped 9.5% before settling +6.9% at lunch. MatsuKiyo popped as well.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/095/696/original/Screenshot%202019-08-14%20at%205.16.51%20PM.png?1565774282" class="editor-image img-responsive" data-smartkarma-image-id="95696"></figure><div class="content-caption">source: tradingview.com, Quiddity</div>Over the lunch break, cocokara fine released a <a href="https://corp.cocokarafine.co.jp/news/pdf/20190814_TD01.pdf" target="_blank" rel="noopener">statement</a> (Japanese only for now; English will be in the Discussion Posts below if it comes) saying similar, and that they would enter exclusive negotiations with Matsumoto Kiyoshi on joining, with an eye to concluding a basic agreement, followed by a final agreement. When the market opened in the afternoon, both fell, then both slowly rose back into the end of the day. cocokara ended up 1.3%; Matsukiyo fell 2.2% on the day. The share price ratio closed at 1.689.The panel convened in mid-June to study the matter looked at product policy, store opening areas, the organizational structure of the two enterprises, and decided that the synergy effects with MatsuKiyo were significant. Apparently MatsuKiyo submitted two proposals - capital tie-up as first envisaged earlier in April and "management integration" (which means a full joining (merger or holdco)).On a pro-forma basis (using end-March numbers), the combination would run 3,008 stores and have almost ¥1 trillion in sales (¥976.4bn in FY18) against the current number one and number two <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia Holdings (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha Holdings (3391 JP)</a> with ¥670-695 billion in segment sales each this past year. This comes as something of a surprise. I thought Sugi would end up being the preferred partner for reasons of culture, overlap (lack thereof), and Cocokara's desire to get into healthcare services, where Sugi already has a tie-up with <a href="https://www.smartkarma.com/entities/medpeer-inc" target="_blank" data-smartkarma-citation="entities:4090:1" rel="noopener">Medpeer Inc (6095 JP)</a>. I also figured Sugi might offer better terms. I would note that this is still not a done deal. Usually, two firms will talk informally, then the boards will decide management teams should talk formally after the ground has been broken. In this case the informal talks to understand synergy and culture appear not to have been completed before we got to the Independent Committee so in this case the parents have decided which potential spouse is better before the kids have done the speed dating.A full discussion is below the fold.<hr> For more on this subject, see my previous piece <a href="https://www.smartkarma.com/insights/cocokara-fine-cocokara" target="_blank" data-smartkarma-citation="insights:30197" rel="noopener">Cocokara Fine は Cocokara いいね*</a> and <a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415" rel="noopener">Michael Causton</a>'s excellent and informative pieces on the deal and the sector <a href="https://www.smartkarma.com/insights/matsukiyo-and-cocokara-fine-tie-to-shake-up-drugstore-sector" target="_blank" data-smartkarma-citation="insights:29890" rel="noopener">Matsukiyo and Cocokara Fine Tie to Shake up Drugstore Sector</a>, <a href="https://www.smartkarma.com/insights/japan-drugstores-set-to-expand-further" target="_blank" data-smartkarma-citation="insights:28119" rel="noopener">Japan Drugstores Set to Expand Further</a>, and <a href="https://www.smartkarma.com/insights/drug-fuelled-marriages-and-macho-shachos-in-japan" target="_blank" data-smartkarma-citation="insights:30346" rel="noopener">Drug-Fuelled Marriages and Macho Shachos* in Japan</a>. Furthermore, two of his recent big picture pieces <a href="https://www.smartkarma.com/insights/japanese-retailing-the-big-disruption-and-opportunity-in-the-next-5-years" target="_blank" data-smartkarma-citation="insights:30770" rel="noopener">Japanese Retailing: The Big Disruption – and Opportunity – in the Next 5 Years</a> and <a href="https://www.smartkarma.com/insights/winners-and-losers-in-japanese-retailing-in-the-next-5-10-years" target="_blank" data-smartkarma-citation="insights:30771" rel="noopener">Winners and Losers in Japanese Retailing in the Next 5-10 Years</a> are excellent backdrop, with the latter providing the SWOTs for the sector.For more information on Japanese Tender Offers and M&amp;A - how they work and how they unfold - please refer to the <a href="https://www.smartkarma.com/insights/quiddity-japan-m-a-guide-2019" target="_blank" rel="noopener">Quiddity Japan M&amp;A Guide</a>.

A couple of minutes before the AM session close yesterday, the Nikkei Inc released a story saying that the Special Committee formed to help cocokara Fine (3098 JP) management decide whether to enter merger talks with Matsumotokiyoshi Holdings Co (3088 JP) (commonly known as "MatsuKiyo") or with Sugi Holdings (7649 JP) has decided to go with MatsuKiyo. The cocokara Board of Directors looked at the same information and inputs, and they agreed with the panel that the synergy effect was greater if they joined with MatsumotoKiyoshi. cocokara shares immediately popped 9.5% before settling +6.9% at lunch. MatsuKiyo popped as well.  source: tradingview.com, QuiddityOver the lunch break, cocokara fine released a statement (Japanese only for now; English will be in the Discussion Posts below if it comes) saying similar, and that they would enter exclusive negotiations with Matsumoto Kiyoshi on joining, with an eye to concluding a basic agreement, followed by a final agreement. When the market opened in the afternoon, both fell, then both slowly rose back into the end of the day. cocokara ended up 1.3%; Matsukiyo fell 2.2% on the day. The share price ratio closed at 1.689.The panel convened in mid-June to study the matter looked at product policy, store opening areas, the organizational structure of the two enterprises, and decided that the synergy effects with MatsuKiyo were significant. Apparently MatsuKiyo submitted two proposals - capital tie-up as first envisaged earlier in April and "management integration" (which means a full joining (merger or holdco)).On a pro-forma basis (using end-March numbers), the combination would run 3,008 stores and have almost ¥1 trillion in sales (¥976.4bn in FY18) against the current number one and number two Welcia Holdings (3141 JP) and Tsuruha Holdings (3391 JP) with ¥670-695 billion in segment sales each this past year. This comes as something of a surprise. I thought Sugi would end up being the preferred partner for reasons of culture, overlap (lack thereof), and Cocokara's desire to get into healthcare services, where Sugi already has a tie-up with Medpeer Inc (6095 JP). I also figured Sugi might offer better terms. I would note that this is still not a done deal. Usually, two firms will talk informally, then the boards will decide management teams should talk formally after the ground has been broken. In this case the informal talks to understand synergy and culture appear not to have been completed before we got to the Independent Committee so in this case the parents have decided which potential spouse is better before the kids have done the speed dating.A full discussion is below the fold. For more on this subject, see my previous piece Cocokara Fine は Cocokara いいね* and Michael Causton's excellent and informative pieces on the deal and the sector Matsukiyo and Cocokara Fine Tie to Shake up Drugstore Sector, Japan Drugstores Set to Expand Further, and Drug-Fuelled Marriages and Macho Shachos* in Japan. Furthermore, two of his recent big picture pieces Japanese Retailing: The Big Disruption – and Opportunity – in the Next 5 Years and Winners and Losers in Japanese Retailing in the Next 5-10 Years are excellent backdrop, with the latter providing the SWOTs for the sector.For more information on Japanese Tender Offers and M&amp;A - how they work and how they unfold - please refer to the Quiddity Japan M&amp;A Guide.

Cocokara (3098) Going With MatsuKiyo (3088) But Ratio Overextended

'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/000/093/001/original/2019-07-13_16-16-31.png?1563002212" class="editor-image img-responsive" data-smartkarma-image-id="93001"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/005/original/2019-07-13_16-25-24.png?1563002742" class="editor-image img-responsive" data-smartkarma-image-id="93005"></figure>Source: Japan Analytics
</div>MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/020/original/2019-07-14_06-28-16.png?1563053334" class="editor-image img-responsive" data-smartkarma-image-id="93020"></figure><div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/024/original/2019-07-14_06-45-29.png?1563054338" class="editor-image img-responsive" data-smartkarma-image-id="93024"></figure> Source: Japan Analytics</div>VALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/025/original/2019-07-14_06-47-40.png?1563054585" class="editor-image img-responsive" data-smartkarma-image-id="93025"></figure> Source: Japan Analytics</div>TORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  <div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/026/original/2019-07-14_06-54-51.png?1563054906" class="editor-image img-responsive" data-smartkarma-image-id="93026"></figure> Source: Japan Analytics</div>VOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/028/original/2019-07-14_07-31-40.png?1563057109" class="editor-image img-responsive" data-smartkarma-image-id="93028"></figure> Source: Japan Analytics</div>3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a> and <a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">Tsuruha (3391 JP), </a><a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a><a href="https://www.smartkarma.com/entities/tsuruha-holdings-inc" target="_blank" data-smartkarma-citation="entities:9536:1" rel="noopener">, and </a><a href="https://www.smartkarma.com/entities/lawson-inc" target="_blank" data-smartkarma-citation="entities:1040:1" rel="noopener">Lawson (2651 JP)</a>. Electrical Equipment has suffered from weakness in component stocks <a href="https://www.smartkarma.com/entities/alps-alpine-co-ltd" target="_blank" data-smartkarma-citation="entities:12001:1" rel="noopener">Alps Alpine (6770 JP)</a> (-38% over one year), <a href="https://www.smartkarma.com/entities/murata-manufacturing-co-ltd" target="_blank" data-smartkarma-citation="entities:11649:1" rel="noopener">Murata (6981 JP)</a> (see <a href="https://www.smartkarma.com/profiles/scott-foster" target="_blank" data-smartkarma-citation="accounts:1134" rel="noopener">Scott Foster</a>'s <a href="https://www.smartkarma.com/insights/murata-mfg-6981-jp-buy-on-decline-for-the-long-term" target="_blank" data-smartkarma-citation="insights:30919" rel="noopener">(Buy on Decline for the Long Term</a>), and <a href="https://www.smartkarma.com/entities/taiyo-yuden-co-ltd" target="_blank" data-smartkarma-citation="entities:9924:1" rel="noopener">Taiyo Yuden (6976 JP)</a>, while <a href="https://www.smartkarma.com/entities/smc-corp" target="_blank" data-smartkarma-citation="entities:20866:1" rel="noopener">SMC (6273 JP)</a>, <a href="https://www.smartkarma.com/entities/fanuc-corp" target="_blank" data-smartkarma-citation="entities:752:1" rel="noopener">Fanuc (6954 JP)</a>, and <a href="https://www.smartkarma.com/entities/komatsu-ltd" target="_blank" data-smartkarma-citation="entities:8416:1" rel="noopener">Komatsu (6301 JP)</a> have weighed on the Machinery Sector.<div class="content-caption">
<figure class="editor-figure mceNonEditable"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/093/031/original/2019-07-14_07-44-47.png?1563057897" class="editor-image img-responsive" data-smartkarma-image-id="93031"></figure></figure> Source: Japan Analytics</div>SECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (<a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">OBIC (4684 JP)</a>, Other Commerical Products (<a href="https://www.smartkarma.com/entities/hoya-corp" target="_blank" data-smartkarma-citation="entities:8990:1" rel="noopener">Hoya Corp (7741 JP)</a>, and Commercial Services (<a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit 6098 JP).</a> We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (<a href="https://www.smartkarma.com/entities/nippon-steel-sumitomo-metal-corp" target="_blank" data-smartkarma-citation="entities:961:1" rel="noopener">Nippon Steel &amp; Sumitomo Metal (5401 JP)</a>) <div class="content-highlight">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 two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/welcia-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:20895:1" rel="noopener">Welcia (3141 JP)</a>, <a href="https://www.smartkarma.com/entities/daiseki-co-ltd" target="_blank" data-smartkarma-citation="entities:2330:1" rel="noopener">Daiseki (9793 JP), </a><a href="https://www.smartkarma.com/entities/yaskawa-electric-corp" target="_blank" data-smartkarma-citation="entities:2458:1" rel="noopener">Yaskawa Electric (6506 JP), </a><a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis (4927 JP)</a>, <a href="https://www.smartkarma.com/entities/sekisui-house-ltd" target="_blank" data-smartkarma-citation="entities:4508:1" rel="noopener">Sekisui House (1928 JP)</a>, <a href="https://www.smartkarma.com/entities/keyence-corp" target="_blank" data-smartkarma-citation="entities:3077:1" rel="noopener">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a>, and <a href="https://www.smartkarma.com/entities/obic-co-ltd" target="_blank" data-smartkarma-citation="entities:1273:1" rel="noopener">Obic (4684 JP)</a>.</div>


Source: Japan Analytics
MOVING AVERAGE BREAKOUT - Japanese equities have now risen by 5.1% since the low of 4th June and, since July 1st, the Total Market Value has exceeded the 50-Day Moving Average for the first time since 26th April. Over the last two weeks, the Total Market Value has gained 1.7% in both Yen and US dollar times. For the previous twelve months, the equity market has moved in line with the US dollar/Japanese Yen exchange rate. It remains to be seen how the 'gap' that has opened up in the last month will be closed. Any further strength in the Yen from current levels will likely see the market slip below the 50-Day Moving Average again.
 Source: Japan AnalyticsVALUE TRADED RATIO - The Value Traded Ratio (Value Traded/Total Market Value) has seen two new eighteen-month lows. If the three days around Christmas are excluded, the current apathy towards Japanese equities is the most extreme since 2012 and is confirmed by recent BAML investor surveys. In the past, such periods of inactivity (marked"▲"above)  have preceded changes in market direction, more often upwards rather than downwards and suggest the current rally has more 'legs'. 
 Source: Japan AnalyticsTORAKU INDEX - Conversely, the Toraku advance/decline index is suggesting a degree of caution having breached the 120 'overbought' line for only the third time in eighteen months. Combining this analysis with the Value Traded Ratio, there is scope for a short-term upward move akin to that of October 2018 to be followed by a sharper downward trend into the autumn.  
 Source: Japan AnalyticsVOLUME SCORE TIMELINE - The lull in market turnover is confirmed in the greener 'bias' in our Sector volume timeline. The Retail and Restaurant Sectors are hot as we are in the middle of the quarterly results announcements for February/May/August/November year-end companies. REITs remain the 'go-to' defensive Sector while the Information Technology and Internet Sectors are the 'tema-du-jour' - to mix language metaphors. The 'untouchables' are Metals, Banks, UtilitiesTransportation,  and Multi-Industry.
 Source: Japan Analytics3-MONTH SECTOR CONTRIBUTION - Over the last three months, a long Telcos/short Autos strategy would have yielded 82 basis points of performance. The Retail Sector has responded well to the results released so far led by drugstores Welcia (3141 JP) and Tsuruha (3391 JP), Fast Retailing (9983 JP), and Lawson (2651 JP). Electrical Equipment has suffered from weakness in component stocks Alps Alpine (6770 JP) (-38% over one year), Murata (6981 JP) (see Scott Foster's (Buy on Decline for the Long Term), and Taiyo Yuden (6976 JP), while SMC (6273 JP), Fanuc (6954 JP), and Komatsu (6301 JP) have weighed on the Machinery Sector.
 Source: Japan AnalyticsSECTOR SCORE MATRIX - Arranging our cap-weighted Sector Relative Price Scores and Results &amp; Revisions Scores in a four-quadrant matrix whose extremes are Contrarian Sell, Contrarian Buy, Unrequited Growth, and Ex-Growth suggest profit-taking in Information Technology (OBIC (4684 JP), Other Commerical Products (Hoya Corp (7741 JP), and Commercial Services (Recruit 6098 JP). We are not contrarian enough to fall into the banking 'trap', however, the Metals Sector may offer some 'crumbs' of comfort for those in need of a deep value 'fix' (Nippon Steel &amp; Sumitomo Metal (5401 JP)) 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 two weeks, as well as adding some brief comments on Welcia (3141 JP), Daiseki (9793 JP), Yaskawa Electric (6506 JP), Pola Orbis (4927 JP), Sekisui House (1928 JP), Keyence (6861 JP), Japan Post Insurance (7181 JP), and Obic (4684 JP).

🇯🇵 JAPAN • Market Update - Levitating on Thin Air

Cross Asset Strategy

TW3 NORTH ASIA 10-16TH JUNESmartkarma's North Asian Insight providers were overwhelmingly bullish this week. In the Event-Driven space, <a href="https://www.smartkarma.com/profiles/sanghyun-park" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> provided an update on the Nexon Sale, and <a href="https://www.smartkarma.com/profiles/michael-causton" target="_blank" data-smartkarma-citation="accounts:2415">Michael Causton</a> gave an excellent overview of the M&amp;A permutations for Japan's listed Drugstore companies. <a href="https://www.smartkarma.com/profiles/douglas-kim" target="_blank" data-smartkarma-citation="accounts:342">Douglas Kim</a> reviews SKC's purchase of KCFT and suggests that the SK Group appears intent on making more big M&amp;A deals where it wants to have a leading presence - in this case in vertically integrating the lithium-ion batteries/components/materials.  Also in Korea, KCGI's move on Hanjin Kal is running into funding problems, while a 3% stake has recently by purchased by Goldman Sachs, with the rumoured end-buyer being Delta Airlines.  Only one IPO was commented on - <a href="https://www.smartkarma.com/profiles/oshadhi-kumarasiri" target="_blank" data-smartkarma-citation="accounts:3584">Oshadhi Kumarasiri</a> casts a dubious eye over the upcoming <a href="https://www.smartkarma.com/entities/shinnihonseiyaku-co-ltd" target="_blank" data-smartkarma-citation="entities:28122:1">Shin-nihon-seiyaku Co Ltd (4931 JP)</a> deal and suggests that management maybe selling out ahead of the peaking of the company main, and so-far only brand, Perfect One.Bullish Equity Bottom-Up comments were published on <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1">Nissan (7201 JP)</a>, <a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1">Renesas Electronics (6723 JP)</a>, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten (4755 JP)</a>, <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1">Hitachi (6501 JP)</a>, <a href="https://www.smartkarma.com/entities/modec-inc" target="_blank" data-smartkarma-citation="entities:2840:1">Modec(6269 JP)</a>, <a href="https://www.smartkarma.com/entities/nintendo-co-ltd" target="_blank" data-smartkarma-citation="entities:5415:1">Nintendo (7974 JP)</a>, and <a href="https://www.smartkarma.com/entities/life-corp" target="_blank" data-smartkarma-citation="entities:1743:1">Life (8194 JP)</a>. Only <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1">ZOZO (3092 JP)</a> saw (another) bearish call.Bullish Thematic &amp; Strategy Insights were released on Japanese Telcos from <a href="https://www.smartkarma.com/profiles/kirk-boodry" target="_blank" data-smartkarma-citation="accounts:1920">Kirk Boodry</a> - highlighting another regulatory-driven boost for Rakuten, while <a href="https://www.smartkarma.com/profiles/sanghyun-park" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a> delved into the murky world of high-speed trading (HST) in Korea where Citadel and Merrill Lynch have made some controversial moves. In Japan, HST has recently been regulated with all operators required to establish an onshore entity or appoint a local agent and meet stringent reporting requirements governing their trading activities. Perhaps Korea should follow this example? Lastly, this author updated his Relative Price Score data, although these Insights are not summarised below.  <hr><div class="content-highlight">EVENT DRIVEN: BULLISH</div><a href="https://www.smartkarma.com/insights/nexon-sale-current-status-checkup" target="_blank" data-smartkarma-citation="insights:30312">Nexon Sale: Current Status Checkup</a><a href="https://www.smartkarma.com/insights/drug-fuelled-marriages-and-macho-shachos-in-japan" target="_blank" data-smartkarma-citation="insights:30346">Drug-Fuelled Marriages and Macho Shachos in Japan</a><a href="https://www.smartkarma.com/insights/korea-m-a-spotlight-skc-acquires-kcft-for-1-billion" target="_blank" data-smartkarma-citation="insights:30396">Korea M&amp;A Spotlight: SKC Acquires KCFT for $1 Billion</a><div style="text-align: center;" class="content-highlight">EVENT DRIVEN: BEARISH</div><a href="https://www.smartkarma.com/insights/hanjin-kal-special-situation-kcgi-s-takeover-attempt-is-tougher-than-previously-appeared" target="_blank" data-smartkarma-citation="insights:30150">Hanjin Kal Special Situation: KCGI's Takeover Is Tougher than Previously Appeared</a><div style="text-align: center;" class="content-highlight">IPOs &amp; PLACEMENTS: BEARISH</div><a href="https://www.smartkarma.com/insights/shinnihonseiyaku-ipo-perfect-one-not-so-perfect-afterall" target="_blank" data-smartkarma-citation="insights:30407">Shinnihonseiyaku IPO: Perfect One, Not So Perfect Afterall</a><div style="text-align: center;" class="content-highlight">EQUITY BOTTOM UP: BULLISH</div><a href="https://www.smartkarma.com/insights/nissan-chances-of-the-alliance-surviving-have-dimmed-greatly" target="_blank" data-smartkarma-citation="insights:30324">Nissan: Chances of the Alliance Surviving Have Dimmed Greatly</a><a href="https://www.smartkarma.com/insights/renesas-factory-automation-and-aircon-inventory-adjustments-to-take-time" target="_blank" data-smartkarma-citation="insights:30342">Renesas: Factory Automation and Aircon Inventory Adjustments to Take Time</a><a href="https://www.smartkarma.com/insights/rakuten-pay-tops-the-japanese-cashless-war" target="_blank" data-smartkarma-citation="insights:30358">Rakuten Pay Winning the Japanese Cashless War</a>? <a href="https://www.smartkarma.com/insights/hitachi-ltd-6501-jp-share-price-up-on-restructuring-news" target="_blank" data-smartkarma-citation="insights:30304">Hitachi Ltd. (6501 JP): Share Price Up on Restructuring News</a><a href="https://www.smartkarma.com/insights/modec-on-track-to-win-roughly-half-of-its-bids" target="_blank" data-smartkarma-citation="insights:30377">MODEC: On Track to Win Roughly Half of Its Bids</a><a href="https://www.smartkarma.com/insights/switch-production-to-move-outside-of-china-stock-plunges-following-dull-e3-presentation" target="_blank" data-smartkarma-citation="insights:30385">Switch Production to Move From China; Nintendo Plunges After Dull E3 Presentation</a><a href="https://www.smartkarma.com/insights/life-corp-ties-with-amazon-japan" target="_blank" data-smartkarma-citation="insights:30388">Life Corp Ties with Amazon Japan</a><div style="text-align: center;" class="content-highlight">EQUITY BOTTOM UP: BEARISH</div><a href="https://www.smartkarma.com/insights/zozo-the-underlying-operating-metrics-worry-us" target="_blank" data-smartkarma-citation="insights:30391">Zozo: The Underlying Operating Metrics Worry Us</a><div class="content-highlight">THEMATIC &amp; STRATEGY: BULLISH</div><a href="https://www.smartkarma.com/insights/japan-telcos-regulator-to-lower-cap-for-early-mobile-contract-cancellation-positive-for-rakuten" target="_blank" data-smartkarma-citation="insights:30315">Japan Telcos - Lower Cap for Early Cancellation: Positive for Rakuten</a><a href="https://www.smartkarma.com/insights/algorithm-trading-on-kosdaq-citadel-fund-case-checkup" target="_blank" data-smartkarma-citation="insights:30334">Algorithm Trading on KOSDAQ: Citadel Fund Case Checkup</a><div style="text-align: center;" class="content-highlight">THEMATIC &amp; STRATEGY: BEARISH</div><a href="https://www.smartkarma.com/insights/japan-june-relative-price-scores-market-sectors-peer-groups-more-of-the-same" target="_blank" data-smartkarma-citation="insights:30323">🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same</a><a href="https://www.smartkarma.com/insights/japan-relative-price-scores-overbought-oversold-companies-june-2019" target="_blank" data-smartkarma-citation="insights:30393">🇯🇵 Japan • Relative Price Scores - Overbought &amp; Oversold Companies - June 2019</a>

TW3 NORTH ASIA 10-16TH JUNESmartkarma's North Asian Insight providers were overwhelmingly bullish this week. In the Event-Driven space, Sanghyun Park provided an update on the Nexon Sale, and Michael Causton gave an excellent overview of the M&amp;A permutations for Japan's listed Drugstore companies. Douglas Kim reviews SKC's purchase of KCFT and suggests that the SK Group appears intent on making more big M&amp;A deals where it wants to have a leading presence - in this case in vertically integrating the lithium-ion batteries/components/materials.  Also in Korea, KCGI's move on Hanjin Kal is running into funding problems, while a 3% stake has recently by purchased by Goldman Sachs, with the rumoured end-buyer being Delta Airlines.  Only one IPO was commented on - Oshadhi Kumarasiri casts a dubious eye over the upcoming Shin-nihon-seiyaku Co Ltd (4931 JP) deal and suggests that management maybe selling out ahead of the peaking of the company main, and so-far only brand, Perfect One.Bullish Equity Bottom-Up comments were published on Nissan (7201 JP), Renesas Electronics (6723 JP), Rakuten (4755 JP), Hitachi (6501 JP), Modec(6269 JP), Nintendo (7974 JP), and Life (8194 JP). Only ZOZO (3092 JP) saw (another) bearish call.Bullish Thematic &amp; Strategy Insights were released on Japanese Telcos from Kirk Boodry - highlighting another regulatory-driven boost for Rakuten, while Sanghyun Park delved into the murky world of high-speed trading (HST) in Korea where Citadel and Merrill Lynch have made some controversial moves. In Japan, HST has recently been regulated with all operators required to establish an onshore entity or appoint a local agent and meet stringent reporting requirements governing their trading activities. Perhaps Korea should follow this example? Lastly, this author updated his Relative Price Score data, although these Insights are not summarised below.  EVENT DRIVEN: BULLISHNexon Sale: Current Status CheckupDrug-Fuelled Marriages and Macho Shachos in JapanKorea M&amp;A Spotlight: SKC Acquires KCFT for $1 BillionEVENT DRIVEN: BEARISHHanjin Kal Special Situation: KCGI's Takeover Is Tougher than Previously AppearedIPOs &amp; PLACEMENTS: BEARISHShinnihonseiyaku IPO: Perfect One, Not So Perfect AfterallEQUITY BOTTOM UP: BULLISHNissan: Chances of the Alliance Surviving Have Dimmed GreatlyRenesas: Factory Automation and Aircon Inventory Adjustments to Take TimeRakuten Pay Winning the Japanese Cashless War? Hitachi Ltd. (6501 JP): Share Price Up on Restructuring NewsMODEC: On Track to Win Roughly Half of Its BidsSwitch Production to Move From China; Nintendo Plunges After Dull E3 PresentationLife Corp Ties with Amazon JapanEQUITY BOTTOM UP: BEARISHZozo: The Underlying Operating Metrics Worry UsTHEMATIC &amp; STRATEGY: BULLISHJapan Telcos - Lower Cap for Early Cancellation: Positive for RakutenAlgorithm Trading on KOSDAQ: Citadel Fund Case CheckupTHEMATIC &amp; STRATEGY: BEARISH🇯🇵 Japan • June Relative Price Scores: Market, Sectors &amp; Peer Groups - More of The Same🇯🇵 Japan • Relative Price Scores - Overbought &amp; Oversold Companies - June 2019

🇰🇷 🇯🇵 That Was The Week That Was North Asia - 10-16th June 2019 @Smartkarma

Japan

SUNDRUG CO., LTD. operates an outlet drug store chain primarily in the Tokyo area.  The Company sells mainly medicines, cosmetics, baby care products, and household utensils.  Sundrug supplies merchandise to franchise stores.  The Company also operates a real estate business.

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Sundrug Co Ltd (9989 JP)

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🇰🇷 🇯🇵 That Was The Week That Was North Asia - 10-16th June 2019 @Smartkarma

TW3 NORTH ASIA 10-16TH JUNESmartkarma's North Asian Insight providers were overwhelmingly bullish this week. In the Event-Driven space, Sanghyun...

Campbell Gunn

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