Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>A shift in composition needed in a Japanese portfolio this year</li>
<li>A weaker US and Japanese economy together with a stronger Yen will  make sector allocation key.</li>
<li>Some sectors to avoid or invest in during this next phase.</li>
</ul>


A shift in composition needed in a Japanese portfolio this year
A weaker US and Japanese economy together with a stronger Yen will  make sector allocation key.
Some sectors to avoid or invest in during this next phase.


2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong - Part 4

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

<ul>
<li>We remain constructive on global equities as long as the MSCI ACWI (ACWI-US) holds above major support at $90.50-91.50.</li>
<li>We continue to monitor for whether ACWI-US and EEM-US break supports at $90.50-91.50 and $37, or if broken indexes (EURO STOXX 50, MSCI ACWI ex-US, EAFE) can reclaim supports.</li>
<li>Neither has happened yet, so we remain in wait-and-see mode. We are downgrading non-US small-caps to market weight. Non-US Value remains leadership -- remain overweight/buys in Financials and Communications</li>
</ul>


We remain constructive on global equities as long as the MSCI ACWI (ACWI-US) holds above major support at $90.50-91.50.
We continue to monitor for whether ACWI-US and EEM-US break supports at $90.50-91.50 and $37, or if broken indexes (EURO STOXX 50, MSCI ACWI ex-US, EAFE) can reclaim supports.
Neither has happened yet, so we remain in wait-and-see mode. We are downgrading non-US small-caps to market weight. Non-US Value remains leadership -- remain overweight/buys in Financials and Communications


MSCI ACWI, MSCI EM Still Above Supports; Buys in Global Value - Financials and Communications

Index Rebal/Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Index Rebal/Special Situations

Quiddity Advisors

Pan-Asia Catalysts/Events

Index Rebalance

<ul>
<li>JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted capped index composed of 400 constituents.</li>
<li>The base date for the August annual review is 30th June 2026. The index review results are expected to be announced on 7th August 2026.</li>
<li>In this insight, we have presented our final expectations for the August 2026 review.</li>
</ul>


JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted capped index composed of 400 constituents.
The base date for the August annual review is 30th June 2026. The index review results are expected to be announced on 7th August 2026.
In this insight, we have presented our final expectations for the August 2026 review.


Quiddity JPX-Nikkei 400 Rebal 2026: End-June 2026 Ranks (FINAL EXPECTATIONS)

'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/000/151/378/original/2020-08-08_12-56-11.png?1596858996" class="editor-image img-responsive" data-smartkarma-image-id="151378"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>30x</strong> - Following Friday's 'peak' in this quarter's results announcements, our prediction that the market multiple would exceed 30 times by months end, occurred in one week, and aggregate forecast operating and net profits are now ¥4.3 trillion and ¥4.6 trillion lower than at the end of last month. A large number of companies that previously had avoided making full-year forecasts three months ago are now doing so, hastening the decline. The last time the market aggregate multiple was above 30 times was just before "3/11" when net income and total market value were both half the current values. Other than the 2008/9 financial crisis, the market multiple rarely exceeded 25 times in the prior decade.  </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/387/original/2020-08-08_15-39-59.png?1596868850" class="editor-image img-responsive" data-smartkarma-image-id="151387"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>-40%</strong> - Forecast full-year revenues are 10% lower than a year ago, and forecast operating profits are 40% below the level of August 2019. Forecast operating margins, at 4.8%, are 300 basis points below the peak of September 2018. Net margins are to decline by 318 bps to 2.7% as net income forecasts are half those of a year ago.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/388/original/2020-08-08_15-45-35.png?1596869157" class="editor-image img-responsive" data-smartkarma-image-id="151388"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>SECTOR FORECASTS</strong> - Four Sectors are forecasting full-year losses - <strong>Energy</strong>, <strong>Metals</strong>, <strong>Restaurants</strong> and <strong>Consumer Services</strong>, although<strong> Metals</strong> appears to be bottoming out. Only the Healthcare Sector has seen any operating margin improvement; however, that modest change is now well discounted. <strong>Autos</strong>,<strong> Utilities</strong>, and<strong> Transportation</strong> have seen 100 bps year-on-year forecast operating margin declines, but are still expecting to be in the black. The<strong> Information Technology</strong> and<strong> Non-Bank Finance</strong> (mostly Insurance) Sectors are forecasting 'flat'.</p><p style="text-align: center;"><strong>•BEST &amp; WORST 7th AUGUST •</strong></p><p style="text-align: left;">The 'best' of Friday's large-cap announcements came from <a href="https://www.smartkarma.com/entities/mixi-inc" target="_blank" data-smartkarma-citation="entities:602:1" rel="noopener">mixi (2121 JP)</a> and <a href="https://www.smartkarma.com/entities/t-d-holdings-inc" target="_blank" data-smartkarma-citation="entities:3431:1" rel="noopener">T&amp;D Holdings (8795 JP)</a>; the worst from <a href="https://www.smartkarma.com/entities/daiichikosho-co-ltd" target="_blank" data-smartkarma-citation="entities:8629:1" rel="noopener">Daiichikosho (7458 JP)</a> and <a href="https://www.smartkarma.com/entities/kyoritsu-maintenance-co-ltd" target="_blank" data-smartkarma-citation="entities:19645:1" rel="noopener">Kyoritsu Maintenance (9616 JP)</a>.  More extensive coverage follows in the <strong>DETAIL</strong> section below.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/389/original/2020-08-08_16-30-24.png?1596871844" class="editor-image img-responsive" data-smartkarma-image-id="151389"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/390/original/2020-08-05_07-34-43.png?1596872118" class="editor-image img-responsive" data-smartkarma-image-id="151390"></figure><p></p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/391/original/2020-08-08_16-37-27.png?1596872258" class="editor-image img-responsive" data-smartkarma-image-id="151391"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/392/original/2020-08-08_16-38-12.png?1596872310" class="editor-image img-responsive" data-smartkarma-image-id="151392"></figure><div class="content-caption">Source • Japan Analytics</div><div><hr></div><div><p style="text-align: center;"><strong>DAILY STATS</strong></p></div><hr><div><p><strong>PERCENTAGES</strong> -<strong> 65%</strong> of quarterly results,<strong>  76</strong>% of annual forecasts/revisions and <strong>80</strong>% of interim forecasts have negative Scores and<strong> 28%</strong> of companies reporting lost money for the quarter.</p></div><hr><div><p style="text-align: center;"><strong>663 Quarterly Results</strong></p></div><div><ul>
<li>
<strong>Results Score:</strong> 29% Positive / 6% Neutral / 65% Negative</li>
<li>
<strong>Average Results Score Change:</strong> -3.4 points</li>
<li>
<strong>Average % Change in Revenue:</strong> -10.4% Quarter YoY / -2.2% Rolling TTM YoY </li>
<li>
<strong>Average Operating Profit Margin Change:</strong> -1.3 ppt</li>
<li>
<strong>Percentage Making Quarterly Losses:</strong> 28%</li>
</ul></div><hr><div><p style="text-align: center;"><strong>196 Annual • 123 Interim Forecasts/Revisions</strong></p></div><div><ul>
<li>
<strong>Annual Forecast/Revision Score:</strong> 19% Positive / 5% Neutral / 76% Negative</li>
<li>
<strong>Interim Forecast/Revision Score Change: </strong>19% Positive / 1% Neutral / 80% Negative</li>
<li>
<strong>Average Forecast/Revision Score Change:</strong> -10.9 points</li>
</ul></div>

Source • Japan Analytics30x - Following Friday's 'peak' in this quarter's results announcements, our prediction that the market multiple would exceed 30 times by months end, occurred in one week, and aggregate forecast operating and net profits are now ¥4.3 trillion and ¥4.6 trillion lower than at the end of last month. A large number of companies that previously had avoided making full-year forecasts three months ago are now doing so, hastening the decline. The last time the market aggregate multiple was above 30 times was just before "3/11" when net income and total market value were both half the current values. Other than the 2008/9 financial crisis, the market multiple rarely exceeded 25 times in the prior decade.  Source • Japan Analytics-40% - Forecast full-year revenues are 10% lower than a year ago, and forecast operating profits are 40% below the level of August 2019. Forecast operating margins, at 4.8%, are 300 basis points below the peak of September 2018. Net margins are to decline by 318 bps to 2.7% as net income forecasts are half those of a year ago.Source • Japan AnalyticsSECTOR FORECASTS - Four Sectors are forecasting full-year losses - Energy, Metals, Restaurants and Consumer Services, although Metals appears to be bottoming out. Only the Healthcare Sector has seen any operating margin improvement; however, that modest change is now well discounted. Autos, Utilities, and Transportation have seen 100 bps year-on-year forecast operating margin declines, but are still expecting to be in the black. The Information Technology and Non-Bank Finance (mostly Insurance) Sectors are forecasting 'flat'.•BEST &amp; WORST 7th AUGUST •The 'best' of Friday's large-cap announcements came from mixi (2121 JP) and T&amp;D Holdings (8795 JP); the worst from Daiichikosho (7458 JP) and Kyoritsu Maintenance (9616 JP).  More extensive coverage follows in the DETAIL section below.Source • Japan AnalyticsDAILY STATSPERCENTAGES - 65% of quarterly results,  76% of annual forecasts/revisions and 80% of interim forecasts have negative Scores and 28% of companies reporting lost money for the quarter.663 Quarterly Results

Results Score: 29% Positive / 6% Neutral / 65% Negative

Average Results Score Change: -3.4 points

Average % Change in Revenue: -10.4% Quarter YoY / -2.2% Rolling TTM YoY 

Average Operating Profit Margin Change: -1.3 ppt

Percentage Making Quarterly Losses: 28%
196 Annual • 123 Interim Forecasts/Revisions

Annual Forecast/Revision Score: 19% Positive / 5% Neutral / 76% Negative

Interim Forecast/Revision Score Change: 19% Positive / 1% Neutral / 80% Negative

Average Forecast/Revision Score Change: -10.9 points


🇯🇵 JAPAN • Results & Revisions 7th August - MS&AD, Mixi, SMC, Otsuka, Kyoritsu M, Hoshizaki, HDS

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

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

Quantitative Analysis

<ul>
<li>We analysed the earning revision of component stocks of MS-Japan in the past month.</li>
<li>We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.</li>
<li>We highlighted EPS revision on Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial, Orix, Kioxia, Toyota Motor, Rakuten.</li>
</ul>


We analysed the earning revision of component stocks of MS-Japan in the past month.
We tabulated stocks with the top impact on index's EPS, stocks' EPS revision, and revenue revision.
We highlighted EPS revision on Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial, Orix, Kioxia, Toyota Motor, Rakuten.


MS-Japan Index Earning Revision (May): Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial

Japan

T&D Holdings, Inc. is a holding company established through the merger of Taiyo Life Insurance, Daido Life Insurance, and T&D Financial Life Insurance. The Company manages life insurance operations for its subsidiaries.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

T&D Holdings (8795 JP)

2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong - Part 4

In light of a weaker US and Japanese economy and a stronger Yen, sector allocation is crucial for Japanese portfolios this year. Certain sectors...

Rikki Malik

MSCI ACWI, MSCI EM Still Above Supports; Buys in Global Value - Financials and Communications

MSCI $ACWI, MSCI EM $EEM Still Above Supports at $90.50-$91.50 and $37, though being tested today. Meanwhile, broken indexes (EURO $STOXX 50,...

Vermilion Research

Quiddity JPX-Nikkei 400 Rebal 2026: End-June 2026 Ranks (FINAL EXPECTATIONS)

There will be 45 ADDs and 39 DELs for the JPX-Nikkei 400 index in August 2026. We correctly predicted 75 of the 84 confirmed index changes (89%...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 7th August - MS&AD, Mixi, SMC, Otsuka, Kyoritsu M, Hoshizaki, HDS

30x - Following Friday's 'peak' in this quarter's results announcements, our prediction that the market multiple would exceed 30 times by months...

Campbell Gunn

MS-Japan Index Earning Revision (May): Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial

We analyzed MS-Japan's consensus for May 2026 and highlighted changes of EPS in Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial, Orix,...

Ke Yan, CFA, FRM

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong - Part 4

​In light of a weaker US and Japanese economy and a stronger Yen, sector allocation is crucial for Japanese portfolios this year. Certain sectors...

Rikki Malik

MSCI ACWI, MSCI EM Still Above Supports; Buys in Global Value - Financials and Communications

MSCI $ACWI, MSCI EM $EEM Still Above Supports at $90.50-$91.50 and $37, though being tested today. Meanwhile, broken indexes (EURO $STOXX 50,...

Vermilion Research

Quiddity JPX-Nikkei 400 Rebal 2026: End-June 2026 Ranks (FINAL EXPECTATIONS)

There will be 45 ADDs and 39 DELs for the JPX-Nikkei 400 index in August 2026. We correctly predicted 75 of the 84 confirmed index changes (89%...

Janaghan Jeyakumar, CFA

🇯🇵 JAPAN • Results & Revisions 7th August - MS&AD, Mixi, SMC, Otsuka, Kyoritsu M, Hoshizaki, HDS

30x - Following Friday's 'peak' in this quarter's results announcements, our prediction that the market multiple would exceed 30 times by months...

Campbell Gunn

MS-Japan Index Earning Revision (May): Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial

We analyzed MS-Japan's consensus for May 2026 and highlighted changes of EPS in Mitsubishi, Takeda Pharmaceutical, Mitsubishi UFJ Financial, Orix,...

Ke Yan, CFA, FRM

In light of a weaker US and Japanese economy and a stronger Yen, sector allocation is crucial for Japanese portfolios this year. Certain sectors...