'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

- MARKET COMPOSITE -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/724/original/2019-01-26_17-35-03.png?1548496734" class="editor-image img-responsive" data-smartkarma-image-id="76724"></figure>
<div class="content-caption">Source: Japan Analytics</div>
SLOW &amp; STEADY RECOVERY - From December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have continued to recover to now 19% by number and 26% by value. Total Market Value has now risen by 11.2% from the Christmas Day low and is overdue a 'breather'.
<hr>
- SECTORS -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/725/original/2019-01-26_17-29-21.png?1548497304" class="editor-image img-responsive" data-smartkarma-image-id="76725"></figure>
<div class="content-caption">
LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.</div>
SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, Healthcare and Utilities continue from our previous review with Restaurants replacing Transportation. Equally predictable is the bottom half-dozen - Banks, Autos, Metals, Building Materials, and Chemicals remain from two weeks ago, with Construction replacing Autos. 
<hr>
- COMPANIES -
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/763/original/2019-01-27_15-07-37.png?1548569281" class="editor-image img-responsive" data-smartkarma-image-id="76763"></figure>
<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/076/775/original/2019-01-27_16-34-40.png?1548574490" class="editor-image img-responsive" data-smartkarma-image-id="76775"></figure>
Source: Japan Analytics
</div>
COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. <a href="https://www.smartkarma.com/entities/26722" target="_blank" data-smartkarma-citation="entities:26722:1">UUUM (3990 JP)</a> is currently the most 'extreme' positive outlier, and <a href="https://www.smartkarma.com/entities/20895" target="_blank" data-smartkarma-citation="entities:20895:1">Welcia (3141 JP)</a> the most 'extreme' negative outlier

- MARKET COMPOSITE -

Source: Japan Analytics
SLOW &amp; STEADY RECOVERY - From December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have continued to recover to now 19% by number and 26% by value. Total Market Value has now risen by 11.2% from the Christmas Day low and is overdue a 'breather'.

- SECTORS -


LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.
SECTOR BREAKDOWN - The top six sectors measured by their percentage above the weighted average of 5-240 Days remain domestic and defensive. REITs, Information Technology, Media, Healthcare and Utilities continue from our previous review with Restaurants replacing Transportation. Equally predictable is the bottom half-dozen - Banks, Autos, Metals, Building Materials, and Chemicals remain from two weeks ago, with Construction replacing Autos. 

- COMPANIES -



Source: Japan Analytics

COMPANY MOVING AVERAGE OUTLIERS - As with the Market Composite and Sectors, the Moving Average Outlier indicator uses a weighted sum of each company's share price relative to its 5-day, 20-day, 60-day, 120-day and 240-day moving averages. 'Extreme' values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers, as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. UUUM (3990 JP) is currently the most 'extreme' positive outlier, and Welcia (3141 JP) the most 'extreme' negative outlier

Japan: Moving Average Outliers - Tech[nical] Rebound

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/837/original/2019-01-18_11-35-42.png?1547778954" class="editor-image img-responsive" data-smartkarma-image-id="75837"></figure>
Source: Japan Analytics
</div>
RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. This insight updates our list of overbought and oversold companies, reviews the best and worst performing companies by RPS over the last two months and adds some specific comments on stocks on each category.
RPS STATISTICS - The Company 'outlier' thresholds are set to "+4" for overbought and "-2" for oversold.  Currently, of the 3,686 listed companies for which monthly data is available, 91 companies are 'Overbought', and 120 are 'Oversold' - 2.5% and 3.2%, respectively of the total. For companies with a market capitalisation of over ¥100b, there are 35 'Overbought' and 24 'Oversold' companies. 
RPS 'TOPS' - In the last two years, 445 companies have achieved an RPS of '4' or more. 80% have seen their RPS fall to below '4' within the following two months. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 63% - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last two months have been <a href="https://www.smartkarma.com/entities/8225" target="_blank" data-smartkarma-citation="entities:8225:1">Descente (8114 JP)</a>,  <a href="https://www.smartkarma.com/entities/4908" target="_blank" data-smartkarma-citation="entities:4908:1">Ariake Japan (2815 JP)</a>, <a href="https://www.smartkarma.com/entities/15862" target="_blank" data-smartkarma-citation="entities:15862:1">Fancl (4921 JP)</a>, <a href="https://www.smartkarma.com/entities/13435" target="_blank" data-smartkarma-citation="entities:13435:1">Bandai Namco (7832 JP)</a>, <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote (7532 JP)</a>, and <a href="https://www.smartkarma.com/entities/1492" target="_blank" data-smartkarma-citation="entities:1492:1">Gmo Payment Gateway (3769 JP)</a>.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/838/original/2019-01-18_11-36-19.png?1547778995" class="editor-image img-responsive" data-smartkarma-image-id="75838"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/839/original/2019-01-18_11-37-01.png?1547779035" class="editor-image img-responsive" data-smartkarma-image-id="75839"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/840/original/2019-01-18_11-37-37.png?1547779070" class="editor-image img-responsive" data-smartkarma-image-id="75840"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/841/original/2019-01-18_11-38-07.png?1547779100" class="editor-image img-responsive" data-smartkarma-image-id="75841"></figure>
<div class="content-caption">
Source: Japan Analytics
</div>
RPS 'BOTTOMS' - 296 companies have seen their RPS fall to '-2' or below in the last two years. 58% have seen their RPS recover to above '-2' within three to six months. For larger capitalisation companies, the numbers are 72 companies and 67%. Some recent examples of positive RPS mean reversion in the last two months have been <a href="https://www.smartkarma.com/entities/22772" target="_blank" data-smartkarma-citation="entities:22772:1">LINE Corp (3938 JP)</a> - a 'contrarians only' selection in our last <a href="https://www.smartkarma.com/insights/japan-relative-price-score-update-overbought-and-oversold-companies" target="_blank" data-smartkarma-citation="insights:25849">Insight</a>, and <a href="https://www.smartkarma.com/entities/15457" target="_blank" data-smartkarma-citation="entities:15457:1">Tokyo Electric Power (9501 JP)</a>.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/842/original/2019-01-18_11-39-56.png?1547779218" class="editor-image img-responsive" data-smartkarma-image-id="75842"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/843/original/2019-01-18_11-42-06.png?1547779350" class="editor-image img-responsive" data-smartkarma-image-id="75843"></figure>
<div class="content-caption">Source: Japan Analytics</div>
<div class="content-highlight">
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 largest two-month positive and negative changes in RPS.
NB - All data is as of January 17th close.
</div>



Source: Japan Analytics

RELATIVE PRICE SCORE - The Relative Price Score (RPS) measures stock price performance relative to TOPIX and is calculated by comparing the current deviation with the mean absolute deviation of monthly and daily relative share prices. As all companies are, as a result, on a comparable scale, 'overbought' and 'oversold' outliers and changes in scoring can reveal short-term and longer-term trading opportunities. This insight updates our list of overbought and oversold companies, reviews the best and worst performing companies by RPS over the last two months and adds some specific comments on stocks on each category.
RPS STATISTICS - The Company 'outlier' thresholds are set to "+4" for overbought and "-2" for oversold.  Currently, of the 3,686 listed companies for which monthly data is available, 91 companies are 'Overbought', and 120 are 'Oversold' - 2.5% and 3.2%, respectively of the total. For companies with a market capitalisation of over ¥100b, there are 35 'Overbought' and 24 'Oversold' companies. 
RPS 'TOPS' - In the last two years, 445 companies have achieved an RPS of '4' or more. 80% have seen their RPS fall to below '4' within the following two months. For companies with a market capitalisation higher than ¥100b, the numbers are 95 companies and 63% - demonstrating the superior persistence of large capitalisation companies in this regard. Some examples of RPS mean reversion in the last two months have been Descente (8114 JP),  Ariake Japan (2815 JP), Fancl (4921 JP), Bandai Namco (7832 JP), Don Quijote (7532 JP), and Gmo Payment Gateway (3769 JP).





Source: Japan Analytics

RPS 'BOTTOMS' - 296 companies have seen their RPS fall to '-2' or below in the last two years. 58% have seen their RPS recover to above '-2' within three to six months. For larger capitalisation companies, the numbers are 72 companies and 67%. Some recent examples of positive RPS mean reversion in the last two months have been LINE Corp (3938 JP) - a 'contrarians only' selection in our last Insight, and Tokyo Electric Power (9501 JP).


Source: Japan Analytics

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 largest two-month positive and negative changes in RPS.
NB - All data is as of January 17th close.


Japan: Relative Price Scores - Overbought and Oversold Companies - Calling 'Tops' & 'Bottoms'

MARKET COMPOSITE
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/380/original/2019-01-13_13-31-55.png?1547353946" class="editor-image img-responsive" data-smartkarma-image-id="75380"></figure>
<div class="content-caption">Source: Japan Analytics</div>
NEW YEAR RALLY - From the December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have recovered to 14% by number and 20% by value - just on the 'buying zone' line. As we <a href="https://www.smartkarma.com/insights/japan-2018-market-review-bear-market-rally-ahead" target="_blank" data-smartkarma-citation="insights:26917">expected</a>, the Total Market Value has rallied 8.7% and looks to have some further to run, especially if the Yen reverses some of its recent strength. The Bank of Japan provided a 'helping hand' on both 4th and 10th January, the only days this year so far on which the market declined. 
<hr>
SECTORS
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/383/original/2019-01-13_15-22-47.png?1547360595" class="editor-image img-responsive" data-smartkarma-image-id="75383"></figure>
<div style="text-align: left;" class="content-caption">LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.</div>
SECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days remain, predictably, domestic and defensive - REITs, Information Technology, Media and Utilities continue from our previous review with Healthcare and Transportation replacing Food, Beverages and Tobacco and Internet Content &amp; Services. Equally predictable is the bottom half-dozen. Banks, Autos, Metals, Electrical Equipment, and Chemicals remain from 23rd December Moving Average Outliers <a href="https://www.smartkarma.com/insights/japan-moving-average-outliers-year-end-blues" target="_blank" data-smartkarma-citation="insights:26895">Insight</a>, with Building Materials replacing Non-Bank Finance. Over the last trading five days, however, there has been a noticeable reversal with Autos, Electrical Equipment, and Machinery all over '55' while Other Consumer Products, Restaurants, Telecommunications and Food, Beverages &amp; Tobacco are all below '40'.
<hr>
COMPANIES
COMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, our moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/382/original/2019-01-13_15-19-43.png?1547360415" class="editor-image img-responsive" data-smartkarma-image-id="75382"></figure>
<div class="content-caption">Source: Japan Analytics</div>
THE +/-100% CLUB - The number of extreme negative outliers reached a peak for 1,352 on December 25th and has since returned to 'normal' levels. We suggested in the previous Insight in this series that such an extreme number of extremes was a signal of a short-term bottom, which, so far, has proved to be correct.
<div class="content-highlight">
In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. 
</div>

MARKET COMPOSITE

Source: Japan Analytics
NEW YEAR RALLY - From the December 25th's lows of 8% by number and 11% by value, the percentages of Japanese stocks above the weighted sum of moving averages have recovered to 14% by number and 20% by value - just on the 'buying zone' line. As we expected, the Total Market Value has rallied 8.7% and looks to have some further to run, especially if the Yen reverses some of its recent strength. The Bank of Japan provided a 'helping hand' on both 4th and 10th January, the only days this year so far on which the market declined. 

SECTORS

LEGEND: The 'sparklines' show the three-year trend in the weighted percentage above moving average relative to the Market Composite and the 'STDev' column is a measure of the variability of that relative measure. The table also provides averages for the breaks above and breaks below and the positive and negative crossovers.
SECTOR BREAKDOWN - The top six sectors measured by the percentage above the weighted average of 5-240 Days remain, predictably, domestic and defensive - REITs, Information Technology, Media and Utilities continue from our previous review with Healthcare and Transportation replacing Food, Beverages and Tobacco and Internet Content &amp; Services. Equally predictable is the bottom half-dozen. Banks, Autos, Metals, Electrical Equipment, and Chemicals remain from 23rd December Moving Average Outliers Insight, with Building Materials replacing Non-Bank Finance. Over the last trading five days, however, there has been a noticeable reversal with Autos, Electrical Equipment, and Machinery all over '55' while Other Consumer Products, Restaurants, Telecommunications and Food, Beverages &amp; Tobacco are all below '40'.

COMPANIES
COMPANY MOVING AVERAGE OUTLIERS - As with the market and sectors, our moving average outlier indicator uses a weighted sum of the share price relative to its 5-day, 20-day, 60-day, 120 day and 240-day moving averages. Extreme values are weighted sums greater than 100% and less than -100%. We would caution that this indicator is best used for timing shorter-term reversals and, in many cases, higher highs and lower lows will be seen. 

Source: Japan Analytics
THE +/-100% CLUB - The number of extreme negative outliers reached a peak for 1,352 on December 25th and has since returned to 'normal' levels. We suggested in the previous Insight in this series that such an extreme number of extremes was a signal of a short-term bottom, which, so far, has proved to be correct.

In the DETAIL section below, we highlight the current top and bottom twenty-five larger capitalisation outliers as well as those companies that have seen the most significant positive and negative changes in their outlier percentage in the last two weeks and provide short comments on companies of particular note. 


Japan: Moving Average Outliers - New Year Rally

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

In 2014, electronic parts giant <a href="https://www.smartkarma.com/entities/9924" target="_blank" data-smartkarma-citation="entities:9924:1">Taiyo Yuden (6976 JP)</a> bought Class A pref shares in storied smallcap capacitor maker <a href="https://www.smartkarma.com/entities/5087" target="_blank" data-smartkarma-citation="entities:5087:1">Elna Co Ltd (6972 JP)</a> from Japan Industrial Partners. In late 2015 Taiyo Yuden exercised its right to convert the 15mm pref shares to 15mm common shares. In February of this year, Taiyo Yuden concluded a Capital and Business Alliance with ELNA and underwrote a third-party allotment lifting its stake from 22.3% to 63.8%, spending a total of ¥5bn, buying 76.924mm shares (now worth 7.6924mm shares after the 1:10 share consolidation at the end of Sep-2018) at ¥65 (now ¥650-equivalent) apiece. That was done in part because ELNA had seen its liabilities exceed its assets so entered into a grace period. The third party allotment was conducted at a significant discount to the then-current share price, so required the AGM to approve, which it did on 30 March. The deal was executed the following week.
<h2>The New News </h2>
Today, Taiyo Yuden announced that it was going to merge with ELNA, effectively buying/squeezing out the minorities in ELNA. This will take the form of a share exchange whereby 4 shares in ELNA will get you 1 share in Taiyo Yuden. Given that Taiyo Yuden traded today at ¥2,554/share, this means your ELNA shares trading at ¥883 yen today are worth a quarter less (¥638.5). 
This is a reasonably aggressively-priced takeunder, to be executed on a short timeline. Some people will object. Others may be happy to be taken out of their misery as the company has lost money every year since 2013 and is on its way to a sixth consecutive year of losses. 
<h2>Schedule</h2>
The proposed schedule looks as follows:
<div>
<table class="table table-striped">
<tbody>
<tr>
<td colspan="2" style="width: 848px;">
<h2>Schedule</h2>
</td>
</tr>
<tr>
<td style="width: 467px;">Event</td>
<td style="text-align: center; width: 381px;">Date</td>
</tr>
<tr>
<td style="width: 467px;">Announcement Date</td>
<td style="text-align: center; width: 381px;">28-Sep-18</td>
</tr>
<tr>
<td style="width: 467px;">Signing of Merger Agreement</td>
<td style="text-align: center; width: 381px;">28-Sep-18</td>
</tr>
<tr>
<td style="width: 467px;">Expected Announcement Date of Record Date of EGM</td>
<td style="text-align: center; width: 381px;">5 Oct 2018</td>
</tr>
<tr>
<td style="width: 467px;">Record Date for ELNA EGM</td>
<td style="text-align: center; width: 381px;">20 Oct 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Extraordinary Shareholder Meeting</td>
<td style="text-align: center; width: 381px;">4 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Last Trading Date</td>
<td style="text-align: center; width: 381px;">25 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">ELNA Delisting Date</td>
<td style="text-align: center; width: 381px;">26 Dec 2018</td>
</tr>
<tr>
<td style="width: 467px;">Effective Date</td>
<td style="text-align: center; width: 381px;">1-Jan-19</td>
</tr>
</tbody>
</table>
</div>

In 2014, electronic parts giant Taiyo Yuden (6976 JP) bought Class A pref shares in storied smallcap capacitor maker Elna Co Ltd (6972 JP) from Japan Industrial Partners. In late 2015 Taiyo Yuden exercised its right to convert the 15mm pref shares to 15mm common shares. In February of this year, Taiyo Yuden concluded a Capital and Business Alliance with ELNA and underwrote a third-party allotment lifting its stake from 22.3% to 63.8%, spending a total of ¥5bn, buying 76.924mm shares (now worth 7.6924mm shares after the 1:10 share consolidation at the end of Sep-2018) at ¥65 (now ¥650-equivalent) apiece. That was done in part because ELNA had seen its liabilities exceed its assets so entered into a grace period. The third party allotment was conducted at a significant discount to the then-current share price, so required the AGM to approve, which it did on 30 March. The deal was executed the following week.
The New News 
Today, Taiyo Yuden announced that it was going to merge with ELNA, effectively buying/squeezing out the minorities in ELNA. This will take the form of a share exchange whereby 4 shares in ELNA will get you 1 share in Taiyo Yuden. Given that Taiyo Yuden traded today at ¥2,554/share, this means your ELNA shares trading at ¥883 yen today are worth a quarter less (¥638.5). 
This is a reasonably aggressively-priced takeunder, to be executed on a short timeline. Some people will object. Others may be happy to be taken out of their misery as the company has lost money every year since 2013 and is on its way to a sixth consecutive year of losses. 
Schedule
The proposed schedule looks as follows:





Schedule



Event
Date


Announcement Date
28-Sep-18


Signing of Merger Agreement
28-Sep-18


Expected Announcement Date of Record Date of EGM
5 Oct 2018


Record Date for ELNA EGM
20 Oct 2018


ELNA Extraordinary Shareholder Meeting
4 Dec 2018


ELNA Last Trading Date
25 Dec 2018


ELNA Delisting Date
26 Dec 2018


Effective Date
1-Jan-19





Taiyo Yuden (6976 JP) Takeunder of ELNA (6972 JP)

Japan

Taiyo Yuden Co., Ltd. manufactures and markets electronic components such as, ceramic capacitors, inductors, hybrid integrated circuits (IC), and ferrite. The Company's products include power supplies, inverters, optical disks, filters, coils, and thermistors.

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Taiyo Yuden (6976 JP)

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