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>Global equites (MSCI ACWI) have pulled back some following the FOMC's hawkish-leaning announcement. Short-term support is at $102 on ACWI-US--last week's breakout level-- while longer-term support remains at $98-$99.</li>
<li>A break below $102 would indicate more consolidation is likely but, if ACWI-US remains above $98, we remain bullish on global equities, and we view pullbacks as buying opportunities.</li>
<li>Europe remains bullish, and we remain overweight Japan and India. Actionable Themes: many stocks highlighted within Consumer Discretionary, Energy, Industrials, Services, and Technology</li>
</ul>


Global equites (MSCI ACWI) have pulled back some following the FOMC's hawkish-leaning announcement. Short-term support is at $102 on ACWI-US--last week's breakout level-- while longer-term support remains at $98-$99.
A break below $102 would indicate more consolidation is likely but, if ACWI-US remains above $98, we remain bullish on global equities, and we view pullbacks as buying opportunities.
Europe remains bullish, and we remain overweight Japan and India. Actionable Themes: many stocks highlighted within Consumer Discretionary, Energy, Industrials, Services, and Technology


MSCI ACWI, EURO STOXX 50, TOPIX Remain Bullish; Buys in Cons Disc, Industrials, Services, Technology

Executive Director, Metrical Inc

Aki Matsumoto

Executive Director

Independent Leading Corporate Governance Research

Metrical Inc

METRICAL INC. is an independent leading Corporate Governance research firm in Japan where Corporate Governance is increasingly recognized as an important element on corporate management in these days. Thus, CG research and solutions would become an essential component of global capital markets and play important to contribute to transparency of the markets and maximize shareholders’ value in Japan. 

METRICAL INC. provides Corporate Governance research and analysis including rating services, and  also offers investment research and IR services with solutions and customized profound research on CG and IR issues.

<ul>
<li>The fact that only 7% of companies disclosed their cost of capital disappoints investors who had hoped that the "TSE request" would change management's mindset to become more share-price conscious.</li>
<li>The average ROE of listed companies declined slightly. This indicates that they haven't been able to find effective investments to raise business profitability and that shareholder returns have been inadequate.</li>
<li>The ROE trend does not indicate a significant change in management's mindset, so this will be a major issue if the stock price moves lower to the June AGM season.</li>
</ul>


The fact that only 7% of companies disclosed their cost of capital disappoints investors who had hoped that the "TSE request" would change management's mindset to become more share-price conscious.
The average ROE of listed companies declined slightly. This indicates that they haven't been able to find effective investments to raise business profitability and that shareholder returns have been inadequate.
The ROE trend does not indicate a significant change in management's mindset, so this will be a major issue if the stock price moves lower to the June AGM season.


ROE Trends Do Not Seem to Indicate a Significant Change in Management's Mindset?

<ul>
<li>If the ISS ROE criteria, which seems somewhat slow, were to be resumed, many companies would still be below 5%. However, how many companies are feeling threatened?</li>
<li>About 40% of the companies have large shareholders holding more than 20% of their shares, which is one reason why many companies do not feel a sense of threat.</li>
<li>Domestic institutional investors should apply the Proxy Voting Guidelines more strictly to companies that do not make maximum efforts to increase their ROE.</li>
</ul>


If the ISS ROE criteria, which seems somewhat slow, were to be resumed, many companies would still be below 5%. However, how many companies are feeling threatened?
About 40% of the companies have large shareholders holding more than 20% of their shares, which is one reason why many companies do not feel a sense of threat.
Domestic institutional investors should apply the Proxy Voting Guidelines more strictly to companies that do not make maximum efforts to increase their ROE.


To Raise ROE, Breaking Away from Familiar Relationships and Creating Tension in Management Is Key

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

Rikki Malik

Macroeconomics

<ul>
<li>US Q4 2023 GDP data "surprised" the market on the upside</li>
<li>US Inflation appears even lower than the government reported statistics</li>
<li>Japan inflation statistics ease and the BOJ hints at ending negative rates</li>
</ul>


US Q4 2023 GDP data "surprised" the market on the upside
US Inflation appears even lower than the government reported statistics
Japan inflation statistics ease and the BOJ hints at ending negative rates


<ul>
<li>Looking at BOJ's fund flows for private non-financial corporations for 4 cumulative quarters, Cash and Deposits have increased, and Outward Direct Investment has increased steadily as a destination for cash.</li>
<li>The average dividend payout ratio for listed companies has remained flat, while both ROE and DOE have declined slightly, which may reinforce the view that shareholder returns are not sufficient.</li>
<li>With cash on hand still increasing while capital expenditures have not grown much, the use of cash is expected to remain a focus of discussion next fiscal year.</li>
</ul>


Looking at BOJ's fund flows for private non-financial corporations for 4 cumulative quarters, Cash and Deposits have increased, and Outward Direct Investment has increased steadily as a destination for cash.
The average dividend payout ratio for listed companies has remained flat, while both ROE and DOE have declined slightly, which may reinforce the view that shareholder returns are not sufficient.
With cash on hand still increasing while capital expenditures have not grown much, the use of cash is expected to remain a focus of discussion next fiscal year.


Is the Deflationary Mindset of Managers Still Prevailing?

Japan

The TOPIX, also known as the Tokyo Stock Price Index, is a capitalization-weighted index of all companies listed on the First Section of the Tokyo Stock Exchange. The index is supplemented by the subindices of the 33 industry sectors. The index calculation excludes temporary issues and preferred stocks, and has a base value of 100 as of January 4, 1968.

TSE Tokyo Price Index TOPIX (TPX INDEX)

MSCI ACWI, EURO STOXX 50, TOPIX Remain Bullish; Buys in Cons Disc, Industrials, Services, Technology

MSCI ACWI, EURO $STOXX 50, $TOPIX Remain Bullish. $ACWI holding above short-term support at $102 (last week's breakout level), though we remain...

Vermilion Research

ROE Trends Do Not Seem to Indicate a Significant Change in Management's Mindset?

I would like to discuss the issues on the Nikkei article published on December 22, "Cost of Capital Disclosure Stays at 7%."

Metrical Inc

To Raise ROE, Breaking Away from Familiar Relationships and Creating Tension in Management Is Key

I would like to discuss the issues on the December 21 Nikkei article, "U.S. Proxy Voting Advisor ISS to Restore ROE Criteria; Objections to...

Metrical Inc

More Food (Data) For Thought

"Positive surprise in US Q4 2023 GDP, while inflation remains lower than reported! Japan's easing inflation and BOJ's potential end to negative...

Rikki Malik

Is the Deflationary Mindset of Managers Still Prevailing?

I would like to discuss the issues on the December 20 Nikkei article, "Weak Yen and M&A Effects Lead to Highest Corporate Financial Assets, Likely...

Metrical Inc

MSCI ACWI, EURO STOXX 50, TOPIX Remain Bullish; Buys in Cons Disc, Industrials, Services, Technology

MSCI ACWI, EURO $STOXX 50, $TOPIX Remain Bullish. $ACWI holding above short-term support at $102 (last week's breakout level), though we remain...

Vermilion Research

ROE Trends Do Not Seem to Indicate a Significant Change in Management's Mindset?

I would like to discuss the issues on the Nikkei article published on December 22, "Cost of Capital Disclosure Stays at 7%."

Metrical Inc

To Raise ROE, Breaking Away from Familiar Relationships and Creating Tension in Management Is Key

I would like to discuss the issues on the December 21 Nikkei article, "U.S. Proxy Voting Advisor ISS to Restore ROE Criteria; Objections to...

Metrical Inc

More Food (Data) For Thought

​"Positive surprise in US Q4 2023 GDP, while inflation remains lower than reported! Japan's easing inflation and BOJ's potential end to negative...

Rikki Malik

Is the Deflationary Mindset of Managers Still Prevailing?

I would like to discuss the issues on the December 20 Nikkei article, "Weak Yen and M&A Effects Lead to Highest Corporate Financial Assets, Likely...

Metrical Inc

"Positive surprise in US Q4 2023 GDP, while inflation remains lower than reported! Japan's easing inflation and BOJ's potential end to negative...