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>It’s no surprise that some companies consider the dissolution of parent-subsidiary listings as a swift and effective measure to raise ROE. However, not every listed subsidiary will be TOB.</li>
<li>TOB of a high-profitability subsidiary can have significant impact on both the denominator and numerator of the parent company's ROE because it uses more cash and will improve profit margins.</li>
<li>Even if the "significance of parent-subsidiary listings" is disclosed, few investors believe that the listed subsidiary's independence is fully ensured, and the dissolution of parent-subsidiary listings will eventually follow.</li>
</ul>


It’s no surprise that some companies consider the dissolution of parent-subsidiary listings as a swift and effective measure to raise ROE. However, not every listed subsidiary will be TOB.
TOB of a high-profitability subsidiary can have significant impact on both the denominator and numerator of the parent company's ROE because it uses more cash and will improve profit margins.
Even if the "significance of parent-subsidiary listings" is disclosed, few investors believe that the listed subsidiary's independence is fully ensured, and the dissolution of parent-subsidiary listings will eventually follow.


ROE and Valuations of Japanese Stocks Will Improve Through Dissolution of Parent-Subsidiary Listings

<ul>
<li>While disclosure of committee activities in annual securities report provides clues to the independence of committee, this might create higher hurdle for moving to Company with US type 3 Committees.</li>
<li>Based on the premise that disclosure of committee activities can change management's mindset and enable committees to function, more specific details should need to be disclosed to all listed companies.</li>
<li>Many companies have nominating committees that meet 1-2 times a year before the AGM. Few companies have a Succession Plan, which is of great interest to investors.</li>
</ul>


While disclosure of committee activities in annual securities report provides clues to the independence of committee, this might create higher hurdle for moving to Company with US type 3 Committees.
Based on the premise that disclosure of committee activities can change management's mindset and enable committees to function, more specific details should need to be disclosed to all listed companies.
Many companies have nominating committees that meet 1-2 times a year before the AGM. Few companies have a Succession Plan, which is of great interest to investors.


What Can Be Done to Make the Independence of the Committee Function that Investors Have Questioned?

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

iShares MSCI ACWI ETF / Technical Analysis

<ul>
<li>We see global equities (MSCI ACWI) going through a pause/pullback amid short-term breakouts in the U.S. dollar (DXY) and global sovereign 10-year yields.</li>
<li>A rising DXY and climbing yields is a near-term headwind, and we could continue to see more choppy price action in the weeks ahead.</li>
<li>With that said, as long as the DXY remains below $106, the 10-year Treasury yield remains below 4.35%, and ACWI-US is <em>above</em> $98, we would view pullbacks as buying opportunities.</li>
</ul>


We see global equities (MSCI ACWI) going through a pause/pullback amid short-term breakouts in the U.S. dollar (DXY) and global sovereign 10-year yields.
A rising DXY and climbing yields is a near-term headwind, and we could continue to see more choppy price action in the weeks ahead.
With that said, as long as the DXY remains below $106, the 10-year Treasury yield remains below 4.35%, and ACWI-US is above $98, we would view pullbacks as buying opportunities.


Pause/Pullback Underway; Downgrading Europe and Mexico; Buys in Services, Tech, Comm, Healthcare

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

Rikki Malik

Macroeconomics

<ul>
<li>Recent US economic data has been mixed on the inflation/growth front. </li>
<li>Fed dot plot and messaging at odds with market expectations.</li>
<li>The extent of rate cuts is correct, but timing is likely not.</li>
</ul>


Recent US economic data has been mixed on the inflation/growth front. 
Fed dot plot and messaging at odds with market expectations.
The extent of rate cuts is correct, but timing is likely not.


US Interest Rates and the Dollar and Impact on Markets

<ul>
<li>Although there's range in the cost of capital, a sense of level is shared among investors, so even if a company estimates lower, it will be found to be incorrect.</li>
<li>The essential problem isn't scrutiny of the cost of capital, but rather that many companies produce low returns. Investors are skeptical that companies produce returns above their cost of capital.</li>
<li>If stock prices do not rise, investors will continue to demand that companies improve their management, attributing this to the negative gap between the cost of capital and return.</li>
</ul>


Although there's range in the cost of capital, a sense of level is shared among investors, so even if a company estimates lower, it will be found to be incorrect.
The essential problem isn't scrutiny of the cost of capital, but rather that many companies produce low returns. Investors are skeptical that companies produce returns above their cost of capital.
If stock prices do not rise, investors will continue to demand that companies improve their management, attributing this to the negative gap between the cost of capital and return.


Investors Expect a Feasible Management Strategy Rather than an Accurate Cost of Capital

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)

ROE and Valuations of Japanese Stocks Will Improve Through Dissolution of Parent-Subsidiary Listings

I would like to discuss the issues on the December 13 Nikkei Shimbun article, "Parent-Subsidiary Dissolutions Call for Japanese Stock Hopes:...

Metrical Inc

What Can Be Done to Make the Independence of the Committee Function that Investors Have Questioned?

I would like to discuss the issues on the December 13 Nikkei Newspaper article, "Number of Nominating Committee Meetings: 1 to 17 in FY2022, with...

Metrical Inc

Pause/Pullback Underway; Downgrading Europe and Mexico; Buys in Services, Tech, Comm, Healthcare

Pause/pullback underway in $ACWI, but as long as the $DXY remains below $106, the 10-year Treasury yield remains below 4.35%, and $ACWI is above...

Vermilion Research

US Interest Rates and the Dollar and Impact on Markets

Recent mixed US economic data on inflation and growth, has reduced interest rate cut expectations but we believe the path to US lower interest...

Rikki Malik

Investors Expect a Feasible Management Strategy Rather than an Accurate Cost of Capital

I would like to discuss the issues on the December 11 Nikkei article, "'Its Cost of Capital is Too Low': Market Uncovers Lax Estimates."

Metrical Inc