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>For Japanese companies that take time to take action while watching their surroundings, it's skeptical of the expectation that individual managers will initiate measures in response to a "TSE request.</li>
<li>The shift from deflation to inflation won't only affect company's profit structure and balance-sheet, but will also force Japanese companies to change as it resets the mindset of all managers.</li>
<li>Since there's little economic rationale for holding cash under inflation, all companies, rather than individual management decisions, will be forced to use cash for investment in growth and shareholder returns.</li>
</ul>


For Japanese companies that take time to take action while watching their surroundings, it's skeptical of the expectation that individual managers will initiate measures in response to a "TSE request.
The shift from deflation to inflation won't only affect company's profit structure and balance-sheet, but will also force Japanese companies to change as it resets the mindset of all managers.
Since there's little economic rationale for holding cash under inflation, all companies, rather than individual management decisions, will be forced to use cash for investment in growth and shareholder returns.


Changing Japanese Companies Is Not TSE Request but Inflation that Changes Mindset of All Managers

<ul>
<li>Not because TSE requires it, but because management should provide shareholders with a concrete plan and outlook for cash allocation based on the company's growth stage and the external environment.</li>
<li>For companies that disclosed improvement measures before TSE requested them and saw their stock price rise significantly, the sustainability of the stock price depends on the feasibility of the plan.</li>
<li>The stock market jumped the gun and rallied in anticipation of the company's announcement of feasible plan as expected, even though the company has yet to disclose any improvement plan.</li>
</ul>


Not because TSE requires it, but because management should provide shareholders with a concrete plan and outlook for cash allocation based on the company's growth stage and the external environment.
For companies that disclosed improvement measures before TSE requested them and saw their stock price rise significantly, the sustainability of the stock price depends on the feasibility of the plan.
The stock market jumped the gun and rallied in anticipation of the company's announcement of feasible plan as expected, even though the company has yet to disclose any improvement plan.


Can Many Companies that over Years Could Not Suddenly Transform Themselves Thanks to TSE Requests?

<ul>
<li>Even though OP Margin has been stagnant, NP Margin has improved due to the corporate tax rate cut, and the increased free cash flow has been less directed to investments.</li>
<li>The fact that OP Margin didn’t rise much while personnel and R&amp;D costs were curbed and there wasn't much investment simply implies a lower gross margin in the core business.</li>
<li>With ROE growth sluggish and cash accumulating, it's reasonable that investors demand further shareholder returns. If asset turnover declines while OP Margin slows, there's little reason to hold cross-held shares.</li>
</ul>


Even though OP Margin has been stagnant, NP Margin has improved due to the corporate tax rate cut, and the increased free cash flow has been less directed to investments.
The fact that OP Margin didn’t rise much while personnel and R&amp;D costs were curbed and there wasn't much investment simply implies a lower gross margin in the core business.
With ROE growth sluggish and cash accumulating, it's reasonable that investors demand further shareholder returns. If asset turnover declines while OP Margin slows, there's little reason to hold cross-held shares.


Shouldn't Shareholders Raise Voice for a Company that Is Building up Cash While Its ROE Is Sluggish?

<ul>
<li>It's skeptical that managers before the bubble economy really took risks. They no longer are protected by regulations  as they were before, and must take risks on their own initiative.</li>
<li>The Stewardship Code and Corporate Governance Code were introduced in the hope that they would provide a boost to standstill managers to improve profitability to increase corporate value.</li>
<li>Exit from the market is an important factor, but it can decelerate the speed at which exits are facilitated, such as maintaining listing through transitional measures or changing TOB rules.</li>
</ul>


It's skeptical that managers before the bubble economy really took risks. They no longer are protected by regulations  as they were before, and must take risks on their own initiative.
The Stewardship Code and Corporate Governance Code were introduced in the hope that they would provide a boost to standstill managers to improve profitability to increase corporate value.
Exit from the market is an important factor, but it can decelerate the speed at which exits are facilitated, such as maintaining listing through transitional measures or changing TOB rules.


Japanese Managers Have Always Wanted to Distance Themselves from Market Pressures

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>The MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EAFE (EFA-US), and EM (EEM-US) are all reversing topside their 2-month downtrends.</li>
<li>Despite this being a bullish short-term development, we still expect $93 to cap upside on the ACWI-US, leaving about 4-5% upside from here (at time of writing)</li>
<li>As a result, we would use any further strength as an opportunity to get more defensive. Actionable Themes: REA-AU, GFL-CA, GFL-US, Consumer Staples, Health Care, and Gold Miners</li>
</ul>


The MSCI ACWI (ACWI-US), ACWI ex-US (ACWX-US), EAFE (EFA-US), and EM (EEM-US) are all reversing topside their 2-month downtrends.
Despite this being a bullish short-term development, we still expect $93 to cap upside on the ACWI-US, leaving about 4-5% upside from here (at time of writing)
As a result, we would use any further strength as an opportunity to get more defensive. Actionable Themes: REA-AU, GFL-CA, GFL-US, Consumer Staples, Health Care, and Gold Miners


Shift To Defensives as $ACWI Makes Push for $93; Remain Overweight Europe; Opptys in China/HK, Japan

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)

Changing Japanese Companies Is Not TSE Request but Inflation that Changes Mindset of All Managers

I would like to discuss the issues on the March 8 Nikkei article, "The Truth Behind Japan's Stock Market Solo Surge: Overseas Investors' Interest...

Metrical Inc

Can Many Companies that over Years Could Not Suddenly Transform Themselves Thanks to TSE Requests?

I would like to discuss the issues on the March 8 Nikkei article, "Top share price gainers among low P/B stocks are those with expanded shareholder...

Metrical Inc

Shouldn't Shareholders Raise Voice for a Company that Is Building up Cash While Its ROE Is Sluggish?

I would like to discuss the issues on the March 6 Nikkei article, "ROE as a Resume of Japanese Companies: Struggle with 'Global' Continues."

Metrical Inc

Japanese Managers Have Always Wanted to Distance Themselves from Market Pressures

I would like to discuss the issues on the February 27th Nikkei article, "Market Pressure Brings Ambition to Management."

Metrical Inc

Shift To Defensives as $ACWI Makes Push for $93; Remain Overweight Europe; Opptys in China/HK, Japan

$ACWI, $ACWX, $EFA, and $EEM all reversing topside their 2-month downtrends. Despite this bullish short-term development, we still expect $93 to...

Vermilion Research