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 is very difficult to ensure the independence and transparency of a committee when the board of directors is staffed with people who are aligned with the president's wishes.</li>
<li>Companies with high ROE have superior corporate governance, due to effective overseas investor's engagement, while companies with low ROE show unclear policies for improving ROE, despite having formalized board practice.</li>
<li>To improve the effectiveness of the board, companies should appoint people to the board who will help expand the value of the company, and use engagement with overseas investors etc.</li>
</ul>


It is very difficult to ensure the independence and transparency of a committee when the board of directors is staffed with people who are aligned with the president's wishes.
Companies with high ROE have superior corporate governance, due to effective overseas investor's engagement, while companies with low ROE show unclear policies for improving ROE, despite having formalized board practice.
To improve the effectiveness of the board, companies should appoint people to the board who will help expand the value of the company, and use engagement with overseas investors etc.


To Expand Value and Improve Capital Profitability, the Promotion of Human Resources Is Necessary

<ul>
<li>The high percentage of foreign ownership is a characteristic of companies that have improved capital profitability and increased valuations, which is effective for overseas investor engagement.</li>
<li>If the system is revised to help collaborative engagement and the identification of substantial shareholders, some of the challenges will be eliminated for both investors and the company.</li>
<li>To make the engagement more effective, investors should increase active funds and companies should decrease cross-shareholdings.</li>
</ul>


The high percentage of foreign ownership is a characteristic of companies that have improved capital profitability and increased valuations, which is effective for overseas investor engagement.
If the system is revised to help collaborative engagement and the identification of substantial shareholders, some of the challenges will be eliminated for both investors and the company.
To make the engagement more effective, investors should increase active funds and companies should decrease cross-shareholdings.


What Investors and Companies Should Do to Make Engagement More Effective ....

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

Sun Pharmaceutical Industries / Technical Analysis

<ul>
<li>Our long-term bullish outlook (since early-November 2023) remains intact. With that said, we believe a 1-3-month pullback has likely begun.</li>
<li>Supports to watch are at $110 on MSCI ACWI (ACWI-US) and $41-42 on MSCI EM (EEM-US), and whether these levels hold or not will determine the severity of the pullback.</li>
<li>The S&amp;P 500 is violating its 20-day MA, Europe's EURO STOXX 50 is breaking below 4884, and Japan's TOPIX appears to be staging a false breakout at the 2800-2815 level</li>
</ul>


Our long-term bullish outlook (since early-November 2023) remains intact. With that said, we believe a 1-3-month pullback has likely begun.
Supports to watch are at $110 on MSCI ACWI (ACWI-US) and $41-42 on MSCI EM (EEM-US), and whether these levels hold or not will determine the severity of the pullback.
The S&amp;P 500 is violating its 20-day MA, Europe's EURO STOXX 50 is breaking below 4884, and Japan's TOPIX appears to be staging a false breakout at the 2800-2815 level


Pullback Underway; Getting Defensive; Long-Term RS Bottoms for Defensives Is a Reason for Caution

<ul>
<li>We need to watch carefully to see whether cash flow will subsequently increase in the projects that the CB issuers have invested their proceeds in.</li>
<li>Share prices of companies that announce equity financings, including CBs, usually decline. Besides the dilution, another aspect is the effect of the company's announcement of the sale of its shares.</li>
<li>In the case of CBs, the company should keep in mind that it sold the conversion rights of its shares for less than their actual call option value.</li>
</ul>


We need to watch carefully to see whether cash flow will subsequently increase in the projects that the CB issuers have invested their proceeds in.
Share prices of companies that announce equity financings, including CBs, usually decline. Besides the dilution, another aspect is the effect of the company's announcement of the sale of its shares.
In the case of CBs, the company should keep in mind that it sold the conversion rights of its shares for less than their actual call option value.


Although the Cost of Capital for CBs Should Be Considered Much Higher than for SBs

<ul>
<li>Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there's insufficient time for a thorough review of useful information.</li>
<li>Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don't will continue to widen.</li>
<li>Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.</li>
</ul>


Few companies file their annual securities reports prior to AGM, and since they are filed 1-2 days prior to AGM, there's insufficient time for a thorough review of useful information.
Profitable companies that gain the support of overseas investors further increase their return on capital through engagement, and the gap between them and those that don't will continue to widen.
Since reducing policy shareholdings will reduce the percentage of voting rights that unconditionally favor company proposals, engagement will be more effective and speed up the process of management improvement.


What Is Needed for More Engagement to Be Effective Is to Reduce Policy Shareholdings

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)

To Expand Value and Improve Capital Profitability, the Promotion of Human Resources Is Necessary

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