In today’s briefing:
- Honda (7267 JP) – MAMMOTH New ¥1.1Trln Stock Buyback
- [Japan Activism] Exedy (7278) – Murakami-San Selling into the Buyback
- EQD | Nikkei Index Options Weekly – December 16 – 20
- Isetan Shinjuku to Hit ¥424 Billion
- Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?
Honda (7267 JP) – MAMMOTH New ¥1.1Trln Stock Buyback
- Today, along with the announcement of Memorandum of Understanding between Honda Motor (7267 JP), and Nissan Motor (7201 JP) to work towards negotiating a Joint Holding Company by June 2025…
- Honda cancelled their existing ¥100bn buyback, and initiated a truly mammoth NEW Buyback – up to 1.1 billion shares (23.7% of TSO), spending up to ¥1.1trln on market through Dec-2025.
- Assuming the stock pops, it is probably “only” worth 15-18%, but that’s still a LOT. At that rate it boosts BVPS by 8+% on its own, and EPS by 17%.
[Japan Activism] Exedy (7278) – Murakami-San Selling into the Buyback
- Exedy Corp (7278 JP) announced a big buyback. Murakami-san did not sell the first pop. The shares fell. Exedy started buying back and the shares went up. Now Murakami’s selling.
- Today after the close, Murakami Group companies announced that City Index Elevens had started selling. They sold 1.25% of shares out in 6 trading days to 16 December.
- I expect they sold another 2% in the past week through today. Shares tanked today. This is not a good signal. And it comes earlier than I expected.
EQD | Nikkei Index Options Weekly – December 16 – 20
- All 5 trading days of the past week saw non-volatile price declines but with implied vols still ticking higher leaving historic vol and implied vol moving in opposite directions.
- Trading activity focused on Puts, 59.5% of all options trades were Puts last week
- Postions being covered into market weakness as seen from large decrease in open interest (60% of the decline was Puts).
Isetan Shinjuku to Hit ¥424 Billion
- Isetan-Mitsukoshi has gone from being the most cautious forecaster among the big department store retailers to the most optimistic.
- This is largely on the back of previously unimaginable sales records at its main stores, especially Isetan Shinjuku.
- All of which is bringing in piles of profit, with projections of exceeding its previous average profit by four times.
Is the High Volatility of Japanese Equities Only Due to Their Small Market Capitalization?
- In addition to many manufacturing companies that are sensitive to economic cycles, TSE is also characterized by many companies with sluggish operating cash flow growth.
- Low interest rates in Japan can also be a factor in high volatility. As the volatility of low interest rates increases, corporate value volatility is likely to increase as well.
- Some overseas investors pay attention to the equity spread over JGB yields. As the risk of rising interest rates in Japan increases, they are likely to unwind their futures positions.
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