The Chinese New Year effect is such that any YoY comparisons around January / February are prone to huge distortions so normally you would treat with caution any outlier economic statistic from around this time. However, an 18% YoY drop in exports is arguably an outlier too far and whether the blame needs to be put on fiscal, monetary or even social policy (minimum wage increases), this is a warning shot across that bow that China has a problem. How great a problem may be debated, but as to how much impact it would have on Japan, we only have to look at the economic and corporate data from around the time of the 2012 Senkakus Crisis to know it could be sizable.
The latest crisis at Daiichi Sankyo’s (4568) (¥1,746 -28) Ranbaxy unit – recall of generic Lipitor after a 20mg tablet was found in a sealed 10mg box – is actually a bit suspicious and it may well be that a third party is involved. Still, the problem is not so much the US, now, but the damage all this bad news is doing to Ranbaxy’s sales at home. Arguably, the US was always a short-term opportunity (now lost), with India the long-term growth story. However, the latter is now being hurt both by Ranbaxy’s deteriorating image at home but also that of the local health authority, which is increasingly seen as corrupt according to a report in the Economic Times.
Shares in Sony (6758) (¥1,864 +20) bucked the overall downward trend following the announcement that the company had sold its “birthplace” for US$156mil, which is a decent enough price (¥10bil profit to be booked on the deal), but also a reminder that the company is running out of such options (previous sales have been in the US$800~1bil range). The share price move was, though, in advance of the pricing of the Japan Display IPO, which came in right at the bottom of the ¥900~1,100 indicated price range, which is likely to be viewed as disappointing. It is also going to be interesting to see how the PS4 fares from March 14th when Titanfall is released for the XBox One. Importantly, Microsoft is bundling the Sci-Fi game in with the X1 console “for free”, which essentially means that it has cut the X1 price by US$60. Currently, the PS4 is outselling the X1 3:2 in US and 5:1 in Europe.
On the “Seeking Alpha” website, there’s a concise “why Toyota’s a Buy” guide. Yes, the argument is a little simplistic, but the points made (strong sales of luxury cars, new RAV4 and Highlander selling well, low P/E) should hit home, which does beg the question as to why the shares have been such a poor performer recently. Our worry is that the full effect of Unintended Acceleration story has still yet to be felt, but given how well Toyota (7203) (¥5,800 -89) has kept the legal machinations out of the press, it is difficult to see how this would have drained share price performance to the extent it has done. Another explanation – and this goes to the heart of foreign investor sentiment at this point – is that Toyota is the ultimate Abenomics play and Toyota’s peak relative to the market last summer doesn’t coincide with the peak in the stock market or yen weakness, but does coincide with the peak in Abe’s popularity.
Nidec (6594) (¥12,740 +155) shares did what Astellas (4503) didn’t do and responded positively to news of a stock split. However, since stock splits usually come in the wake of a strong share price performance, the news does beg the question how longer do the shares continue to rally. Well, in Nidec’s case, the situation is inconclusive. Since 1990, the stock has been split an impressive five times prior to this news. In 1994, the shares fell 39% over the next year (March ~ March), in 1997 they gained 35%, in 2000, they fell 41%, in 2004 they gained 18% and in 2005 they gained 45%, for an average gain of 4%. Mind you, that was still better than Topix, which was only up once in these five (fiscal) years.