20 April 2018

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The PSA Must Read Weekly Research Round-Up: Reports published this week on China Reviewing It’s Auto Market Policies / SBI Holdings (8473 JP) 4Q Performance & FY17 Results Preview / Nissan’s (7201 JP) Ambitious Robotaxi plans/ As the non-ferrous & rare metal markets continue to rise, we highlight the winners and losers / Pelham Smithers comments on the fact that 1Q is traditionally the weakest quarter for Japanese Equities – (week to April 20)

The PSA Japan Research Round-Up for the week ending 20 April, 2018

Weekly Market Comment by Pelham Smithers

1Q is Traditionally Weakest Quarter for Japanese Equities: Conditions Should Improve from Here

With any luck, the Japanese stock market has had its sell-off. Stock markets shouldn’t be seasonal, but the Japanese stock market is getting a reputation for being so, particularly with quantitative easing. While all five 4Qs since Kuroda became BoJ Governor have seen QoQ returns in excess of 5%, four of the five 1Qs have been negative. However, this 1Q sell-off was less to do with swings in liquidity. Instead, external factors took their toll on the Japanese stock market in 1Q 2018, in the form of very aggressive foreign selling.
Thanks to a weak yen and strong exports, Japanese corporate earnings have risen quickly, keeping valuations in check. 2017 Topix EBIT/shr came in at ¥165, which is ¥4 better than expected just prior to the Dec quarter results season. This in turn has brought EV/OP valuations down to 13.5x, which is low. However, while foreign activity was broadly neutral in 2017, it has since turned very negative so that foreign investors have now sold nearly half of what they bought when Abe came to power in 2013. Foreign investors normally sell due to expectations of deteriorating GDP growth / corporate earnings, but this has yet to materialize. Offsetting this has been heavy buying of ETFs by the BoJ, – now the primary tool for QE…………..

Reports / Flash Notes Summaries

1. SBI Holdings (8473 JP) SBI Securities 4Q Performance – FY17 Results Preview Flash Note
2. Japan Market Strategy and Tech Strategy Presentation
3. China Reviews Auto Market Policies

Company / Sector / Thematic Comments

Technology: Consumer Electronics, Gaming

1. Sony (6758 JP) Gets Another Hit Movie

Technology: Electronic Components and Precision

2. Murata (6981 JP) to Spend ¥100bil on EV Component Capacity
3. Micro Cap Inter Action (7725 JP) Moves into the Sun
4. Feedback from Micro-Cap SPE-Related Marumae’s (6264 JP) Results Meeting

Chemicals / Materials

5. Interest Returns to Solid-State LiBs
6. Sumitomo Metal Mining (5713 JP) Leads Non-Ferrous Shares Higher
7. Titanium Stocks Soar on US-Russia Sanctions
8. Graphite Electrode Makers Negotiate Long-term Contracts
9. The Message from TSMC is that Smartphone Demand Will be Weak

Automobile

10. Nissan’s (7201 JP) Ambitious Robotaxi Plans
11. Nissan’s (7201 JP) Carlos Ghosn Confirms Changes Lie Ahead, but No Details Given
12. China to Remove Ownership Cap
13. EVs to Shine at Beijing Auto Show
14. Risk of More Competition in Asia’s Commercial Vehicle Market

Auto Parts / Machinery

15. NOK (7240 JP) Bucks the Trend
16. Yaskawa (6506 JP) Recovers Slightly
17. Denso-Aisin Gap Reversal
18. Impact of the 4Q Performance for SBI Securities on SBI Holdings’ (8473 JP) Results

Internet / eCommerce

19. Kakaku.com (2371 JP) Reaches One-year High
20. Recruit Holdings (6098 JP): Update on Indeed
21. GREE (3632 JP) vs GungHo Online (3632 JP)
22. LINE (3938 JP): Difficult Times Ahead

Pharmaceutical

23. Takeda (4502 JP) May Still Acquire Shire
24. Feedback from Cosmos Pharm (3349 JP) FY17 Q3 Results Meeting / Dealing with Rising Costs
25. List of PSA Published Reports Since Dec 2017 to Date

PSA Company Visits, Tours and Interviews

• Attended earnings meetings at: ABC Mart (2670 JP) and Marumae Co (6264 JP)

*If you would like access to the full weekly the reports highlighted and if you would like to see the list of reports produced YTD, please contact our sales team. You can also find PSA research on FactSet, Thomson Reuters (Reuters Knowledge, Thomson One Analytics, Starmine), Capital IQ, and Bloomberg (under PSAZ < GO> or by typing in the < stock code> equity CN PSA).

2018-05-10T12:45:04+00:00