The Must Read PSA Weekly Research Round-up (week to 22 Jun)

The PSA Must Read Weekly Research Round-Up: Reports published this week on Kitanotatsujin (2930 JP) and Suzuki Motors (7269 JP) / We look at the Video Games Market focusing on Square Enix (9684 JP) growing hopes of success with Chinese mobile game Cross Gate / Nintendo (7974 JP) goes to war with hackers / Joel Scheiman looks at China’s environmental regulations and its impact on the materials industries / Pelham Smithers ask whether we should be bullish or bearish on Japanese equities at this point

The Weekly Comment by Pelham Smithers

As a defensive sector, Japan’s pharmaceutical sector has had an up-and-down time of it during the Abe era. In the early days of Abenomics, the sector was a serial underperformer, as there were high hopes that Abenomics would soon pull Japan out of its deflationary slump. However, even as early as 4Q 2013, misgivings were beginning to emerge (primarily then around the forthcoming consumption tax hike) and the sector went into a long period of outperformance, which ended in June 2016 with “Kuroda Mark III”, when Kuroda changed policy on further lowering interest rates. The sector then went into a period of underperformance that really only ended this year when Trump’s trade policy started to threaten global growth. Since that point in early January, the sector has outperformed Topix by 10%, something that is all the more impressive when you consider that the sector’s largest constituent at the time, Takeda (4502 JP), has declined by a third due to worries over its merger with Shire (SHP LN).

Reports / Flash Notes Published This Week: Headlines at a Glance

1. Kitanotatsujin (2930 JP): FY18 is Critical Year
2. Suzuki Motors (7269 JP) in Top Form – What’s Next?

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics, Gaming

1. Cross Gate Sends Square Enix (9684 JP) to New Highs: Read-Across to Activision
2. Nintendo (7974 JP) Goes to War with Hackers
3. Disney Raises its Offer for Fox: Implications for Valuing Sony’s (6758 JP) Assets

Chemicals

4. Cyclical Chemicals have Discounted a Lot of Bad News
5. China’s Environmental Policies Move Material Markets
6. Japan Display (6740 JP) Rises Further from the Bottom
7. Japan’s Solid-State LiB Project Kicks Off

Autos

8. Honda (7267 JP): Doubts over Alternative Power Train Policies in North America
9. Toyota (7203 JP) to Change Marketing Approach
10. Thai Auto Market Recovers – Japanese Benefit

Auto Parts / Machinery

11. Nikkei Highlights Mitsubishi Electric (6503 JP) and Gives Other Machinery Stocks a Boost
12. Daikin (6367 JP), NOK (7240 JP) and NGK Spark (5334 JP) Show Resilience

Telecom

13. Does the SoftBank (9984 JP) AGM Really Signal a Change?

Software

14. Mercari (4385) IPO Goes Well, Bucking Market Sell-off

Strategy

15. Should We Be Bullish or Bearish?

PSA Company Visits, Tours and Interviews

• Visited Daikin (6367 JP)
• Interviewed Kuraray (3405 JP)

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