Active Investing in Japan

The month of April is over as far as the Nikkei is concerned and that is a good thing. The Nikkei 225 Stock Average lost 28.76 (-0.17%) to 17,400.41 (range: 17,299.37 – 17,542.25) . Nikkei 225 futures in Osaka lost 50, or -0.29% to 17,410 (range: 17,300 – 17,560). TOPIX 1st Section fell 2.41, or -0.14% to 1,701 (range: 1,694.04 – 1,718.97), barely holding onto to 1,700. Advancers outnumbered decliners 936 x 669 (124 unchanged). JASDAQ lost 0.02 (-0.02%) to 80.95 (range: 80.58 – 81.32).

A slew of economic data for March and a Bank of Japan decision to hold at 0.50% was mixed into today’s trading. [...]

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Don’t get excited! Golden Week is coming (three-day weekend plus Tokyo and Osaka are also closed next Thur. and Fri.). There’s not much reason for new buying, as many investors will be on the sidelines and/or quick to take any profits, given the holiday. Hey, this is almost like the status quo, but what’s different is the fact the U.S. and other global markets are still open and of course there are geopolitical factors as well. Investors don’t want to be unnecessarily exposed. Another thing, why would companies report earnings ahead of this holiday? Especially if they were expected to be good?

At any rate, here’s what happened today [...]

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I subscribed late last year and just received the premier issue (May ‘07). There’s a deal to sign up for 12 issues @$12 or 75% off cover price and I think I’ll do just that and maybe gift a few too. It is published monthly, but the next issue does not come out until mid/late August (Sept. issue).

My thoughts so far: Very nice, that is, both the articles and the advertisements. 328 pages in all, plenty of material. Maybe that’s why they are taking off until Sept.? In fact, it’s beyond overkill with ads — could be a textbook for marketing to the wealthy — but in the end, I’m not sure the ads really bother me. If this were weekly, it would probably get old. But on a monthly basis, I think the articles are well worth flipping through the ads. Heck, it might be fun to see the next round of ads!

In closing, I like it. Take a look for yourself! Check out their beta website: http://www.portfolio.com/

Nikkei 225 Stock Average: -215.61 (-1.24%), 17,236.16 (range: 17,221.55 – 17,379.52)

N225 Futures – Osaka: -170 (-0.97%), 17,280 (range: 17,240 – 17,390)

TOPIX 1st Section: -18.82 (-1.10%), 1,687.34 (range: 1,683.19 – 1,701.46), Decliners > Advancers: 1,194 x 428 [108 unchanged], Only 2/33 sectors post gains, TOPIX Core 30 hits near calendar year low

JASDAQ: +1.41 (1.78%), 80.50 (range: 79.19 – 80.50)

Yen/US$: last at 118.75

The FT Alphaville blog discusses a new research report by Merrill Lynch that says any Fed easing due to subprime mortgage woes ‘could fuel the biggest bull run ever seen in emerging markets,’ in the words of FT. In short, here’s the scoop on emerging market stocks according to Merrill:

“We continue to believe the asset class is undercapitalised, under-leveraged, under-owned and under-valued.”

This seems to be a valid argument, especially before the hedge herd, mutual funds and lastly, individual investors drive prices up. In fact, Merrill predicts 20% annualized growth to 2,010 (currently 964), through 2010 for the MSCI Emerging Markets Index.

But, how about Japanese small cap stocks?

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HOYA (JP: 7741) got beat up again, -3.77% to ¥3,830 (down over 7% in two sessions). It is nearing a calendar year low, set March 19 at ¥3,810. Not necessarily a rush to get in here, but arguably becoming an attractive buying opportunity — either look at buying as a trade and/or build (add) a position using the good ol’ buy-on-a-dip strategy. Long-term there don’t appear to be any issues.

By the way, Deutsche Bank Securities (Japan) downgraded it to “hold” from “buy” with a downward revised target of ¥4,350, from ¥5,350 previously. Whoops! Mizuho did a number, make that two, taking it to a “3″ from a “1.” Goldman appears to have come out with a note too, but don’t know the details yet. HOYA now has a trailing P/E ratio (for the past fiscal year ended in March) under 20, at 19.79 as of yesterday’s close. It was in a similar position in 2005, when it went on to gain about 60% in a year.

After HOYA’s (JP: 7741) earnings failed to impress, it looks like Canon’s (JP: 7751) (CAJ) continued success just may rub off on the overall market and bring buyers back into the game. If not, we play the wait-and-see, flat, up 1.5%, down 2% game a little longer. At any rate, the Nikkei 225 Stock Average lost 3.6 points (0.02%) to 17,451.77 (range: 17,305.78 – 17,500.34), while TOPIX 1st Section closed 0.53 points higher (0.03%) to 1,706.16 (range: 1,691.79 – 1,711.05). Advancers outpaced decliners 1,031 x 565 (133 unchanged) and 19 of 33 industries posted gains. N225 futures in Osaka were down 30 (0.17%) to 17,450 (range: 17,320 – 17,520). You are not going to believe this: JASDAQ closed in positive territory for the first time in (wait, I can’t remember how long) +0.75% to 79.09. And, get ready, TOPIX 2nd Section posted a gain for the first time in nine.

So much for the morning rally. An S&P upgrade of Japan’s long-term credit rating one notch to “AA” from “AA-” resulted in buying of yen, and the rest is no surprise, selling of exporters and sustained weakness in domestic oriented and smaller-cap stocks. The Nikkei finished 2.75 points (0.02%) higher to 17,455.37 (range: 17,413.64 – 17,656.55). Nikkei 225 futures in Osaka gained 0.40% to 17,480 (range: 17,420 – 17,680). TOPIX 1st Section lost 4.44 (0.26%) to 1,705.63 (range: 1,701.59 – 1,726.36), as decliners outpaced advancers 1,093 x 525 (111 unchanged). The Nikkei Shimbun reports 244 stocks established new lows, versus 181 on Friday and only 43 that reached new highs. TOPIX 2nd Section fell for an 8th straight session, the longest losing streak since an 11-day span last September. JASDAQ fell 1.08% to 78.50 (range: 78.25 – 79.20).

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Blue chip exporters are leading the rally. Thank the Dow — 13,000?! Domestic oriented stocks and most financial stocks are weak — one exception of strength is ORIX (JP: 8591) (IX). There’s a clear and present preference. We’re still seeing bullishness in Kyocera (JP: 6971) (KYO) and TDK (JP: 6762) (TDK), but surprised to see weakness in Nidec (JP: 6594) (NJ). Sony (JP: 6758) (SNE) and Nintendo (JP: 7974) (NTDOY.PK) are both at/near new highs (multi-year in the case of Sony, all-time for Nintendo). Strength pretty much across the board with autos. So it’s lunch time in Tokyo and the Nikkei 225 is up 0.94% to 17,617.51, N225 futures +1.32% to 17,640 and TOPIX 1st Section +0.68% to 1,721.69. I hate to say it, but no surprise here, JASDAQ -1.01% to 78.56! // Get ready for earnings season. Don’t forget the N225 is still about 700 points shy of its multi-year high set in February before the global sell-off.

The Nikkei 225 Stock Average rose 0.46% to 17,452.62 (range: 17,404.62 – 17,502.02), unable to regain/hold the psychologically important level of 17,500. It was the third lightest trading day of the year, but buying of N225 futures after yesterday’s drop (despite an overall lack of bullishness and only a 0.1% gain to 17,410 (range: 17,410 – 17,530), finishing about 40 points below the benchmark), a rebound in Asian stocks and the yen, which weakened about 0.6% to 118.7 against the U.S. dollar, all helped the Nikkei close in positive territory. TOPIX 1st Section gained 0.18% to 1,710.07 (range: 1,703.21 – 1,714.54) as decliners actually outnumbered advancers 676 x 915 (139 unchanged). TOPIX 2nd Section fell for a 7th straight day, matching a losing streak last November. JASDAQ fell 1.1% to 79.36 (range: 79.19 – 80.22), continuing its funk (also seven straight down sessions). Kyocera (JP: 6971) (KYO) +0.96% to ¥11,520 and TDK (TDK) +1.18% to ¥10,260, seem to remain in favor, despite recent volatility, as we suggested in an earlier post.
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