Active Investing in Japan

No need to get excited over the fact that the Japanese economy has now contracted two consecutive quarters (no shooting the messenger). That was largely already factored into equities, thus explaining the severely depressed levels registered of late. However, as The Economist reported in its latest edition, the “Toyota shock” of a sharp decline in expected earnings (-74% fiscal y-o-y) reverberated across Japan, bringing home the realization, to some, that stocks may not be so cheap anymore. So, it may be the case that we are closer to fair value, in spite of a market that pretty much trades at book value. continue reading…

Prior to yesterday’s 6.5% drop in Tokyo (Nikkei 225 close at 8,899), the N225 had rallied 33% in the prior six sessions to recoup a good chunk of the 37% drop between Oct. 1 and the 26-year low reached Oct. 27 at 7,162. Yesterday I stated the obvious in that Tokyo would sell-off as reality set in post-Obama euphoria, but I made the point that the number of sellers would be limited. In fact, volume and turnover weren’t exactly heavy, although stocks were broadly lower. continue reading…

UPDATE: (Osaka open). December Nikkei 225 futures (Singapore) point to another move to the downside, although the decline is a more modest one (-130 points) than we’ve seen recently. N225 futures in Chicago shed 440 points to settle at 7,110, also the low of the day. Osaka futures settled at 7,160 yesterday, but in extended trading fell as low as 6,900. Osaka futures have since opened down 180 points at 6,980.

December Nikkei 225 futures trading in Singapore opened at 7,480, off a little more than 2%. That’s right about where the Osaka futures settled on Friday at 7,470. In Chicago, the close was a bit more optimistic at 7,550. At any rate, at these levels, if the benchmark N225 trades in-line, we’ll be at a new post-bubble low. Sad, but true. For a comparison of various market and other related metrics see: Nikkei and TOPIX, then and now.

December Nikkei 225 futures dropped 790 points in Chicago today to settle at 8,215. Minutes ago in Singapore, N225 futures gapped down 465 points to 8,200 and futures in Osaka fell 440 points to 8,220. Intra-day in Chicago, the low was 8,080. That leaves just 450 points, another sell-off, from hitting the once unthinkable low of 7,630 (set on 10/10 taking us back to the post-bubble trough days of spring-2003). Seems at least for today that the 8,000-level will be held. We haven’t seen very heavy volume in equities. That suggests it is mostly traders with a dearth of sellers and the rest on the sidelines or heads buried in hands. Pay attention to the bickering over a new/modified government stimulus. Interestingly, the government had been selling off equity positions it had acquired years back and had to recently put a halt to that activity. Now, it may be buying again. Don’t agree with that measure, but it may be a necessary evil.

N225 December futures settled at their daily high, +1,000 at 9,000, in Chicago. In Singapore, futures opened Tuesday +1,275 at 9,330. No question Tokyo equities and futures trading in Osaka will mirror global gains Monday after Tokyo was closed for a national holiday. Problem here and elsewhere is not just the threat of quick profit-taking, but also the unchanged reality of a slowing global economy. No doubt there is massive under-valuation of equities in Japan, but at the same time, aside from overseas AIMs and SWFs, this is a market that requires an equally massive amount of patience.

clipped from markets.nikkei.co.jp ＳＧＸ日経平均先物・寄り付き　1275円高の9330円で始まる

Down more than 11% in early trading, the Nikkei shed 9.6% to plunge to the 8,000-level (closing at 8,276). N225 futures barely managed to preserve that level, dropping 1,180 points to 8,020.

Yet again, the JP financial press, citing a Nikko/Citi strategist, points to (preemptive) selling by hedgies. Combined de-leveraging and de-risking by HFs is delivering a crushing blow. The Nikkei is now down over 50% since its peak last year, falling 27% in just this month of October.

A marginal life insurer, Yamato and the REIT New City Residence both filed for bankruptcy. This spooked today’s market further, exacerbating uncertainty and eroding confidence even more. All eyes on America and the G7 talks.

clipped from charge.biz.yahoo.co.jp 「株崩落」の見方＝日本の金融システムも悪化 従来、日本の金融システムは米国ほど悪化していないとの認識だったが、その認識も崩壊した。この点は痛い。 これを見越し、ヘッジファンドはキャッシュ化の動きを強めている。１１月決算のヘッジファンドは３０日・４５日ルールの期限が近く、顧客の換金を見越して売却を続けているようだ。今週の動きは、彼らにとって売りをためらう局面ではない。売れるだけ売ろうとしている。

The Nikkei had a rough go last week indeed, losing 3.6% and the 14,000-level (13,973.73); TOPIX fell to 1,371.57 after a short-lived recovery of 1,400 two weeks ago. No worries though, as Chicago Nikkei 225 futures not only held 14k, but added 140 points to the upside (14,220) setting the stage for a gap up on Monday (Osaka N225 futures: 13,980). continue reading…

Thought the Dow’s 3.5% rally and the Nasdaq and S&P 500’s 4.2% gains were big? Take a look at the 5.5% surge in N225 futures in Chicago. The last quote was at 12,460. A late $/¥ quote shows a recovery of the 100-level. A quick review of Investing in Japan’s listing of Japanese ADRs shows real estate and leasing firm ORIX (IX: 39.28 -0.38%) led the charge and chip equipment and diagnostics-maker Advantest (ATE: 24.29 -1.34%) put up the second-best daily performance — granted the two have severely depressed stock prices! continue reading…