What Worked Asia - 28 Oct 2016 - This week was one of those weeks when nothing really stands out

What Worked – In China nothing really happened in Value, but there was a good selloff in Quality, particularly high ROIC names. High ROIC names that went down were Koradior Holdings down 15% and Great Wall Motors down 13%. In Hong Kong, Value did slightly better but the real outperformance came in names with positive EPS revisions. China South City Holdings is up 10% and China Overseas Grand Oceans is up 7%.

Singapore saw a move into Quality and away from large cap names. Delfi Limited is up 8% and Super Group is up 7%. In South Korea there was a slight selloff in high beta names, but nothing really stood out after the strong performance in Value last week. There was a huge selloff in high Beta names in the Philippines this week. GT Capital Holdings is down 8% and JG Summit Holdings is down 4%. Nothing stood out in India this week. Huge reversal in momentum names in Malaysia. YTL Corp is down 8% and UOA Development is down 6%.

Who Moved – 131 names moved on volume this week. A lot of the volume spikes came in Taiwan, South Korea and India. On the positive side, Bumi Resources is up 46%, Shun Cheong Holdings is up 32% and Golden Energy Mines is up 25%. On the other side, COSMAX is down 17%, Great Wall Motors is down 13% and Belle International Holdings is down 13%.

Summary

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What Worked Japan - 28 Oct 2016 - Value continued to work and has down well over the last month

What Worked – Value continued to work this week and has done really well over the last month. This week, PE did particularly well. Low PE names that stood out were ORIX (8591) up 15%, Jafco (8595) up 14% and Maeda Corp (1824) up 10%. High Beta names have also done well over the last month. Mitsubishi Materials (5711) is up 10%, Taiheiyo Cement (5233) is up 9% and NEXON (3659) is up 8% this week.

After a great run in growth names from October 2015 up to July of this year, growth including this week has not done well since. High growth names that were hurt this week were M3 (2413) down 7%, Sohgo Securities (2331) down 7% and MonotaRO (3064) down 5%. Since, August mean reversion has dominated the technical signals. The Stochastic Oscillator factor has only had one positive week since the end of August, meaning names up over the previous month went down each week.

Who Moved – We had 27 names moved on volume this week. On the positive side, ORIX (8591) is up 15%, Jafco (8595) is up 14% and Nidec (6594) is up 11%. On the other side, M3 (2413) is down 7%, IHI Corp is down 6% and Mitsubishi Tanabe Pharma (4508) is down 4%.

Summary

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What Worked Australia - 28 Oct 2016 - Momentum reversal as div yield bounces

What Worked – This week saw both long and short term momentum signals reverting in a poor week for the index overall. Momentum was largely hurt by profit taking in the names that were up over the last 12 months, while there was some buying into the laggards. One year performers that were hurt this week included Galaxy Resources (GXY, -4.3%), Resolute Mining (RSG, -9.9%) and Credit Corp Group (CCP, -10.0%), while Estia Health (EHE, +0.4%), Spotless Group (SPO, +1.0%) and Incitec Pivot (IPL, +1.4%) all managed to make positive returns for the week.

Dividend Yield, while it has been back and forth over the last month, finally saw an uptick in the higher yielding names in the market, however the numbers where largely driven by a sell-off in the low yielding space. Low yielding names that were hit this week included Australian Agricultural Company (AAC, -11.5%), Orocobre Limited (ORE, -8.6%) and Syrah Resources (SYR, -11.9%).

Who Moved – This week saw 14 names from the moving on higher than normal volumes. Four names managed to end the week in the positive, and included Aconex (ACX, +10.7%), Corporate Travel management (CTD, +3.4%) and Macquarie Atlas Roads (MQA, +1.7%), while Bega Cheese (BGA, -20.6%), Ardent Leisure group (AAD, -17.9%) and Wesfarmers Limited (WES, -8.6%) all finished the week significantly down and backed by volume.

Summary

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What Worked Asia - 21 Oct 2016 - Value did well and Quality suffered in most Asian Markets

What Worked – In China, Large cap and Value names did well this week. Red Star Macalline Group is up 15% and Sihuan Pharmaceutical is up 12%. Nothing stood out in Hong Kong this week. In India, Value outperformed at the expense of Quality. Low PE names in India that did well were DCM Shriram up 22% and ICICI Bank up 14%.

In South Korea, Large cap and Value did well this week and Quality suffered. Low PE names that did well were BNK Financial up 9% and Woori Bank up 9%. Quality names that were down were Medy-Tox down 10% and Dongwon F & B down 10%. Taiwan also saw a move into Value and from Quality. Green Seal Holdings is up 17% and TSRC is up 12%.

In the Philippines high Dividend Yield names did poorly, coming in with a negative 44% IC. However, this week that just means that high dividend names did not go up as much as low dividend names in the Philippines

Who Moved – 144 names moved on volume this week. At the country level a good number of the names came in Taiwan and India. At the Sector level, the Finance and Process Industries sectors pick up a disproportional number of volume spikes. On the positive side, Barito Pacific is up 30%, Esso Thailand Public is up 27% and Superblock Public is up 22%. All on strong volume. On the other side, Philippine Trust is down 31%, Kajaria Ceramics is down 14% and Apexindo Pratama Duta is down 12%.

Summary

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What Worked Japan - 21 Oct 2016 - Value and High Beta names down over the last year bounced this week

What Worked – Huge reversal in names that were down over the last 12 months. Mitsui Fudosan (8801) is up 12%, Sumitomo Real Estate (8830) is up 10% and Tokyo Tatemono (8804) is up 10%. The reversal was mainly driven by Value and Beta. Since the beginning of July, the quintile with the lowest PBR names is up approx. 13%. Low PBR names up this week were Japan Display (6740) up 20%, Mitsubishi Motors (7211) up 16% and Nomura Real Estate (3231) up 11%.

This week there was a slight selloff in large-cap names and names with a high % of Retail investors. Large-cap names have not done well since the beginning of August. Shochiku (9601) is down 6%, Toda Corp (1860) is down 4% and Rakuten (4755) is down 4% this week. After outperforming on average since September, Growth names did not do well this week. High OP growth names down were M3 (2413) down 6% and ONO Pharma (4528) down 4%.

Who Moved – Only 7 names moved on volume this week. On the positive side, TADANO (6395) is up 12%, Japan Petroleum (1662) is up 4% and JGC (1963) is up 1%. On the other side, Kamigumi (9364) is down 5%, Seven & I Holdings (3382) is down 3% and Nippon Yusen Kabushiki Kaisha is down 1%.

Summary

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What Worked Australia - 21 Oct 2016 - Book rules as profitability sold

What Worked – PBR continued to produce solid numbers this week, but once again driven by a sell-off in the more expensive names by these measures in the market. That being said, the cheaper names on a PBR basis have produced excess returns consistently since June. Periods of value working like this have been historically followed by a large sell-off soon after. Expensive names on a PBR basis that were hurt this week included Amcor Limited (AMC, -4.9%), Dominos Pizza (DMP, -2.8%) and Iron Mountain Inc (INM, -4.0%) while some of the cheaper names saw positive returns like Origin Energy (ORG, +2.2%), Genworth Mortgage (GMA, +3.3%) and Santos Limited (STO, +3.0%).

Dividend Yield suffered this week also, with higher yielding names seeing a continued sell-off including Nine Entertainment Holdings (NEC, -4.8%), Seven West Media (SWM, -3.3%) and Cromwell Property Group (CMW, -2.7%). On the other side, lower yielding names bounced including Infigen Energy (IFN, +22.9%), NextDC (NXT, +9.6%) and Galaxy Resources (GXY, +4.5%) leading the charge.

Who Moved – 9 names from the 200 strong index managed to move this week on significantly higher than normal volumes. Finishing the week down included Crown Resorts (CWN, -17.0%), Start Entertainment (SGR, -9.4%) and Fisher & Paykel Healthcare (FPH, -4.2%), while Tatts Group (TTS, +14.6%), Credit Corp Group (CCP, +5.5%) and Tabcorp Holdings (TAH, +2.0%) all finished the week well above the index.

Summary

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What Worked Asia - 14 Oct 2016 - Sell off in Beta in HK/China with move into Value in Singapore/South Korea

What Worked – Good sell off in high Beta names and names that were up over the last 3 months in China. Leyou Technologies Holdings is down 5% and China Jicheng Holdings is down 8%. Hong Kong also saw the same sell off in 3-month momentum but low PE names were also hurt this week in Hong Kong. Lee & Man Paper were down 9% and Skyworth Digital Holdings were down 8%.

In South Korea, value, particularly PBR,  did well this week. Hanwha Chemical is up 10% and E-Mart is up 8%. In Singapore, there was a selloff in high Beta names and a move into high Dividend Yield names. Noble Group is down 4% and Silverlake Axis is down 4%. Beta and low PBR names were hurt India. Bank of Baroda was down 6% and DLF Limited was down 4%. Size and Value outperformed in Taiwan this week. USI Corp was up 5% and China Motors was up 1%. Value, particularly high Div Yield names, did well in the Philippines this week. Premium Leisure was up 2% and Globe Telecom was up 1%.

Who Moved – 115 names moved on volume this week in Asia and almost a third of those names came in Thailand. No one specific Sector stood out. On the positive side, Chaoyue Group is up 28%, Nan Hai Corp is up 27% and Huchems Fine Chemical is up 20%. On the other side, Jammu & Kashmir is down 20%, Intermedia Capital is down 17% and Regina Miracle international is down 11%.

Summary

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What Worked Japan - 14 Oct 2016 - After last week's strong moves, Value and Beta did not do well

What Worked – After the strong positive moves in high Beta and low Value names last week, high Beta names were hurt this week. Value names were also hurt but not as much as high Beta names. High Beta names that did not do well this week were Kobe Steel (5406) down 8%, JFE Holdings (5411) down 7% and Dowa Holdings (5714) down 7%.

Looking at Retail Investors, after an unusual week of underperformance, names with a high percent of Retail Investors bounced back. Names that did well were TADANO (6395) up 12% and Toshiba (6502) up 7%. There was also a slight move into growth and high ROE names. High ROE names that did well were Zenkoku Hosho (7164) up 7%, Lion (4912) up 6% and FAST RETAILING (9983) up 4%. High OP growth names that were also did well were COSMOS Pharma up 6% and M3 Inc (2413) up 4%.

Who Moved – Only 7 names moved on volume this week. On the positive side, TADANO (6395) is up 12%, Japan Petroleum (1662) is up 4% and JGC (1963) is up 1%. On the other side, Kamigumi (9364) is down 5%, Seven & I Holdings (3382) is down 3% and Nippon Yusen Kabushiki Kaisha is down 1%.

Summary

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What Worked Australia - 14 Oct 2016 - Big move out of expensive names and Growth names down

What Worked – For the first time this year Value signals have produced an IC of greater than 25%, a big number in terms of weekly results. This was not however the market buying cheap names, but rather a large sell-off in the more expensive names. Value itself has been working as an overall signal for the last few weeks, but while the cheaper names have continued upwards rather steadily, the more expensive names have been hurt. Since the beginning of August, more expensive names on an FY1 PER basis have underperformed the market by almost -2.5%, and off -3.8% from the mid-August peak. Names that are expensive on a forward PER basis that did poorly this week included Aconex (ACX, -4.6%), Nextdx Limited (-7.6%) and Technology One Limited (TNE, -5.4%). Technology Services as a sector saw no names posting a positive result this week.

Growth was negatively impacted this week also, although a more even distribution – the low growth names did well, while the high growth names were sold off. Syrah Resources (SYR, +5.4%), Goodman Group (GMG, +1.1%) and Westfield Corp (WFD, +1.6%) amongst the low growth names that outperformed the index this week, while Galaxy Resources (GXY, -9.0%), Orocobre Limited (ORE, -3.3%) and Bellamy’s Australia (BAL, -4.6%) where all sold off while being amongst the highest growth names in the index.

Who Moved – Not a big week for volume this week, with 7 names from the 200 moving on higher than normal volumes. Those that underperformed this week included OFX Group (OFX, -10.7%), Bank of Queensland (BOQ, -0.8%) and Tabcorp Holdings (TAH, -0.8%), while BT Investment Management (BTT, +10.6%), Sigma Pharma (SIP, +1.0%) and Telstra (TLS, +1.0%) all finished the week higher.

Summary

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Names where Consensus is moving away from Guidance

With 1H Earnings Season right around the corner, we screened for names where consensus moved away from Company guidance in the last 2 months. We screened for names where consensus EPS is down more than 10% in the last 2 months, however guidance is 10% above consensus. For example, Nintendo’s (7974) guidance is 31% above consensus. However, consensus has fallen 17% in the last two months. Other names where consensus is going down and increasing the gap between guidance are FamilyMart (8028), Toppan Printing (7911) and Idemitsu Kosan (5019). The gap between guidance and consensus for FamilyMart is huge Consensus EPS is negative ¥6.3, however guidance is still at ¥232.

On the other side, names where consensus going up and increases the gap between guidance and consensus are Mitsubishi Corp (8058), Toshiba (6502) and Toho Gas (9533). Consensus EPS for Toshiba is up 33% in the last 2 months and now guidance is 29% below consensus. For McDonalds Holding (2702) consensus EPS is ¥18 and up 15% over the last 2 months. However, company guidance is still sitting at ¥8.

Here are the results of the two screens.

EPS Consensus moving up and away from Guidance

EPS Consensus moving down and away from Guidance

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