What Worked Asia - 02 Sep 2016 - Nothing really stood out in HK/China, but good selloff in Size in Taiwan

What Worked – Nothing really stood out in Hong Kong / China this week. There was a slight move into momentum names in China and a slight move into high Beta names in Hong Kong. High Beta names in Hong Kong that did well were Luen Wong Group up 30% and Melco International Development up 15%. Singapore saw a move into high growth names this week, with a slight sell off in high Beta names. Singapore Post is up 3% and Mapletree Commercial is up 3%. There was a good move in Value and large cap names in South Korea this week. Samsung Card is up 17% and Pan Ocean is up 11%.

In Taiwan there was a big selloff in large cap names. Evergreen Marine is up 16% and Epistar Corp is up 12%. Beta and low PBR names did not do well in Indonesia this week. Low PBR names that did not do well were Bank CIMB Niaga is down 22% and Holcim Indonesia is down 9%. India saw a slight move into high Beta and momentum names. Momentum names that were up this week were Dr. LaiPathLabs up 26% and Aegis Logistics up 20%. Positive EPS revisions names did well in the Philippines this week. San Miguel Pure Foods was up 4% and LT Group was up 3%.

Who Moved – 182 names moved on volume this week in Asia. At the sector level, a good amount of the spikes came in the Financial and Health Technology sectors. At the regional level, HK/China made up almost half of the volume spikes, despite no factor really standing out in HK/China. On the positive side, Plaza Indonesia Realty is up 21%, China Aircraft Leasing Group is up 17% and Korean Air Lines is up 20%. On the other side, Hon Hai Precision Industry is down 13%, China Goldjoy Group is down 13% and Creative China Holdings is down 10%.


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What Worked Australia - 02 Sep 2016 - Dividends and short term momentum

What Worked – With the market down this week, there was a small push into Value names, in particular Dividend Yield. Meanwhile 12-month momentum creeped up along with Beta, albeit in a much smaller fashion than is usual for these higher volatility signals. 12-month momentum was largely driven by selloff in the 12-month losers rather than buying into the winners, with names like Mesoblast (MSB, -6.2%), Spotless Group (SPO, -6.1%) and Village Roadshow (WRL, -8.0%) all extending their losses from the last year.

Names with good forward EPS revisions saw a slight selloff also, with MMA Offshore (MRM, -12.7%), BHP Billiton (BHP, -4.7%) and Newcrest Mining (NCM, -4.1%) all showing very strong forward EPS revisions over the last month, yet all underperformed the index. Short term signals (Stochastic Oscillator & 1 Week momentum) saw a big pick up for the week coming into the close today.

Who Moved – Few more names than usual moving on substantially higher volumes this week. Steadfast Group (SDF, -2.2%), Star Entertainment (SGR, +3.0%) and Vocus Communications (VOC, -5.2%) all finished lower, while Ramsay Health Care (RHC, +7.1%) Super Retail (SUL, +3.5%) and Retail Food Group (RFG, +3.3%) all finished higher for the week on very strong volume.


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What Worked Japan - 02 Sep 2016 - Value and Beta very strong after a good month in August

What Worked – Value did very well this week. PBR names came in with an over 50% IC this week. PBR has not been consistently strong since February 2015, however recently PBR has worked 6 out of the last 8 weeks. Low PBR names that did well were Iyo Bank (8385) up 17%, Tokyo Electric Power Company (9501) up 19% and Juroku Bank (8356) up 16%. Low PE names also continued to do well this week. Low PE names have outperformed since the beginning of August. Joyo Bank (8333) is up 15%, Unipres Corp (5949) is up 13% and Chiba Bank is up 13%.

As with Value, high Beta names did very well in August and this last week. Beta has not consistently done this well in the last 2 years. High Beta names that did well were Minebea (6479) up 14%, Hyakugo Bank (8368) was up 14% and Dai-Ichi Life Insurance was up 13%. Names down over the last year bounced nicely this week, particularly in the Banks sector. Gunma Bank (8334) is up 14% and Bank of Kyoto (8369) is up 13%. There has been a clear shift away from Growth and into Value/Beta since the beginning of August. COSMOS Pharma (3349) was down 7% and Square Enix was down 5%

Who Moved – Only 21 names moved on volume this week. Banks and Retail names made up almost half of the volume spikes. Iyo Bank (8385) is up 17%, Tokyo Electric Power Company (9501) is up 19% and Juroku Bank (8356) is up 16%. On the other side, AEON Financial Service (8570) is down 9%, CALBEE is down 9% and Lawson (2651) was down 8%.


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Frightened Children - Analysts clinging onto the Mother of Guidance

“A mother understands what a child does not say” – Jewish proverb

 We looked at the growing consensus hugging nature of analysts in Japan who increasingly base their forecasts on a +/-5% range within company guidance.

Fig.1 below shows how the trend has climbed in the past 3 years. Whether one blames compliance or a lack of capability, consensus hugging now pervades over 50% of analysts from around 35% prior to 2013.

Fig.1 : % of Companies with Consensus Estimates less than +/-5% from company Guidance

The study gets worse when we look at it by sector. Since Lehman Shock, 75% of financial analysts in aggregate are within 5% of company guidance from 35% in late 2008. Unsurprisingly after the immediate crash, most analysts were way out of line with company guidance. 

When we broadened the study to +/-10% of guidance, nearly 70% of analysts are holding within that range. Has the hollowing out on the sell-side of more experienced analysts caused the trend? Naturally, the compression of commissions has forced many firms to cut overhead and the trend toward less experienced analysts has grown.

Fig. 11 % of All stocks estimates +/10% of company guidance

Link here

What Worked Australia - 26 Aug 2016 - Reversal in Beta and move to yield

What Worked – This week saw a very strong move into high yield names, and a move into size and more profitable companies.  Spotless Group (SPO, +3.5%), G8 Education (GEM, +4.0%) and Southern Cross Media (SXL, +13.3%) all amongst the highest yielding names in the market and all producing good returns for the week. On the other end of the yield scale Mesoblast (MSB, -7.3%), Worleyparsons (WOR, -13.8%) and Western Areas (WSA, -19.7%) were all sold off quite strongly.

Beta was hurt badly, returning -3.8% on a quintile spread basis for the week. High beta names that were hurt included Whitehaven Coal (WHC, -3.7%), Santos Limited (STO, -7.2%) and Beach Energy (BPT, -9.1%).

Who Moved – Not a big week for volume this week with most names in the index sitting around average volume. 16 names managed to move on higher than normal volumes. In the winner’s circle, GWA Group (GWA, +24.7%), Ardent Leisure (AAD, +7.8%) and Slater & Gordon (SGH, +6.0%) all up versus the index, while Monadelphous Group (MND, -17.4%), McMillan Shakespeare (MMS, -14.5%) and Japara Healthcare (JHC, -10.3%) were all sold off heavily.


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What Worked Japan - 26 Aug 2016 - High Beta and Low PBR names were hurt as Retail names benefited

What Worked – Pretty good sell off in names that were up over the last month and high Beta names. This is the first week high Beta names have not done well since the middle of July. Names that did well over the last month that were hurt this week were Sumco (3436) down 7%, Sony Financial (8729) down 7% and Tokyo Ohka Kogyo (4186) down 7%. High Beta names that did not do well this week were Unipres Corp (5949) down 10%, Alps Electric (6770) down 9% and Sumitomo Heavy Industries (6302) down 7%.

Looking at Value, PE was pretty much insignificant but we did see a selloff in low PBR names. Japan Petroleum Exploration (1662) was down 9%, Inpex (1605) was down 8% and J.Front Retailing (3086) was down 7%. On the other side, names with a high % of Retail Investors did well this week after poor performance since the beginning of July. Capcom (9697) was up 8%, Kyowa Exeo (1951) was up 6% and Iida Group (3291) was up 6%.

Who Moved – Not a strong week for volume this week. Only 12 names moved on volume. On the positive side, UNY Group was up 10%, Familymart (8028) was up 9% and Shochiku (9601) was up 3%. On the other side, Cosmo Energy (5021) was down 11%, Sumco (3436) was down 7% and SHIMAMURA (8227) was down 6%.


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What Worked Asia - 19 Aug 2016 - Value worked in HK/China with a slight selloff in Size

What Worked – Value was strong in China with a slight selloff in size this week. Low PE names that did well were Fufeng Group up 19% and Huadian Fuxin Energy up 12%. In Hong Kong, Value also did well but to a lesser degree. In Hong Kong, Nexteer Automotive was up 38% and APT Satellite was up 21%. In South Korea, Beta did well and ROE was hurt this week. Vieworks was up 9% and Emerson Pacific was up 8%. High ROE names that were hurt were Hanatour Service was down 7% and It’S Skin was down 7%.

In Taiwan there was a slight selloff in Size this week. Synnex Technology was down 6% and Simplo Technology was down 5%. In India Beta and PBR were strong this week. High Beta names that did well were NCC Limited up 10% and Edelweiss Financial Services up 9%. In Malaysia, PBR did well and high ROE/ROIC names were hurt this week. High ROE names that were down were Bursa Malaysia down 5% and Berjaya Auto also down 5%.

Who Moved – 227 names moved on volume this week. A good portion of those names spiked in the Financial and Electronic Technology Sectors. At the Country level, Hong Kong /  China dominated the volume spikes this week. On the positive side, Jubliant Life Sciences was up 32%, Bank Mayapada Internasional was up 28% and Hugel was up 25%. On the other side, Orion Corp was down 17%, China State Construction International was down 17% and Chularat Hospital was down 13%.


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What Worked Japan - 19 Aug 2016 - After weeks of weak but positive returns, strong moves in Value and Beta

What Worked – Strong move in Value and Beta this week. Value has done well over the last 3 weeks, but this week it really spiked up. PBR came in with an IC of 42%, followed by Dividend yield with an IC of  38%. Low PBR names that did well this week were Inpex Corp (1605) up 11%, Yokohama Rubber (5101) up 11% and Resona Holdings (8308) up 8%. High Beta names also did really well this week.

Beta has followed the same pattern as Value recently. Very strong in the beginning of July followed by positive but weak returns in the following weeks then a good spike up this week. Beta came in with an IC of 49%. High Beta names that did well were SUMCO (3436) up 13%, Unipres (5949) up 9% and Zeon (4205) up 8% this week. On the other side, high ROIC/ROE names were hurt this week. Iida Group (3291) was down 13%, Santen Pharma (4536) was down 13% and HOSHIZAKI (6465) was down 12%.

Who Moved – Only 23 names moved on volume this week. On the positive side, Toyo Tire & Rubber (5105) was up 7%, Hikari Tsushin (9435) was up 6% and Shimadzu Corp (7701) was up 6%. On the other side, Hokuetsu Kishu Paper (3865) was down 14%, Iida Group was down 13% and Shikoku Electric Power (9507) was down 11%. All moved on strong volume.


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What Worked Australia - 19 Aug 2016 - PBR is the new Aussie superstar

What Worked – While the momentum play in Australia was long considered a favorite, this week, like so many other this year, has been terrible for momentum investors. 12 month momentum, one of the mainstay factors in the market, has returned a quintile spread of -17.2% in the last 6 months. Unlike last week, 12 month momentum this week saw the 12 month winners being rather flat to market, while the laggards were the ones outperforming. Beach Energy (BPT, +7.1%), SAI Global (SAI, +8.1%) and Ainsworth Game Tech (AGI, +0.9%) all up after being some of the largest underperformers in the last year.

In a strange twist this year, PBR, a usually underwhelming signal in Australia to say the least, is a becoming a blockbuster. PBR has returned a quintile spread of +39.4% over the last 6 months. Some of the sub 1.0x PBR names coming through this week included News Corp (NWS, +1.3%), Santos Limited (STO, +3.2%) and Cleanaway Waste Management (CWY, +21.1%), while the more expensive end of the scale has seen Domino’s Pizza (DMP, -0.9%), Cochlear (COH, -0.8%) and CSL Limited (CSL, -7.3%) all come off this week.

Who Moved – 16 names moved on substantially higher than normal volumes this week. On the positive side, Ansell Limited (ANN, +16.5%), Orora (ORA, +10.9%) and Trade Me Group (TME, +5.9%) all finished up stronger, while G8 Education (GEM, -15.5%), AMP Limited (AMP, -5.9%) and IAG Limited (IAG, -5.1%) all finished the week lower.


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End of 1Q FY3/17 Earnings Summary - Full-year Consensus numbers still a lot more bullish than Guidance

If we look at the 1Q Aggregate numbers, which Sectors are best and worst positioned for the rest of the year? On the positive side, names in the Information and Communication sector achieved 30% of the aggregate OP guidance. Toho (9602) achieved 39% of full-year OP and KONAMI (9766) achieved 36% of its full-year OP guidance. The Pharmaceutical Sector achieved 40% of its aggregate OP. Takeda Pharma (4502) has already achieved 113% of its full-year OP guidance and Eisai (4523) has already achieved 48% of full-year OP guidance. Transportation Equipment achieved 32% of full-year OP guidance. Honda (7267) is at the top with 45% of OP guidance achieved, followed by Toyota Motors (7203) with 38% achieved.

On the other side, only 18% of aggregate OP was achieved in the Machinery Sector. Sankyo (6417) has a negative 16% achieved and Ebara (6361) is basically at nothing achieved. Electronic Appliances companies were only able to achieve 18% of full-year OP guidance. NEC (6701) OP came in at negative 30¥bn OP so that is not a good start for them. Fujitsu (6702) is not much better losing 11¥bn at the OP level in the first quarter. Other Sectors that are not off to a good start are Construction with only 17% of full-year OP achieved, Nonferrous Metals with only 18% achieved and Oil & Coal Products with only 15% of full-year OP guidance achieved.

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