Japanese Salaries basically unchanged over the last 10 years

Recently the IMF wrote that Japan needs to increase wages, so we thought we would see if that was true. It is. As the only individual-level Salary data is on a parent-only basis we compared Personnel Expenses to the number of Employees and then aggregated up the data. Interestingly on an aggregate basis the number of Employees (including Temp workers) in Companies with market cap above ¥30bn increased 34% in the last 10 years. This is compared to an increase in Personnel Expenses of 36%. So basically companies have added more people but not increased wages / Salary.

However, if we look at the sector level there is some discrepancy. Industrial Services is a great example. Personnel Expenses are basically flat, while the number of Employees has increased 17% in the last 10 years.  Transportation is basically the same with only a 2% increase in Expenses and a 20% increase in Employees. Energy Minerals is the worst with a 32% increase in Employees and only a 3% increase in Personnel Expenses. Health Services is really the only sector that had a significant increase in Personnel Expenses and not in Employees.

While we are not advocating huge Personnel Expenses, if your Employees do not have money they cannot buy your products. It is the circle of life…..

Japan Wage & Employment Changes by Sector

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What Worked Asia - 11 Mar 2016 - Div Yield worked in China/HK and PBR was strong in Indonesia and Thailand

What WorkedHong Kong was all about Dividend Yield as the other Value factors cooled off after a strong performance last week. Texhong Textile Group was up 17% and COCSO Pacific was up 7%. Singapore on the other hand saw a huge selloff in high Dividend names and a move into low PBR and positive EPS revision names. Indo Food Agri Resource was up 12% and Accordia Golf was up 5%.

In China we saw a good selloff in short-term momentum names and a move into high Dividend yield names. BBMG Corp was down 7% an Hua Hong Semiconductor was down 6%. High Dividend names that did well were Lonking Holdings up 10% and Xinyi Solar Holdings up 10%. South Korea saw a move into PBR names and a move away from Quality and long-term momentum. Doosan heavy Industries was up 10% and Hankook Tire Worldwide was up 10%. There was also a good selloff in Value in Taiwan, particularly Dividend Yield. Chlitina Holdings was down 10% and Yungtay Engineering was down 7%. The Philippines was all about Beta this week. First Gen was up 10% and Megaworld was up 8%.

Who Moved Good volume week with 217 names moving on volume. A good number of the volume spikes came in Taiwan and South Korea. At the Sector level, Process Industries and Producer Manufacturing saw good volume. On the positive side, Honbridge Holdings was up 26%, HTC Corp was up 27% and Doosan Infracore was up 23%. On the other side, Bumi Armada was down 22%, Mindtree was down 15% and Boer Power Holdings was down 14%.


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What Worked Japan - 11 Mar 2016 - Really nothing compared to last week although slight selloff in Beta

What Worked After last week’s huge Value bounce it looks almost like the market just took a break this week. None of the Value or Quality signals stood out and only a couple of factors exceeded our self-imposed 10% threshold as significant. Stochastic Oscillator had a negative 12% IC. So there was a slight sell off in names up over the last month.

Minebea was down 7% and ASATSU-DK was down 4%. There was also a slight selloff in high Beta names. However this is after a huge positive move for Beta last week. High Beta names that went down this week were Asics down 11%, NSK down 9% and Taiyo Yuden down 8%.

Who Moved – Despite nothing really standing out, 20 names moved on volume this week. On the positive side, Suzuki Motors was up 2%, Sangetsu was up 2% and Komatsu was also up 2%. On the other side, Kansai Electric Power was down 24%, Tokyo Gas was down 6% and Coco-cola East was down 6%.


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What Worked Asia - 04 Mar 2016 - Most of the Region bounced on Value and Beta

What WorkedValue bounced in pretty much every region in Asia this week. In China, Beta and Value did well at the expense of Quality. Hydoo International was up 23% and Jiangnan was up 19%. In Hong Kong it was pretty much the same with PBR the strongest factor and Quality hurting. High ROE names that did not do well this week were KuangChi Science down 9% and Pacific Textiles down 6%. Beta was the strongest factor in Singapore, followed by PE. Super Group was up 18% and Sembcorp Industries was up 17%. In South Korea, Quality was hurt badly and as with the other regions Beta did well. Ottogi was down 10% and Hansae Yes24 was down 9%.

Malaysia was more about PE than Beta this week. AirAsia was up 22% and SapuraKencana was up 6%. India was the same as other regions with Beta and Value outperforming. Inox Wind was up 34% and DLF Limited was up 23%. Thailand was really the only region were Value and Beta were not a factor and Size dominated. Total Access Communication was up 17% and Bank of Ayudhya was up 10%.

Who Moved 208 names moved on volume this week. A good number of the names came in the Financial and Consumer Non-Durable Sectors. At the Country level, Thailand, Indonesia and India pick up a good portion of the volume spikes. On the positive side, AirAsia was up 22%, China Resource Beer was up 22% and DoubleDragon Properties was up 21%. On the negative side, Sihuan Pharma was down 54%, Philippine Long Distance was down 19% and Global Brands Group was down 11%.


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What Worked Japan - 04 Mar 2016 - Crazy reversal in Momentum and Beta but the move was not supported by Volume

What Worked Beta and Value bounced up harder this week than they did two weeks ago. Beta has really only worked 4 times since the middle of last October. However, this week Beta came in with a crazy high 46% IC. High Beta names that did well were Sumco up 17%, Alps Electric up 17% and Minebea up 18%. FY1 PE almost did as well as Beta. The last time PE did this well was back in October 2015. Low PE names that were up were IHI up 17%, TDK up 17% and Shinsei was up 14%.

PBR also outperformed this week. Low PBR names that did well were Mitsui OSK up 18%, Inpex up 17% and DMG MORI up 14%. There was a good move into names with a high percent of Foreign Investors. Toshiba was up 20% and Inpex was up 17%. Price reversal was even stronger than Beta this week with a really rarely seen 60% negative IC. Dowa was up 14% and Monotaro was up 14%.

Who Moved – Unfortunately not a lot of names bounced on strong volume. Only 16 names moved on volume this week. On the positive side, Nissan Motors bounced up 13%, Hitachi Capital was up 10% and Zeon was up 10%. On the negative side, overall there were only 74 names with negative returns this week in TPX500.  The ones that were down on volume were NEC down 8%, SCSK Corp down 5% and Odakyu Electric down 4%.


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What Worked Asia - 26 Feb 2016 - Value / Beta were hurt in most regions after last week's bounce

What WorkedIn Hong Kong there was a selloff in high Beta names.  Alibaba Health Information was down 15% and KWG Property Holdings was down 12%. In China there was a slight move away from Large-cap names. Zhejiang Expressway was down 10% and Tingyi Holdings was down 10%. Value and large-cap names were hurt in Singapore, Keppel Corp was down 3% and Ezion Holdings was down 4%. Taiwan saw a move into Value and away from Growth names. Some strong sales growth names that were hurt were Motech down 9% and Giga Solar Materials down 9%.  India also saw a good selloff in Value this week with a slight move into Quality. AIA Engineering was up 3% and also EIH Limited was up 5%. Malaysia was one of only place that value worked this week. Dividend Yield was very strong. Press Metal was up 3% and Pavilion Real Estate Investment was also up 4%. Nothing really stood out in South Korea.

Who Moved 151 names moved on Volume this week. The volume spikes were well distributed across the region with a slight focus in the Financial Sector. On the positive side, XinRen Aluminum was up 79%, Freeman Financial Corp was up 37% and Bank Tabungan Pensiunan was up 37%. On the other side, OBI Pharma was down 32%, KEPCO was down 24% and KWG Property was down 11%.


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What Worked Japan - 26 Feb 2016 - Selloff in Value after the strong bounce last week

What WorkedAfter last week’s strong bounce in Beta and Value, this week we saw a moderate selloff in Value and a slight move back into Retail names. Since the middle of October last year we see that PE has one strong week followed by a month or so of underperformance. If that holds true this time we have two more weeks of Value hurting. The last time that PE consistently did well was back in April/May of 2015. Low PE names that did not do well this week were Nippon Shokubai down 11%, Shinsei Bank down 9% and Mitsubishi Gas Chemical down 8%.  Retail names that bounced back were Aiful up 10%, Softbank up 10% and Fujikura also up 10%.

Who MovedCompared to last week, volume really dried up. Only 26 names moved on strong volume, which is about normal for Japan. On the positive side, Central Glass was up 21%, Unipres was up 16% and Trend Micro was up 16%. On the other side, ABC-Mart was down 5%, Temp Holdings was down 4% and Inpex was down 4%.



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What Worked Asia - 19 Feb 2016 - Value and Beta drove most Markets in Asia this week

What WorkedBeta and Value bounced in Hong Kong this week. Beta has not done this well in Hong Kong since last September. Obviously there was a huge reversal in price momentum. Names that did well were Alibaba Health up 37% and Season Pacific Holding up 23%. In China it was all about Beta and to a lesser degree Value. Huaneng Renewables was up 35% and Huadian Fuxin Energy was up 30%. In South Korea, it was the opposite. Value was the strongest and Beta trailed behind. Value names that did the best were OCI was up 26% and Ssangyong Cement was up 12%. Singapore was all about Beta and Large cap. The one-week price reversal was through the roof high. Names that were up were Sembcorp Marine was up 20% and Noble Group was up 18%. Interestingly in India, Value barely worked and Beta did nothing this week. Indonesia was also all about Value and Beta did nothing this week. Names that were up were Eagle High Plantation up 27% and Media Nusantara was up 10%. Value and Beta did well in Malaysia. SapuraKencana Petroleum was up 9% and Press Metal was up 5%.

Who Moved218 names moved on volume this week. A good number of volume spikes came in India and South Korea. Relative to other regions, there were not a lot of spikes in China and Hong Kong. At the Sector Level, the Finance Sector dominated the spikes. On the positive side, Thai Airways International was up 37%, Huaneng Renewables was up 34% and Just Dial was up 26%. On the other side, COSMAX was down 21%, Enseval Putera Megatrading was down 18% and Korea Kolmar was down 17%.


Factor Performance Asia ex-Japan

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What Worked Japan - 19 Feb 2016 - Value / Beta bounced hard on very strong volume

What WorkedHuge bounce in Value and high Beta names. With TOPIX bouncing 8% this week, Value (particularly PE), Beta and names with a high percent of Foreign investors really did well this week. High Beta and names with a high % of Foreign Investor have not done this well in the last 2 years. The last time PE did this well was last October. Value names that did well this week were Tokyo Tatemono up 26%, Nabtesco Corp was up 21% and Capcom was up 22%. High Beta names  that did well were Sumitomo Rubber Industries up 29%, Sumco up 27% and IHI Corp up 24%. Names with a high percent of Foreign Investors that outperformed were Softbank was up 22%, Capcom was up 22% and ASATSU-DK was up 22%. There was a slight sell off in Retail names as they have done well pretty much every week since the beginning of the year.

Who MovedA very good sign was that this week’s move was on very strong volume. 210 names moved on volume this week. 189 names moved up on strong volume and only 21 names moved down on volume this week. Looking at the names that moved down, Yamazaki Bread was down 12%, Trend Micro was down 9% and Hokuetsu Kishu was down 7%. On the positive side, aside from ASATSU-DK all the above names moved on volume. Other names that moved up on strong volume were DMG MORI was up 19%, Itochu was up 17% and Pola Orbis up 18%.


Japan Factor Performance

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3/3 Earnings Summary - Not much change YoY Aggregate numbers not great but not bad.....

We still have some stragglers who have not announced, but the majority of names are in. With only 40 new names the aggregate numbers have not really change much over last week. YTD aggregate YoY OP growth is at 14% and aggregate Net Income growth is now at 6%. YTD YoY growth at the sector level are also positive. Only 8 out of 31 Sectors have negative YoY growth. The worst is Iron & Steel with OP down 35% YoY and Mining OP is down 27% YoY. On the positive side, OP for the Electric Power and Gas is up 140% YoY and aggregate OP for Pulp & Paper is up 60% YoY

 Looking toward the full-year numbers, we have now achieved 78% of full-year aggregate OP guidance and 79% of full-year Net Income guidance. At the sector level, Pharmaceutical sector has already achieved 111% of its full-year guidance, Land Transportation has achieved 91% of its full-year OP guidance and 88% of OP guidance has been achieved in Rubber Products. On the other side, Machinery has only achieved 67% of full-year OP guidance and Wholesale Trade has only achieved 68% of full-year guidance.

 The gap between Company guidance and Consensus estimates remained the same. At the aggregate level, Net Income guidance is now 7% below consensus and aggregate OP is now 4% below consensus. OP guidance for Electric Appliances is 5% below consensus. Guidance for both the Rubber Products sector remains 9% below consensus. However, OP guidance for the Pharmaceutical sector is now 6% below consensus, compared to9% below last week.

 Looking at what consensus is doing after announcements,OP consensus is up 0.5% since announcements, consensus OP for the Marine Transportation sector dropped 4% last week and Nonferrous Metals consensus estimate fell 2% last week to a total of 5% since announcement. Consensus estimates for Other Financing Business was also reduced by 2%. On an overall absolute basis, OP consensus estimates for the Securities % Commodities is down 8% since the announcements.

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