Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20
Global "Debt Mountain": Beware of This "New Peak" - 13th Nov 20
Overclocking Zen 3 Ryzen 5600x, 5800x, 5900x and 5950x to 4.7ghz All Cores Cinebench R20 Scores - 13th Nov 20
Is Silver Leading Bitcoin or is Bitcoin Leading Silver? - 13th Nov 20
How Elliott Waves Simplify Your Technical Analysis - 13th Nov 20
How to buy Bitcoins using debit/credit card? - 13th Nov 20
Will COVID Vaccine Kill Gold and Silver? - 12th Nov 20
Access to Critical Market Reports - 12th Nov 20
Stock Market Dow Futures Reach 30,000 on News of COVID-19 Vaccine Trials Success - 12th Nov 20
8 Terms & Conditions You Must Know Before Asking For Life Insurance Policy Quotes - 12th Nov 20
Gold Stocks Post 2020 US Election Outlook - 11th Nov 20
Champions’ League Group Stage Draw: All You Need To Know - 11th Nov 20
Stock Market Secular Trend - 11th Nov 20
Stock Market Correction Curtailed by US Election - 11th Nov 20
What Causes a Financial Bubble? - 11th Nov 20
Ryzen 9 5900X RTX 3080 - Scan.co.uk vs Overclockers.co.uk UK Custom PC System Builder Review - 10th Nov 20
Killing Driveway Weeds FAST with a Pressure Washer - Saving Block Paving from LOTS of WEEDs - 10th Nov 20
Trump Fired, Biden Hired, What Next?  - 10th Nov 20
Looking for a Personal Loan? Here Is What You Have To Know  - 10th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Abenomics Proof Japanese Stock Market Investments

Stock-Markets / Japanese Stock Market May 13, 2013 - 12:54 PM GMT

By: Money_Morning

Stock-Markets

Keith Fitz-Gerald writes: The Japanese Topix Index is up more than 40% this year (and nearly 71% since July 2012) thanks in large part to Prime Minister Shinzo Abe's unlimited stimulus initiative known euphemistically as "Abenomics."

The argument behind this spending is a classic one, at least in economic terms: stimulate the economy to produce higher inflation, weaken the currency and aid the exporters.


But like Fed Chairman Ben Bernake's spending here and Draghi's spending in Europe, it's ultimately going to fail.

Sure the short-term effects are great...a wildly enthusiastic stock market that's trading at the highest levels seen in 4.5 years, a relaxation of risk and fresh strength in export focused companies that are showing stronger results on a devalued Yen. No question, I'll take a bull market any day.

It's the hangover I'm worried about - nobody knows how long this run will last.
This is especially problematic because most investors don't have the discipline needed to trade in and, of course, out when the party stops.

Piercing the Veil

I bring this up because it's not popular right now to look behind the scenes or inside the kimono, as the old expression goes:

  • Although Japan is known as an export market, it actually imports more than it exports, to the tune of $857 billion in imports versus $793 billion of exports. This is particularly a vexing problem with regard to fuel. Ninety-six percent of Japan's reactors remain off-line since the earthquake/tsunami of 2011. The corresponding rise in liquid natural gas expenditures was more than 50% in Q1 at 624 billion Yen. That hasn't yet hit earnings, especially in power intensive manufacturing sectors.
  • Japanese citizens have experienced a 27% drop in purchasing power (against the USD) since September 2012, when the Yen began its slide. At the same time, costs are going up faster than wages. I see the effects in my neighborhood (in Tokyo) daily as once spotless cars go unwashed, paint is peeling off buildings and the formerly flawless facade of Japan starts showing some cracks.
    • The Japanese mortgage market is backfiring in reaction to stimulus. Case in point, the latest data from Mizuho Securities shows rates rising at a time when they should be falling thanks to the Bank of Japan flooding the system with cash. The 30-year mortgage, for example, rose from 1.80% to 1.81%. Contrast that with the U.S. which saw mortgage rates fall by nearly 50% in reaction to Bernanke's stimulus from 2008 to May 2 all the way to 3.35%.
  • Combined public, private and corporate debt was already approaching 500% of GDP before this stimulus. Nobody knows how much higher it can go, but to say the nation is functionally bankrupt is an understatement.
  • The population is literally dying off and household savings are in decline. This means the excess capacity needed to absorb newly minted Japanese bonds is also in decline. Unless, of course, Japan goes to external sources. But then, there's a real problem...international markets will demand higher rates to cope with higher risks. Derivatives traders are already lining up to play this game the way they did with Greece, Spain and Italy. The true cost of capital will more than double.
  • Volatility risk is rising, so this game is already underway. Because the Bank of Japan is buying government bonds, they are effectively locking out other market participants and reducing liquidity. Not surprisingly, volatility is rising and the markets are going to fast become addicted to implicit BOJ support the way a drug user depends on his next "fix."

Are There Any Winners?

Yes. Quite a few actually: 310 out of 521 Topix companies that have reported since April 1 have beaten analyst estimates soundly.

But to really home in on the winners, you've got to focus on those sectors that will derive the biggest benefits from Abenomics: Japanese financial companies, car makers and industrial ceramics.

The financial companies are pretty easy to understand. The flood of government liquidity will help them generate higher profits while also flushing
them with cash.

If they lend it into the system instead of hoarding it like the big banks in the United States, there could be some huge profits working their way to the bottom line.

3 Winners

My favorite is Sumitomo Mitsui Financial Group, Inc. (NYSE: SMFG):
Japan's second-largest bank by market value, recently reported record net
income of 790 billion yen ($8 billion), which represents a 52% increase over the previous year.

The company also announced it raised its annual dividend by 20%, to 120 yen.

As of December 31, 2013 the company reported profit margins and operating margins of 18.28% and 37.37%, respectively.

When it comes to car makers, I like Daihatsu (Tokyo: 7262.T or OTC: DHTMY). I could easily go with Toyota (NYSE: TM) given its global scale, but the much smaller Daihatsu has stayed largely focused on its home markets.

The company recently announced the April 8, 2013 launch of its new MEBIUS, a
hybrid passenger vehicle, built under an OEM arrangement with Toyota. The MEBIUS represents the second hybrid vehicle supplied under an OEM arrangement after the ALTIS.

In fact, Toyota actually owns 51.3% (218,649,000 shares) of Daihatsu shares, as of March 31, 2013).

With a focus on Japanese (nationwide) sales, the company once again demonstrates its domestic focus. Also, sales of MEBIUS could be boosted at a time when Japanese consumers are feeling the impact of increasing fuel costs as a result of a weakening Yen.

In the industrial ceramics sector, I like Kyocera (NYSE: KYO). While many Japanese hi-tech manufacturing companies are struggling to remain competitive in markets they once dominated, Kyocera has charted a clear path forward.

The Kyoto-based company recently reported FY3/2013 Components Business Sales of ¥725.1 billion, which represents a 12.89% increase over the same
period a year ago.

The company's Electronic Device Group and Applied Ceramic Product Group sales were up ¥42.8 billion and ¥31.7 billion, respectively on strength from Kyocera Display Corp and expanded solar energy business in Japan, respectively.

I think we could see the solar energy business lead to increasing sales as a result of Japan's shutdown of its nuclear power-producing operations. I also expect Japan to become the world's second largest solar market after China as this shift matures.

Looking forward, the company is forecasting FY3/2014 net sales, profit from operations, pre-tax income and net income attributable to shareholders of ¥1,400,000 million, ¥140,000, ¥150,000, ¥96,000, which would represent increases of 9.4%, 82%, 48%,and 44%, respectively over the same period a year ago.

At the end of the day, stimulus is what it is...a well-intentioned but completely flawed effort to master the immutable laws of money.

That's why you want to go with investment choices that have the equity necessary to underwrite the risks that come with it.

Source :http://moneymorning.com/2013/05/13/three-abenomics-proof-investments/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules