Bystander’s View on Japan #11, August 13th 2012


ROE: Back to Basics

This week is a OBON week in Japan when most of the factories and offices take a summer break.

Stock trading will be quite light. So, taking this opportunity, I would like to analyze Japanese stocks according to ROE.

 Recent issue of NIKKEI Veritus has risted up their top picks by screening, the stocks which have higher Yen 200 billion market capitalization, and which have higher expected ROE comparing past 5-year average and also previous year.

 Top 10 stocks are as follows.

               Company        (Code)   Expected ROE%

        1.    Oracle Japan  (4716)       46.2

        2.    Daito Trust      (1878)       32.3

        3.    M3                   (2413)       31.3

        4.    Marubeni         (8002)       23.5

        5.    Rakuten          (4756)       21.9

        6.    Nitori               (9843)       21.5

        7.    Daihatsu         (7262)       16.3

        8.    Sumitomo Rubber (5110) 16.2

        9.    Lawson          (2651)       15.8

      10.    NIDEC           (6594)       15.4

 The performace of those companies, during March 2009 and now, are more than 50% better than TOPIX, according to NIKKEI Veritus.

Back to basics will work when market direction is hard to read. 



                     August 10       %Change

    NIKKEI     8891.44      +3.93

    TOPIX       746.79       +3.15 

TSE has been increased because too much pesimisims is gone past few weeks, but the trading volume has been thin for several weeks. As this is a typical summer holiday week in Japan, trade will be thinner.



Generally speaking, sentiment is better on Japanese economy. Thanks to hot weather, summer sale has been good. People may spend more during summer holidays. 



The laws to increase the sales tax passed parliament last week. This week will be a off-week for political battle.

But the end of summer will likely to be the end of Noda administartion.

Noda might have promissed to Tanigaki, the opposition party leader, to dissolve the diet and have the general election.

Many political analysts are saying the general election is inevitable in September 2012.