Japanese Equities: Land of the Relatively Rising Sun [View article]
Don, good article, and no doubt that EWJ has size and liquidity. Ironically, as I published recently (available on SA by searching ticker EWJ or my website at steventowns.com for those interested), its size and liquidity are exactly what did it in, or more precisely, what did in the Japanese equity market. The massive deleveraging last autumn handily took the N225 to a 26-year low. And relative yen strength has basically been the coup de grace for Japanese equities. I am not too excited about investment funds that are in the red but outperforming relatively. And in this case, any significant recovery for EWJ would necessitate a weaker yen, which would impact the fund's returns. I would be more interested in cherry picking some of EWJ holdings for accumulation and dividend reinvesting.
Japanese Stocks: Timely Buybacks, Stock Retiring [View article]
Hi Ankit,
No problem at all. Companies can buy back shares, which then become part of Treasury Stock and could be reissued; but when Treasury shares are retired (or canceled), it permanently eliminates those shares. In either case, existing shareholders benefit from having a greater share of any profits, although the company's cash level will be lower. The debate is about whether a share buy back is done when shares are undervalued vs. overvalued and whether shares will be reissued or not. The best case for shareholders is obviously when "undervalued" shares are bought and retired.
Japanese Exporters Look Poised to Profit from Weak Yen [View article]
Hi John,
Thanks for your comment and question. Toyota's ordinary shares (JP: 7203) are down about 4% ytd, compared to approx. -8% for its ADRs. The difference equals almost exactly the 4% weakening of the yen against the dollar ytd.
So why is Toyota down in its home market despite sustained growth and even surpassing GM by some measures? This is quite simply, in no particular order, due to (1) its run-up, almost doubling in the past two-years, (2) channeling of investment funds to overseas investments offering higher yields, (3) propensity to take profits quickly and frequently, (4) concern about the U.S. real estate market (inc. sub-prime) and slowing of overall U.S. economy, (5) higher gasoline prices hurting sales of higher margin autos, or at least boosting sales of lower margin autos in U.S.; weak domestic market w/ real growth only in the mini/sub-compact car (low margin) and luxury segments (high-margin, low volume), (6) uncertainty of FOMC policy, a rate hike would increase consumers' borrowing costs, (7) tough competition in BRIC economies, where Toyota has been somewhat of a late entrant, (8) high/rising commodity and materials costs mean imports and component costs are higher, possibly exacerbated by the weak yen, ....
There's a lot weighing the stock down, but it's not exactly tanking by any means. Obviously ADR holders are suffering more due to the negative forex impact.
I wanted to follow-up on my comment to M Opine. The WSJ article summarized above does mention that some of Toyota's mistakes are being blamed on "increased use of parts designed by outside suppliers like Delphi Corp. that aren't part of the traditional circle of Toyota partners in Japan." However, this would be one of many issues at Toyota and probably a lesser one as compared to limitations of CAD software.
I think ultimately the quality issue at Toyota has more to deal with its aggressive expansion than production location. The article takes this position as do most of the analyses of Toyota.
Regarding Hyundai, here's a note from its website on its U.S. assembly (see the hyperlink on Hyundai to the left to read about its history in the U.S.):
"In April of 2002, Hyundai broke ground in Montgomery, Alabama for its first U.S. automobile assembly plant, a $1 billion investment that is scheduled to open in 2005 and employ nearly 2,000 people. The facility, to be built on 1,600 acres, is expected to assemble 300,000 vehicles per year. The first two vehicles scheduled to be produced in the Hyundai Motor Manufacturing Alabama (HMMA) assembly plant are the revised Sonata and Santa Fe models."
Thanks for leaving a comment and your thoughts. Actually, Toyota is exporting more to the U.S. recently (and consistently over the past 10 years) in order to meet demand. There was an article in Bloomberg about two weeks ago that said on the year through July 45% of Toyota's sales in the U.S. were imports from Japan, a 34+% increase over last year.
Furthermore, the article says that through July 55% of Toyota's sales were from N. American plants versus 63% last year and 78% each for rivals Honda (HMC) and Nissan (NSANY).
Japanese Stocks in the "House of Pain" (EWJ, ITF, VPL) [View article]
Mike please see this post (click here) I just published that hopefully explains everything and let's you see the light. The key is the exchange rate and the underlying index (MSCI Japan).
Toyota Dominates Japan’s Domestic Auto Market -- Market Share Ranking (TM, NSANY, HMC, DCX) [View article]
Thanks for your comment. The global push by Toyota is amazing. Apparently Toyota now has its eyes set on India, also with a 2010 target date; in this case for achieving mass production of so-called "affordable" autos. It's getting easier to see how the BRIC economies will be key to future growth and profitability for auto manufacturers.
I wonder how long Suzuki will be able to hold onto its leading market share in India. In fact, I believe a major Japanese auto will take an equity stake in Suzuki in the near-term. It only makes sense given the trend towards smaller, more fuel efficient cars. I am not sure "hybrid" is as good of a solution as "compact" is. And that is exactly what Suzuki's competitive advantage is.
Toyota Shares Hit New All Time High; Share Buy-back Begins Tomorrow [View article]
Quick update on TM's share buy back: 11.575 million shares repurchased on 2/15 at Y6,210 per share for aggregate purchase price of Y71.88 billion (~$611.4 million at current FOREX rate). Per last year's shareholder meeting TM can still repurchase another 50+ million shares for a total of 65 million.
Greenspan Comments on Japan's Economy (EWJ, ITF, VPL) [View article]
Thanks for your analysis Enzio -- I appreciate your insightful comments. I had never thought of Japan in terms of it "exporting its imports" but you are right in that in order to export Japan must import raw materials first. Excellent point that if the yen appreciates Japan's import costs fall but at the same time its exports become less price competitive. Most readers should recognize the latter but of equal importance for Japan is the rate at which the Chinese RMB appreciates.
I won't argue against your main point that "many of us over-emphasize the role of FOREX rates and economic growth." However, for individual companies and especially for large scale exporters such as the companies I referenced that derive a large majority of their sales and profits overseas, FOREX is in fact a huge issue.
Toyota President & GM CEO to Meet in Japan (GM, TM) [View article]
The word is that GM and Toyota have agreed to continue working on fuel-cell research beyond their current contract which ends next March. See this piece by the Japan Times Online for more information.
Japanese Equities: Land of the Relatively Rising Sun [View article]
Japanese Stocks: Timely Buybacks, Stock Retiring [View article]
No problem at all. Companies can buy back shares, which then become part of Treasury Stock and could be reissued; but when Treasury shares are retired (or canceled), it permanently eliminates those shares. In either case, existing shareholders benefit from having a greater share of any profits, although the company's cash level will be lower. The debate is about whether a share buy back is done when shares are undervalued vs. overvalued and whether shares will be reissued or not. The best case for shareholders is obviously when "undervalued" shares are bought and retired.
Hope that helps.
Japanese Exporters Look Poised to Profit from Weak Yen [View article]
Thanks for your comment and question. Toyota's ordinary shares (JP: 7203) are down about 4% ytd, compared to approx. -8% for its ADRs. The difference equals almost exactly the 4% weakening of the yen against the dollar ytd.
So why is Toyota down in its home market despite sustained growth and even surpassing GM by some measures? This is quite simply, in no particular order, due to (1) its run-up, almost doubling in the past two-years, (2) channeling of investment funds to overseas investments offering higher yields, (3) propensity to take profits quickly and frequently, (4) concern about the U.S. real estate market (inc. sub-prime) and slowing of overall U.S. economy, (5) higher gasoline prices hurting sales of higher margin autos, or at least boosting sales of lower margin autos in U.S.; weak domestic market w/ real growth only in the mini/sub-compact car (low margin) and luxury segments (high-margin, low volume), (6) uncertainty of FOMC policy, a rate hike would increase consumers' borrowing costs, (7) tough competition in BRIC economies, where Toyota has been somewhat of a late entrant, (8) high/rising commodity and materials costs mean imports and component costs are higher, possibly exacerbated by the weak yen, ....
There's a lot weighing the stock down, but it's not exactly tanking by any means. Obviously ADR holders are suffering more due to the negative forex impact.
Toyota to Tackle Quality Concerns [View article]
I think ultimately the quality issue at Toyota has more to deal with its aggressive expansion than production location. The article takes this position as do most of the analyses of Toyota.
Regarding Hyundai, here's a note from its website on its U.S. assembly (see the hyperlink on Hyundai to the left to read about its history in the U.S.):
"In April of 2002, Hyundai broke ground in Montgomery, Alabama for its first U.S. automobile assembly plant, a $1 billion investment that is scheduled to open in 2005 and employ nearly 2,000 people. The facility, to be built on 1,600 acres, is expected to assemble 300,000 vehicles per year. The first two vehicles scheduled to be produced in the Hyundai Motor Manufacturing Alabama (HMMA) assembly plant are the revised Sonata and Santa Fe models."
Toyota to Tackle Quality Concerns [View article]
Furthermore, the article says that through July 55% of Toyota's sales were from N. American plants versus 63% last year and 78% each for rivals Honda (HMC) and Nissan (NSANY).
Japanese Stocks in the "House of Pain" (EWJ, ITF, VPL) [View article]
Toyota Dominates Japan’s Domestic Auto Market -- Market Share Ranking (TM, NSANY, HMC, DCX) [View article]
I wonder how long Suzuki will be able to hold onto its leading market share in India. In fact, I believe a major Japanese auto will take an equity stake in Suzuki in the near-term. It only makes sense given the trend towards smaller, more fuel efficient cars. I am not sure "hybrid" is as good of a solution as "compact" is. And that is exactly what Suzuki's competitive advantage is.
Toyota's Big Plans to Be #1 [View article]
www.toyota.co.jp/en/ne...
Toyota Shares Hit New All Time High; Share Buy-back Begins Tomorrow [View article]
Greenspan Comments on Japan's Economy (EWJ, ITF, VPL) [View article]
I won't argue against your main point that "many of us over-emphasize the role of FOREX rates and economic growth." However, for individual companies and especially for large scale exporters such as the companies I referenced that derive a large majority of their sales and profits overseas, FOREX is in fact a huge issue.
Toyota President & GM CEO to Meet in Japan (GM, TM) [View article]