”Gazing at the “three shifts” relating to a weak dollar, commodities and emerging economies”

31st December, 2020

There are only a few days left in 2020 during which Covid-19 struck.  As of 25/12, the Nikkei Average’s low for this year was 16,358 points, set on 19/3, and its high was 26,905 points, set on 21/12.  The index fluctuated widely, at 5,273 points above and below the average of 21,631 points.  The price of 21,631 points is between the low of 21,529 points on 15/6 and the low of 21,710 points on 31/7, and it is likely to function as a turning point in the price marking the bottoming out of the market in the event of a major decline in the future.  Furthermore, the net asset price per share of 22,600 yen, calculated based on a weighted average PBR (price-to-book-value ratio) of 1.18 times as of the closing price on 24/12, is a price at which we can expect the lower limit to be reached if the market were to be oversold during a market adjustment phase.

I would like to mention “three shifts” as keywords when looking at the stock market in the coming year: (1) a risk-on weaker dollar shift as a result of the Fed’s monetary easing, (2) a commodities shift where commodity prices will be in the spotlight, and (3) an emerging markets shift where quantitative easing money flows into emerging markets as the dollar weakens.

The “shift to a weaker dollar” will create a structure and trend in which the expansion of the Fed’s balance sheet will reduce the supply of quantitative easing money in the US, making it more likely to flow to Japan and emerging economies instead.  While the Japanese market had been playing the role of supplying quantitative easing money through the BOJ’s unconventional monetary easing since 2013, it is now suggested that it will be on the receiving end of quantitative easing money.   US stocks have outperformed Japanese stocks since the Lehman shock, but the gap may narrow from next year.

In the “commodity shift,” prices of non-ferrous metals and precious metals are expected to soar as electric vehicles (EVs) and green energy infrastructure construction are promoted to reduce greenhouse gas emissions.  In addition, the

frequent occurrence of abnormal weather and natural disasters due to global warming, as well as changes in income levels, consumption and dietary habits in emerging countries with large and as yet growing populations, may lead to water and food shortages, which in turn may lead to higher grain prices.  These factors will make it easier for overall commodity prices to soar.

A “shift to emerging markets” could, as a result of tighter antitrust laws and a weaker US dollar, see a shift from a structure in which market capitalization that is currently skewed toward a small number of major US high-tech companies, such as GAFA, to one in which investment funds flow to emerging markets with relatively low income levels.  As a result, the income gap between developed and emerging markets will be narrowed.  During the BRICs (Brazil, Russia, India and China) boom from 2000 to 2008, Russian stocks performed particularly well against the backdrop of soaring oil prices, but the next boom in emerging economies is likely to be led by countries with large populations, such as India, African countries and Indonesia.

In the 28/12 issue, we will be covering Healthcare & Medical Investment Corp (3455), IG Port (3791), Mitsubishi Materials (5711), and Toyota Tsusho (8015).


  • Healthcare & Medical Investment Corp (3455)  126,100 yen (25/12 closing price)

・A healthcare-focused J-REIT that has Sumitomo Mitsui Banking Corp and NEC Capital Solutions as major sponsors in addition to Ship Healthcare Holdings, which engages in the nursing care business.  Acquired a J-REIT-first hospital asset in 2017/11.

・For the FY2020/7 (Feb-July) results announced on 15/9, operating revenue increased by 0.5% to 2.023 billion yen compared to the previous period (FY2020/1), operating income decreased by 2.8% to 1.072 billion yen, and distribution per unit decreased by 2.4% to 3,240 yen.  Acquired two properties (total acquisition price: 1.456 billion yen): “Verde Hotaka” and “Sunny Life Kamakura”.  The number of properties held at the end of the period was 35, and the occupancy rate was 100%.

・For FY2021/1 plan (2020/8-2021/1), operating revenue is expected to increase by 1.7% to 2.058 billion yen compared to the previous period (FY2020/7), operating income to decrease by 0.8% to 1.063 billion yen, and distribution per unit to decrease by 1.1% to 3,205 yen.  The annual distribution yield (based on the closing price on 24/12) based on the company forecast for FY2021/7 is 5.08%.  Amidst increasing uncertainty in the real estate market, particularly for commercial facilities and hotels, due to the Covid-19 pandemic, the corporation has concluded fixed-rent, long-term lease agreements with the facility operators.


  • IG Port, Inc (3791)                  1,317 yen (25/12 closing price)

・Founded in 1987 as an animation production company (IG Tatsunoko).   Under its umbrella are animation production companies like Production I.G., Wit Studio, and Signal MD, as well as hit productions like “Attack on Titan”.  

・For 1Q (Jun-Aug) results of FY2021/5 announced on 9/10, net sales decreased by 42.9% to 1.127  billion yen compared to the same period the previous year, and operating income fell to minus 150.0  billion yen from a positive 171 million yen in the same period of the previous year.  In addition to the growth in the copyright business, the publishing business was also strong due to demands for comic books as a result of stay-at-home routines, but the lack of major sales in the video production business had a negative impact on performance.

・For its full year plan, net sales is expected to increase by 6.2% to 9.621 billion yen compared to the previous year, and operating income to decrease by 15.6% to 238 million yen.  The popular movie, “Fate/Grand Order,” which had been postponed due to the Covid-19 pandemic, will be released nationwide this December.  The sequel will be released in the spring of 2021.  Media mix development linked with smartphone apps is also going well.  It is expected to contribute to full-year results, including the demand for e-comics from those staying at home.  Copyright business, such as design cans for “Attack on Titan”, is also strong.


  •  Mitsubishi Materials Corp (5711)                 2,223 yen (25/12 closing price)

・Starting point was the expansion of the Tsukumo Shokai (the predecessor of the Mitsubishi Group) into the mining industry in 1871.  Engaged in high-performance products such as electronic materials, processing, metals, cement, environmental energy, and other businesses.  Domestic leader in copper and copper alloy products. 

・For 1H (Apr-Sep) results of FY2021/3 announced on 16/12, net sales decreased by 3.1% to 725.568  billion yen compared to the same period the previous year, operating income decreased by 59.4% to 6.89 billion yen, and net income fell into the red to minus 19.15 billion yen due to the posting of a provision for loss on business restructuring.   Benefiting from higher gold and palladium prices, sales had increased in the metals business, but decreased in other businesses.

・Company has revised its full-year plan upwards.  Net sales is expected to decrease by 4.4% to 1.45 trillion yen compared to the previous year (original plan 1.42 trillion yen), operating income to decrease by 78.9% to 8.0 billion yen (original plan zero), and ordinary income to decrease by 59.7% to 20.0 billion yen (original plan 7.0 billion yen).  Rising copper and gold prices are expected to provide a tailwind to the metals business, and dividends from overseas mines in which company had invested are expected to increase.  Measures to promote electric vehicles (EVs) by major countries are expected to continue to benefit the metals business.


  • Toyota Tsusho Corp (8015)                   4,070 yen (25/12 closing price)

・Established in 1948 as a successor to the trading division of Toyota Sangyo, which financed sales of Toyota vehicles.  A general trading company affiliated with Toyota, with a focus on the automotive business.  Its Africa Division has a history dating back to 1922 in the Toyota Group.

・For 1H (Apr-Sep) results of FY2021/3 announced on 29/10, revenue decreased by 18.8% to 2.7325 trillion yen compared to the same period the previous year, and operating income decreased by 33.7% to 71.999 billion yen.  Declines in dealings in automotive production-related products and in automotive sales due to the effects of Covid-19 had impacted results.  The 2Q (July-Sep) Q-on-Q results showed an improvement in performance, with revenue up 28.9% and operating income up 2.8 times.

・For its full year plan, profit is expected to decrease by 41.0% to 80.0 billion yen compared to the previous year.  The company has added “Circular Economy Business,” meaning the recovery and reuse of automotive  parts and resins, to the key issues in its medium-term management plan through FY2023/3, and is aiming for early profitability in automotive metal and battery-related businesses.  While the BRICs and ASEAN countries were the focus of attention during the 2000-2008 emerging markets boom period, going forward, Africa is expected to attract attention as a promising emerging market from 2021 onwards.


【Disclaimer and Notes relating to this report】

Issuer of this report:  Phillip Securities Japan, Ltd.    4-2 Nihonbashi Kabutocho, Chuo-ku, Tokyo 103-0026

TEL: 03-3666-2101 URL: http://www.phillip.co.jp/


Authors of this report:

Phillip Securities Research Department 

Kazuhiro Sasaki, Certified International Investment Analyst(CIIA®), Chartered Member of The Securities Analysts Association of Japan (CMA®)


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