Report type: Weekly Strategy
“The Reoccurrence of the Spread of COVID-19 in Europe and the New Variant From South Africa”
Since the Austrian government announced the implementation of their 4th nationwide lockdown on 19/11 from the
22nd in response to the spread of COVID-19, the stock market began rushing into COVID-19 alert mode worldwide. Even
Germany, where there has been a spread in the infection to a degree that exceeded the previous year, went ahead with
a partial city lockdown, such as in the State of Bavaria, which is bordering Austria. On the other hand, France expressed
their policy of avoiding a lockdown and recommended all adults above the age of 18 to go for their 3rd vaccination from
the 27th.
Just then, it was also the timeframe where there would most likely be an adjustment of positions in the year by
institutional investors and funds, etc. in order to confirm their annual investment performance by the year-end after the
start of the Thanksgiving holidays overseas. We can surmise that there would likely be the sale of stocks starting from
those that easily generate profit, such as those related to semiconductors, which have been performing strongly so far.
With trading tending to be relatively thin in the Japanese stock market as well due to lesser participation by foreign
investors as a result of the Thanksgiving holiday mood, South Africa’s health authority announced that they detected a
new COVID-19 variant. There are risks of it having high transmissibility and the characteristic of evading immunity, and
they expressed “grave concerns” of it becoming a factor of exponentially increasing the number of infected. Also, since
this variant was detected in Hong Kong as well, there has been a growing sense of uneasiness in the future in investors,
and on the 26th, the Nikkei average plunged by almost 900 points compared to the previous day’s closing price until
close to 28,600 points.
The Japan Department Stores Association’s October net sales of nationwide department stores that was announced on
the 25th went in the black last since 3 months by increasing by 2.9% compared to the same month the previous year on
a same-store basis and increased in November as well approximately by 7% compared to the same period the previous
year up to the 17th, which showed signs that the increase in opportunities to go out following the easing of restrictions
in activities had pushed back the recovery of the Japanese economy. Since it was also just when it was said that Prime
Minister Kishida began adjustments toward the resumption of the “Go To Travel” around Jan-Feb next year, it would be
ideal if a normalisation in economic activities were to be on track.
However, as seen from since last year, even if a spread in COVID-19 were to reoccur, we can expect a situation where
the stock market would be pushed up with a focus on growth stocks, such as those related to semiconductors and hightech enterprises, by excess liquidity money due to a drop in interest rates or an increase in scale of a fiscal stimulus, such
as benefits by the governments of each country worldwide. The repeated spread of COVID-19 is not always regarded as
a bad thing for the stock market. As experienced in the Heisei bubble in Japan in 1989, we can expect that the time
where there would be a high probability of a full-scale collapse in the stock market would be when there is monetary
tightening being carried out, such as an increase in interest rates. It is likely that there is still room to perceive shortterm plunges as investment opportunities.
In the 29/11 issue, we will be covering Nisshinbo Holdings (3105), Fujitsu (6702), Zenrin (9474), Fukui Computer
Holdings (9790) and AirAsia Group (AAGB)
Nisshinbo Holdings Inc. (3105) 840 yen (26/11 closing price)
・ Established in 1907. A conglomerate comprising of wireless and
communications, microdevices, brakes, precision equipment, chemicals,
textiles, real estate and other business segments. Aims towards being “an
environment and energy company”.
・ For 9M (Jan-Sep) results of FY2021/12 announced on 11/11, net sales
increased by 13.4% to 381.08 billion yen compared to the same period the
previous year and operating income returned to profit from (696 million yen)
the same period the previous year to 20.209 billion yen. In addition to the
wireless and communications business for government agencies and
municipalities becoming stable, the microdevices, brakes and precision
equipment businesses all recovered from the COVID-19 impact.
・Company revised its full year plan. Although net sales is expected to increase
by 9.8% to 502 billion yen compared to the previous year (original plan 510
billion yen), operating income is to increase by 20.2% to 15 billion yen (original
plan 10 billion yen). While a postponement in construction period in the
wireless and communications business and a decrease in revenue in the
textiles business have affected sales, the reduction in expenses is expected to
contribute. The company’s technology of simultaneous detection of speed
information and 3D positional information by combining camera images and
millimetre wave lasers is likely to gain importance towards fully automatic
driving.
Fujitsu Limited (6702) 19,385 yen (26/11 closing price)
・Separated and went independent from the present Fuji Electric (6504) in
1935. Expands “technology solutions” such as system construction,
“ubiquitous solutions” which handle PCs, and “device solutions” involving
electronic devices.
・For 1H (Apr-Sep) results of FY2022/3 announced on 27/10, sales revenue
increased by 1.9% to 1.663 trillion yen compared to the previous period and
operating income increased by 30.9% to 81.483 billion yen. Although there
was a 24% decrease in revenue in the ubiquitous solutions business due to a
reactionary decrease in special demand in remote work in the previous year,
there was a 26% increase in revenue in the device solutions business due to
an increase in demand for semiconductors for PCs and servers.
・For its full year plan, sales revenue is expected to increase by 1.1% to 3.63
trillion yen compared to the previous year and operating income to increase
by 3.3% to 275 billion yen. Those related to digital transformation (DX) and a
network increase following the expansion of 5G base stations are expected to
contribute. In addition to indications of aggressive PC demand in the 2021
Aug-Oct period financial results of the U.S. HP and Dell Technologies
announced on 23/11, Microsoft will begin supplying Windows 11 in November
this year. An increase in demand in PC replacement is expected.
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