Abenomics: Coming our way! /NOL flash

Perhaps one of the more significant events last week was that, finally, Abenomics is now officially an export! Singapore’s SGX-listed NOL agreed to sell their logistics arm APL Logistics to Kintetsu Express (TSE) for around US$1.2 billion. Meanwhile, an even bigger transaction was announced in Australia with Toll Holdings (ASE listed) courted by Japan Post for an estimated USD$5 billion. Both suitors are Japanese, and both acquisition prices are at premiums the markets had not expected to see. These developments, while unrelated, may have had their origins as far as four months back when the Japanese GPIF signalled - in what looked then as a coordinated follow up to an earlier massive BOJ stimulus announcement that day - that they will put half of their assets in equities, equally split between Japanese and foreign markets. This would be up from 12% each under the fund’s previous strategy. Basically, this would mean adding almost US$150-200 billion into the global stock markets! Source: GPIF Japan With last week’s events, it seems that Japan Inc., is also following the calls by the Japanese government to seek higher returns elsewhere, anywhere. Perhaps we are witnessing the beginnings of a similar trend we saw in the late 80s when Japan Inc. was active buying up overseas interests. Basically, this cocktail of increased financial liquidity from the Japanese central bank, combined with the lack of domestic opportunities, is redirecting Japan Inc. to seek higher returns overseas. Last week’s moves represent only the beginning of a new wave (or perhaps tsunami. Potential candidates for these probable Japanese suitors will be simply busy ‘making up’ themselves for the rich premium they now hope and expect to see! The N225, having broken through its key resistance of around 18,100 last week, looks likely to test its next level at roughly 19,000 and then possibly 19,700. Should the 18,100 level fail to hold, however, we could see it supported at around 17,250, followed by stronger support around 16,400. Interestingly the YTD move on the N225 has NOT been accompanied by a similar degree of weakness in the JPY. Does this in fact signal that the JPY seems settled at this range of between 115 to 122 to the USD? If so, it would certainly offer foreign investors comfort in committing funds into Japan without having to deal with the usual dilemma of translation losses due to correspondingly weaker JPY.

NOL Flash

Interest in NOL shares may continue this week. On the heels of last week’s announced sale of its logistics business at higher-than-expected prices, NOL may be in play this week again due to positive news related to its core liner business. Late Friday, it was announced that the US West Coast dockworkers and their employers reached a five-year contract deal. This averted a shutdown of 29 ports that could have cost the US economy and NOL heavily. In fact NOL’s recent earnings release blamed the industrial slowdown and subsequent congestion in the West Coast Ports - a major contributing segment of NOL’s container liner business - as a key reason for the slide in both quarterly and annual revenues for the company. NOL shares closed strongly, up 3% to $1.02 during last Wednesday’s half-day trade on the back of the Kintetsu/APL logistics deal. This new development from the West Coast Ports could offer traders a reason to bid up the stock again!
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