Topix sectors: Looking beyond Securities and Shipping

by SR on March 2, 2012

I’ve been taking a look at the performance of the various Topix industry sectors over the past day or so, just trying to get a feel for where there might be laggards and where the sector rotation might lead if investors get excited enough that they start looking for the next industry. The following chart shows the percentage change in price for each of the 33 Topix industry sectors, together with the Topix index itself, since the market hit its low on 24 November 2011.
topix industry sector performance in percent since trough
A total of 14 sectors have outperformed the wider market, helped by the high market caps of some of those rising sectors, such as Transportation Equipment. This contains Toyota and Honda, both in the top 5 largest stocks in Japan by market cap.

The performance of the individual sectors since the market bottomed on 24 November last year has been broadly in line with what one would expect. The classic defensives, such as railways and telecoms, have underperformed, for example.
topix industry sector performance in percent since trough
There are still some oddities. Why has machinery not picked up more if investors expect a cyclical recovery? (We talk about that in relation to THK here and discuss the fading impact of Europe here.) Why have shippers such as Mitsui OSK run so hard, despite the BDI moving only 15% from its lows? I understand the idea that they will benefit from a resurgence in Japanese auto output and better demand for autos generally, but that only takes one so far.

Rubber is another issue. Tyre companies stand to gain significantly from lower natural rubber prices but have not yet performed very well. In part that is probably due to their stellar performance between the 11 March 2011 earthquake and the market trough in December, when they showed tremendous resilience. Some clients have suggested that rising oil prices are dampening sentiment but I disagree, given that share prices have risen only recently and pretty much coincidentally with rising crude. Natural rubber prices have come off their lows, but if they remain at these levels I expect Bridgestone and probably the other tyre suppliers in Japan to blow past their official company guidance this year. Surely worth a look. Some more details can be found in this post on rubber and on Bridgestone – and how it links to the Chinese car market.

 

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