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When all else fails goes the tortured tradition of summer stockbroking, you can't beat an acronym. When acronyms fail, you really are in trouble. Over the past few weeks, followers of the Tokyo stock market have been asked to bask in the glare of SuNRiSe, a collection of four tenuously-linked Japanese names-- SoftBank, Nintendo, Recruit, and Sony, whose initials only spell sunrise in desperate times.
This quartet, say brokers who should probably know better, is Japan's answer to the famously high growth Fangs-- Facebook, Amazon, Netflix, Google in the US-- though with what they admit are slightly different business models. Goldman Sachs, Mizuho neither of whom invented the term, and others have begun mentioning Sunrise in published research, without appearing to believe whatever wafer thin narrative links of video games maker that happens to have a hit new product and a temporary staffing agency benefiting from a record tight labour market, and declares these Japanese champions of the digital age.
Sure, they're all internationally focused, and all are on surprisingly strong rebounds from earlier lows. But so are many others, and this is not the stuff of memorable acronyms. You can see exactly how we got here though. The Topix Index has risen more than 6% since the start of the year, but on increasingly unfamiliar fundamentals. Most of the long rally that began in 2013 has been closely correlated with dollar-yen. Stocks have risen when the yen has fallen.
But decoupling has now set in. Correlation was at a high of 83% in March 2016, but now stands at 63%. Just as abrupt has been the drop in the once rock solid correlation between Topix topics and US bond yields. With previously reliable narratives decreasingly in play, and with concerns over global growth favouring stocks relatively less exposed to the business cycle, the market has seen value sharply underperforming growth throughout the first half of 2017.
The difficulty for investors though, lies in formulating good argument for buying into that momentum. As its cheerleaders like to point out, the Sunrise four up an average 30% years to date have outperformed the Fangs, up an average 25% so far. But in its clumsiness, the search for equivalence between the US and Japan runs the risk of confirming why global investors remain so resolutely underweight the latter.
