Japan: Best and Worst Performing ADRs Last Week and YTD

by: Steven Towns

Nearly 80% (22 of 28) of Japanese ADRs trading on the NYSE/NASDAQ posted a weekly loss. Earnings season in Japan so far has not been very impressive and guidance continues to be conservative, as widely expected.

On average, the 28 Japanese ADRs lost a combined 1.8% last week. For the year, they are barely in positive territory, up a combined average 0.3%.

To make matters worse, there was a lot of wait-and-see (resulting in lighter volume) and preemptive Golden Week selling.

Why even report earnings, especially if they are going to be good, ahead of the holiday? Tokyo is closed today (Monday) and Thursday and Friday.

Japanese stocks are underperforming again, with smaller caps lagging in particular. This is in spite of the weak yen, which is unlikely to strengthen meaningfully over the next few months, if at all, for the remainder of the year, in my opinion.

Some analysts point to yen weakness in comparison to forex guidance in corporate earnings and see the potential for nice upside.

Among larger cap stocks, it is getting increasingly ugly for banks and autos, the former which also were the worst performing sector last year in Japan and the latter, which interestingly stand to benefit from the weak yen (but are not popular now due to persistent fear of a U.S. and/or global economic slowdown, among other things).

Average weekly Japanese ADR returns over the past several weeks:

    04/13 - 04/20: +1.5%
    04/05 - 04/13: -2.1%
    03/30 - 04/05: +1.3%
    03/23 - 03/30: -1.6%
    03/09 - 03/16: -1.9% Japan-ADR-wkly-ytd-04-20-07
    03/02 - 03/09: +0.6%
    02/23 - 03/02: -3.8%
    02/16 - 02/23: +0.5%

See the thumbnail chart image to the right for Japanese ADR performance two weeks ago.

See the chart near the bottom for weekly and year-to-date returns.

The five best performing ADRs last week:

    1. Kubota (KUB) 6.3%
    2. Trend Micro (TMIC) 4.2%
    3. Nidec (NJ) 2.6%
    4. Canon (NYSE:CAJ) 1.3%
    5. Mitsui & Co. (OTCPK:MITSY) 0.9%

The five worst performing ADRs:

    1. Internet Initiative Japan (NASDAQ:IIJI) -6.3%
    2. Advantest (NYSE:ATE) -5.8%
    3. Nomura (NYSE:NMR) -5.3%
    4. Mitsubishi UFJ (MTU) -4.9%
    5. NIS Group (NIS) -4.4%

Disclosure: The author owns shares of NIS Group and IIJ and also owns IIJ call options.