When all else fails, goes the tortured tradition of summer stockbroking, you cannot 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 consider “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 US market’s Fangs (Facebook, Amazon, Netflix, Google), but with “slightly different business models”.
Goldman Sachs and Mizuho (neither of whom invented the term) are among the banks that have begun mentioning Sunrise in research, without appearing to believe the wafer-thin growth narrative that links a telecoms company (owner of a flawed robot called Pepper) with a video games maker (recovering from a product misfire), a conglomerate (that just resumed making vinyl records after 28 years), and a temporary staffing agency. Yes, they are all internationally focused and all are on rebounds from 2016 lows, but it takes more than an acronym to join the dots between companies touted as champions of the digital era.
It’s easy to see how we got here. The Topix has risen more than 6 per cent this year: notionally attractive, but on uncertain fundamentals. Most of the long rally from 2013 has been closely correlated with the dollar-yen rate, but decoupling has set in. Yen-Topix correlation was at a high of 83 per cent in March 2016, but now stands at 63 per cent. Just as abrupt has been the drop in the once solid correlation between the Topix and US bond yields.
With concerns over global growth favouring stocks relatively less exposed to the business cycle, the market has seen value stocks sharply underperforming throughout the first half of 2017. The difficulty for investors lies in formulating a good argument for buying into the growth stock momentum. As its cheerleaders like to point out, the Sunrise four (up 30 per cent year to date), have outperformed the Fangs (up 25 per cent) in 2017. But in its clumsiness, the assertion of equivalence between Fangs and Sunrise runs the risk of confirming why global investors remain so resolutely underweight Japan.