Japan Stock Market Plummeting: Quick Update

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Disclaimer: I am long shares of SK Japan (7608) and Round1 (4680) at the time of publishing this post.

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Hey everyone,

Even though my focus is on video production, I have kept an eye on the market.

Some of you may be feeling some pain. In a matter of 3 days, the ytd gains of the Nikkei 225 were wiped out.

Aside from macro/economic news you can easily search up, here is a comical view of what happened the last 3 days:

Day 1 (First big red candle): Okay, we hit a support level, but we are still up on the year.

Day 2 (2nd big red candle): Oh sh*t, we broke past support, my ytd gains might be wiped out, lemme sell.

Bull: Be greedy when others are fearful. Time to add on to some positions.

Bear: Don’t catch a dropping knife

Day 3 (today, Aug 5th, 2024 JP time): I can’t handle further losses; I’m gonna sell.

Also, potential domino effect of people lagging in their reaction. Retail investors who aren’t watching the markets every day. Swing traders taking losses. Seniors selling their fund products in fear of their retirement savings evaporating.

Other factors:

a) If you are a foreigner, you likely use margin to invest in Japan. The rate on IBKR is 1.5% as of August 4th, 2024, and has been low for all of 2023/2024. You are able to borrow on the value of your US stocks. Some stocks have a maintenance margin of 50%. The US stock market has been declining. If your US stocks declined in value, then you can’t borrow as much to fund your JP positions. Selling your US stocks would result in less margin to invest in JP stocks.

i.e. Forced selling due to reasons outside of valuation

There are definitely more reasons and people who can give you a much better explanation.

Revisiting JP names I’ve pitched:

Round1 (4680): Intrinsic value of 1000-1200 yen per share in 2/3 years

Today’s price when post is published (roughly): 700 yen per share

Dirt Cheap Level: 500-650

Cheap: 650-700

Fair: 700-800

SK Japan (7608): Intrinsic value of 1000-1600 yen per share in 1-2 years

Today’s price when post is published (roughly): 650 yen per share

Dirt Cheap: 600-700

Cheap: 700-850

Fair: 850-950

Furyu (6238): Growth value of 1500–2000 yen per share in 3 years

Today’s price when post is published (roughly): 980 yen per share

Book value per share: 820 yen per share

Dirt cheap price: 800-900

Cheap: 900-1100

Fair: 1100-1200

Happy hunting, everyone! It’s important in times like these to not lose your composure. We want volatility to be on our side, so when our stocks get ridiculously cheap, we can take advantage of irrational/forced selling.

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