Asia and Global Semiconductor and Tech Research

Andrew Lu

Thematic (Sector/Industry)

<ul>
<li>SEMI reports September front end and back end test/assembly equipment sales decline of 18% and 25% y/y, respectively, resulting 3Q23 sales decline of 17% and 28% y/y.</li>
<li>However, WSTS/SIA and US ISM Purchasing Managers Index reported more moderate 7% y/y decline in August global semi sales and 4% y/y decline in September index. </li>
<li>The discrepancy is due to global semi vendors are seeing PC and Smartphone IC improvement but need to consume earlier overbuilt inventories first before boosting in house or foundries' capex.</li>
</ul>


SEMI reports September front end and back end test/assembly equipment sales decline of 18% and 25% y/y, respectively, resulting 3Q23 sales decline of 17% and 28% y/y.
However, WSTS/SIA and US ISM Purchasing Managers Index reported more moderate 7% y/y decline in August global semi sales and 4% y/y decline in September index. 
The discrepancy is due to global semi vendors are seeing PC and Smartphone IC improvement but need to consume earlier overbuilt inventories first before boosting in house or foundries' capex.


What Sep US SEMI Equipment and Aug SIA/WSTS Global Sales Y/Y Discrepancy Tells Us?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a>'s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.</li>
<li>At the reported indicative IPO price of JPY 1890/share, <a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a> will be valued at JPY 435bn (US$2.94bn).</li>
<li>The stock should be added to the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TPX INDEX</a> at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.</li>
</ul>



Kokusai Electric (6525 JP)'s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.


Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later

Asian Economist

Kok Peng Chan

<ul>
<li>By tracking chip sales, sector earnings and ICT profit margins our analysis point to an early-to-mid-cycle AI expansion, not an AI-bubble about to implode</li>
<li>WSTS data show AI demand in a de-synchronised mode, revealing a multi-speed chip cycle with AI in the fast lane and legacy end-markets still digesting past booms</li>
<li>Tech and communication stocks dominate the S&amp;P 500, but unlike 1999 their market and earnings share are broadly matched, suggesting elevated but not irrational pricing provided AI monetisation holds up</li>
</ul>


By tracking chip sales, sector earnings and ICT profit margins our analysis point to an early-to-mid-cycle AI expansion, not an AI-bubble about to implode
WSTS data show AI demand in a de-synchronised mode, revealing a multi-speed chip cycle with AI in the fast lane and legacy end-markets still digesting past booms
Tech and communication stocks dominate the S&amp;P 500, but unlike 1999 their market and earnings share are broadly matched, suggesting elevated but not irrational pricing provided AI monetisation holds up


Index Rebalance

<ul>
<li>The changes to the <a href="https://www.smartkarma.com/entities/nikkei-225" target="_blank" data-smartkarma-citation="entities:22909:1" rel="noopener">Nikkei 225 (NKY INDEX)</a> as part of the September rebalance should be announced in just over 2 weeks. We expect 2 changes at the review.</li>
<li>
<a href="https://www.smartkarma.com/entities/baycurrent-consulting-inc" target="_blank" data-smartkarma-citation="entities:25985:1" rel="noopener">BayCurrent Consulting</a>'s PAF will double, <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing</a>'s CPAF will stay the same, and Sony Financial Group will be deleted from the index following its spinoff from <a href="https://www.smartkarma.com/entities/sony-corp" target="_blank" data-smartkarma-citation="entities:563:1" rel="noopener">Sony Corp (6758 JP)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/sanrio-co-ltd" target="_blank" data-smartkarma-citation="entities:16476:1" rel="noopener">Sanrio (8136 JP)</a>'s improved liquidity increases the probability of index inclusion, and the stock could be added to the index at the next rebalance if it misses in September.</li>
</ul>


The changes to the Nikkei 225 (NKY INDEX) as part of the September rebalance should be announced in just over 2 weeks. We expect 2 changes at the review.

BayCurrent Consulting's PAF will double, Fast Retailing's CPAF will stay the same, and Sony Financial Group will be deleted from the index following its spinoff from Sony Corp (6758 JP). 

Sanrio (8136 JP)'s improved liquidity increases the probability of index inclusion, and the stock could be added to the index at the next rebalance if it misses in September.


Nikkei 225 Index Rebalance Sep25: Performance of Potential Adds/Deletes & Positioning

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>We remain near-term bullish since our 4/22/25 Compass, and our intermediate-term outlook remains bullish as well (as of our 5/14/25 Compass).</li>
<li>We will maintain our bullish intermediate-term outlook as long as market dynamics remain healthy and SPX is above 6028-6059 (up from 5700-5785 as it is highly unlikely to be tested).</li>
<li>Some will point to August seasonality as a reason to be cautious; we simply are not seeing any signs that suggest a meaningful pullback is imminent.</li>
</ul>


We remain near-term bullish since our 4/22/25 Compass, and our intermediate-term outlook remains bullish as well (as of our 5/14/25 Compass).
We will maintain our bullish intermediate-term outlook as long as market dynamics remain healthy and SPX is above 6028-6059 (up from 5700-5785 as it is highly unlikely to be tested).
Some will point to August seasonality as a reason to be cautious; we simply are not seeing any signs that suggest a meaningful pullback is imminent.


Market Extended Entering Seasonally Weak August; Meaningful Pullback Imminent? Not Likely

United States

The Philadelphia Semiconductor Index is a modified capitalization-weighted index comprised of companies that are involved in the design, distribution, manufacturing and sale of semiconductors. The index was developed with a base value of 100 as of december 1, 1993. Index methodology changed from Price-weighted as of 12/21/2009.

Philadelphia Stock Exchange Semiconductor Index (SOX INDEX)

Philadelphia Stock Exchange Semiconductor Index

Philadelphia Stock Exchange Semiconductor Index (SOX INDEX)

What Sep US SEMI Equipment and Aug SIA/WSTS Global Sales Y/Y Discrepancy Tells Us?

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Andrew Lu

Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later

Kokusai Electric starts trading today. Initial passive demand will come from TOPIX trackers next month. Flow from global passive trackers will come...

Brian Freitas

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Kok Peng Chan

Nikkei 225 Index Rebalance Sep25: Performance of Potential Adds/Deletes & Positioning

A week or so to go for the announcement of changes to the NKY in September. The forecast adds have dropped a bit over the last week and there will...

Brian Freitas

Market Extended Entering Seasonally Weak August; Meaningful Pullback Imminent? Not Likely

Market Extended Entering Seasonally Weak August; Still Little Evidence that a Meaningful Pullback is Imminent. Still Bullish $SPX $QQQ since 4/22...

Vermilion Research