This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. SF Holdings A/H Listing – Lower End Looks Digestable
- S.F. Holding (002352 CH), China’s largest express delivery company, is now looking to raise around US$800m in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the IPO pricing.
2. Pony AI IPO – Autonomous Valuation
- Pony AI (PONY US), an autonomous mobility solutions provider, is looking to raise up to US$195m in its US IPO.
- As per Frost & Sullivan, Pony AI was among the first companies in China to obtain licenses to operate fully driverless robotaxis in all four Tier-1 cities in China.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
3. Kansai Electric US$3.5bn Deal Updates – Has Delivered a Decent Correction, as Compared to past Deals
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- In our earlier note, we talked about the placement and ran the deal through our ECM framework.
- In this note, we talk about the updates and share price performance since then.
4. DigiCo REIT – The Positives – Hot Sector with Built in Growth
- DigiCo REIT (DIGICO AU) aims to raise over US$1bn in its Australian IPO.
- DigiCo REIT (DREIT) aims to be a diversified owner, operator and developer of data centres, with a global portfolio and broad investment mandate across stabilised, value-add and development opportunities
- In this note, we talk about the positive aspects of the deal.
5. SF Holding H Share Listing (6936 HK): Valuation Insights
- S.F. Holding (002352 CH) has launched its H Share listing at HK$32.30-36.30 per share. Pricing will be on 25 November, and the listing on 27 November.
- We previously discussed the listing in SF Holding H Share Listing: Updates Point to Improving Fundamentals and SF Holding H Share Listing: AH Discount Views.
- Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.
6. SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated
- SF Holding’s HKEX listing launched on Tuesday, November 19th; deal to be priced by 26th
- SF hopes to raise about US$800 mn, less than originally anticipated in financial media
- About one quarter of the offering will be taken up by ten cornerstone investors
7. LG Chem’s Tax Alarm: Pillar Two Tax Could Soar Next Year + LGES Block Deal on the Horizon
- The local market’s buzzing that LG Chem could face a 200-300 billion KRW tax hit from Pillar Two next year, with LGES ramping up U.S. production.
- LG Chem may be reconsidering its plan to sell 2% of its LGES stake, dropping ownership below 80%, shifting the tax burden to LGES instead of itself.
- Flagging this now—LG Chem’s tax burden looms. Consider shorting LGES or a long-short with LG Chem, plus prep for the 2T KRW block deal with the pre-disclosure process.
8. FineToday Holdings (289A JP) IPO: The Bull Case
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- FineToday has four product categories: Hair care, Skin care, Body care, and others. Hair care is the largest category, accounting for 49.0% of 9M24 revenue.
- The bull case rests on return to revenue growth, three-pronged growth strategy, top-quartile profitability and top-tier FCF generation.
9. Pre-IPO S.F. Holding (6936 HK) – Thoughts on Valuation and the Outlook
- One important reason S.F. chose to go public on Hong Kong stock market is due to financial pressure, which mainly comes from its heavy asset development model and internationalization strategy.
- Considering the discount of the H-share price versus the A-share price, if the IPO pricing is at the lower limit of the range, then the safety margin would be higher.
- In the short term, S.F. is better than JD Logistics, so its valuation should be higher than JD Logistics and industry average. Future valuation expansion depends on international business performance.
10. KDC REIT Placement – Accretive Acquisitions Should Garner Strong Support
- Keppel DC REIT (KDCREIT SP) is looking to raise S$600m (US$450m) from a primary placement. The proceeds will be used to acquire interest in two data centers in Singapore.
- The deal will be a large one to digest, accounting for 47 days of the stock’s three month ADV. That said, the acquisitions appear to be accretive to bottomline.
- In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. 7&I (3382) – What If… A Modest Proposal
- A lot of the talk around the news that Ito family scion Ito Junro had proposed to Seven & I Holdings (3382 JP) an MBO was about thwarting Alimentation Couche-Tard.
- Several mentioned that this bid – seemingly uncompetitive at the moment – would make ACT back down. I discussed the bid and its repercussions here.
- Here I suggest an alternate solution which might get everyone what they want.
2. 7&I (3382) Ito Family MBO – New Urgency for ACT
- Days ago we got a dramatic headline about Ito family scion ITO Junro and his family company Ito Kogyo making a bid for Seven & I Holdings (3382 JP).
- The stock popped, then fell. Details were not clear. Was the ¥9trln an EV number? A market cap? Was he serious? How would he get funding. Skepticism was rife.
- Today we get more headlines from NHK. who says the family wants to raise ¥8trln to take 7&i private by end-Feb 2025.
3. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 6 Adds, 5 Deletes, Capping, US$3.5bn Trade
- Using data from the close on 15 November, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 16.9% and a one-way trade of TWD 57.5bn (US$1.77bn).
- Short interest is at the highs in most forecast deletes, while the trend is mixed among the potential inclusions.
4. TIP Taiwan Value High Dividend Index Rebalance: A Lot to Trade This Week
- There are 15 changes for the TIP Taiwan Value High Dividend Index in November. The Yuanta Taiwan Value High Dividend ETF (00940 TT) has an AUM of US$5bn.
- Estimated one-way turnover is 26% and there are 16 stocks with over 4 days of ADV left to trade. The rebalance commenced yesterday and will end on Friday.
- An equal weighted basket of inclusions has outperformed an equal weighted basket of deletions since July. That could continue over the week as the ETF continues to rebalance their portfolio.
5. TIP Customized Taiwan Select High Div Index Rebalance Preview: 32% T/O; US$2.75bn Trade; HUGE Impact
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 284bn (US$8.7bn).
- We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 15.8% and a round-trip trade of around US$2.75bn.
- An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since beginning September with a pick-up in pace over the last 2-3 weeks.
6. SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide
- The S.F. Holding (002352 CH) H-shares are being offered at a price range of HK$32.3-36.3/share, a discount of 20.2%-29% to the A-shares. The max raise (including oversubscription) is US$912m.
- Unlike Midea Group (300 HK), the S.F. Holding (002352 CH) H-shares will not get Fast Entry to any indices. Southbound Stock Connect inclusion will take place on 23 December.
- With no index inclusion in the short-term, the H-shares discount to the A-shares should remain wide. The H-shares could become short sell eligible in February.
7. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 December.
- With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
- Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.
8. Fuji Soft (9749): KKR To Launch at ¥9,451, Fuji Soft REJECTS Bain’s Bid – Governance in Shambles
- On Friday 15 November, KKR announced it would launch KKR Tender2 to buy the rest of FujiSoft not purchased in KKR Tender1. Their new price is ¥1 higher than Bain’s.
- Fuji Soft Inc (9749 JP) announced (J) it supported the KKR2 Tender and rejected the Bain TOB Proposal. KKR1 shareholders are “made whole” at ¥9,451/share. Minimum is 53.22%.
- The document, however, is a Governance Disaster – an absolute shambles, effectively gaslighting investors at every turn. And now investors can see it was problematic from the start.
9. Seven & I Holdings (3382 JP): Evaluating the Potential MBO
- Seven & I Holdings (3382 JP) did not dispute the NHK article’s claims that the founding family aims to raise buyout funds by the end of the fiscal year.
- Since 13 November, there have been conflicting press reports on the MBO offer price. The NHK article’s implied offer price of JPY3,082 seems the most credible.
- The MBO’s aggressive completion timeline pressures Alimentation Couche-Tard (ATD CN) to respond by either overbidding, working with the founding family at the back-end or walking away.
10. S&P/ASX Index Rebalance Preview (Dec 2024): Dexus and Spark NZ with Double Deletions
- With the review period nearly complete, there could be one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) in December.
- Both deletes are also deletions from a global index next week and there could be short-term buying/covering opportunities on a drop in the stock price.
- There has been a buildup of cumulative excess volume in all stocks over the last few months. There has been no increase in positioning in CAR Group (CAR AU) recently.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. 2025 High Conviction Idea: Gold
- Gold prices have staged multi-year breakouts in multiple currencies, indicating a long-term bullish outlook.
- In addition, gold is on the verge of staging relative breakouts against global equity markets that point to multi-year outperformance ahead.
- The U.S. macro outlook calls for a re-acceleration of inflation, which is also positive for gold.
2. Trump Watch: Possible U-Turn on Tariffs?
- Our Geopolitical team is wrapping up an analysis on the escalating Ukraine-Russia conflict.
- In the meantime, here’s a piece we believe markets might not yet be fully tuned into:With Donald Trump and Elon Musk seemingly forming a close alliance, their influence on trade and economic policies has become a hot topic.
- Notably, Vivek Ramaswamy and Musk have thrown their support behind Javier Milei’s economic strategy in Argentina, which includes radical measures such as aggressive spending cuts and a commitment to reducing trade barriers.
3. EM as an Asset Class 2024
- EM sovereign debt has seen significant changes since the pandemic, but no wave of defaults has occurred
- China’s debt numbers are higher than Europe’s for the first time, impacting the global market
- Sovereign debt restructuring remains a complex and idiosyncratic process, with challenges ahead for debt dynamics and growth in the EM market
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
4. The Week at a Glance – The largest company about to report – fuel for the Nasdaq bet?
- Happy Monday! Welcome to our “Week at a Glance” series, where we highlight the key events and trends to watch for the week ahead.
- Monday:BOJ Ueda – Volatility IgnitedBank of Japan Governor Ueda’s remarks today set the stage for rising yen volatility, as he dodged giving markets a decisive signal on December’s rate hike prospects.
- With Ueda emphasizing data-dependency and the challenge of gauging the weak yen’s impact, traders are left grappling with a coin toss for December – keeping uncertainty alive.
5. Overseas Equity ETFs Surpass Domestic Equity ETFs For the First Time in 17 Years
- One of the biggest trends impacting the fund flow in Korea this year has been the huge capital inflow into overseas equity ETFs.
- The net asset value of the listed ETFs in Korea investing in overseas stocks surpassed the ETFs investing in domestic stocks for the first time in 17 years.
- The ETFs that invest in overseas stocks were 35.8 trillion won on 12 November 2024, up 111% from 12 January 2024.
6. Steno Signals #126 – Where did all the liquidity go?
- Happy Sunday, everyone! If you can’t show it in a meme, then it’s not true.
- That’s my modus operandi in the research business, and I stumbled upon this tremendous meme of the business cycle and how JPoww and his ilk respond to it.
- This has been the Fed’s operating model for a while: exaggerating the business cycle in both directions.
7. US Politics: “Liquid Gold”
- Donald Trump is committed to reducing energy prices by 50% within a year.
- However, uncontrollable factors may hinder this goal.
- As such, he may only achieve a modest success, if any.
8. Macro Regime Watch: An In-Depth Look at Regime Trends Across Major Markets
- Welcome back to Macro Regime Watch, where we dive into our nowcasting models to analyze Growth, Inflation, and Liquidity trends.
- Over recent months, we’ve dedicated substantial time to upgrading our models and refining the data we use.
- But the core question remains: how do we interpret the complexities of the macro environment, and how can these insights inform financial market strategies?
9. Major M&A Rule Changes Approved by the Korean Government
- On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by the Korean government.
- Revised rules have three specific goals: Improve rules on calculating and determining merger prices when M&As take place between nonaffiliated business entities, strengthen disclosure duties, and improve external evaluation system.
- If the Korean government is really serious about making positive rule changes, they need to apply these new laws not just for NON-AFFILIATED companies but more importantly for AFFIILATED companies.
10. Portfolio Watch: Stay Composed—The Trump Trade Is Still ON
- Happy Friday and welcome to our weekly Portfolio Watch.
- Many have been puzzled by the weakness in US markets towards the end of the week, with explanations largely pointing to an exhaustion of the Trump trade.
- This trade had been roaring across USD, USD bond yields, USD equities, and Crypto.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. 2025 High Conviction: AI Chip Spend Slows
- AI spending is fueling today’s semiconductor market, as generative AI demand falls into place
- Hyperscale datacenters are doing the bulk of today’s spending as they invest in advance of demand
- These investments are falling into question, and spending is likely to level off or drop in 2025, leading to a dramatic semiconductor downturn
2. Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR
- Entegris Inc (ENTG US) – Memory spending is happening next year, but MSI remains weak.
- Astera Labs (ALAB US) – This is now the second way to play a levered Trainium ramp, as they have extensive content with Amazon.com Inc (AMZN US).
- Lattice Semiconductor (LSCC US) – Standard kitchen sink; I like the stock long-term.
3. Silergy (6415.TT): It Will Grow in 4Q24, While Auto Is Expected to Grow to 15% by the End of 2025.
- In the 3rd quarter of 2024, revenue was NT$4,284 million, the gross margin (GM) was 55%, the operating profit margin (OPM) was 24%, and the net margin was 15%.
- The Gen-4 product line is ramping up and is expected to contribute around 4% of total revenue by the end of 2025.
- Chinese current economic stimulus programs may impact demand in the Consumer segment.
4. Silicon Wafers Q324 Area Shipments, Revenue, EBIT, Outlook & More
- Silicon wafer area shipments in Q324 amounted to 3,214 million square inches (MSI), up 5.9% QoQ and up 6.8% YoY,
- Q324 saw the combined revenues from the top four players in the segment reaching $2.5 billion, up 0.5% QoQ and up 6.5% YoY
- Top 4 EBIT amounted to just $337 million, up 1.5% QoQ but down 38.9% YoY.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
2. Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
- JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).
4. Swiggy IPO Trading – Decent Anchor but Tepid Overall Demand
- Swiggy Limited raised around US$1.35bn in its India IPO, although the demand wasn’t great.
- Swiggy Limited is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.
5. SF Holdings A/H Listing – Thoughts on A/H Premium and past A/H Listings
- S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, is now said to be looking to raise around US$1-1.5bn in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premium.
6. ECM Weekly (11th Nov 2024)-SF Holdings, Swiggy, ACME, NivaBupa, Sagility, Eternal Beauty, Shuangdeng
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, Indian deals flow seemed to be the only one continuing unbated despite the US elections overhang from the past week.
- On the placements front, there weren’t many large deals but we did look at upcoming lockup expiries.
7. Sagility India IPO Trading – Lackluster Demand
- Sagility India (2058883D IN) raised US$250m in its India IPO.
- Sagility India (Sagility) is a pure-play healthcare focused solutions and services provider to Healthcare Payers and Providers.
- We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the trading dynamics.
8. ISU Petasys Rights Issue: Today’s Wild Price Action Has Opened up a Fresh Trading Angle
- I initially skipped this rights issue due to the tight 15% discount and lack of hedge options, but today’s 20% drop opens up a potential angle worth exploring.
- Today’s selloff stems from pushback on ISU Petasys entering the battery business, not just dilution concerns. This means there’s a high chance we’ll see a lot of leftover, unsold shares.
- The strategy is to grab stock rights cheaply or go for the public offering. The main risk is whether the 15% spread holds until listing, but the case is strong.
9. Initial Thoughts on the Klarna IPO
- On 12 November, Klarna announced that it confidentially filed public offering paperwork. The company is getting ready for an IPO in 1H 2025.
- Klarna’s valuation reached as high as $45 billion in 2021 which declined to as low as $6.5 billion. Its valuation has recently risen to about $14.6 billion.
- Klarna generated 13.27 billion SEK in revenue (US$1.2 billion) in 1H 2024 (up 27% YoY). Operating margin improved significantly from -18% in 1H 2023 to -2% in 1H 2024.
10. SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- SF Holding’s domestic parcel volumes have grown slower than overall market volumes recently; is this strategic, or simply a loss of share?
- SF Holding is not closely aligned with any of the large online retail platforms in China; ultimately, is this independence an advantage or a disadvantage?
- When will SF Holdings’ varied international operations — and there are a few of them — begin to pull their own weight, in terms of profitability and growth?
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Meituan (3690 HK): Big Passive Selling in December
- The announcement of the changes to the Hang Seng indices is on 22 November, the capping will use the close on 3 December and implemented at the close 6 December.
- Meituan (3690 HK)‘s outperformance over the last couple of months will result in capping of the stock weight in all major indices and passives will sell stock.
- We estimate passive trackers will need to sell 35m shares (US$866m; 0.64x ADV) of Meituan (3690 HK) and that number will change over the next 3 weeks depending on performance.
2. 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
- The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
- There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.
3. KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
- Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
- There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.
4. Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value
- In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
- Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
- The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.
5. Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
- Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.
- Fast Retailing‘s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.
6. INDIA: Index Changes Due to the 45 New Additions to the F&O Segment
- The National Stock Exchange (NSEIN IN) has announced a list of 45 stocks that will be added to the Futures & Options (F&O) segment of the market from 29 November.
- There will be changes to the NIFTY Index, NSE Nifty Next 50 Index, S&P BSE SENSEX Index and the CNXIT Index over the next couple of rebalances.
- There are some interesting situations out there, including a change to the universe for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that could lead to more changes.
7. STAR Chip Index Rebalance Preview: 3 Potential Changes in December; US$450m Round-Trip Trade
- There could be 3 constituent changes for the STAR Chip Index at the December rebalance. There will also be a couple of capping changes.
- Estimated one-way turnover is 5.05% resulting in a one-way trade of CNY 1.6bn (US$225m). Passives need to trade between 0.6-1x ADV in the potential changes.
- The forecast adds have underperformed the forecast deletes over the last month but there has been a marked improvement in performance in the last week. Watch out for more.
8. NASDAQ 100 Index Rebalance: Lovin’ It as AppLovin (APP) Replaces Dollar Tree (DLTR)
- AppLovin (APP US) will replace Dollar Tree Inc (DLTR US) in the Nasdaq-100 Stock Index (NDX INDEX) after the close of trading on 15 November.
- Passive trackers are expected to buy over US$1.6bn in AppLovin (APP US) while they will sell around US$250m in Dollar Tree Inc (DLTR US).
- AppLovin (APP US) is the biggest tech name outside the S&P 500 INDEX (SPX INDEX) now and is a high probability inclusion to the index at the December rebalance.
9. NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
- On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
- The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.
10. CES China Semiconductor Chips Index Rebalance Preview: Three Changes in December
- There could be three changes for the CES China Semiconductor Chips Index at the close of trading on 13 December.
- Based on the assets tracking the index, passive trackers will need to trade between 0.1-0.3x ADV in the stocks.
- There will be selling in Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) to cap the stock at 10% of the index weight.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Steno Signals #125: EUR Liquidity Overtakes USD Liquidity – A Historic Shift
- Happy Sunday from Copenhagen.
- Bear with me this week through this long read as we approach an extremely interesting crossroads in sovereign bond markets, impacted by very tight liquidity.
- This story has been somewhat masked by policy events in the US and Germany, but it may nonetheless be the most important narrative for Q4, which is why you need to pay attention to it.
2. New Tariffs and China: THE BARK IS WORSE THAN THE BITE
- Trump’s approach to China will be more transactional based on trade and technology.
- China’s dependence on the US for its exports has declined over the last 6 years. ASEAN and other emerging markets are the engines for China’s export growth.
- The average tariff on China’s exports to the US will increase from its current level of 20% but may be tempered by a reciprocal import agreement with the US.
3. Flash Macro Watch: The Fed has abandoned its 2% target
- Following another reasonably hot U.S. CPI report yesterday, it’s time to dust off the old sell-side charlatan chart comparing today’s inflation to the 1970s.
- Honestly, I find this comparison absurd in many ways, as the drivers of inflation are different now.
- Still, there is an interesting resemblance, which got me thinking…Inflation in the U.S. is trending around 3-3.5%, and the Fed has made no progress over the past 3-4 months toward the 2% target.
4. US Politics: Promises, Promises
- Donald Trump has consistently advocated for the use of tariffs to address what he perceives as ‘unfair’ trade practices causing US trade deficits.
- His stance, whether used as a bargaining chip or not, is based on a Hobbesian view.
- This viewpoint poses a significant threat to the global economy.
5. Second Trump Presidency: Growth Focus Will Support Equities, but Challenge the Fed
- The decisive outcome of the US presidential election has significantly reduced the uncertainty facing financial markets due to their familiarity with President-elect Trump’s policies during his first term.
- President-Elect Trump has a complex past relationship with the Fed. There are fears that pressure will be exerted on the Fed to boost growth at the cost of higher inflation.
- US fiscal policy conduct will be closely monitored by the Treasury market which is discounting fewer policy rate reductions by the Fed in 2025. Fed policy conduct will remain data-dependent.
6. How to Trade the Trump Euphoria Rally
- We expect the stock market to rally into January, driven by corporate tax cut expectations, FOMO performance chasing and buybacks as the post-earnings season window re-opens.
- Expect stock prices to consolidate or pull back just before Inauguration Day.
- That’s when many of the unknowns of the Trump Administration’s initiatives will be better defined.
7. The Drill: A Look at Trump’s Policy and Their Impacts
- Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.
- This reduction hints at an unwillingness to increase production in the near future.
- Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.
8. Asia Geopolitics: Dealing with a More Trumpian World
- Asia Pacific economies benefit from a global order which preserves their sovereignty and allows them to prosper. Trump’s return puts some of these benefits at risk.
- Washington under Trump will continue to pursue its rivalry with Beijing, but Trump’s responses to crises in Ukraine and the Middle East could leave instability in its wake. =
- Washington’s allies in Asia will start “Trump-proofing” their defence strategies. Countries will hedge between the US and China while ramping up military spending.
9. Steno Signals #126: Disentangling the ECB Schnabel Speech – How Will QT Develop from Here?
- We’re at a critical juncture in sovereign bond markets, with liquidity running razor-thin and the game changing fast.
- German Bunds, traditionally rock-solid, are now trading through swaps and nearing zero on cross-currency swaps (ESTRON/SOFR) – a first in modern market history.
- The takeaway? Major central banks, especially the ECB, are pressing too hard on QT, and the markets are about to hit back hard if they don’t ease up soon.
10. Overview #12 – Not Another Trump Trade!Time to Fade?
- A review of recent events/data impacting our investment themes or outlook
- In the markets we follow, China, Gold and the JPY most impacted
- Which ones should we fade and where has the trend changed?
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings Monitor: TSMC Premium Holding Up; ASE & CHT See Sharp Drops
- TSMC: +15.6% Premium; Relatively Aggressive Trade is to Long Premium
- ASE: -3.0% Discount; Good Level to Go Long the Premium
- CHT: -2.8% Discount; Good Level to Go Long the Premium
2. TSMC Q324 Earnings Key Takeaways
- Q424 revenue forecast of $26.5 billion, up 13% QoQ and the highest Q3 to Q4 revenue jump since Q4 2017
- Demand for AI acceleration is real and just beginning. According to a key customer of theirs, “demand right now is just insane”
- Overseas fabs progressing well with Arizona yielding well and on track for high volume production in early 2025
3. ASML Tanks Semis On Tepid 2025 Outlook
- ASML reported revenues of €7.5 billion, +19% QoQ and +11.9% YoY. This was €200 million above the high end of the guided range. Q424 guided to €9 billion
- Logic Fab delays and a collapse in sales to China caused ASML to reduce their 2025 forecast to the low end of the €30 -€40 billion guided in November 2022
- Despite these challenges, ASML’s latest forecast still implies 16% YoY growth in 2025
4. TSMC 3Q24: Capex & Margin Guidance Remains Strong; Explains Why AI Demand Not Overhyped; Stay Long
- TSMC Delivers Strong 3Q24 Revenue and Margin Growth; Margin Guidance Climbs
- Management Says Believes AI Demand is Not Hyped… Companies Extracting ROIs
- TSMC – Structural Long Rating Maintained; NT$1,515 Price Target Suggests 46% Upside
5. Semis Just Broke a Record. Why Did Nobody Notice?
- August’s WSTS semiconductor revenues registered a record high of more than $53 billion
- Nobody seemed to notice, including the organization making the announcement
- There’s valid concern that the market is on the verge of a collapse, and this may be overshadowing record sales
6. TSMC (2330.TT; TSM.US): 4Q24 Outgrowth; Co-Work with Almost AI Innovators.
- 4Q24 Guidance: Sales will be US$26.1-26.9bn, up 13%; GM outlook will be 57-59%; and OPM outlook is 46.5-48.5%
- AI revenue contribution will triple and reach mid-teens sales contribution this year. Almost every AI innovator cooperates with TSMC.
- APT will grow above the corporate average in the next five years.GM is approaching the corporate average, but it’s not the same currently.
7. KYEC (2449.TT): 4Q24 Outlook Brightening; NVDA Will Become #1 Client in 2025
- We expect King Yuan Electronics Co, Ltd. (2449 TT)‘s 4Q24 outlook to be a seasonal uptrend with a slight increase quarter-over-quarter.
- NVIDIA Corp (NVDA US) will become the top client at KYEC, and Mediatek Inc (2454 TT) is expected to become the second-largest client in the outlook for 2025.
- The focus will primarily be on currently available sources, particularly KYEC for production.
8. Taiwan Tech Weekly: IPhone 16 Sales Surge in China; Samsung’s Strength Diluted Against TSMC’s Focus
- Hua-Where? Hua-Who? Report: Apple’s iPhone 16 Pro & Pro Max Sales Surge 44% in China; A Strong Start Amidst Competition
- Samsung Under Siege: Facing Major Challenges Across Verticals as TSMC Tightens Foundry Grip
- TSMC 3Q24: Guidance Remains Strong; Explains Why AI Demand Not Overhyped; Stay Long… TSMC is Working with All AI Innovators
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Hyundai Motor India IPO: Valuation Insights
- Hyundai Motor India (1342Z IN), a subsidiary of Hyundai Motor (005385 KS), aims to raise up to US$3.3 billion at a valuation of US$19 billion.
- We previously discussed the IPO in Hyundai Motor India IPO: The Bull Case, Hyundai Motor India IPO: The Bear Case and Hyundai Motor India IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs1,865-1,960 per share is attractive. Therefore, we would participate in the IPO.
2. Horizon Robotics Pre-IPO – PHIP Updates – More of the Same, Lots to Watch Out For
- Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO.
- Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
- In this note, we talk about the recent updates from its filings.
3. ECM Weekly (14th Oct 2024) – Tokyo Metro, Rigaku, Hyundai, China Res, Swiggy, USS, Akeso, Shiyue
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the live IPOs front, the two Japanese IPOs, Tokyo Metro (9023 JP) and Rigaku Holdings (268A JP) appeared attractively priced. The same couldn’t be said about Hyundai Motor India.
- On the placements front, there were deals in Hong Kong, Japan and India.
4. China Resources Beverage IPO – Volatility Makes Pricing a Bit Tricky
- China Resources Beverage (CRB HK) is looking to raise up to US$650m in its Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
5. Akeso Biopharma Placement – The Placing Price Is Not Cheap Despite Positive Business Progress
- HARMONi-2 results are impressive and the overall data is solid and reliable. The NMPA has approved NDA of ebronucimab and sNDA of cadonilimab. Akeso’s fundamentals have indeed undergone positive changes.
- Akeso’s current market capitalization already partially reflects the positive expectation about the future successful FDA approval of AK112. In our view, the Placing Price is not cheap.
- When the market value falls back to below RMB45 billion is a more comfortable valuation to buy Akeso, and below RMB35 billion market value provides a golden opportunity.
6. Hyundai Motor India IPO: The Good, The Bad and The Valuation. Not for Quick Gain Seekers
- Hyundai Motor India (HMIL) ‘s USD 3 billion+ IPO opens today, 15th October, at 10:00 am IST. The bidding will remain open until 4:30 pm IST on 17th October.
- Near-Term Outlook: Limited Short-Term Gain Potential. While Hyundai is likely to outperform Maruti Suzuki given the valuation discount, it may underperform the broader sector in the near term.
- Long-Term Opportunity: For investors with a longer-term horizon, Hyundai presents a relatively low-risk opportunity. Its established brand and world-class manufacturing facilities offer the potential for steady, long-term growth.
7. FCP Capital Sends a Proposal to KT&G to Buy Korea Ginseng Corp for 1.9 Trillion Won
- On 14 October, FCP Capital sent a proposal to KT&G to purchase Korea Ginseng Corp for 1.9 trillion won.
- Although KT&G stated that it has no intentions to sell Korea Ginseng Corp, this proposal highlights the ongoing pressure by FCP Capital to improve further value in KT&G.
- The 1.9 trillion won in proposed purchase price is higher than the 1.2 trillion won to 1.3 trillion won that KT&G revealed as the intrinsic value of Korea Ginseng Corp.
8. CR Beverage (2460 HK) IPO: Valuation Insights
- China Resources Beverage (CRB HK), China’s largest purified drinking water company, has launched its HKEx IPO to raise up to US$650 million.
- We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
- Our valuation analysis suggests that CR Beverage is attractively valued at the IPO price range. Therefore, we would participate in the IPO.
9. Horizon Robotics IPO – Peers Are Down a Lot, Its Valuation Isn’t
- Horizon Robotics is looking to raise up to US$696m in its Hong Kong IPO.
- Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
10. Horizon Robotics (9660 HK) IPO: The Bull Case
- Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
- Horizon ranked fourth among all global ADAS and AD solution providers in China by solution installation volume in 2023 and 1H24, with a market share of 9.3% and 15.4%, respectively.
- The bull case rests on a large TAM, a blue-chip customer base, a robust backlog, a core business in good health, a high gross margin, and a strong balance sheet.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿
- As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.
- There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up.
- There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got 🍿🍿🍿.
2. MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out
- MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
- MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
- Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.
3. China ETF Inflows & Implications: YTD Inflows Nearing US$150bn
- Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
- 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
- The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.
4. S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December.
- There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
- Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.
5. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade
- Using data from the close on 11 October, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 15% and a one-way trade of TWD 49bn (US$1.52bn)
- Shorts have been building up in some of the forecast deletes and in a couple of the forecast adds as well.
6. China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025
- China Resources Beverage (CRB HK) is offering 347.8m shares in its IPO at a price range of HK$13.5-14.5/share. With the overallotment option, the IPO could raise up to HK$5.8bn (US$474m).
- Cornerstone investors will take up nearly half the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
- Index inclusions will commence with the HSCI in March 2025 – that will also result in Stock Connect inclusion. The next index inclusion will take place in June.
7. Korea Value-Up ETFs: Latest Market Info on Initial AUM Setup & Resulting Passive Impacts
- KRX will launch 12 ETFs tracking the Korea Value-Up Index on November 4—9 passive and 3 active—aiming for an initial AUM exceeding 1 trillion KRW.
- KRX is pressuring ETF operators to reveal initial capital by November 4, with expectations to exceed 1 trillion KRW due to government pressure.
- Early signs of position buildup are emerging, so it’s essential to monitor stocks with significant passive impact closely moving forward.
8. Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer
- Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
- The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation.
- KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.
9. Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
- Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP).
10. Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun
- The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
- The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
- In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.