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. Sep24 Nikkei 225 Rebal – Now 1 ADD, 1 DELETE; Fastie+TEL Still Where the Fun Is
- The March 2024 rebal is done and dusted. When announced, there were 2 prospective DELETEs for Sep 2024. Now there is only one expected DELETE, Nippon Paper Industries (3863 JP).
- The one likely inclusion is therefore Ryohin Keikaku (7453 JP). But there is more fun afoot with Fast Retailing (9983 JP) and Tokyo Electron (8035 JP).
- The two stocks – of totally different sectors – interact somewhat, both in determining Nikkei 225 direction, and their relative potential selldowns.
2. Riso Kyoiku (4714) Partial Tender (¥320/Sh) Followed by Third Party Dilution To Get Hulic to 51%
- Today, cram school operator Riso Kyoiku (4714 JP) and 20% owner real estate developer Hulic Co Ltd (3003 JP) amended their Capital and Business Alliance agreement.
- Hulic will buy 25.5% of shares out in a Partial Offer at +43.5% vs last. Then post-tender, they will buy shares at last from the company to go to 51.%
- The founder will sell his 10%. The rest is interesting. It’s a high ROE high div stock. Some own it from higher. Pro-ration is tough to estimate. But we try.
3. JAPAN ACTIVISM: Mitsui Fudosan (8801) Responds to Elliott with Buyback, Amended Long-Term Plan
- 9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback.
- The stock popped 7% the next day to ¥1302, on the highest volume since the covid crash, hesitated a day, then powered almost 20% higher through the end of March.
- Today, Mitsui Fudosan responded with an Amendment to their Plan out to 2030. It has a higher dividend, a share buyback, higher EPS target growth, and higher ROE target. But…
4. The TOPIX Big April Basket Flows: ¥200bn a Side Including Many Multi-ADV Flows
- Every year in April there is an interesting phenomenon with TOPIX. It is what Janaghan Jeyakumar, CFA calls “The Big April Basket.” The TSE re-assesses Liquidity Factor Coefficients.
- It also does a FFW change, and this year it has Phased Weight Reductions for those slowly leaving TOPIX and PWR re-inclusions for those identified last October as going back.
- Janaghan had 18 “High Conviction” LF removals. All were hits. They are upweights. Then there are 34 changes to FFW coefficients.
5. Riso Kyoiku (4714 JP): Hulic (3003 JP)’s Partial Tender Offer
- Riso Kyoiku (4714 JP) announced a partial tender offer and third-party allotment with Hulic Co Ltd (3003 JP), the largest shareholder. Hulic aims to make Riso Kyoiku a consolidated subsidiary.
- The offer is for a maximum of 39.4 million shares (23.15% post-allotment ownership ratio) at JPY320 per share, a 46.8% premium to the undisturbed price (5 April).
- Irrevocable (from the founder and Chairman) represents a 9.26% post-allotment ownership ratio. The offer is light, but there is no minimum acceptance condition.
6. S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
- With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
- The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
- There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.
7. HSCEI Index Rebalance Preview: One Change or Two in June?
- SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
- For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
- Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.
8. China TCM (570.HK) – Latest Updates on Privatization and the Potential Merger with Taiji Group
- Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
- The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
- We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.
9. KOSPI200 Index Rebalance Preview: Hanmi Semiconductor (042700 KS) Flying High
- Around 85% of the way through the review period, we see four changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- The impact on the potential inclusions ranges from 0.4-8 days of ADV while the impact on the potential deletions varies from 1-13 days of ADV.
- Hanmi Semiconductor (042700 KS) is up 72% in the last two months following its appearance on the list of potential Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) inclusions in June.
10. KOSDAQ150 Index Rebalance Preview: Potential Adds Still Outperforming
- With nearly 85% of the review period complete, there could be 15 changes for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance.
- Prior to the June rebalance, C&C International (352480 KS) will replace CanariaBio (016790 KS) in the index following CanariaBio being listed as an Administrative Issue and an Investment Attention Issue.
- The potential adds have outperformed the potential deletes and the KOSDAQ 150 Index since the start of the review period. Lighten positions ahead of the end of the review period.
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. EM Watch: China is preparing something BIG!
- The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
- As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
- We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.
2. Technically Speaking: The Early Bird Gets the Worm, China Retail Buys Hong Kong
- Hong Kong market is at historically cheap valuations. So what’s new?
- Capitulation bottom in late January/early February dramatically reduced shorts and now long positioning starts.
- China retail buying is taking a cue from China’s government buying programs and SOE company directives.
3. Israel-Iran War Coming?
- Welcome to this week’s Great Game, where we cover current geopolitical events relevant to your portfolio!
- Situation: Israel attacked the Iranian embassy in Damascus, Syria, killing several high ranking Republican Guard officers, and the whole region is now anticipating the Iranian response.
- Meanwhile, Israel and Hamas are making little progress in their truce talks in Cairo while Israel has withdrawn from smaller areas in Southern Gaza amidst heavy diplomatic pressure from the US.
4. Positioning Watch – Reflation bets are back in
- Hello everyone, and welcome back to our weekly positioning/sentiment overview.
- The mood in equity markets is still good, with major indices stabilizing at levels far above all time highs despite taking some time to swallow hawkish comments from Fed officials.
- Markets seemingly don’t care about the repricing of Fed rates until they hear it from Powell’s mouth or until they get a feeling of true pivot (on the pivot).
5. 5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
- Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.
- This week we are watching out for the following 5 topics within global macro: Rates Pricing, Liquidity Turning, Labor Market, Commodities, China.
- The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions.
6. Yen Weakness Not Solely Due to Bank of Japan as Corporates Play a Critical Role
- The weak yen could be a legacy of aggressive quantitative easing (QE), whereby the BoJ became the largest holder of government bonds, forcing traditional buyers overseas.
- Overseas cash hoarding by Japanese affiliates is being cited as another reason for yen weakness. Superior growth opportunities outside of Japan are a reason for the lack of cash repatriation.
- Japan’s exporters currently face formidable competition with China, making a strong yen an unattractive option during a period of higher cost pressures, notably for labour.
7. Indonesia Economics: Disinflation Setbacks Tie Central Bank’s Hands Tighter
- The latest figures show headline inflation inch further away from the central bank’s target, showcasing the difficulties caused by volatile food inflation worldwide.
- In addition to sticky inflation, fiscal policy uncertainty also lurks in the background; the new government has many big-ticket manifesto pledges that need to be funded.
- Still-Strong growth, sticky inflation, and depreciationary risks to the rupiah will cause Bank Indonesia to delay rate cuts, possibly for the whole year.
8. Energy Cable: Melt UP in commodities upcoming?
- Take aways: Booking profits in crude, staying long in broader metals. Crude predicting ISM to turn in 6-9 months time. Sluggish German IP ahead. Last week, we reached our profit level in crude oil, leading us to exit the trade successfully.
- Our outlook remains bullish on commodities, spurred by what we perceive as a reflation head fake.
- This optimism has prompted us to enter a long proxy-position in the Bloomberg Commodity Index (BCOM), as we observe the rally widening across the commodity complex (Chart 1).
9. Gold and Goldilocks
- This week’s ‘CPI Print’ has caused something of a panic in the bond markets and has left the ‘Pivot’ Pundits struggling versus the ‘No Cuts’ crowd, some of whom are now doubling down and even talking about rate rises.
- Traders in other markets are looking across with some degree of concern, long wary of the ability of the bond markets to trigger problems elsewhere.
- So too are the politicians, keen for their particular narrative on the economy to win them votes, but concerned that they need the markets (and by extension the Fed) to support their cause.
10. Looking For Inflation In All The Wrong Places
- Conventional inflation hedge vehicles have exhibited subpar performance despite rising concerns over persistent inflation that will delay the Fed’s rate cuts.
- That’s because 1970s-style “bad inflation” is not present and “good inflation”, which is a by-product of an economic recovery and stronger growth expectations, is becoming dominant narrative.
- Market expectations are shifting from a soft-landing to a no-landing outcome, which should be bullish for cyclical stocks and neutral to bearish for bonds.
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 Continues Falling from Extreme Level; CHT at Unusual Discount
- TSMC: +11.8% Premium — Falling Closer to Its Historical Range
- ASE: +9.2% Premium; Further Breakdown Could Indicate Return to Previous Trading Range
- CHT: -1.8% Discount — Good Level to Long the Spread
2. The Data Center is the New Compute Unit: Nvidia’s Vision for System-Level Scaling
- Nvidia CEO Jensen Huang has repeatedly emphasized that the data center is the new unit of compute.
- While this concept seemed straightforward at first, the deeper implications became clearer after Nvidia’s presentations at GTC and OFC 2024.
- I only recently grasped exactly what is happening, and a simple reframing of the underlying principles that drove Moore’s Law makes the entire picture clearer.
3. Will Taiwan Quake Trigger a Shortage?
- A major earthquake struck Taiwan on April 3, where 25-30% of the world’s semiconductor wafers are produced
- Most semiconductor fabs are far away from the earthquake’s epicenter
- Those companies that have issued statements indicate that damage was slight, but there is still likely to be a shortage, which should boost chip maker profitability through 2024
4. TSMC (2330.TT; TSM.US): 2Q24F Preview; TSMC Is Anticipated to Receive ~US$5Bn from the US Chip Act.
- TSMC Q2 2024 outlook is expected to increase by approximately 5% QoQ, with 2024 projected Capex to see a slight uptick.
- Intel is expected to adopt TSMC N3B technology in 2Q24F, while we anticipate that MediaTek will transition to N3E by the end of 3Q24F.
- Intel has received financial assistance of US$8 billion through the US Chips and Science Act, and TSMC is also projected to receive around US$5 billion.
5. Taiwan Tech Weekly: Quanta Surging on Nvidia Server Orders; Nanya Results Ahead; Intel Foundry Event
- Quanta surged with major server wins from Meta, Alphabet, and Amazon. Nanya Tech results are two weeks ahead and Intel will host a webinar this week about its Foundry business.
- Mediatek: Accelerating Momentum in Automotive, Data Center, and AI Memory Solutions
- Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?
6. Fabricated Knowledge Quarterly Review
- This is the first edition of a quarterly summary piece to highlight my ideas and best pieces quarterly.
- This is one of the 16th-best quarters in SOXX since 2002. While it’s a pretty solid showing at a 17% quarterly return, this doesn’t compare to the incredible returns in 2020 and 2023.
- Now, the misleading thing is that SMH, a broader ETF, is up 30%.
7. Intel’s New Segment Reporting. Transparency Or Obfuscation?
- Intel launched a new segment reporting structure under which its newly created Foundry P&L allegedly racked up operating losses of ~$17 billion over the past three years
- The Foundry P&L is not expected to reach breakeven until the ’27/’28 timeframe
- Intel’s share price is down >10% in the two days since the new financial model was launched.
8. Post Nvidia GTC Industry Impact: Large Quanta Server Win Just the Beginning of an Order Wave?
- Just a week after Nvidia’s GTC conference, Quanta has reportedly secured large orders for new Nvidia Blackwell-based servers from Google, Amazon AWS, and Meta.
- Other firms showcasing Nvidia servers at GTC include Wiwynn, Gigabyte, Pegatron, Asus, Hon Hai (Ingrasys), Wistron, Dell, and Super Micro. There could be a higher probability of new order wins.
- Stock Focus: Asustek — Improving outlook as a play on both AI PCs and AI servers.
9. Yaskawa (6506 JP): Start of a New Factory Automation Growth Cycle
- The outlook for factory automation is improving with inventory clearance, the upturn in the semiconductor industry and an AI-enhanced response to the labor shortage.
- Yaskawa’s margins should continue to rise with renewed growth in Robotics, efficiency gains and an upgraded product line.
- Valuation stretched at 30x EPS guidance for FY Feb-25, but current weakness looks like a long term buying opportunity.
10. Vanguard (5347.TT): A Consensus View to Build a New 12″ Fab in Singapore.
- The utilization rate for Vanguard in 1Q24F is at a recent low of 50-53%, indicating that the utilization rate is expected to increase from 2Q24 onwards.
- Vanguard should consider building a new 12″ Fab in Singapore, aligning with our potential acquisition of Taiwan Semiconductor (TSMC) – ADR (TSM US)’s 40nm and above business.
- In conclusion, the future outlook appears promising for the coming 3~4 years.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Kokusai Electric (6525 JP): The US$4.8 Billion Lock up Expiry
- Kokusai Electric (6525 JP)’s 180-day IPO lock-up period for 71% of outstanding shares expires on 22 April. The shares exiting the lock-up period are worth US$4.8 billion.
- The likely seller will be KKR & (KKR US) as it was the sole selling shareholder in the IPO. The shares are currently trading at 2.4x the IPO price.
- Kokusai anticipates a return to growth and margin improvement in FY24. However, Kokusai trades at a material premium to peer multiples and is fully priced.
2. ECM Weekly (1st Apr 2024) – Shinhan, GlobalWafers, Mankind, Hyundai Marine, Bharti Hexacom, ChaPanda
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, HD Hyundai Marine Solution (443060 KS) and Bharti Hexacom were in the market trying to raise over US$500m each.
- Placements flow continued unabated this week as well, India, Taiwan and South Korea seeing large blocks.
3. HD Hyundai Marine Solutions IPO: Valuation Insights
- HD Hyundai Marine Solution (443060 KS), the ship after-service subsidiary of HD Hyundai (267250 KS), aims to raise up to US$550 million.
- We previously discussed the IPO in HD Hyundai Marine Solutions IPO: The Investment Case.
- We examine the syndicate’s valuation methodology. Our analysis suggests that the HMS is, at best, fairly valued at the IPO price range. We would pass on the IPO.
4. Waaree Energies Pre-IPO – Riding the Anti-China US Wave
- Waaree Energies is looking to raise up to US$400m in its upcoming India IPO.
- Waaree Energies is a solar PV module manufacturer in India with an aggregate installed capacity of 12 GW, as of Jun 2023.
- In this note, we talk about the company’s past performance.
5. HD Hyundai Marine Solution IPO – Peer Comparison – Not Particularly Exciting
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In our previous note, we talked about the company’s historical performance. In this note, we talk about peer comparison.
6. HD Hyundai Marine Solution IPO – Thoughts on Valuation
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$551m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In our previous notes, we talked about the company’s historical performance and undertook a peer comparison. In this note, we share our thoughts on valuation.
7. Horizon Robotics Pre-IPO Tearsheet
- Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities International.
- 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.
- HR was the first and the largest Chinese company providing integrated ADAS and AD solutions in terms of annual installation volume since 2021, according to CIC.
8. Weekly Deals Digest (07 Apr) – Kokusai Electric, HD Hyundai Marine, Langham, Jastec, JSR, Best World
- A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
- ECM developments: Kokusai Electric (6525 JP) lock-up expiry and HD Hyundai Marine Solution (443060 KS), Bharti Hexacom (6597372Z IN) IPOs.
- Event-Driven developments: Langham Hospitality Inv Ss (1270 HK), IntelliCentrics Global Holding (6819 HK) Jastec Co Ltd (9717 JP), JSR Corp (4185 JP), Best World International (BEST SP), Isetan Singapore (ISET SP).
9. Crizac Pre-IPO Tearsheet
- Crizac is looking to raise US$120m in its upcoming India IPO. The bookrunners on the deal are Equirus and Anand Rathi.
- Crizac is an education platform offering international student recruitment solutions to global institutions of higher education in the United Kingdom, Canada, Republic of Ireland, Australia and New Zealand (ANZ).
- Crizac is one of the largest student recruitment solutions providers from India to the UK with a market share of 13.0%, in terms of the number of students in 2023.
10. Ibotta IPO Valuation Analysis
- In my insight, I discuss valuation framework for comparable company analysis and outline revenue growth scenario under my base case.
- Considering Ibotta achieved profitability in 2023 driven by strong growth in the segment of third-party publishers, I view EV/Revenue as the most appropriate methodology to value Ibotta.
- I have a positive view of the upcoming Ibotta IPO. The company’s efficient B2B2C business model, success-based marketing approach and scale provide Ibotta with a long runway of 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. JSR (4185 JP) – Activist Murakami-San Goes to 5+%! Bumpitrage? Appraisal Rights? A Technicality?
- In what is a surprising move to me, Murakami-san has gone substantial on JSR Corp (4185 JP) with the vast majority of his stake purchased at a spread of <0.05%.
- As suggested in JIC Launches a NOT-¥1trln Tender Offer for JSR (4185). Welcome? Yes. Overwhelming? Meh, the deal price was not overwhelming. It got less so as the market rose.
- But this is an odd target. High float. No competition. Would take a lot to block or force the bumpitrage, which suggests appraisal rights or a “technicality.”
2. HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
- With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
- Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
- Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).
3. If Rakuten (4755) Combines Financial Units… Who Wins and How? Well… It’s Complicated
- A couple of years ago, Rakuten (4755 JP) – burning through cash to start its mobile business – announced it would its Bank and Securities units. Bank listed. Securities didn’t.
- Mizuho ended up buying 49% of Securities. Today, it was announced there would be discussions to put Bank, Securities, Card, and Insurance in a new listed Holdco.
- How this works will end up being complicated. More complicated than it should be. But the complexity would make this more of a win-win for everyone.
4. TOPIX Inclusions: Who Is Ready (Apr 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- There were no Section Transfers announced in the last 3 months so currently there are no live TOPIX Inclusion events at present.
- There are currently 79 names capable of satisfying all the key section transfer requirements. Our long-term pre-event candidate CELSYS (3663 JP) is one of them.
5. SciClone Pharma (6600 HK): Privatisation At IPO Price
- After Sciclone Pharmaceuticals (6600 HK) was suspended on the 19th March pursuant to the Takeovers Code, I speculated a Scheme at the March 2021 IPO Price. And that’s what unfolded.
- Li Zhenfu (SciClone’s NED), Assicurazioni Generali (G IM) and concert parties (collectively controlling 36.61%) have made an Offer at $18.80/share, a 33.9% premium to last close. Terms are final.
- The long stop date is the 31 October. That’s too conservative. This could be wrapped up late July.
6. JSR Corporation (4185 JP): Murakami Becomes a Substantial Shareholder
- Murakami’s City Index Eleventh entity reported a 5.11% position in JSR Corp (4185 JP). The share purchases started on 19 March, the day of the tender start.
- Murakami’s average buy-in price of JPY4,346.22 per share is broadly in line with the JPY4,350 tender offer.
- Murakami’s disclosure suggests two possibilities: starting an activist campaign for a bump or pursuing the appraisal process to determine a fair value. We think the latter is likely.
7. Langham Hospitality Investments (1270 HK): Great Eagle (41 HK)’s Possible Scheme Privatisation
- Langham Hospitality Inv Ss (1270 HK) received a notice from Great Eagle Holdings (41 HK), the largest unitholder, that it intends to present a detailed proposal for scheme privatisation.
- The privatisation interest is unsurprising, as the unit price has declined by 43% over the last twelve months. A tough 2023 did not help the declining sentiment.
- Our methodology for triangulating the potential offer price results in a range of HK$0.63-1.76. Our best guess is an offer of around HK$0.85, a 47% premium to the last close.
8. KRX Imposes a 20% Cap on Weight Ceiling in Sector ETFs with Few Constituents
- KRX limits individual stock weight to 20% in ETFs with few constituents. KRX confirms working on it, with an official announcement expected soon.
- Excludes index ETFs like KOSPI 200. KRX hasn’t finalized criteria for constituent number but expected to involve fewer than 30 stocks.
- This could open new passive trading opportunities. Sector ETF cap at 30%, large AUM ones offer noteworthy trading potential.
9. Estimating Participation Rate for Hyundai HS Tender Offer, Currently at a 5% Spread
- It is somewhat unusual that there is still a spread of over 5%. This likely reflects concerns about the relatively high intensity of allocation risk.
- Retail: 30%, Institutions: 16% of float shares (46%). Retailers may contribute 20%, institutions 10-15%. Total tender rate: 30-35%.
- In that case, it means that roughly 70% of our holdings could be tendered. And at this level, it seems reasonable enough to target the current spread of 5%.
10. Updated Tool (31Mar24) & “Diff File Generator” For TSE “Mgmt Conscious of Capital Cost/Stock Price”
- In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】. But they did not actually shame.
- The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links, and we are weeks ahead of the TSE. Working to get months ahead.
- We created a tool to name everyone, show their reports, provide links, and now a new tool. Put in a name, see the difference between the Old/New Reports.
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. Gold’s Next Leg Up And Why It Matters
- Gold price is a reflection of underlying global stress in currency markets
- Gold price is a reflection of actual not reported real rates of interest
- Gold price is a reflection of global increased demand from central banks and consumers
2. Steno Signals #93 – Material Stealth QT Upcoming During a War Economy
- Happy Easter and welcome to our flagship editorial! The tide is turning on USD liquidity and the four most recent bills auctions have seen net negative issuance, which is a harbinger for the trend into April, which is typically strongly net issuance negative due to tax seasonality (see chart 1).
- Only during the first lockdown in 2020, did the net amount of outstanding bills increase through this period, which makes for a solid hit ratio in predicting (much) weaker USD liquidity in Q2 this year.
- We wrote on New Years eve of 2023 that “USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities, which makes us set for a material rally (or a blow off top) in Q1.”, which I guess was as precise as it could be.
3. March Themes and Thematic Portfolio Review
- A monthly review at how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
4. Macro Regime Indicator: From Stealth QE to Stealth QT
- Welcome to our Monthly Macro Regime monitor.
- Coming into March, we wrote that “We see little change to the optimistic and risk-favoring sentiment for March, and we thus remain in the goldilocks ‘Gung Ho’ regime.
- With tailwinds from both liquidity and growth, we continue to see a great case for continuing to move/stay further out of the risk curve when it comes to allocation.
5. Is a Major RMB Depreciation on the Cards?
- Further weakness in the JPY poses a risk to RMB stability
- If major stimulus is unleashed in China, it is likely the RMB will weaken
- Continued incremental easing will benefit the economy in the long term but may disapoint equity investors looking for a quick fix despite Chinese data improving
6. Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend
- With the BOJ’s struggle to support the yen gaining traction, the NKY and TPX both hit major resistance
- Hong Kong finally breaches resistance with a potential move to 20k in the near term
- Diversification opportunities are abundant with potential negative correlation between China/HK markets and US
7. 5 Things We Watch – EUR-Inflation, Central Banks, The Business Cycle, Positioning & Commodities
- Welcome to our weekly ‘5 Things We Watch’, where we take you through 5 of the things we look out for in global macro.
- With markets hawking up Fed expectations, Euro Area inflation surprising on the downside, and commodities breaking out technically, there are plenty of things to shed some light on!
- This week we are watching out for the following 5 topics within global macro:
- EUR-Inflation
- Central Banks pricing
- The Business Cycle
- Fixed Income Positioning
- Commodities
8. Out of the Box: 6 Reasons the Fed Will Be Hiking Rates in 2024
- Even though the Santa rally in US STIRS has largely been reversed, markets are still pricing in 2.5 full cuts by the end of this year or so with the first to come around summer time.
- Currently, one of the most unappreciated risks by markets would be the Fed actually hiking rates in 2024 and thus we thought we would present 6 compelling and thought provoking arguments for why the Fed hiking in 2024 might not be impossible after all (our base case is a hold).
- The first argument has to do with year-on-year inflation seemingly having reached its equilibrium at 3%, a range in which it has found itself for the last year or so.
9. The Stock Market’s Q2 Challenges
- The S&P 500 ended the quarter exhibiting a series of “good overbought” conditions which are signals of strong momentum. Can the bullish momentum continue?
- Equity price momentum in Q2 is dependent on continued rising EPS estimates, a tame bond market response to higher Treasury coupon issuance, and a possible liquidity squeeze.
- The market is vulnerable to a setback. A lot has to go right.
10. Positioning Watch – Steepener bets back on?
- Hello everyone, and welcome back to our weekly positioning watch! Hope you all had a great time off during the Easter break.
- The market narrative has remained more or less intact after the break, with equity sentiment still going strong until today despite a bit of a hiccup delivered from the Fed, with especially Waller but also to a certain extent Powell pushing back on the 3 rate cuts priced in just a couple of weeks ago.
- The scenario with 0 Fed cuts in 2024 is looking to come into play, right as European central banks have likely received the final evidence for them to start cutting rates, with German CPI surprising on the dovish side, and UK Retail Prices collapsed, paving the way for both BoE and ECB to cut rates before the Fed, which admittedly has a more difficult time battling inflation.
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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. Missed The AI Mania Surge? Here’s A Few Options Still Worth Considering
- It’s probably not a good idea to chase the AI mania surge by buying the likes of NVIDIA, AMD, Micron etc at their currently highly elevated share prices
- Taiwan has a large ecosystem of semiconductor companies many of which are critical to the AI hardware supply chain
- We present a range of options with exposure to AI hardware for your consideration including foundry, fabless IC design, server BMC & Copper Clad Laminate
2. Micron’s Earnings and Broadcom’s Accelerators
- I wrote about this in my recent post about HBM, and it seems almost everything I talked about became true. HBM is going to bail out the memory markets meaningfully.
- Let’s talk about earnings, but I was hoping you could keep this post in mind while I discuss Micron.
These are the kinds of beats we start to see when the cycle turns. Now, the stocks have begun to anticipate this, but given the pricing dynamics of HBM, I feel very confident in Micron’s ability to hit a new cycle high in profitability.
3. Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?
- Hon Hai shares have hit a new all-time high and have just risen past our target price of NT$155, surging after investors flocked to Hon Hai on AI news.
- Hon Hai showcased two key technologies at Nvidia’s GTC conference last week: Nvidia-based AI servers with liquid cooling systems and an AI autonomous driving controller using Nvidia’s Orin X processor.
- Hon Hai’s sharp rally appears to have partly been caused by a short squeeze; While we like the long-term fundamentals and increased TP to NT$170, Hon Hai appears near-term overbought.
4. Taiwan Tech Weekly: Key Taiwan Server Names Soar; Raising TSMC Growth Target; Memory Rally
- Key Taiwan Server Names Soar; Delta Electronics Major Winner of Nvidia’s Conference
- TSMC (2330.TT; TSM.US): Raising Growth Target to 25%+ YoY in 2024F
- Memory Monitor: Micron Leapfrogging Into HBM3E for AI; Nanya Lagging Peers But Poised to Benefit
5. Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
- A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
- The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored.
6. MediaTek (2454.TT): Dimensity 9400 Unveiled in Sep; 2Q24F Sales Could Be a Bit Higher than 1Q24F.
- Mediatek Inc (2454 TT) Dimensity 9400 is expected to be released in September 2024F.
- Artificial Intelligence (AI) is a trending topic, and MediaTek is adapting by emphasizing Generative AI functionality in its Dimensity 9300 and 9400 smartphone models.
- The smartphone market is expected to recover in 2024F, with MediaTek’s revenue in the second quarter potentially surpassing the first quarter.
7. Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Surges As New AI Play; But Shorts Amassing as Well
- Delta Taiwan Outperforms Delta Thailand After Showcasing Its AI Power Efficiency Solutions at NVIDIA Corp (NVDA US)’s GTC Conference
- Delta Taiwan vs. Thailand Valuation Mismatch Has Corrected Further; Delta Thailand Finally Worth Less Than Its Parent
- Short Interest Spiked for Delta Taiwan; Taiwan Rally Short-Term Overdone Due to AI Concept Stock Hype?
8. Semiconductor Real Time Indicators Update
- Taiwan companies are required to report revenue on a monthly basis. These updates can help us understand how a given quarter is progressing & predict quarterly earnings ahead of time
- Initially we focused on MoM % increase/decrease. This is useful, but one needs to account for anomalies such as seasonality and potential non-linearity month to month within a given quarter
- We now also provide the monthly YoY revenue comparison. This eliminates anomalies due to both seasonality and intra-quarter non-linearity, enabling a clearer perspective on where the industry is at.
9. Mediatek: Accelerating Momentum in Automotive, Data Center, and AI Memory Solutions
- Mediatek is advancing full speed with recent industry collaborations for automotive chips, data center connectivity solutions, and AI memory solutions.
- In particular, the company has entered the market for Co-Packaged Optics (CPO), with partnerships announced with Foxconn and Ranovus.
- While the stock has rallied and re-rated, consensus forward estimates do not appear overly demanding and could still have room to increase further.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. HD Hyundai Marine Solution IPO Preview
- HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024.
- The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won.
- A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).
2. Globalwafers GDR Offering – Coming to Market Earlier than Anticipated
- Globalwafers (6488 TT) is looking to raise up to US$681m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
- The deal is a somewhat large one to digest at 20.2 days of three month ADV and the proceeds will be used to purchase raw materials overseas.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
3. Shinhan Financial Group Placement – Another Selldown, Momentum Is Strong but Deal Is Large
- BNP Paribas (BNP FP) is looking to raise around US$680m via selling 3.5% of its stake in Shinhan Financial (055550 KS).
- This will be the fourth selldown for the stock since the start of the year. It will also be the largest one of the lot, so far.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
4. Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
- Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
- HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
- Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.
5. ECM Weekly (25th Mar 2024) – TCS, Akeso, Coforge, ABSL, Tokio Marine, Trial, Migao, Mixue, Reddit
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Trial Holdings (5882 JP) ended up doing better than we expected, while Hong Kong finally got its first US$100m+ listing for the year.
- For placements, India was again at the forefront, this time with a not-so-pleasant results of Tata Consultancy Svcs (TCS IN).
6. Mankind Pharma Placement – Well Flagged, past Deals Have Done Well but Its Expensive
- ChrysCap is looking to raise around US$295m via selling a 2.8% stake in Mankind Pharma.
- MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
- We have looked at the IPO, lock-up release and prior placement in our earlier notes. In this note, we talk about the current deal dynamics.
7. Bharti Hexacom IPO: Valuation Insights
- Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise up to US$513 million at an IPO price range of Rs542-570 per share.
- We previously discussed the IPO in Bharti Hexacom IPO: The Bull Case and Bharti Hexacom IPO: The Bear Case.
- Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would not participate in the IPO.
8. HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In this note, we talk about the company’s historical performance.
9. Bharti Hexacom IPO: The Bull Case
- Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise around US$500 million at a valuation of US$3.3-4.2 billion.
- The offer is a pure secondary offering. The Government of India aims to reduce its stake from 30% to 15% of outstanding shares.
- The bull case rests on market share gains, ARPU growth, low churn rates, improving margins, cash generation and low leverage.
10. Bharti Hexacom IPO – Unexciting and at a Half-Decent Discount
- Bharti Hexacom is looking to raise up to US$513m in its upcoming India IPO.
- Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
- We have looked at the company’s past performance in our earlier notes. In this note, we talk about valutions.
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. Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
- ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
- All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others.
- Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.
2. KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
- It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
- There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.
3. Samsonite (1910 HK): Dual-Listing Musings
- It seems like every week, Bloomberg reports a HK-listed company weighing privatisation options. HKBN (1310 HK), ESR (1821 HK), and Samsonite (1910 HK) have all been rumoured of late.
- Last Friday, Samsonite announced it was focused on pursuing the listing of its shares on a second exchange.
- No preferred exchange was mentioned. Nor whether the goal is to secure a dual primary listing, or a secondary listing. A buyout, for now, appears to be on the backburner.
4. Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game
- In response to Roland DG Corp (6789 JP) request, on 22 March, Taiyo said it was considering a revised offer. However, Taiyo has since remained silent.
- Despite discussions with Brother Industries (6448 JP), the Board have not been able to eliminate dis-synergies concerns. The Board has left the decision to accept the Taiyo offer to shareholders.
- While the Board is trying to dissuade Brother, Brother will take its offer directly to shareholders if the Taiyo offer fails. Taiyo’s behaviour suggests a reluctance to bump.
5. Quiddity Leaderboard TDIV Jun 24: 5 Changes; US$1.2bn One-Way
- In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
- I currently see 5 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
- The estimate for one-way flow in June 2024 is US$1.22bn.
6. MMA Offshore: A$2.60/Share Cash Offer From Seraya Partners
- Marine and subsea services provider MMA Offshore (MRM AU) has entered into a Scheme with Singapore’s Cyan Renewables.
- Cyan, wholly-owned by Seraya Partners, is offering A$2.60/share in cash, a 11% premium to last close and a 31% premium to the 90-day VWAP.
- MMA shareholder approval and FIRB are the key conditions. This Offer will tentatively complete mid-late July.
7. Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
- As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block.
- Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.
8. Alteogen: Block Deal Sale of About 3% of Shares
- On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale.
- The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won.
- This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.
9. Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM
- 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: APM Human Services Internation (APM AU), Chilled & Frozen Logistics Holdings (9099 JP), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Probiotec Ltd (PBP AU).
- Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Vinda International (3331 HK), Snow Peak Inc (7816 JP).
10. SillaJen Rights Offering Worth 34% of Outstanding Shares
- On 22 March, SillaJen Inc (215600 KS) announced that it will conduct a rights offering worth about 129 billion won for R&D and financials improvement.
- The rights offering size is 34.5 million shares, representing 34% of total outstanding shares. The expected rights offering price is 3,750 won which is 26% lower than current price.
- We would not subscribe to this rights offering and we remain negative on the company.