Thematic (Sector/Industry)

• OVERSEAS. SPX +0.7% with all sectors in the green ahead of expected soft CPI print on Wed; Oil strong with weaker USD; MSFT wins as Activision purchase progresses
• JAPAN. NKY Futures +0.4% vs Cash; USDJPY 140.3; Markets start coalesing around BOJ policy shift; TSE kicks out 48 companies from Prime listing; Big Earnings Beat from Lawson(2651)
• NUGGET. Building a global semi-supply chain is a central tenet of Japan’s industrial policy. We think focusing on short term cyclical semi-weakness risks missing out on the home runs

• China’s beer sector is still trading up, despite the deflation concerns of the overall China consumer sector.
• Visible ASP growth and margin improvement over the next few years make the sector an attractive investment opportunity.
• Prefer China Resources Beer Holdings (291 HK) as it offers the best risk-reward within the sector.  

• Exchanges, especially in developed markets, continue to seek revenue streams outside of the traditional trading and transaction-based fees which has led to a mini-boom in exchange-driven M&A targeting diversification
• We use data and IT revenues as a proxy for “stickier” potentially recurring revenues in four DM and three EM exchanges, concluding that DM exchanges are under more diversification pressure
• We identify three buy opportunities in exchanges; we like Hong Kong Exchange, Deutsche Borse and we add Nasdaq, whilst we are negative on Coinbase which remains the exchange to avoid

• Boss Zhipin: SME Development Index rebound slightly in June, and labor subindex also marginally improved, but still far below the prosperity range
• XPEV:  Xpeng establishes partnership with Freesbe for Israel market (+)
• BABA/PDD/1024.HK: Taobao launched a dedicated entrance to short videos (+/-/-)

• You might have heard the news that Nasdaq Inc announced1 a “special rebalance” for the Nasdaq 100; an index which tracks the largest technology stocks across a range of America’s sectors.
• This reshuffle seeks to “address overconcentration in the index by redistributing the weights”; specifically the weightings of the Big 7 (Google, Microsoft, Apple, Nvidia, Amazon, Tesla, and Meta) who, together, account for ~54% of the index.
• The rebalance will be based on the shares outstanding as of July 3rd, and changes are expected to be announced on July 14th; taking effect by July 24th2.

• Update on the US postage fraud case we reported on earlier: it’s far more expansive than previously reported, and last week the judge ordered that the trial begin in August
• A new report from the US Congress attacks Temu, SHEIN on two fronts: Xinjiang-made goods and de minimus imports; tighter enforcement or new legislation could soon follow
• It’s unclear how the postage fraud case and growing Congressional concerns will play out; worst-case, both could dramatically undermine the direct-to-US consumer business model

• OVERSEAS. SPX rises as investors see end of Fed rate hike cycle; Investors continue to doubt the US bull market; China steps in again to support Real Estate market
• JAPAN. NKY Futs +0.4% vs Cash; USJPY 141.3; “New” NISA eligible funds expand;  JP investors buy record foreign bonds in H1;  ON THE STREET:Mit Motors to BUY; Toyota to Neutral
• NUGGET. Push for more women on boards continue in Japan – still lagging, but trend is up. Will it play out in valuations? Global Evidence Supportive.

• Forty to sixty percent of the world’s carbon emission takes place in buildings. Energy efficiency job is the single largest component that balances the job loss
• In traditional energy and job gain in renewable energy. China is materially behind the US in energy efficiency; We believe inclusion of energy efficiency in the upcoming stimulus package 
• Will be a sound choice to boost employment and GDP, and our listed companies in the new energy sector shall benefit from the trend.

• After a strong 1H23, global equities were down this week. The MSCI World Index fell 1.42%, while the S&P 500 dropped 1.06%.
• The decline was driven by strongerthan-expected labor market data and concerns that this may make the Fed less accommodating.
• The Russell 2000 finished the week down 1.32%, while the NASDAQ declined 0.92%.

• Advanced Transportation Solutions (75.2% of the index) contributed to the index’s outperformance, rising 4.7%, while Energy Technology (6.5% of the index) was up 0.4% and Industrial Climate and Ag Technology was down 0.8%.

• Valuation: Based on forward 12-month consensus estimates, the current P/E ratio of the WTR Sustainable index is 25.3x versus 20.5x for the S&P 500.

• Global semiconductor sales amounted to $40.7 billion in May’23. This represented an increase of 1.7% MoM and a 21.1% decline on a year-ago basis
• Samsung pre-announces Q2’23 sales and operating profit slightly down sequentially
• HMB3 standard launched. SK Hynix wins a critical HMB3 design win at NVIDIA

• OVERSEAS.  SPX -0.3% and down WoW; Weak Payrolls numbers lead to fall in US 2Yr to 4.95%, USD weakness;  This week – packed schedule with CPI; Watch Bank earnings
• JAPAN. NKY Futs flat vs Cash; USDJPY 142.2, on weaker US payrolls;   JP companies struggle to lift ROE due to expanding Equity Base (=more buybacks?); Kishida to reshuffle cabinet
• NUGGET. Heat Pumps – A Big Deal for Daikin(6367)/Melco(6503).  A large addressable, and growing market, and great for the environment. Yes, you should get excited!

• The Nikkei has recently launched two new equity indices for investors that are focused on dividends.
• We highlight some similarities and differences with the well-known US S&P 500 Dividend Aristocrats Index
• We carry out a quick and simple screen of the Nikkei constituents to find the best dividend stocks to buy

• BABA: Ant Group fine to be announced, but listing unlikely until 2024 (+)
• LKNCY: COTTI Coffee downgrade its promotion campaign, and Coffee price war is gradually easing (+)
• BEKE: Beike is exploiting new opportunity in home decoration business, and Beike Group Decoration delivered its first batch of projects in Tianjin

• Energy- Rotation to Laggards or Something More Brewing?
• The worst S&P 500 sector so far in 2023 has been energy which is down almost 8% getting trounced by the technology and communication services sectors.
• Inflation readings have benefited so far by energy “staying in the box” in 2023 versus the wild price spikes to $5/gallon gasoline and above which occurred last spring.

• Bitcoin Depot, a North American Bitcoin ATM firm, took a significant leap last week, diving into public markets through an $885 million SPAC transaction.
• This move marks the company as the first pure-play operator in the industry to pursue such an avenue, a distinct endeavor in a field dotted with complexity and uncertainty.
• Within the past few years, we’ve seen several crypto SPAC deals, such as cryptocurrency miner Core Scientific and digital rewards and crypto platform Bakkt Holdings, successfully step into the public arena.

• The Global Emerging Markets Weekly provides a summary of the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
• Macro data points: Chinese PMI data, South Korean inflation data.
• Companies mentioned:Ant Financial Services Group (6688 HK), Alibaba Group Holding (9988 HK) , Taiwan Semiconductor (TSMC) (2330 TT), Huabao International Holdings (336 HK) 

• Japanese stocks headed lower this week, tracking weaker US stocks. 
• With a bout of profit-taking, we are also seeing some rotation out of high-valuation, strong momentum stocks into “cheap” laggards. 
• Marine transportation stocks the big winners this week. Investors love those high dividends and low PBs

• One of the biggest stories in the Korean economy in the past two days have been the quasi bank run at MG Community Credit Cooperative (MGCCC) (새마을금고).
• The negative news about this has contributed to KOSPI falling two consecutive days (down 2% from July 5th to 7th). 
• MGCCC’s delinquency rate jumped from 1.93% at the end of 2021 to 3.59% at the end of 2022 and 6.18% as of June 29th 2023.

• WTR-CMI last week. In an up-week for the market, our WTR-CMI index of 30 chemical and material technology companies appreciated 4.8%, surpassing both the S&P 500 and Russell 2000 returns of 2.3% and 3.7%, respectively.

• FUL’s 13.2% appreciation led our index, as the company delivered strong margins in 2QFY23 (May- 23) and provided solid EBITDA guidance for the year.

• The stock was also helped by FUL’s announcement of two bolt- on acquisitions, Adhezion Biomedical, a privately held medical adhesives company, and XCHEM International, a UAE specialty adhesives manufacturer with a strong position in MENA. 

• This year’s Jakarta Fair was a spectacle with large crowds, who were spending as well as enjoying all the discounted food on offer and viewing new products on show.
• The highlights from the show were a plethora of 2W and 4W EVs, a notable presence from dairy players, and many financing options being offered by multi-finance and fintech players. 
• In the consumer sector, we like Mitra Adiperkasa, Ace Hardware Indonesia, Matahari Department Store, Cisarua Mountain Dairy (Cimory), Ultrajaya Milk, PT Nippon Indosari Corpindo (ROTI), and Astra International, for auto exposure.

• OVERSEAS. Strong ADP numbers drive bond and equity sell off; SPX -0.8% as all sectors in the red  as reality of further Fed hikes get real; EV Truce in China
• JAPAN. NKY Futs -1.1% vs Cash; USDJPY 144.1; Expect further follow through of yesterday’s NKY sell off; Yen strength won’t help – as we head into weekend, correction finally here?
• NUGGET. Profit Renaissance for Japan’s Defense Industry. From big (MHI, Melco, etc) to Small – expect numerous beneficiaries of the policy changes afoot.

• A weekly curated selection of Chinese news articles and company announcements focused on developers in distress
• We look for their deals, updates, specific project progress news (‘local signals’), as well as relevant local research commentaries about the market
• We do not verify the underlying data or provide any opinion, we only select and summarize the information; see direct links to sources

• Computer-scientist-turned venture capitalist Kai-Fu Lee unveiled a new generative artificial intelligence (AI) company called 01.AI on Monday, the latest entrant in a race to develop large language models that can power products equivalent to OpenAI’s ChatGPT in China.
• The new company was officially launched after three months of incubation by the AI pioneer’s Sinovation Ventures, according to a statement posted on the VC firm’s WeChat account Monday. The new website for the company has come online, according to the statement.
• Beijing-based 01.AI aims to develop a platform and application ecosystem based on AI 2.0 era technologies, Lee said in the statement.

• There is tremendous growth in Australian insolvencies, which is not simple a base effect
• Construction insolvencies are up 75% YoY through mid June, the worst of any sector
• NAB shows +17x exposures risk-weighted at 75%, PD +84% in qualifying revolving retail

• XPEV/NIO/LI/TSLA/1211HK: 16 major automakers pledge to jointly maintain order in China auto market (+/+/+/+/+)
• XPEV: Xpeng G6’s conversion rate exceeds 50%, outperforming the industry (+)
• ZLAB：ZLAB’s FcRn Efgartigimod received NMPA approval. We expect 2023 revenue US$10mn (-)

• OVERSEAS. US Back to Equity Declines as Fed Minutes indicate  more hikes coming;  Yield Rise across the curve; SPX -0.2% with Cyclicals hit hardest; New Car Sales up Again
• JAPAN. NKY Futs -0.7% vs Cash; USDJPY 144.7;  RENGO confirms largest wage Hikes in 3 decades;  Rakuten Securites IPO=¥100bn? is it enough for parent?; Big Buyback from Leopalace(8848)
• NUGGET.  Nintendo Switch Sales still has more to run ? it would seems so -as IP is driving sales to new records in its 7th YEAR !

• Some assets in A-share that were considered to have long-term growth but are not anymore. Then the logic of capital’s allocation in A-share isn’t based on growth, but on liquidity.
• There’s no real separation between local finance and medical insurance fund. So, there could be “surprises” during the promotion of DRGs policy. Then a slump in sentiment and valuations is possible.
• For China healthcare, there’re structural opportunities and rebounds this year. We analyzed the possible trajectory of stock price fluctuations in different sectors, and also our top pick.

• The USDA surprised the market with a 5% lower-than-expected planted soybean area in 2023, with soybeans rallying 7%.  
• The U.S. Midwest drought remains in focus. Dry areas are by far the greatest since 2002 and soybean crop ratings are at historic lows for this time of year. 
• With the budding El Niño, supply risk to edible oils in 2024 continues to rise. Reiterate the positive call on Plantations and the bullish CPO price forecast. 

• OVERSEAS. US out for Independence Day – not a lot to report; European Stocks gain, and volumes 1/3 of normal;  META to Launch “Thread”, to compete with Twitter
• JAPAN. NKY Futs -0.8% vs Cash; USDJPY 144.5; NKY -1% as JP succumbs to profit taking; Toyota to cut Solid State battery costs by 50%; Rakuten to list Securities biz
• NUGGET.  Lawson – if management can execute on their MTP, the stock is super cheap. Potential growth, Yield, Take out play ?

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Providers, Pranav Bhavsar and Nitin Mangal. They will be sharing with us their Top Stock Picks in India. From trends, current opportunities, and insights on their picks, join us as we get the full picture from Pranav and Nitin.

The webinar will be hosted on Wednesday, 12 July 2023, 17:00 SGT/HKT.

Pranav Bhavsar is the Founder of ASA Capital Management, focusing on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.

Nitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed a product for Institutional Investors named as “Analysis Beyond Consensus” during his association with Edelweiss Securities Ltd, Mumbai. 

• Europe has seen some remarkable energy prices in recent days with record negative electricity prices in the North Western part of the continent, while Saudi Arabia strikes again and prolongs the supply cuts into August.
• Read along in our weekly Energy Cable, where Steno Research and 3Fourteen Research share their thoughts on Energy markets. As usual, we don’t quite agree.
• At yesterday’s auction for the day-ahead German baseload electricity prices turned outright negative and we wonder if this could be a signal of deflation to come like we saw in the gas markets last fall where the short end of the curve absolutely nosedived once we realized filling the storages was not going to be a problem.

• The growth of China’s semiconductor industry is inevitable and ever increasing sanctions on advanced semi supply chain components are adding fuel their self-sufficiency aspirations
• Most Chinese semi stocks P/E ratios are sky high & volatile to boot. Many US semi stocks have peaked as far as their exposure to China growth is concerned. 
• One sub-segment of the WFE sector may provide China semi growth exposure at reasonable valuation with relatively low risk. 

• OVERSEAS. SPX eakes out gains despite weak ISM Manufacutring in light trading ahead of July 4th Independence Day Holiday; TESLA +6.9% on big 2Q delivery numbers
• JAPAN. NKY Futs -0.4% vs Cash; JPYUSD 144.7; Strong BOJ Tankan print drives NKY to new highs;  JP land prices continue to rise; Support for JP foundry goals from IBM
• NUGGET.  Japan’s passing of the GX Promotion Law enables the issuance of ¥20 trillion in bonds and promotes ¥150 trillion of decarbonization investment over the next decade. Investment opportunities abound!

• A collapse of real estate speculation destroyed the balance sheets of Chinese households, leading to downward spiral in consumptions. A tremendous stimulus package can reflate the economy, 
• But it doesn’t solve the structural problems; Unlike semiconductor and biotech, inputs to renewable energy are many and supply chains are long.  To stay ahead, Chinese companies must keep themselves 
• Cost competitive,  which means they can neither realize profits nor retaliate US containments. But their equities offer the long-term hope to replace real estate as nest eggs of Chinese retirees.

• 2252HK:   NHC issued the “14th Five-Year Plan for Large-Scale Medical Equipment Allocation” ,  the planned quota of laparoscopic robots is slightly lower than our estimated (-)
• 1801HK/LEGN:Innovent/ISAO co-developed CAR-T received approval in China ahead   of Legend’s CARVIKTI, might try to squeeze in NDRL list this year (+)
• LKNCY: Luckin Coffee reported 50mn monthly transacting customers in June(/)

• OVERSEAS.  Strong close to Month, Quarter and Half Year as SPX rose +1.2% on Friday; AI Trade Back as NDX100 hit  $5trn Mkt cap; Apple now >$3 trill !
• JAPAN. NKY Futs +0.7% vs Cash; USDJPY 144.3; Tokyo Inflation print 3.2% raises questions on national inflation and BOJ’s next steps;  Tokyo heats up as Power conservation measures implemented
• NUGGET.  We believe Toyota’s concerns regarding BEVs are valid. We see them having the technology and manufacturing prowess at scale, strong branding, and global reach to eventually overtake Tesla

• ZLAB: Laekna Therapeutics IPO’ed in HK with two AKT inhibitors. We believe it will complement PARP inhibitor (+)
• LKNCY: COTTI Coffee opened its No.4k store，but may lack sustainability(/)
• 002202CH/601615CH：Siemens Gamesa’s wind turbine suffers quality recall, may benefit Chinese vendors (-)

• In any portfolio, it’s always good to have a listing of up and coming companies on hand which you may be interested in which may have recently IPO’d, did a significant acquisition, or has introduced a new and exciting product or service.
• These companies may also have parabolic forward Wall St. estimates for both revenue and or profits.
• I generally refer to this listing as my “wild broncos” listing and they generally can have wild price and volume swings (based upon earnings releases, press releases, investor day presentations, or analyst upgrades) and sometimes can often come under attack by short seller reports.