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 #97 – 5 reasons why the CNY will be devalued next week and how to trade it
- I spent last week in Asia and even though I admittedly like to see my research as edgy and contrarian, I quickly realized that most PMs in the region agreed on my take on the imminent risk of a devaluation of the CNY.
- USD/CNH call options are popular/consensus in the Asian Macro PM space, but interestingly there is no consensus around the contagion from a devaluation of the USDCNY.
- The discussions I had pointed in all directions, meaning that a CNY devaluation holds the potential to turn into a macro earthquake, despite it already being a consensus position.
2. April Themes and Thematic Portfolio Review
- A monthly review of 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
3. Corporate Value Up Program Guidelines Proposed by the FSC – Disappointing & Needs Improvement
- Some of the Corporate Value Up program’s initial guidelines proposed by the Financial Services Commission (FSC) were announced today.
- Overall, the initial guidelines were disappointing mainly because they lacked concrete figures with regards to tax incentives for companies that make significant improvements to their corporate governance.
- More concrete measures announced today included recommendations for overlapping parent company listing (split listing) and disclosure recommendations for the majority shareholder’s profit transfer to an unlisted private company (tunneling).
4. Portfolio Watch: No respite for Asian FX.. How to deal with it?
- Welcome to our weekly Portfolio Watch! We have had a strong week in our portfolio with a USD-reflationary lean, but we are starting to contemplate how to deal with contagion from a continued rise in USD versus Asian FX pairs, especially if the increasing latent risk of a major devaluation of the CNY comes into fruition.
- There is currently no respite for the Asian FX pairs as all major forward looking models point to a reacceleration of US inflation trends from the current plateau around 3.5% YoY.
- We will look at the devaluation risks in detail tomorrow in our weekly “Steno Signals”, but will pinpoint value pockets in markets already today in our Portfolio Watch.
5. NPS Changes Its Core Asset Allocation Method – First Time in 18 Years
- NPS announced today that it will change its core asset allocation method, which aims to increase its purchase of risky assets including stocks and alternative assets.
- Under the new system, the proportion of risky assets will increase to 65% of the NPS’ entire fund assets and the remaining 35% will be allocated to the safe assets.
- There is an increasing probability that a portion of the 24.6 trillion won (2.3% of AUM) could get allocated to risky assets including domestic equities.
6. Positioning Watch – Prepare for further action in JPY pairs
- Hello everyone, and welcome back to our weekly positioning/sentiment overview!Equity sentiment has soured a bit since we last spoke, with broad US traded ETF fund flows sent back into solid negative territory after a stunning start to the year.
- While most of it is due to the tax-season in April, the hawkish repricing of global central banks has also played its part in normalizing the über-bullish sentiment in US equities, with markets now also biting their nails as an ECB June cut is no longer a certainty.
- Chart 1: Rolling monthly US ETF fund flowsAfter a couple of weeks of outflows from XLE, the reflation bet is back on track with around 500 mn.
7. China Ups the Ante with Relaxation of Property Curbs
- Property restrictions removed in major cities, continuing the gradual process from the last 6-8 months
- A BIG signal to the market and the public with the relaxation of curbs in Beijing
- China’s factory output continues expansion and travel data positive for consumption
8. The Week At A Glance: ISMs, NFP, FOMC & QRA to put even more pressure on USD rates?
- The QRA announcement will be released in a few hours (on Monday) while the issuance details will be released on Wednesday.
- We generally don’t see any reasons to fear the Q2 issuance as a strong tax-season has been confirmed with the TGA standing at 941bn dollars, which is almost 200bn above the target range.
The TGA also printed above the target range going into Q2, making it unlikely that the US Treasury turns the heat on in the issuance pace. We see a small downgrade of the Q2 number (202bn) as the most likely.
9. Energy Cable: The recipe for another summer of exploding energy prices (in Europe)
- Energy markets in Europe still fragile. A hot summer and manufacturing rebound could set prices going.
- Manufacturing cycle is improving everywhere but in Germany. Cost-push inflation showing up in drilling now
- This week we want to talk about the ingredients needed for another summer of exploding electricity and gas prices.
10. Great Game – Could Biden Have Even More to Fear from Trump’s Trial?
- Welcome to this week’s Great Game where we will catch up on events in the Middle East and also cover the Trump trial that’s currently taking all the attention in the US Election race.
- Situation:Israel responded very lightly to the massive Iranian attack on April 13th and we haven’t heard any more from that conflict over the past week.
- As we predicted, Israel’s response was “next to nothing” and clearly acknowledged the de-escalatory nature of Iran’s strike. I know some took offense to that analysis, but it is genuinely our assessment and I think events since has reinforced that view.
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. Why Tesla Shows Post Results Rebound of over 10%?
- Again, Tesla reports a 1Q24 sales with 4% miss but post market share price up more than 10% for 6 reasons. 1. Gross margin was stable on 15% sales drop;
- 2. ASP was stable; 3. Affordable EV on track for 2025; 4. Factory expansion to slow; 5. Optimus to sell end of 2025; 6. 2024 EV shipment higher than 2023.
- Near term risks to remain: 1. When will margin trough? 2. Why bother to buy EV if 2nd hand market collapsing? 3. Will Robotaxi/FSD bring in meaningful sales/profits soon?
2. TSMC Just Provided Substantial Visibility into Their Long-Term Growth Estimate; ASML Adds Color
- TSMC and ASML reported 1Q24 results last week; both stocks have fallen post results, impacted by global concerns despite a strong outlook for these two leaders into 2025E.
- TSMC guided for strong growth not just in 2024E, but if one digs into management’s comments, they actually provided strong visibility into their 2028E internal revenue expectations.
- For ASML, its EUV product business is the key indicator to watch. We believe TSMC shares will continue to re-rate even through a period of global economic softness.
3. TSMC, ASML, VAT Group, and Alphawave Earnings
- It’s time for the main event: earnings are upon us. As is customary, let’s start with TSMC, move to ASML and Alphawave, and then discuss VAT Group.
- TSM revenue is above guidance, gross margins are a bit ahead of the midpoint, and operating margins are at the high end of guidance.
- First, while this is a good result, semiconductors are due for a correction. I wrote about this in March, and SOXX has quietly crept downwards since then.
4. Taiwan Dual-Listings Monitor: TSMC Breaks Down From Extreme, UMC Discount Near Historical Low
- TSMC: +9.2% Premium, Major Breakdown From Previous Historically Extreme High
- UMC: -1.9% Discount, Is Near Low End of Historical Range
- ASE: +10.4%; ADR Short Interest Jumps to Very High Level vs. History
5. Intel Is Shifting Focus to Products, Away from Manufacturing/Foundry; Worth to Follow?
- Intel misses 1H24 market consensus again, post market correction of over 7%. Can shifting focus away from foundry/manufacturing help?
- Is the breakdown change for future spin off/IPO of foundry/manufacturing, and non focus businesses like Altera and Mobileye positive?
- We disagree Intel foundry to breakeven in two years; we see AI product lagging behind competitors and non AI server CPU being squeezed by AI server GPU and GPU/CPU integration.
6. Lasertec (6920 JP): Further to Fall
- Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
- Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
- Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife.
7. Q124 Tesla & Meta: Compare & Contrast
- Tesla had a dismal quarter but Musk told a fairy tale about RoboTaxis and Robots and the markets rejoiced
- Meta had a beat & raise quarter but Zuckerberg told the truth about the fact that it would take time to monetise their AI investments and the markets recoiled
- Markets are on edge and big moves either way can be expected post earnings
8. SK Hynix: AI Is Still the Main Driver
- SK hynix earnings were announced, with a 10% Q/Q revenue increase driving a 734% increase in operating profit
- Although the company cited AI demand as the basis for this, its DRAM revenues, which are very AI dependent, increase very little
- NAND SSD demand increased significantly, with a 30% increase in revenues, largely attributable to price increases
9. Taiwan Tech Weekly: Semi/AI Darlings Slammed; TSMC Supply Chain Insights; ASE Wins Key IPhone Order
- Taiwan Tech Shares Fell Sharply Along With Global Selling — Semiconductor and AI Names Most Exposed
- What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?
- ASE Technology Holding (3711 TT) Wins iPhone 16 System-in-Package Order from Apple (AAPL US)
10. Memory Monitor: What SK Hynix Sees For PC and Server Markets Ahead; TSMC’s Strength Vs. Samsung
- SK Reports Massive Margin Rebound; Nanya Tech’s Financial Performance Appears Relatively Weak in Perspective
- AI Applications Now Translating Into Rising Solid-State Memory (SSD) Demand
- SK Povided Positive Color for Taiwan PC Names; New TSMC Collaboration Highlights TSMC Strength vs. Samsung
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 Book Building Results Analysis
- HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range.
- A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
- Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.
2. A Review of Post IPO Price Performance of Top 13 IPOs in Korea Past 8 Months
- In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months.
- We review the the share price performances over different time periods (1 day, 1 week, and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs.
- On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.
3. Krafton Placement – Stock Has Been Doing Well, Momentum Remains Strong
- SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
- The stock has been doing well over the past few months and its earnings and price momentum remain strong.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
4. ECM Weekly (22nd Apr 2024) – Kokusai, J&T, Voda IDEA, ChaPanda, Cloudchain, Johor Plant, Aadhar
- 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, Sichuan Baicha Baidao Industrial (2555 HK)‘s deal launch made it the first large HK IPO for this year.
- On the placement front, Vodafone Idea (IDEA IN) deal was live. Also there are lockup expiries in Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) coming up.
5. Sichuan Baicha Baidao IPO Trading – Tepid Demand, While Peers Have Corrected
- Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
- SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
- We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.
6. Horizon Robotics Pre-IPO – The Negatives – Large Part of the Growth Stems from Its JV
- 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.
- 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 not-so-positive aspects of the deal.
7. Horizon Robotics Pre-IPO – The Positives – Rapid Revenue Growth
- 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.
- 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 positive aspects of the deal.
8. China Resources Beverage (Holdings) Pre-IPO Tearsheet
- China Resources Beverage (Holdings) Company Limited is looking to raise US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are BofA, BOCI, Citic, and UBS.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- According CIC, it was the second largest company in the packaged drinking water market in China and the largest company in the purified drinking water market in 2023.
9. OceanaGold Philippines IPO – Updated Thoughts on Valuation – Too Expensive Even at This Price
- OceanaGold Philippines (OGP PM) is looking to raise up to US$106m in its Philippines IPO.
- OceanaGold Philippines (OGPI) is a producer of gold and copper in the Philippines, and a subsidiary of OceanaGold Corporation, a Toronto Stock Exchange (TSX) listed gold mining and exploration company.
- In our previous note, we talked about the company’s historical performance and shared our quick thoughts on valuation. In this note, we share our updated thoughts on valuation.
10. 99 Speedmart Holding Pre-IPO – Consistent Network Expansion, Although Margins Remain Well Below Peak
- 99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$300m in its upcoming Malaysia IPO.
- 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
- In this note, we look at the firm’s past performance.
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. RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
- They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
- RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.
2. Significant Developments Emerged Today for Korea’s Value-Up
- Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
- Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
- Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.
3. Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto
- 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: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Azure Minerals (AZS AU), QV Equities Ltd (QVE AU), Hollysys Automation Technologies (HOLI US), Shinko Electric.
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU), Lawson.
4. IDX30/LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks
- There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
- The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ).
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
5. Activist Palliser Re-Engages on Keisei Electric (9009) But The Oppty Remains Unconvincing
- Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%.
- The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
- I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.
6. Jardine Cycle & Carriage Is A Short
- Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
- The simple ratio of JCNC/Astra International (ASII IJ) is around its highest level outside the 2008 GFC.
- A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.
7. Japan – Increase in Shorts & Potential Passive Selling in May
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
- The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
- Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.
8. 18yrs Later, Shin-Etsu Chem Takes Out Sub Mimasu Semi (8155) – Cheap But Whatchagonnado?
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu.
- This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.
9. HSCI Index Rebalance Preview: Robosense (2498 HK) Could Be Added in June
- There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
- Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
- There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.
10. BHP/Anglo American: A Decarbonising Solution
- BHP (BHP AU)‘s all-scrip unsolicited Offer for Anglo American (AAL LN), zeroes in on AAL’s copper assets as demand for the metal increases for use in EVs and renewable power.
- The proposal has been labelled highly opportunistic by some shareholders and South African politicians. And that the value of AAL’s Chilian/Peruvian copper mines are obscured by its sprawling business interests.
- The Offer remains conditional and non-binding. A transaction hinges off AAL spinning off its South African iron ore and platinum businesses. Expect AAL to reject terms, but remain engaged.
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 #96 – A major devaluation of the CNY could be imminent
- China is preparing something BIG. That seems more and more obvious to me by the week now. The question is what that BIG thing is.
- China reported a strong 5.2% YoY Q1 despite troubles on the ground, local financial institutions are hoarding bonds because of a weak credit demand growth picture and the Chinese authorities seem to be stockpiling like crazy.
- We have seen plenty of tin-foil theories speculating in the reasons behind those Chinese actions, but maybe China is just preparing a major one-off devaluation of the CNY?
2. Hong Kong: The Glass Is Half Full, Time to BUY Beta
- HSI has now closed above its 3 year downtrend and is poised to advance to its next resistance level
- International brokers finally turning more bullish on the market as the US, Europe and Japan markets turn down
- High beta sectors are set to outperform as global investors reallocate to the cheapest AND 2nd largest tech sector in the world
3. Back Testing the End of Mandatory Lock-Up Periods Monthly Data in Korea
- In this analysis, we provide a back testing analysis of the end of mandatory lock-up periods monthly data in Korea in the past six months.
- All in all, this end of mandatory lock-up period monthly data continues to provide some alpha generating results.
- In the past six months, they have tended to work better in periods when KOSPI declines rather than in periods when KOSPI rises.
4. Will the Ban on Short Selling Stocks in Korea Extended Beyond End of June 2024?
- On 6 November 2023, the Korean government announced that it will temporarily ban short selling stocks until end of June 2024.
- On 25 April 2024, the FSS unveiled for the first time its plan to build a computer system to prevent naked short selling called NSDS (Naked Short Selling Detection System).
- There is a high probability that the the temporary ban on short selling which currently lasts until end of June 2024, could be extended further to 2Q 2025.
5. Great Game: Despite New Aid, Ukraine will lose within 12 months. Plan Accordingly!
- With all eyes on the Middle East for the past weeks and months, we haven’t focused as much on the ongoing war in Ukraine.
- In the big picture, not much has changes on the frontline despite continued heavy losses and a Russian election.
- But now I think it’s time for investors to re-adjust their assessment of the war and consider contingencies for the path ahead.
6. HSCEI Outperformance Is Asia’s Best Kept Secret
- China Enterprise Index (HSCEI) is now the top performing index in Asia on a USD basis
- HSCEI also trades at the lowest P/E multiple in the Asia
- High probability of divergence as US and Europe markets turn down
7. Shipping Watch: No news is bad news (for inflation)
- Headlines in the beginning of 2024 were dominated by shipping and logistic troubles but over the last months that has almost died completely down.
- With “no news” we continue to see spill-overs to goods inflation in coming months.
- In general freight rates have been falling since Jan high but still remain some 50% above 2023 levels
8. Active GEM Funds: Extremes in Positioning & Momentum
- This report identifies stocks at the extremes of their positioning or momentum ranges within our active Global EM fund universe.
- We have pinpointed eight stocks either at their historical positioning extremes or undergoing significant changes in fund ownership, providing detailed ownership profiles for each.
- HDFC Bank loses steam after merger, Nu Holdings surges to new highs, POSCO plunges to new fund ownership lows.
9. The week at a glance: Time for the BoJ to step up, while soft PCE numbers may fool some..
- Welcome to our weekly “the week at a glance” publication where we dissect the most important central bank meetings and key figure releases in a short and sweet format.
- This week we focus on PCE prices, European PMIs and the Bank of Japan.
- Event 1: European PMIs (Tues): A lukewarm, but positive, surprise.
10. Bollinger Bonds
- In our April monthly, we highlighted the combination of fading impulse for momentum stocks (principally tech) and the need for tax related selling in the trading/retail space coming against a background of a correction in the short term bull phase within the longer term bond bear market.
Since the beginning of March, US 10 year yields have gone from 4% to around 4.6%, unwinding the Fed Pivot language that emerged to ‘explain’ the earlier rally.
In our view that was an unlikely ex-post narrative, as is the one emerging now that the Fed will not cut at all.
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. TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ. Maintained full year 2024 outlook
- Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
- SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!
2. What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?
- TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.
- No more Moore’s Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.
- Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.
3. Multiple Positive Catalysts Ahead Of Q124 Earnings Season
- PC, Smartphone Unit shipments both registering YoY growth in Q124
- TSMC will beat guidance & likely guide Q224 up ~5% QoQ. Samsung’s pre earnings showed strong recovery in operating profit
- Server unit shipments are on a ~17% YoY growth run rate
4. Taiwan Tech Weekly: Apple Suppliers Slump on IPhone; PC Volumes Back to Growth; TSMC & ASML Results
- Apple supply chain names are falling due concerns about weak iPhone shipments. Global PC shipments returned to growth as per IDC data.
- TSMC and ASML results this week and will be cruical for the market. Can TSMC rally again to achieve new highs or will it continue trading lower?
- Nanya Technology sees DRAM Industry pricing rising through 2024E; but is underperforming financially.
5. TSMC (2330.TT; TSM.US): 2Q24F Sales in Line, 2024F Is Lowering the Growth Target Below 25% YoY
- Declaring a slower recovery for mature nodes was an outlier, indicating that Vanguard’s recovery progress might be slower.
- Apple’s iPhone is expected to be the focus for N2 production in 4Q15F.
- TSMC’s long-term gross margin is set at 53%, signifying a few key points.
6. ASML. Maintaining 2024 Guidance Despite Sharp Decline In New Bookings
- ASML reported Q124 revenues of €5.3 billion, in line with expectations, down 27% QoQ and down 21% YoY.
- Guided Q224 for €5.95 billion, down ~23% YoY. This implies H224 will have to be much stronger than H124 in order to maintain full year 2024 guidance of flat YoY
- New order intake was €3.6 billion, down significantly from the €9.2 billion in the prior quarter, and challenging the narrative of a strong growth year in 2025
7. Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.
- Novatek Microelectronics Corp (3034 TT)‘s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.
- Looking ahead to 2Q24F forecasts, the anticipated orders from United Microelectronics Corp (2303 TT) could have a positive impact on Novatek’s 1Q24 sales.
- A significant growth is expected after 2Q24, particularly following Novatek’s qualification for the Apple (AAPL US) iPhone 16.
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 Elec (6525) – The Much-Anticipated Lockup Expiry
- Last autumn, Kokusai Electric (6525 JP) was IPOed by KKR. The lockup expires next week, on 21 April 2024 (a Sunday). That frees up about 70% of the stock.
- KKR’s own stake is worth about US$2.8bn. It is not clear that Applied Materials, Qatar, or the Koch Strategic Platforms stakes would be for sale (now, or near-term).
- There is an interesting schedule of events between here and a likely offering date. It pays to pay attention to the details.
2. Baicha Baidao (2555 HK) IPO: Valuation Insights
- Sichuan Baicha Baidao Industrial (SCBCBDID CH), a leading freshly made tea drinks company, has launched an HKEx IPO to raise US$330 million. The shares will be listed on 23 April.
- We previously discussed the IPO in Baicha Baidao IPO: The Bull Case and Baicha Baidao IPO: The Bear Case.
- There are no cornerstone investors. Our valuation analysis suggests that Baicha is fairly valued at the HK$17.50 IPO price. Therefore, we would pass on the IPO.
3. Vodafone Idea Placement – Very Well Flagged but Its Not Going to Fix a Whole Lot of Issues
- Vodafone Idea (IDEA IN) plans to raise around US$2.2bn via a follow-on public offering.
- The deal has been in the works for years and proceeds will be used for capex and short-term debt repayment.
- In this note, we will run the deal through our ECM framework and talk about the deal dynamics.
4. ECM Weekly (15th Apr 2024) – Hyundai Marine, Bharti, Kayou, Zeekr, ChaPanda, Samsung, WT Micr, Sompo
- 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, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO.
- On the placement front, there were deals across India, South Korea and Australia.
5. Pre-IPO Sichuan Baicha Baidao Industrial (PHIP Updates) – Some Points Worth the Attention
- Baicha Baidao’s profit model doesn’t rely on tea drink sales, but on continuous expansion of store size.However, rapid expansion brought by the franchise model has led to significant management challenges.
- The profitability/market attractiveness of ChaPanda stores are declining, which not only reflects franchisees’ concerns about future profit prospects,but also reflects the market’s re-evaluation of the attractiveness of Baicha Baidao brand.
- Although current financial performance of Baicha Baidao seems acceptable, after IPO, its performance could decline year by year, leading to a collapse in stock price/valuation if this is the case.
6. Belle Fashion IPO: The Investment Case
- Belle Fashion Group (2007708D HK), the largest fashion footwear company in China, is seeking to raise up to US$1 billion in a HKEx IPO.
- Belle Fashion originated from Belle International Holdings (2129452D HK), which was privatised in 2017. In October 2019, Belle International spun off its sportswear business as Topsports International Holdings (6110 HK).
- The investment case rests on a market-leading position, return to growth, margin improvement, cash generation and modest leverage.
7. Horizon Robotics IPO Preview: “Journey Together”, Strong Business Position and Market Share Gains
- Horizon Robotics, a consumer-centric and fast-growing provider of integrated ADAS and AD solutions for passenger vehicles, filed for an IPO and plans to raise up to $500M in Hong Kong.
- Horizon Robotics was founded in 2015 by Dr. Yu Kai, Dr. Chang Huang, Ms. Feiwen Tao, and a group of scientists and tech entrepreneurs.
- I have a positive view of an upcoming IPO and believe Horizon Robotics is in a great position to capitalize on rapidly growing smart vehicles market in China and worldwide.
8. Sichuan Baicha Baidao IPO – Doesn’t Offer a Discount to Peers
- Sichuan Baicha Baidao Industrial is looking to raise up to US$330m in its HK IPO.
- SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
- We have looked at the company’s performance in our past note. In this note, we talk about valuations
9. Upcoming Mobvoi’s Debut: Downsized IPO Despite Hyper-Growth In AIGC Business Segment
- Mobvoi, an emerging AIGC market player in China, set terms for an IPO and plans to raise ~HK$330M (~$42M) in Hong Kong. CICC and CMB International are leading the offering.
- The initial public offering is expected to be between HK$3.70 and HK$4.10. At the midpoint of the range, Mobvoi has a market value of ~HK$5.8B based on 1491.5M outstanding shares.
- In my insight, I discuss valuation framework for comparable company analysis and outline revenue growth scenarios for each business segment under my base case.
10. Will the Hyundai Marine Solution IPO Follow in Ecopro Materials’ Footsteps After It Goes Public?
- The prospect of this IPO mirroring the post-listing rallies seen with Ecopro Materials is what keeps local institutions fixated on this IPO despite valuation issues.
- The key factors are speculative trading frenzy among local retail investors and subsequent passive inflows through early entry into KOSPI 200/MSCI Standard.
- Considering two factors is vital. Hyundai Marine Solution’s IPO size is twice Ecopro Materials’, potentially limiting speculative buying. Sector-wide rallies, crucial for Ecopro Materials, haven’t been as prominent in shipbuilding.
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. Pasona (2168 JP) Special Div – Too Small to Matter
- On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
- The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
- A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.
2. Shinko Electric (6967) – Break/Gap Risk Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 5wks ago, reco’d trimming.
- Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR’s approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.
3. Kokusai Electric IPO Lock-Up – KKR Will Be Tempted by the US$2.7bn Release but Might Have to Wait
- KKR raised around US$730m via selling some stake in Kokusai Electric (6525 JP) Japan IPO in Sep 2023. Its remaining stake will be released from its IPO linked lockup soon.
- KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
4. JSR (4185) – Deal Done, Now Back End Arbs Need To Be Card Counters
- Today after the close, the results of the JSR Corp (4185 JP) Tender Offer were announced. Bidco JICC-02 obtained 84.36% of the shares out in the Tender Offer.
- That means imminent index downweights, delayed index downweights, and theoretically another selldown on the last day of listed existence.
- News which came up since the start of the Tender Offer make this a little more difficult than it might have otherwise been.
5. Idemitsu (5019): First SumiChem’s, Now JERA’s Stake in Fuji Oil (5017) To Go to 22%. It’s Coming…
- In the mid-late teens, four refinery groups merged to create two refinery groups – JX and Tonen General became JXTG under ENEOS Holdings (5020 JP) and Idemitsu took over ShowaShell.
- When Idemitsu got ShowaShell, it got 50+% in Toa Oil Co Ltd (5008 JP), 6.58% of Fuji Oil Co Ltd (5017 JP). In 2020, they tried to buy in Toa.
- That was delayed by an activist. Today, Idemitsu announced they had gone to 23% in Fuji Oil. That stake will go up before it goes down.
6. Hang Lung Group: Thoughts On HLP’s Scrip Dividend
- And eagle-eyed reader spotted Hang Lung Properties (101 HK)‘s scrip dividend option for the FY23 final dividend. That’s the first time I’ve seen HLP provide this alternative.
- Over the years, the Chan family and Hang Lung (10 HK) have chipped away at HLG’s and HLP’s minorities. HLP and HLG are currently trading at all-time low P/Bs.
- This scrip dividend, which takes a page out of Jardine Matheson (JM SP)‘s playbook, would boost HLG’s stake in HLP to ~63% from 61.24% currently; if opting only for scrip.
7. ChiNext/ChiNext50 Index Rebalance Preview: Plenty of Overlap Between the Indices
- Nearing the end of the review period, we forecast 8 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
- There are overlapping names for the two indices and some of the stocks will also have flows from the CSI Smallcap 500 Index – Shang (SH000905 INDEX) trackers.
- The potential adds have outperformed the potential deletes between 9-10% for both indices over the last month with the deletes dropping a lot more than the adds.
8. Hollysys (HOLI US): Keep Calm as Closing Date Slips
- On 15 April, Hollysys Automation Technologies (HOLI US) issued a 6-K filing stating that Ascendent remains in the process of obtaining regulatory approvals.
- The gross spread has widened to 8% as the closing date has slipped from the end of March guidance, and an updated timeline is lacking.
- A delay in securing regulatory approvals is not uncommon. However, regulatory approvals should be forthcoming as the transaction involves Chinese entities (including a SASAC entity) acquiring a Chinese-focused company.
9. Shinko Electric (6967 JP): Widening Spread Is an Opportunity
- Shinko Electric Industries (6967 JP)‘s pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread widened from a low of 3.1% on 14 March to 7.0%.
- The widening spread can be attributed to China SAMR approval timing, earnings risk, Ibiden Co Ltd (4062 JP)’s material underperformance lowering the break price and a large fund liquidating positions.
- The deal break risks remain low with the timing remaining the key risk. The current 7.0% spread is an attractive opportunity to add.
10. J&T Global Express IPO Lock-Up Expiry – Tiny Float with 87%+ Stake Lockup Release Worth >US$8.8bn
- J&T Global Express, a global logistics provider, raised about US$500m in its Hong Kong IPO in Oct 2023. Its pre-IPO investors will be released from its IPO linked lockup soon.
- As per Frost & Sullivan (F&S), the firm is the leading express delivery business in Southeast Asia, with a 25.4% market share as per 2023 parcel volume.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
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 #95 – Is the Next Move a Hike?
- Before getting to the financial word, I just briefly want to reiterate that we find a de-escalation most likely between Iran and Israel after the events unfolding over the weekend.
- Our head of geopolitics, Mikkel Rosenvold, released his take earlier.
- Quote of the week: Iran’s Chief of Staff: “Our attack is over, and we do not wish to continue it, but we will respond forcefully if Israel targets our interests.
2. The week at a glance: Soft CPI in UK and a BIG positive surprise from China?
- Happy Monday and welcome to our short and sweet coverage of the data calendar for the week ahead.
- We try to map the events with market moving potential and exploit weaknesses or skews in the economic consensus around them.
- This week we see strong upside to US retail sales, Chinese GDP, while soft downside to the UK CPI figures.
3. Positioning Watch – Volatility Is Back, but Markets Still Lean into USD Duration.. God Knows Why..
- Hi everyone, and welcome back to our weekly positioning / sentiment overview, which will be delivered to you right as firefighters have hopefully put out the fire at the old exchange building in Copenhagen..
- Markets have started the week off where they left last week, with the USD wrecking ball continuing to prevail, posing headwinds for equity and fixed income markets as Fed pricing has more or less turned upside down lately.
- We generally positioned for this repricing of USD fixed income, but were caught wrongfooted in a few trades along the way admittedly.
4. The Rally in Gold: Clear as Day
- The massive rally in the price of gold coincided with Fed Governor Waller’s speech, in which he stated that he believes the Federal Reserve should buy more T-bills.
- Many market pundits argue that changing narratives explain historical gold rallies.
- But digging a bit deeper reveals that, especially since the Great Financial Crisis, the narrative behind gold’s strong performance has been the same and getting stronger.
5. Chinese Data Continues to Improve Incrementally
- Qingming holiday sending surpasses 2019 levels on an absolute and per capita basis
- A further relaxation of housing measures spurs increased mortgage demand
- Two steps forward, one step back -typical signs of a bottoming-out economy.
6. The Liquidity ‘Air Pocket’: A Short Update After US Tax Filing-Week
- Global Liquidity has been the key factor driving risk assets higher. It faces a short-term air pocket that investors need to understand
- Three factors are dragging Global Liquidity — the US Fed, the PBoC and the rising MOVE Index
- Most important near-term, the US money market liquidity has suffered a major hit this week following the April 15th Tax-filing deadline. Next up the QFA at month-end
7. Here Comes the Sentiment Flush
- The S&P 500 violated an uptrend that began in November. The violation resolved with the index is testing initial support nearby at the 50 dma at about 5110.
- Our analysis of market internals concludes that the decline is nearly done. Sentiment is not sufficiently panicked to be contrarian bullish. Technical conditions are oversold but can become more oversold.
- We interpret these conditions as a stock market that’s undergoing final flush before an intermediate-term bottom is formed. We believe any pullback should be temporary and shallow in nature.
8. Hedging Risk Amidst the Escalating Israel-Iran Conflict
- Tensions between Israel and Iran have escalated, potentially leading to a broader conflict involving major global powers, which could significantly impact global financial markets.
- Immediate market reactions could include a drop in global stock markets, a surge in oil prices, and increased demand for safe-haven assets like gold and the US dollar.
- Multi-Asset portfolio managers need to employ strategies such as reducing risky asset exposure, increasing investments in defensive sectors, and diversifying geographically to mitigate the conflict’s impact on investments.
9. Iran’s attack – Large in Size, Harmless in Effect. What’s next?
- Welcome to the weekly Great Game, which is obviously dedicated to the situation in the Middle East.
- We covered Saturday’s attack on Israel in our Debrief, so in this post, I’ll try and look a bit ahead and give our take on what may lie ahead – both in the Israel/Iran conflict, but perhaps even more importantly in the Red Sea deadlock.
- Understanding Iran’s strikeSituation:On Saturday evening, Iran attacked Israel in response to the April 1st bombing of the Iranian embassy in Damascus.
10. Portfolio Watch: The USD Wrecking Ball Is Back
- The USD has been on a roll since the firm US inflation report earlier in the week and we are approaching the point where European trade balances will be impacted substantially by the rally in (energy) commodities.
- Even European Nat Gas seems to be on the move and pairing that move with the broader rise in Oil and Copper leads to a likely “flip” in the Eurozone trade balance.
- When the Euro-zone trade balance shifts from positive to negative, we typically see an impact on the trend of the EUR, which is probably the last thing the ECB needs right now.
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. Early Sign of AI GPU Market Inflection Point?
- Taiwan Dell said “AI GPU shortage issue has been resolved. The lead time has been cut from 40 weeks by the end of 2023 to 8-12 weeks or less now.
- We see this news short term positive but medium term negative to AI GPU supply chain vendors but need more information to confirm if this is an inflection point.
- 1. Taiwan Dell got priority supply? 2. Earlier overbooking over? 3. Lead time cut by supply upside? 4. Cooling company said the same; 5. Will lead time continue to shrink?
2. TSMC (2330.TT; TSM.US): US$6.6bn from US CHIPS Act; the Earthquake Impact and the 2nd Japanese Fab.
- Today, the U.S. Department of Commerce and TSMC Arizona have signed a non-binding preliminary memorandum of terms for US$6.6 billion in direct funding under the CHIPS and Science Act.
- We estimate the impact of the earthquake on April 3rd should result in a loss of within 0.5% in 2Q24F, which means it should not affect our 2Q24F revenue expectations.
- TSMC’s 1st Japan Fab is expected to commence pilot production in February, and the 2nd Fab is projected to begin production of N6/N7 in 2027F.
3. Early Signs from the Reported March/1Q24 Taiwan Semi/Tech Sales
- Y/Y improvement for LCD, PMIC, GaAs RF, gaming card, cooling system, semi equipment&material, semi fab construction, memory, and foundry vendors but more y/y deterioration for WiFi and CMOS sensor vendors
- After 6 vendors beating consensus, we might see AI server supply chain, large panel LCD driver, WiFi/networking, and NAND flash vendors in US to report a better than expected 1Q24.
- We might see 8″/12″ raw wafer (like Shin Etsu, SUMCO , National Silicon Industry, Siltronic AG) vendors in Japan, China, and Germany to report a worse than expected 1Q24.
4. Beaten Down Semiconductor Could be AI Play
- Maxlinear has probably been among this semiconductor cycle’s worst companies, if not the worst.
- I think that it might be time to give them a fresh look.
- Maxlinear was founded in 2003 in Carlsbad, California, by eight engineers. Today, Kishore Seendripu (CEO/Chairmen) and Curtis Ling (CTO) are still founders and work at the company. Maxlinear is a fabless company focused on mixed-signal products in the semiconductor industry.
5. TSMC Snags US CHIPS Act Funding & Ups The Ante On Intel
- TSMC snags $6.6 billion in US CHIPS Act funding, along with loans up to $5 billion and tax credits up to 25% on eligible capital expenditures
- TSMC has committed to building a third fab in Arizona, scheduled to begin operations around 2030
- TSMC’s reiteration of their world class CAGR, Gross Margin & ROE numbers shines a light on Intel’s vastly inferior performance outlook.
6. Taiwan Tech Weekly: TSMC Wins Major U.S. Support; Nanya Results; UMC Rush Orders
- TSMC (2330.TT; TSM.US): US$6.6bn from US CHIPS Act; the Earthquake Impact and the 2nd Japanese Fab.
- Memory Monitor: Nanya’s Results to Provide Latest Color on DRAM Post Earthquake; Short Int Rising
- UMC (2303.TT; UMC.US): Some Rush Orders Coming in and 2Q24F Could Post Positive QoQ.
7. Memory Monitor: Nanya’s Results to Provide Latest Color on DRAM Post Earthquake; Short Int Rising
- DRAM producer Nanya Tech will report its 1Q24E results on April 10th.
- While Micron has said it is evaluating the impact of the Taiwan earthquake on its operations and has halted price discussions with clients, Nanya could provide latest DRAM outlook color.
- Short interest has spiked ahead of Nanya’s results; We note that the company has a large revenue and margin rebound it needs to deliver on to meet 2024E consensus.
8. UMC (2303.TT; UMC.US): Some Rush Orders Coming in and 2Q24F Could Post Positive QoQ.
- United Microelectronics Corp (2303 TT)‘s 2Q24F outlook is experiencing a slight upward now, possibly indicating a positive QoQ.
- UMC’s notable contributors are showing a mixed outlook, and Novatek Microelectronics Corp (3034 TT) could be the most influencer.
- Attention should be paid to the 3Q24F outlook for any potential changes and a shift from a bearish view could positively impact the outlook, potentially signaling the end of downturn.
9. Nanya. Tailwinds Mount Albeit Profits Still Elude
- Nanya’s quarterly revenue was NT$ 9.5 billion, up 9.2% QoQ & up 47.9% YoY
- Nanya still had a net loss of NT$1.2 billion, its sixth loss making quarter in a row
- Larger peers doubling down on HBM, structural reduction in memory wafer capacity & shortages likely triggered by Taiwan earthquake are all mounting tailwinds for Nanya
10. Nanya Technology Sees DRAM Industry Pricing Rising Through 2024E; But Is Underperforming Financially
- Latest Nanya Tech results showed weak margin rebound. Gross margin rebounded but remained below zero.
- Nanya expects DRAM pricing improvement through 2024E; due to demand for AI related memory products reducing capacity for other DRAM products rather than improvement for Nanya’s main Consumer segment.
- Micron is reportedly increasing prices post Taiwan earthquake and this is positive, but we see Nanya’s 2024E consensus margin expectations set at a high bar and the stock isn’t cheap.