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. 44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)
- FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue.
- According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value).
- According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&P 500 Index.
2. Global Liquidity And The US Fed Pivot
- Global Liquidity Cycle bottomed in October 2022. Cycle set to expand further to a peak in late-2025
- Federal Reserve liquidity already rising and driven over medium-term by need to monetize mandatory fiscal spending
- Global Liquidity set to rise by US$12-15 trillion in 2024
3. 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 4
- A shift in composition needed in a Japanese portfolio this year
- A weaker US and Japanese economy together with a stronger Yen will make sector allocation key.
- Some sectors to avoid or invest in during this next phase.
4. Positioning Watch – Where to Find Value Currently
- Hello everyone, and welcome back to our weekly positioning overview.
- We’ve been working on some new ways to look at positioning data across asset classes, and we’ll share some of the inaugural charts in today’s piece and will extend them, week by week.
- Markets have more or less traded sideways since the start of the year, as the risk-on party has taken a bit of a breather it seems, despite rate cut expectations becoming even more embedded after the hawkish US CPI surprise last Thursday – strange move, and we’ll be surprised if probabilities don’t reverse within the next couple of price data points.
5. Steno Signals #82 – Inflation strikes back and no one is prepared for it
- Happy Sunday and welcome to our flagship editorial on the Coronation day of King Frederik in Copenhagen.
- I guess it is somewhat telling for my lack of enthusiasm around the event that I am sitting here spitting out research instead of watching the Crowning.
- The US CPI report printed a tad hotter than expected last week, but smack dab at our expectations of a 3.9% YoY level in core terms.
6. US Interest Rates and the Dollar and Impact on Markets
- Recent US economic data has been mixed on the inflation/growth front.
- Fed dot plot and messaging at odds with market expectations.
- The extent of rate cuts is correct, but timing is likely not.
7. Don’t Fight the Fed (Or the Macro Trend)
- The global disinflation trend is continuing in an uneven manner and both the macro trend and Fed speakers are pointing toward a dovish Fed pivot.
- This argues for a bull steepening of the yield curve and a bullish backdrop for stock prices.
- However, investors should be aware that the lurking risk is the re-emergence of the transitory disinflation narrative, which could derail the bullish scenario.
8. Energy Cable: 4 Charts that Should Keep Largarde up at Night
- Takeaways: Price increases in goods likely to show up in Europe after the Summer
- Watch out for energy prices once we start to fill up for next heating season
- The recent turmoil in freight rates will likely exacerbate the divergence between US and the Eurozone
9. Taiwan Politics: New President Enters the Job with a Daunting In-Tray
- The DPP’s William Lai prevailed after a competitive three-way race for the presidency, but his party’s loss of a legislative majority has produced a divided government.
- China will likely maintain a hawkish stance given the results, but we expect no drastic moves given Beijing’s other domestic and foreign policy challenges.
- Lai enters office with a full in-tray, having to bolster Taiwan’s security relationships with Washington and other allies, in addition to domestic issues on energy and demographics.
10. Japan Taking a Trip Down Tightening Lane? Sure!
- Many economists expect the Bank of Japan, after systematically refusing to adjust its extremely loose monetary policy will be the only country to raise interest rates in 2024.
- If the Bank of Japan decides to raise interest rates, at the same time, global tightening momentum wanes, betting on a stronger yen is a sure thing.
- But with inflation dropping, the Manufacturing PMI below 50, consumer spending and real wages declining, the window for tighter monetary policy is closing rapidly, and hence a long yen position.
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 Contraction Continues; ASE & Chunghwa at Historically Rare Levels
- TSMC: 7.7% Premium — Spread Has Fallen Further, Likely Can Short a Bit Further
- ASE: Drops to 5.1% Premium — Can Consider Going Long at Current Level Due to Maxed Headroom & ASE’s Strong Advanced Chip Packaging Story
- CHT: Trading at -0.9% Discount — Good Level to Long the Spread, Rare Discount
2. Fujitsu (6702 JP): Horizon Scandal Blows Up
- The UK Post Office “Horizon Scandal” has blown up, putting Fujitsu’s computer system failure on the front pages and on the agenda of Parliament and Prime Minister Sunak.
- Fujitsu UK has been awarded £6.8bn in public contracts since 2012. The Justice Secretary is now talking about compensation for the enormous financial and personal damage caused.
- Fujitsu’s share price is coming off a new all-time high reached in December. The amount of compensation and loss of potential future contracts is substantial but uncertain.
3. Semiconductor Events Deserving Your Attention @9/1/2024
- Nanya 12/23 revenues NT$ 3,162 million, +10% MoM, +31.73% YoY. UMC 12/23 revenues NT$ 16,979,226. -9.6% MoM, -18.9% YoY. Samsung Q423 Sales Flat, Op Profit +16% QoQ
- Quintaurius, a RISC-V collaboration between Bosch, Infineon, Nordic, NXP & Qualcomm, launched in Germany
- Intel takes delivery of the first ASML High-NA EUV tool. It’s a great photo opportunity but that’s about as far as it goes
4. Stories Behind the Reported Dec/4Q23 Taiwan Semi/Tech Sales
- Y/Y improvement for LCD panel, 8″/12″ raw wafer, CMOS sensor, GaAs RF, cooling system, design service, and semi equipment and material vendors but y/y deterioration for PC/server and gaming vendors.
- After 9 vendors beating consensus, we might see smartphone IC and RF, semi equipment OEM, and design service vendors in US to report a better than expected 4Q23 sales/earnings.
- After 6 vendors missing consensus, we might see PC/general server IC and niche memory vendors in US to report a worse than expected 4Q23 sales and earnings.
5. TSMC Finishes 2023 With A Flourish
- Q423 revenues amounted to NT$625,529. In US$ terms, using TSMC’s projected exchange rate of 32, this translates to $19.55 billion, a ~13% increase QoQ, and a 2% decrease YoY.
- FY 2023 revenues amounted to NT$2,161.74 billion, down 4.5% YoY. In US$ terms, this amounted to $69.1 billion, an 8.8% decrease YoY and the first such YoY decrease since 2009
- While we foresee Q124 revenues being down 5-10% QoQ, we expect full year 2024 revenues to grow in the range of 5-10% YoY.
6. Mobileye Guides Down; Automotive Inventory, Memory Strength, and Marvell
- Mobileye surprised markets with an extensive guide down to their results.
- Shares reacted poorly, but at first blush, it makes sense given the magnitude of the guide. Let’s walk through the release.
- It starts with inventory, and it’s clear their customers have too much inventory.
7. Taiwan Tech Weekly: Dell Outperforms Taiwan PC Names; TSMC Results Coming After Taiwan Election
- Taiwan PC names have been the top losers over the recent period, after having previously been the top winners. Our Long Dell vs. Short Acer trade is doing well.
- Nanya Tech was a top loser, falling along with its international Memory peers. Nevertheless, we note it underperformed Micron and SK Hynix. We continue to prefer SK Hynix for Memory.
- CES is happening now and will be wrapping up Friday. We like our Dell vs. Taiwan PC names through the CES event. TSMC will be reporting results January 18th.
8. Rohm (6963 JP): Quantum Process Optimization
- Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.
- Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25.
- Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.
9. Apple Partner Hon Hai Reports Weakest December Revenue In Years, But EV Growing; Buying Opportunity
- Hon Hai released its December revenue figures on January 5th; Revenue came in lower than any other December in recent history.
- Hon Hai’s MIH EV consortium is showcasing solutions at CES 2024 this week in Las Vegas. In Taiwan, the Luxgen expects 9,000 customer deliveries for its ‘n7’ EV by June.
- Hon Hai is trading at less than 5x forward 2025E PE; and on a trailing basis one of the lower EV/EBITDA’s in history. Latest share drop is a buying opportunity.
10. Ferrotec (6890 JP): Return to Growth Led by Power Semiconductor Substrates
- Ferrotec shares have dropped by a third since last July and are now selling at 8.2x EPS guidance and 0.6x book value.
- Sales and operating should start to recover in 2H of FY Mar-24, led by power semiconductor substrates.
- Buy for the upturn in the semiconductor cycle and capacity expansion in Japan, China and Malaysia. No significant damage from the Noto Peninsula earthquake has been reported.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Samsung Electronics Placement – Somewhat Well Flagged but Could Have Timed It Better
- KEB Hana Bank, on behalf of the Lee family, is looking to raise up to US$1.6bn via selling 0.5% of Samsung Electronics (005930 KS)
- The deal appears to be somewhat well flagged, however, the timing could have been much better.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
2. Lasertec (6920) Accelerated Block Offering – ¥60bn Likely Easily Taken Up
- Today after the close, there was word of an Accelerated Block Offering by two banks on Lasertec Corp (6920 JP), selling ¥61+bn or US$425mm of shares.
- The Nikkei 225 hit a new 34-year high today, and this caused some tech stocks and high-weights to perform very well vs their peers.
- This should cause the deal to get taken up easily. HOWEVER, it pays to know where the stock is. The register isn’t what volume tells you it might be.
3. Lasertec Placement – Opportunistic Selldown Will Be Easily Digested by the Market
- MUFG Bank and Mitsubishi UFJ Trust and Banking are looking to raise around US$425m from selling their respective stakes in Lasertec Corp (6920 JP).
- Given the strong momentum on the stock, combined with the wave of shareholders ending their cross-shareholdings in Japan, we would argue that the deal is somewhat expected.
- Despite the remaining overhang on the stock, the deal would be easily digested by the market as well, representing just 0.14 days of the firm’s three month ADV.
4. Aequitas 2024 Asia IPO Pipeline – Hong Kong
- In this note, we will take a look at the Asia Pacific IPO pipeline for 2024, starting with Hong Kong.
- This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
- The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.
5. Aequitas 2023 IPOs and Placements Performance Review – IPOs Forming a Low Base, Placements Pick Up
- 2023 marked our eighth year covering Equity Capital Markets in Asia Pacific. In 2023, IPOs didn’t pick up much from the low base of 2022 while placements showed upward momentum.
- We ended 2023 with an accuracy rate of 73.7% across 57 IPOs that we covered and 79.3% across 115 placements.
- For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.
6. Aequitas Japan IPOs + Placements Broker Performance 2023
- In this note, we will take a look at broker performance for Japanese IPOs and placements in 2023.
- The following dataset includes all Japanese IPOs and placements above US$100m, which amounted to a total of 32 deals.
- The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.
7. Aequitas HK IPOs + Placements Broker Performance 2023
- In this note, we will take a look at broker performance for HK IPOs and placements in 2023.
- The following dataset includes all HK IPOs and placements above US$100m, which amounted to a total of 27 deals.
- The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.
8. Ola Electric IPO: The Bear Case
- Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation.
- In Ola Electric IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on high R&D capitalization, ongoing losses, high attrition, declining contract liabilities, cash burn and deteriorating balance sheet.
9. Ola Electric Mobility Pre-IPO Tearsheet
- Ola Electric (1700674D IN) is looking to raise about US$1bn in its upcoming India IPO. The bookrunners are Kotak, Citigroup, BofA, Goldman Sachs, Axis, ICICI Sec, SBI Caps, BoB Caps.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells.
- The firm manufactures EVs and certain core EV components like battery packs, motors and vehicle frames.
10. Aequitas 2024 Asia IPO Pipeline – India
- In this note, we will take a look at the Asia Pacific IPO pipeline for 2024, following up with India after having looked at Hong Kong earlier.
- This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
- The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.
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. LQ45 Index Rebalance Preview (Jan): Reading the Tea Leaves
- The review period for the LQ45 Index ended on 29 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
- Based on the index methodology, there could be up to 5 changes at the rebalance. Plus there will be capping changes for Bank Rakyat (BBRI) and Bank Central Asia (BBCA).
- The impact of passive trading will be higher on the deletions than the inclusions since lower liquidity stocks are replaced with higher liquidity stocks.
2. March 2024 Nikkei 225 Rebal: Socionext, Disco, and a Consumer Goods Stock, Still
- No changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
- The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
- There is the upweight to Nitori (9843) but now less funkiness with Fast Retailing (9983). But it will continue being an interesting Nikkei 225 influence (for years to come).
3. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March
- At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
- We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
- The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.
4. TOPIX Inclusions: Who Is Ready (Jan 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.
- Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024
- There are couple of other pre-event names that we have been tracking for the past few months.
5. Inabata & Co (8098) – LARGE Equity Secondary Offering by Sumitomo Chemical
- On Friday after the close, Inabata & Co (8098 JP) announced Sumitomo Chemical (4005 JP) would sell down a large stake in a ~$200mm secondary equity offering.
- Mizuho Bank’s Retirement Benefit Trust account sells down too. Sumitomo Chem will keep 10+% and other crossholders remain.
- This is “big” at 80 days of ADV with limited early index demand, but a 10% fall would make this cheap enough to buy vs Peers.
6. Taisho Pharma (4581) – Slouching Activism May Not Get This Bumped
- Six+ weeks ago, the founding family which controls a 33% stake in cash-rich Taisho Pharmaceutical Holdin (4581 JP) announced a Tender Offer MBO to buy out minorities.
- ¥8,620/Share is 0.85x PBR but the takeover is at 0.72x operating assets with net debt at zero That’s low – comps are 2+x book and twice the EV/EBITDA ratio.
- But the scourge that is cross-holding investors blindly following management means they have 61-63% before this gets started, and only one small firm has voiced an objection.
7. A/H Premium Tracker (To 5 Jan 2024): STAY Long Hs Vs As: A Premia Still Wide, High Div SOEs Moving
- The New and Better (5mos old) A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
- SOUTHBOUND flows flat/light and NORTHBOUND flows a significant net buy, respectively, but liquid Hs with H/A pairs OUT-perform As on average by 200+bp.
- STILL time to go long Hs vs As for the new year. 52wk wide discounts were just last week. Wide A/H premia in renewables space look vulnerable.
8. Event Trading on KOSPI Transfer Listings: Notable Post-Listing Price Patterns
- In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
- ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
- A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.
9. Offshore China ETFs Rebalance Preview: Two Changes Expected in March
- Based on the close of 8 January, there could be two changes for the iShares A50 China (2823 HK)/ CSOP A50 (HKD) (2822 HK) in March.
- Shaanxi Coal Industry (601225 CH) and China Everbright Bank Co A (601818 CH) could replace Bank Of Ningbo Co Ltd A (002142 CH) and Aier Eye Hospital Group (300015 CH).
- The impact of passive trading will be higher on the inclusions compared to the deletions. Then there are cash and carry positions that will be rebalanced, adding to flow.
10. T&K TOKA (4636 JP): Expect ANOTHER Blandiloquent But Bletcherous Bump From Bain
- In August when Bain announced that it would launch a Tender Offer for T&K Toka Co Ltd (4636 JP) I suggested in my first piece it was the wrong price.
- I suggested it needed another ¥1,000 added onto the price. If the ¥1,300 price Dalton initially indicated seemed low to T&K TOKA, another ¥100 doesn’t seem right.
- It took time. Now it looks like a tender offer launch is imminent. The stock has traded through terms for almost 5 months, but not by a lot.
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. 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 3
- Risk-Reward now skewed towards reward in the Hong Kong market.
- Barbell strategy with both high-beta and lower volatility dividend stocks.
- Some initial ideas included to add or start a portfolio incorporating HK stocks.
2. KOSPI Superperformance Stocks (2019-2023)
- In this insight, we analyze the top 10 performing stocks in KOSPI in each of the past five years (2019-2023) as well as for this entire period.
- The top 10 performing stocks in KOSPI were up on average 310% in 2023, sharply outperforming KOSPI which was up 19%.
- There are some important takeaways from a review of the top 10 performing stocks in each of the five years in KOSPI, including market cap, sector rotation, and turnarounds.
3. EM by EM #37: The Taiwan election & the Trade war
- A victory for Lai in the upcoming election has the potential to significantly elevate geopolitical risks.
- Should Taipei fail to maintain a satisfactory relationship with Beijing threats of retaliation will fuel derisking going forwardThe Taiwan election could reignite another round of cold trade sanctions between the United States and China.
- Given the current hawkishness of the Biden administration, it’s unlikely that this stance will be softened in the upcoming U.S. election.
4. Simple Math – Why Rates Must Fall!
- The divergence among (bond) investors is rapidly increasing. One group expects yields to rise further, while the other expects yields to go down and remain low. I’m in the latter.
- To maintain debt sustainability, real yields must remain below real GDP growth. But with declining potential GDP growth, this is not the case currently, and this includes the US.
- In the Eurozone, the real yield – real GDP picture is distorted because the ECB must aim monetary policy at the weakest link, Italy.
5. What’s next in the Red Sea and Taiwan?
- Welcome to the second Great Game of the year.
- What an action-packed start to 2024 we’ve had in geopolitics, and the coming weeks are looking no less eventful.
- This week, we take a look at the status in the Red Sea as well as Taiwan and give our prediction as to what the coming weeks will bring.
6. Vietnam: Resilient Economic Growth Driven by Friend-Shoring & Bamboo Diplomacy
- Vietnam’s GDP expanded by 5.05% in 2023, lower than the government’s official target of 6.5%
- Chinese President Xi Jinping’s first visit to Vietnam in six years aims to strengthen ties between the two communist nations.
- China and the US vying for cooperation with Vietnam in developing rare earth minerals essential for energy transition.
7. US Employment Data Confirms a Weakening Economy
- The December US Employment report shows a weaker outlook than the headline suggests.
- A loss of over 1.5 million full-time jobs in December.
- Excluding government jobs, an exceptionally low number of new full-time jobs were created over the last year.
8. USD Liquidity Watch: Trading the end of QT
- Welcome to another edition of our USD Liquidity Watch series.
- The investment bank consensus is now (finally) converging towards our long-held view that the US Treasury is effectively behind the liquidity steering wheels at the Fed.
- Lorie Logan of the FOMC said on Friday that “… given the rapid decline of the ON RRP, I think it’s appropriate to consider the parameters that will guide a decision to slow the runoff of our assets.
9. Charting Beyond the Sanguine Stock Market
- The upcoming US elections and eventual Fed pivot may sway the stock market positively
- But the different states of the US business cycle can prospectively instigate different equity market outcomes
- Hence, it is important to monitor the roughly coincident or almost contemporaneous risk of a recession in the US for potential clues
10. Central Banks’ Policy Pivot Impact on Developed Markets
- Throughout 2023, the global developed economy was at the forefront of tackling rising inflation that has been gathering steam since mid-2022.
- The majority of developed G20 countries saw their central banks raise policy rates at record pace to tame rampant price increases.
- Rapid tightening and the potential of an upcoming pivot has resultantly upended stability in growth prospects for the upcoming year.
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. Micron Makes Surprise Settlement With Fujian Jinhua. But Why?
- After a trial that dragged on for close to five years, the US DoJ case against Fujian Jinhua heard closing arguments in September 2023
- Co-Defendant UMC already settled with Micron over two years ago. The two companies have since gone on to further expand their business relationship
- The surprise settlement with Fujian Jinhua may help smooth the path for Micron’s troubled operations in China
2. Semiconductor Outlook 2024: AI’s Adolescence
- The year 2023 began with a significant downturn in the semiconductor market.
- Significant capacity additions were brought on after the historic shortages due to COVID-19, and then demand wobbled as interest rates quickly rose.
- Supply outpaced demand, and the market turned into a period of oversupply.
3. Ushio (6925 JP): Tie-Up with Applied Materials Adds to Long-Term Potential
- Ushio has tied up with Applied Materials (AMAT) to develop lithography systems for package substrates using AMAT’s Digital Lithography Technology.
- This should keep the focus on Ushio’s more advanced technologies (which also include EUV mask inspection light sources) and its potential to rebound with the semiconductor cycle.
- The shares have dropped back 10% since mid-December, providing an entry point. 3Q results are scheduled to be announced on February 9.
4. Misumi Group (9962 JP): Heads up for 3Q Results in Late January
- The gradual upward trend in monthly sales, which has continued through November, has further to go in our estimation.
- At 22x EPS guidance for FY Mar-24, the shares are at the low end of their 5-year P/E range.
- Guidance remains unchanged. 3Q results are due to be announced at the end of January
5. UMC (2303.TT; UMC.US): 1Q24F Outlook, the Wafer Demand of MediaTek and Samsung.
- The wafer demand outlook for 1Q24F should be around flat, but ASP (Average Selling Price) is expected to decline by negative mid-single digits.
- Compared to 4Q23, Mediatek Inc (2454 TT)‘s foundry demand is larger and Samsung Electronics (005930 KS)‘s foundry demand is downsized in 1Q24F.
- United Microelectronics Corp (2303 TT) and Intel Corp (INTC US) are currently discussing the allocation issue of 12nm capacity.
6. Mobileye Profit Warning Is A Harbinger Of Gloom As Q423 Earnings Loom
- From a growth forecast of >20% YoY just two months ago, 2024 is now pegged as a low-to-no growth year
- This will be a big negative for the likes of Infineon, ST Microelectronics, NXP, Globalfoundries and HH Grace, among others.
- Our anticipated gloomy Q423 earnings season just got a whole lot gloomier
7. ‘Clippy’ Having the Last Laugh? Microsoft’s Design Change to Drive AI PC Adoption; Dell Trade Update
- On January 4th, Microsoft announced a design change for PCs whereby a new physical key will be added to PC keyboards; the Microsoft Copilot key.
- Microsoft Copilot will become a must-have for companies in our view. Initial Copilot capabilities can dramatically improve worker productivity and this should help drive AI PC upgrades for the industry.
- CES 2024 Jan 9th – 12th will showcase AI PC models sporting Intel’s Core Ultra processors and Microsoft’s new Copilot key. We also update our Dell vs. Taiwan PCs trade.
8. Vanguard (5347.TT): 1Q24F Revenue Might Decline ~10% QoQ.
- Vanguard Intl Semiconductor (5347 TT) is likely to see that there could be a decline of around 10% QoQ in 1Q24F.
- In terms of revenue contribution, Taiwan, US, China, Europe, and Japan account for approximately 40%, 20%, 15%, 15%, and 10% respectively.
- Taiwan Semiconductor (TSMC) (2330 TT) may give up technology development at 40nm and above and transfer them to Vanguard.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. APR IPO Preview
- APR is getting ready to complete an IPO in KOSPI in February 2024. The IPO price range is from 147,000 won to 200,000 won.
- According to the bankers’ valuation, the company’s valuation is expected to range from 1.1 trillion won to 1.6 trillion won post IPO.
- The company’s best selling product is its skin care beauty device product called Medicube Age-R.
2. Ola Electric IPO: The Bull Case
- Ola Electric (1700674D IN), the largest Indian electric two-wheel vehicles (E2W) player, is seeking US$660 million from a primary raise along with a secondary raise at a US$7-8 billion valuation.
- Ola is the best-selling E2W brand in India in terms of monthly E2W registrations on the VAHAN Portal of the Ministry of Road Transport and Highways.
- The bull case rests on rising market share in a growing market, a rapid growth phase, increasing gross margin and a favourable cash conversion cycle.
3. Hyundai Hyms IPO Preview
- Hyundai Hyms is getting ready to complete its IPO in KOSDAQ in January. The total IPO offering amount is 43.5 billion to 54.9 billion won.
- The company is offering 8.7 million shares in this IPO, of which 40% are old shares and 60% are new shares.
- Hyundai Hyms specializes in shipbuilding equipment. Hyundai Hyms’s main business includes shipbuilding equipment and related services.
4. APR IPO Valuation Analysis
- Our base case valuation of APR is implied price of 370,809 won per share, representing an 85% upside from the high end of the bankers’ valuation range.
- We estimate APR to generate sales of 683.9 billion won (up 25.7% YoY) and operating profit of 114.6 billion won (up 39.5% YoY) in 2024.
- APR is one of the best IPOs in the Korean cosmetics sector in the past several years.
5. Hyundai Hyms IPO Valuation Analysis
- Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range.
- We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
- Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.
6. Pre-IPO QuantumPharm – Good Stories May Not Be Backed up by Performance
- The essential difference between QuantumPharm and InSilico in terms of business models is that InSilico is an end-to-end generative AI-driven biotech but QuantumPharm is more of a platform-based service provider.
- It’s difficult for QuantumPharm to achieve significant increase in revenue scale in short time,because the service fee amount is usually not large, and it takes time to accumulate order volume.
- If there is no substantial performance contribution, these good stories would not bring about a sustained leap in valuation. QuantumPharm’s valuation in last funding round before IPO is too expensive.
7. MIXUE Group IPO: The Investment Case
- Mixue Group (MIX HK), a world-leading freshly made drinks company, filed for an HKEx IPO to raise US$0.5-1.0 billion.
- Mixue is China’s largest and the world’s second-largest freshly made drinks company, in terms of both the number of stores and cups sold in 9M23, according to CIC.
- The investment case rests on a strong brand, leading market share, high revenue growth, robust cost control, stable profitability and cash generation.
8. Weekly Deals Digest (07 Jan) – Ola Electric, Mixue, Aoki Super, Hollysys, Weiqiao Textile, Vinda
- 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 – Ola Electric (1700674D IN) and Mixue Group (MIX HK) IPOs.
- Event-Driven developments – Aoki Super (9977 JP), Hollysys Automation Technologies (HOLI US), Weiqiao Textile Co (2698 HK), Vinda International (3331 HK).
9. J&T Global Express FY23 Earnings Preview | Revenue Growth & Margin | China, SE Asia, ‘Other’
- In this insight we preview J&T’s maiden earnings report as a listed company
- We focus on revenue growth & margin trends in the China & SE Asia businesses
- We fear slowing organic growth & margin deterioration could spook investors
10. Cloudbreak Pharma (拨康视云) Pre-IPO: Old Drug, New Formulation
- Cloudbreak Pharma, a China-based clinical-stage biotechnology company, plans to raise up to US$200m via a Hong Kong listing.
- In this note, we examine the company’s core products, namely CBT-001 and CBT-009, for pterygium and juvenile myopia respectively.
- We are seeing a lack of convincing sustainable innovation from the company. Pre-IPO investors and management are mediocre.
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. HSCI Index Rebalance Preview and Stock Connect: Potential Changes in March
- We see 30 potential adds (including plenty of new listings) and 28 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in March.
- We expect 26 stocks to be added to Southbound Stock Connect following the rebalance while 25 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
2. Allkem + Livent = Arcadium : Updated Expected Index Flows
- Allkem Ltd (AKE AU) saw its last day of trading on 21 December. There was large volume at the close as one major index provider gave it the boot.
- Another delayed their treatment at the last minute, and eliminated a cross-flow.
- But there is still a lot of net buy flow tomorrow (3 Jan) and the next day in the US. Perhaps more than I expected.
3. Korea’s Short Selling Ban to Stay, Likely Until EquiLend-Korean Version Launch
- Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
- Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
- Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.
4. KRX New Deal Index Rebalance Preview: Changes with Flow & Impact
- The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
- There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
- There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS).
5. HSCEI Index Rebalance Preview: Zhongsheng (881 HK) Should Go This Time
- Zhongsheng Group (881 HK) pops up as a potential deletion yet again and a much lower rank raises the probability of deletion to just short of a near certainty.
- With BeiGene (6160 HK) failing the Velocity Test for Tradeable Indexes, Zhongsheng Group (881 HK)‘s deletion from the index should result in China Unicom Hong Kong (762 HK)‘s inclusion.
- Estimated one-way turnover at the rebalance is 1.47% resulting in a one-way trade of HK$946m. Passives will need to trade over 2.5x ADV on both stocks.
6. New Year New NISA Accounts – It’s BIG, But Not so Big
- The Kishida administration put out a Doubling Asset-Based Income Plan in 2022. The goal? To get cash savings (corporate/individual) into growth assets and increase asset-based return contribution to income.
- The goal included doubling the number of NISA accounts, and the amount invested in the next five years. On 1 January 2024, NEW NISA account contribution totals were trebled.
- If accounts double, and contribution totals treble, and exemptions are now permanent, investment doubling is a quasi-certainty. The question is how it turns into income-producing assets. That’s MUCH tougher.
7. NIFTY NEXT50 Index Rebalance Preview: Potential Adds Skyrocketing
- Nearing the end of the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
- Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 26.9bn. There will be more than 1.5x ADV to sell on nearly all deletes.
- The potential adds have outperformed the potential deletes by 35% over the last two months and some stocks are looking extremely frothy.
8. Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
- 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 – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU).
- Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU).
9. NIFTY50 Index Rebalance Preview: One Change, Maybe Two, Low Probability of Three
- Shriram Finance (SHFL IN) is a high probability add and UPL Ltd (UPLL IN) is a high probability delete at the NIFTY Index (NIFTY INDEX) rebalance in March.
- There is a lower probability of Bharat Electronics (BHE IN) or Trent Ltd (TRENT IN) replacing Bharat Petroleum Corp (BPCL IN) at the rebalance.
- Jio Financial Services (JIOFIN IN), Avenue Supermarts Ltd (DMART IN) and Zomato (ZOMATO IN) will enter the running once added to the F&O segment of the market.
10. NIFTY Bank Index Rebalance Preview: Canara Bank Could Replace Bandhan Bank
- Canara Bank (CBK IN) could replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the March rebalance.
- Passive trackers will need to buy 2 days of ADV on Canara Bank (CBK IN) while selling over 1 day of ADV on Bandhan Bank Ltd (BANDHAN IN).
- The impact is even higher where passives will need to buy nearly 6x delivery volumes in Canara Bank and sell 3x delivery volumes in Bandhan Bank Ltd.
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. 5 Things We Watch – Freight Rates, Positioning, Liquidity, EUR-flation, Growth
- Welcome to the first 2024 edition of our ‘5 Things We Watch’, where we as always try to dissect global macro trends, how we see the world and how we trade it.
- The overall consensus this year seems to be locked in on a soft landing in the US, but in our view, risks of tail-end events are increasing, making macro more important than ever in order to navigate financial markets in 2024.
- Freight rates on routes with destinations in the Mediterranean (both shipments from Middle East and China) have generally been on the rise
2. Suez Watch: Massively Rising Container Freight Rates, While Dry Bulk, LNG and Crude Rates More Muted
- Takeaways upfront: No container shipping through Suez towards Europe and price increases ahead; Energy and dry bulk shipping is still alive; Expect transportation and apparel to see price increases in Europe; Hedging 2024 portfolios with long Shipping bets and/or long Energy bets make increasing sense.
- Happy New Year everyone! Things are escalating in the Red Sea as shipping giants such as Maersk and Hapaq-Lloyd haven’t been convinced by the military efforts in the Red Sea and have now completely avoided transporting goods from Asia to Europe through the Red Sea.
- That can be seen in prices which have seen one-way traffic the last week. Freight rates are up >100% this week, and we hear from sources that Maersk is now suggesting an all-in rate of USD 6000 TEU.
3. Charting Beyond the Near-Term Fed Pause
- The initial phase of Fed easing, from pre-Volcker to post-Greenspan, can differ, particularly on the magnitude
- Historical Fed pivots, from hiking to easing, tend to be sensitive to the state of the economy
- The extent of initial Fed easing around historical downturns was at least double the size when compared to episodes with no imminent recessions
4. Macro Regime Indicator: Liquidity is everything in January
- New month, new regime, which means a new asset allocation for the month ahead.
- The turn of the calendar once again calls for us to assess our outlook for the 3 main variables of interest: Liquidity, inflation and growth and feed them into our Regime Model and Asset Allocation tool that spits out the Sharpe Ratio optimizing portfolio given the assumptions about the variables of interest.
- Remember that you can feed the model with your own forecasts to see which baskets to put your eggs in.
5. A Bull Market With Election Year Characteristics
- Long-Term models are signaling the revival of a long-term equity bull.
- But the market may be vulnerable to some choppiness in the next few months.
- The intermediate-term outlook for stocks continues to be bullish and we expect a positive year for the S&P 500 in 2024.
6. EUR Inflation Watch – The ECB forecast is OFF by >1.5%-points for Q1
- The smallest German state, Saarland, sneaked out its preliminary December inflation this morning and it was another soft surprise.
- Saarland CPI increased a tad less than 0.1% on the month, which is below 0.2% in seasonally adjusted terms.
- This is if anything a SOFT print relative to consensus expectations and as Saarland CPI explains 78% of the variability in the nationwide German CPI, it leaves a 0.1% MoM inflation print most likely for the German CPI.
7. China Property And The Demand For Commodities Puzzle
- China’s crude steel production data behaved differently in the 2021-2023 downturn relative to new home sales and new starts, compared to the prior cycles.
- The 40% drop (12M vs prior 12M) at the low point for new starts compares with around 10% for the crude steel.
- In this note, we outline a few possible explanations, with some twists.
8. What the Politics of 2024 Tell Us About 2025
- What does the political and economic landscape of 2024 mean for investors in 2025 under a Biden oe a Trump administration?
- A Biden White House is more predictable using conventional economic analysis. Much depends on whether the Fed can achieve a soft landing of the economy.
- The effects of a Trump White House will be more difficult to predict. The only certain investment bet under a Trump administration may be to buy volatility.
9. Regional Economics: Episodic Stresses, Not Prolonged Crises for Asia in 2024
- While there will be economic and geopolitical shocks, we believe that these will cause episodic stresses, not lasting damage to the region’s growth or stability.
- Monetary policy, China’s economic performance, and geopolitical conflict will shape the economic outlook for the region, while government policy responses may provide economic upsides.
- Thus, we think that the Asia-Pacific region will exhibit commendable economic resilience and modestly improved growth compared to 2023.
10. EA: Inflation Springs as Energy Fades
- EA inflation undershot expectations for the fourth consecutive month but smashed the downtrend with a 0.5pp rise to 2.9% for Dec-23.
- The run of downward surprises means Dec-23 inflation is 0.8pp lower than expected in Oct-23. However, it is close to expectations a year earlier.
- Fading energy price disinflation drove the upside move in a timely reminder that all the EA’s other special aggregates remain well above 2%, discouraging ECB rate cuts.
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 (2330.TT; TSM.US): The 1Q24F Revenue Outlook and the Progress for Intel, MediaTek and Samsung.
- Taiwan Semiconductor (TSMC) (2330 TT)‘s revenue outlook for 1Q24F is expected to show a decline of around negative high single digits QoQ.
- Intel Corp (INTC US) aims to receive x86 CPU technology from TSMC 3nm in 1H24F.
- Mediatek Inc (2454 TT) plans to utilize 3nm technology for manufacturing smartphone SoCs in 2H24F, which will narrow the gap with Qualcomm Inc (QCOM US).
2. TSMC (2330.TT; TSM.US): If Intel Was Split Up, What Impact Will It Have on the Foundry Industry?
- We assume that Intel’s current business model is unable to fully meet the manufacturing needs in that case.
- As for the Intel Foundry Business, we believe that there is potential upside for growth.
- If Intel was doing great in Wafer Manufacturing Business, then why does it have to consider splitting up?
3. No Sign of Selling Advanced Scanners by ASML to China Customers, Implications
- The oversupply of 8″/12″ mature technology and price war especially within China for the next 5 years is inevitable, especially negative for SMIC and Hua Hong Semi.
- Production moving out of China semi demand might increase to 65-70% in next five years to benefit Globalfoundries, UMC, Vanguard, Powerchip mitigating impacts from rising domestic replacement in China.
- By building up in-house fabs, Huawei and HiSilicon supply chain vendors will be benefited the most like semiconductor equipment, material, fab construction, CoWoS interposer, and CoWoS packaging vendors.
4. Taiwan Dual-Listings Monitor: TSMC Premium at a Decent Short Level; ASE Short Interest Declining
- TSMC: 10.5% Premium — Still a Good Level to Short the Spread
- UMC: Trading at -1.1% Discount — Uncompelling, Wait for Deeper Discount
- ASE: 8.8% Premium — Still Wait for Lower Levels Before Going Long
5. KYEC (2449.TT): The Revenue Outlook Will Be an Upward Pickup in 2024F.
- It’s a greater chance that there will be an upward pickup in 2024F revenue for King Yuan Electronics Co, Ltd. (2449 TT), but the magnitude is hard to predict in 1H24.
- It is expected the revenue to decline by approximately -5% in 1Q24F.
- However, the demand for CoWoS at a corporate level is expected to increase by about 10% in 2024F .
6. MediaTek (2454.TT): The Revenue Is Likely Upside Around 10% QoQ in 1Q24F.
- For the upcoming revenue outlook, MediaTek Inc (2454 TT) is likely to reach an upside of around 10% QoQ in 1Q24F.
- MediaTek plans to release 12 million units of the Dimensity 9000 series in 2024F.
- Mediatek’s target markets include China, India, and Southeast Asia, with China remaining the primary market of focus.
7. Quantum Solutions (2338 JP): Look Again at Small Cap Play on AI Servers and Web-3.0 Gaming
- Quantum Solutions has given up 63% of its recent gain but has more NVIDIA GPU related orders in the pipeline. Keep an eye on the stock and the news flow.
- The recent upward revision to sales and profit guidance has been followed by the announcement of a capital and business tie-up with Hajime Tabata’s JP Games.
- The addition of Web-3.0 gaming to distribution of AI servers and Arm-based edge computing hardware could change the nature of the investment.
8. Micron. Earnings Puts & Takes. Take Your Pick
- Q1FY24 revenues of $4.7 billion, up 18% QoQ and up 16% YoY, and $100 million above guided high end, as already flagged on November 28
- Q2FY24 guidance of $5.3 billion, a ~13% increase QoQ. This will once again be loss-making quarter to the tune of an EPS loss of 28 cents.
- Things are looking up for Micron, but 2024 will still be a “recovery” year.
9. Power Semiconductor Specialist Will Benefit from AI Yet Lagging Key Customers’ Share Price Rallies
- UPI Semi is a specialist designer of electronic components and semiconductors for power management. Power management is a key performance factor for AI devices.
- UPI’s clients include most of the world’s largest leading technology companies for semiconductor distribution and AI products.
- UPI shares have lagged the strong performance of its clients — We see opportunity for UPI to now Outperform.
10. Delta Taiwan Vs. Thailand Monitor: Parent Could Sell More of Its Stake; Thai 50x PER Vs. Taiwan 20x
- Delta Thailand vs. Taiwan valuation differential has returned to an historically extreme level.
- For 2024E & 2025E growth expectations continue to be similar for the two companies, yet Delta Thailand’s FY2024E PER is 50x while Delta Taiwan’s is 20x.
- We see substantial relative value in Delta Taiwan and expect likely reversion of relative valuation due to latest return to historically extreme mismatch.