Weekly Top Ten

In this insight, I review a fantastic book written by Morgan Housel called The Psychology of Money (published in 2020).
“The most important part of every plan is planning on your plan not going according to the plan.”
Three parts of the book were particularly outstanding including letter to author’s son, the story of Rick Guerin, and how mice helped the Russians to defeat the mighty German army.

3. Foreign Investors Allowed to Begin Buying Korean Stocks Without Prior Authorization on 14 December

On 13 December, the FSS announced that foreign investors will be allowed to start purchasing Korean stocks without prior authorization starting this week.
The revised Capital Market Act will start to be implemented on 14 December repealing the time consuming and inconvenient pre-registration system for foreign investors.
As a result of the Korean government making this change regulatory change, one of the beneficiaries is likely to be Interactive Brokers Group, Inc (IBKR US).

4. Steno Signals #77 – Oil Demand Is ALL TIME HIGH

Happy Sunday and welcome to our weekly flagship editorial from Steno Research.
It has been an incredibly odd week in the economic calendar and our thesis of a strong year-end for USD key figures has so far been proven right, which especially after the NFP report re-ignited the USD and front-end USD rates, which has been our bet against especially European peers.
Most recent economic key figures from the US have not surprised positively to the extent we saw through the autumn, while Chinese key figures have woken up and made a decent comeback relative to expectations over the past months.

5. 5 (+1) Central Banks We Watch – Fed, ECB, BoE, Norge’s Bank, BoJ & BCB

It’s central bank week once again, and that of course calls for us to share our thoughts ahead of the biggest meeting over the next week with Powell being the first to take the stage on Wednesday, expecting to hawk up the rhetoric a bit whilst keeping the Fed funds upper band steady at 5.5%.
The ECB has recently claimed the title as the most dovish central bank in G10 after markets have added roughly 20 bps of cuts in 2024 to market pricing, and markets now price in approx.
115 bps of cuts in 2024.

6. Central Bank Review: Powell, a Genius or a Madman? 2024 Looks like a Year of Fat Tails

By Mikkel Rosenvold, Steno Research

USD markets felt almost EM like for a couple of hours after Jay Powell and the committee allowed markets to chase the cutting narrative by communicating three expected cuts in the dot plot for 2024.
I am not always convinced that the dot plot is a wise guidance tool as policy makers likely judge that a dot signaling three cuts relative to market pricing (ahead of the meeting) hinting of more than four cuts net/net should lead to a hawkish surprise.
The opposite of course happened since narrative chasers in markets rather look at the sequential move than the nominal forecast.

7. Great Game – Climate, Chips and Corruption!

Welcome to your weekly geopolitical update from the Great Game! With a relatively quiet week in global affairs, we have time to dive into a couple of issues that we’ve been looking at over the past weeks.
But let’s start at the main stage with the current COP28 summit that’s about to wrap up.
Will “majlis” sit-downs save the climate?

8. In A Bitcoin Frenzy; Long BTC Miners & Short BTC

By Pranay Yadav, Mint Finance

BTC’s phenomenal +57% surge since September is propelled by key forces—ETF euphoria, a robust “Risk On” asset bull run, regulatory clarity, and the imminent BTC halving.
While BTC maintains resilience, mining firms, exemplified by Valkyrie Bitcoin Miners ETF (WGMI), have seen a 30% underperformance over the last 3 months.
Mining firms that have scaled up hash-rate over the past year and built up BTC holdings to support outperformance to BTC. However, ample cash reserves are vital.

9. Rate Cuts: How Much? How Quick? How Real?

By Srinidhi Raghavendra, Mint Finance

Western central bankers have made it amply clear that rate cuts are not a given. They remain data dependent. And the data is sending mixed signals.
Meanwhile markets are opting for selective hearing and are pricing sharp rate cuts soon. Inflation is hard to tackle in general. The last mile gets nasty. Are markets ready?
Base effects have contributed to the rapid slowdown in inflation. When these base effects fade, the false sense of safety could crater leading to a very different inflation narrative.

10. Positioning Watch – Are markets ready for Powell Wednesday?

With Powell taking the stage on Wednesday, likely turning more hawkish in his rhetoric after weeks of financial conditions easing, we have had a look at if we are starting to see signs of markets reversing their ultra-bullish positioning.
In general markets have taken a bit of a breather from a positioning perspective after the historically bullish sentiment seen throughout November, and people are now starting to hedge their longs based on recent option volumes, with the aggregate US intraday put-call ratio now back solidly above 1.
Looks like traders are starting to hedge their equity bets going into the central bank bonanza this week.

Weekly Top Ten Macro and Cross Asset Strategy

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Dec 10

Weekly Top Ten Tech Hardware and Semiconductor – Dec 10, 2023

By Smartkarma Content | Tech Hardware and Semiconductor

1. Taiwan Tech Weekly: TSMC Extending Lead Vs. Samsung with 3nm Tech; Hon Hai Result Positive for Apple

Is TSMC Leaving Samsung in the Dust with its New 3nm Process Technology?
Our Pick Himax a Top Loser… Apple Lens Supplier, Yageo Peer, and Taiwan AI Chip Designer Top Winners
Positive Sign for Apple Revenue — Hon Hai November Revenue Higher Than Expected, Guides for Better December

2. MediaTek (2454.TT): Rebounding from Cycle Bottom.

Mediatek Inc (2454 TT) has rebounded from the bottom of the cycle, and it will be able to reach more than 20% YoY in 2024F.
The demand for 4G and 5G Smartphone SoC will be split around 55/45 by shipment volume, with Taiwan Semiconductor (TSMC) (2330 TT) being the primary supplier for MediaTek.
The MediaTek Dimensity 6000 series will be the new flagship product line in 2024F.

3. Semiconductor Events Deserving Your Attention @6/12/23

By Scott Foster, LightStream Research

Global semi sales for October 2023 amounted to $46.6 billion, an increase of 3.9% MoM but still down 0.7% compared to the year-ago period
Global semiconductor equipment billings amounted to $25.6 billion in Q323, down 11% YoY and down 1% QoQ
China is on track to maintain the global #1 semi WFE spender slot for the fourth year in a row and by the widest margin ever.

4. Hamamatsu Photonics (6965 JP): Buy into Current Weakness

The shares are down 27% from their May high, largely discounting excessive inventory and a decline in profits that is likely to continue through next March or June.
Inventory adjustment, the revival of semiconductor, factory automation and medical related demand, plus the leveling off of depreciation, should enable a return to growth after that.
Projected valuations are at the low end of their 10-year ranges. Buy into the current weakness, keeping in mind that 1Q results are likely to be weak.

5. Cerebras. G42 Deal Is A Life Saver. Or Is It?

~$900 million supercomputer deal is off the charts compared to all previous deals
Without the deal, Cerebras would likely soon have run out of cash. With the deal, Cerebras is effectively working as a supercomputer contractor for G42 for the next several years
Three supercomputers to be built in the US, we suspect the remaining six to be built in the UAE. That’s likely to raise some eyebrows.

6. Stories Behind the Reported Nov 2023 Taiwan Semi/Tech Sales

By Andrew Lu

More clear y/y improvement for 8/12″ raw wafer, WiFi IC, GaAs RF/VCSEL, and memory vendors but more y/y deterioration for OLED/LCD driver, LCD panel, design service, equipment/materials, and foundry vendors.
GaAs RF and gaming GPU card vendors showed very impressive y/y sales growth of 54% and 63%, respectively. ABF substrate vendors showed the weakest sales decline of 34% among all.
Except A Data (+2.5% m/m) and Phison Electronics (+5.6% m/m) might see stronger share price to reflect stronger November sales, most of others see good/bad news in the price already.

7. GUC (3443.TT): Why the Company Did Show a Bit Cautious Attitude with the Market Price?

On December 8th, GUC reached its daily limit at the closing price, but the company did not consistently demonstrate an agreeable attitude.
The “AI” is an explicit knowledge for today, while GUC is a company of project based.
GUC’s monthly revenue decreased by 22.15% YoY in November 2023.

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Dec 10

Weekly Top Ten Equity Capital Markets – Dec 10, 2023

By Smartkarma Content | Equity Capital Markets

1. Rakuten Bank (5838 JP) Overnight Offering at a Fat Discount

After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

2. Toyota To Sell Harmonic Drive (6324 JP) Shares in Overseas Offering

Today, Toyota Motor (7203 JP) announced it would sell 4.379mm shares (4.55%) of Harmonic Drive Systems (6324 JP) in an overseas placement.
This is not so big as it is emblematic, adding to the recent news on Toyota unwinds.
Harmonic Drive is heavily held by foreign institutions. This is a foreigners-only deal. But it will need to be absorbed by that group too.

3. Rakuten Bank Placement – Was Expected at Some Point, Current Timing Seems Opportunistic

Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP).
RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
In this note, we will talk about the deal dynamics and updates since our last note.

4. REPT BATTERO Energy Pre-IPO – PHIP Updates – Leaning on ESS

REPT BATTERO Energy (REPT HK) is now looking to raise around US$300m in its upcoming Hong Kong IPO, down from the US$1bn it was aiming for earlier.
REPT BATTERO Energy (REPT) is a lithium-ion battery manufacturer in China, focusing on R&D, production, and sales of EV/ESS lithium-ion battery products such as battery cells, modules and packs.
We have looked at the company’s past performance in our previous note. In this note, we talk about its PHIP updates.

5. Harmonic Drive Placement – Cleanup Share Sale Will Remove the Overhang

Toyota Motor (7203 JP) is looking to raise US$116m from selling its entire stake in Harmonic Drive Systems (6324 JP).
Toyota Motors has indicated over the past one-two weeks that it will be looking to sell/trim its stakes in various entities as part of its exit from its multiple cross-holdings.
While the deal would be a relatively large one to digest at 10 days of ADV, Toyota Motors will be selling its entire stake, clearing the overhang.

6. Evolution Mining Placement – Back to Equity Markets Again to Fund Another M&A Deal

Evolution Mining (EVN AU) is looking to raise around US$350m to partially fund its acquisition of an 80% stake in the Northparkes copper and gold mines.
While the acquisition wasn’t explicitly flagged, the firm has guided that it had been eyeing acquisitions into gold/copper pathways. Thus, we would argue that the deal is somewhat well flagged.
That being said, at 14 days of three month ADV, the deal isn’t a particularly small one for the firm to digest.

7. Dekon Food and Agriculture Group IPO Trading – Tight Float at Listing, Subscription Rates Were Tepid

Dekon Food and Agriculture Group (DFAG CH) raised around US$128m in its Hong Kong IPO.
Dekon Food and Agriculture Group (DFAG) is a vertically integrated livestock farming enterprise in China.
We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.

8. 2024 Major IPOs Pipeline in Korea

This is our 9th “Annual Edition of the Major Korean IPOs Pipeline Preview” at Smartkarma.
This insight will feature 50 of the biggest potential IPOs in Korea in 2024.
These 50 IPOs in Korea are likely to represent more than 80% of all capital raised through IPOs in Korea next year.

9. Rept Battero IPO: The Bull Case

REPT BATTERO Energy (1998104D CH), a leading EV battery manufacturer, is premarketing a US$300 million HKEx IPO, according to press reports.
According to Frost & Sullivan, in 1H23, Rept was the tenth-largest lithium-ion battery manufacturer globally for annual installations for new energy applications.
The bull case rests on rapid ESS revenue growth, reducing customer concentration risks, ambitious capacity expansion plans, promising margin trajectory and improving cash collection cycle.

10. Kasumigaseki Capital (3498 JP) – An Offering Worth Examining

Kasumigaseki Capital is a small cap consulting real estate speculator/developer. They have an interesting, aggressive model. People will recognise the model from pre-GFC but this one is structured better.
The company had planned explosive growth and in October, brought growth plans forward and guidance way up. Now there is an offering to fund that growth.
It appears to also be an offering to get a very large short position out of a risk of potential squeeze. For that, I expect this goes smoothly.

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Dec 10

Weekly Top Ten Event-Driven and Index Rebalance – Dec 10, 2023

By Smartkarma Content | Event-Driven and Index Rebalance

1. Dai-Ichi Life (8750) Proposes a Full Takeover of Benefit One (2412), Overbidding M3

Today post-close, life insurer Dai Ichi Life Insurance (8750 JP) announced plans to launch a Tender Offer to buy out all minorities in Benefit One Inc (2412 JP) at ¥1,800/share.
M3’s Partial (55%) Tender at ¥1,600/share ending next week is obviously a question.
This is GREAT news for M&A in Japan. It’s good for holders of Benefit One and Pasona Group (2168 JP) too.

2. New Benefit One Deal Recalculated, More Benefit for All, Less for One

The deal from Dai-Ichi Life for Benefit One Inc (2412 JP) appears language I did not get the first time around. The JPY 1800/share price is a proposed combined value.
The deal would then lower the TOB price to Pasona, and share the benefits from that lower price to Benefit One minorities.
That suggests more upside to Benefit One than I originally thought, and less upside (but still a chunk) to Pasona.

3. Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

4. Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.

5. March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal 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) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

6. S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

7. NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

8. New Deal for Benefit One (2168) Could Mean Lots More Money for Pasona (2168)

Today, Dai Ichi Life Insurance (8750 JP) announced a proposed counter/over-bid for Benefit One Inc (2412 JP). ¥1800/share for minorities and a better (undefined) outcome for Pasona Group (2168 JP).
This throws the cat amongst the pigeons as it is unsolicited, for 100% not just to get Pasona’s stake, and it will require Benefit One recommend or not.
For Pasona, this deal structure would likely increase the net result from the stake sale, possibly substantially so. It’s in the details.

9. MVIS Australia Equal Weight Index Rebalance Preview: Stocks Close to Deletion Zone

AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

10. Swire (19 HK / 87 HK) Announces NEW, Bigger, Better Buyback

Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div).
Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

Weekly Top Ten Event-Driven and Index Rebalance

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By Michael J. Howell, CrossBorder Capital

Dec 10

Weekly Top Ten Macro and Cross Asset Strategy – Dec 10, 2023

By Smartkarma Content | Macro and Cross Asset Strategy

1. Global Liquidity On The Rise: Is This Gold’s (And BitCoin’s) Breakout Moment?

High street inflation could fall in 2024 and real interest rates stay high, but the gold price and BitCoin (BTC$) may still break higher
Gold has a 1.5-1.6 times sensitivity factor to the growth in Global Liquidity. BitCoin is a whopping 5 times this! It is ‘exponential gold’
Global Liquidity looks set to double in size over the next decade driven by soaring World debts. Alongside, the US dollar has been eclipsed as the marginal World reserve asset

2. FSS Provides Further Details of Korean Companies That Plan to Change Dividend Payout System in 2024

By Said Desaque, DeSaque Macro Research

FSS provided further details as to the number of Korean companies that plan to change their dividend payout system to their shareholders in 2024.
There are 636 companies out of a total 2,267 listed companies in Korea (28%) that have confirmed that they will change their dividend payout system starting 2024.
As listed companies set different voting rights and dividend record dates from the end of the year, investors need to check the dividend record date and dividend amount before investing.

3. The Fate of Quantitative Tightening: Not Solely in the Hands of the Fed

The twin pillars that underpinned US monetary policy since the global financial crisis made policy normalisation difficult. Investors believe quantitative tightening (QT) ceases once the federal funds rate is lowered.
Contrary to the fears encountered during the taper tantrum in 2013, QT has not dramatically tightened US financial conditions since 2017, thereby raising questions about whether any cessation is required.
High levels of bank reserves do not guarantee financial stability, but elevated Treasury borrowing and lower repo market liquidity pose threats that could ultimately force the Fed to end QT.

4. Positioning Watch – Everything better turn out the way markets want it

Hello everyone, and welcome back to our weekly positioning watch, where we dig into everything positioning and sentiment-related.
This week will be all about equities and fixed income, which seems to be running the show at current junctures – just give the gold chart a look, which jumped some 2% on the back of pivot hopes and strong buying activity this morning during Asian hours, while sellers were nowhere to be seen, but fast-forwarding 10-11 hours, gold is now down somewhere near 0.2%.
A huge turnaround in markets which smells a lot like a short-squeeze or tight liquidity in the Asian markets today.

5. Steno Signals #76: The Fed Has Lost Control of Liquidity Trends

Happy Sunday from frosty Copenhagen and welcome to our flagship editorial! The underlying demand trends are not strong.
Running credit card data has been weak in October/November, the credit impulse is worsening and there are signs of actual labour market softening around the otherwise sticky service sectors in the West, yet markets are partying like there is no tomorrow.
What is causing this disconnect and could it continue into the year-end?

6. 5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates

By Angus Mackintosh, CrossASEAN Research

We’ve spent the past 2 days in London, meeting clients and hedge funds, and there was a lot of support for the idea/notion that SOFR-Fed Funds spreads reveal that USD Liquidity is not ample and that the Fed will have to end QT early.
The spread widening in SOFR – Fed Funds, caught a lot of attention over the past few days and it is interesting how swiftly the market jumps to the conclusion that it will lead to the Fed panic-ending QT already in Dec or January.
Why are SOFR – Fed Funds spreads widening and how do we deal with it?

7. Mint Macro Roundup: Dissecting The Recent Jobs Data

By Pranay Yadav, Mint Finance

Nonfarm payrolls showed 199k jobs added, higher than October and above expectations; Unemployment fell to 3.7% but wage growth strong at 4% YoY.
Earlier this week, JOLTs survey showed job opening slide 6.7% to 8.73 million, lowest in 2.5 years with jobs declining across industries.
Job market observed to be loosening and on-track to achieving soft-landing. going forward, it’s vital to watch for job losses.

8. The Week That Was in ASEAN@Smartkarma – Indofood’s On Track, ROTI’s Rising, and BliBli’s Omnichannel

The past week has seen insights on Indofood CBP Sukses (ICBP IJ), PT Nippon Indosari Corpindo (ROTI IJ), Global Digital Niaga (BELI IJ), OCBC (OCBC SP) and Vinfast (VFS US).
There were also macro insights on the Philippines and Vietnam from Manu Bhaskaran and insights on Leader Energy IPO, Mkh Bhd, Vale Indonesia, Aneka Tambang, Bank Tabungan, and Medco Energi.
The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

9. India Politics: State Elections Show Favourable Political Winds for Modi

By Manu Bhaskaran, Centennial Asia Advisors

Premier Modi’s BJP outperformed expectations by winning three state assembly elections, putting it in prime position for re-election in the 2024 general election.
Modi’s personal appeal and welfarist policies will likely deliver dividends in the next elections. But a landslide win is far from guaranteed given the political dynamics.
The government will thus avoid rocking the boat in terms of economic policy.

10. The Market Meaning of a Gold Breakout

By Cam Hui, Pennock Idea Hub

Gold bulls became very excited when gold tested resistance at the 2000–2100 level. We have been more interested in the drivers of gold strength than trying to forecast gold itself.
Our analysis indicates that gold is rising on expectations of falling real rates, which also depresses the USD.
These factors should be bullish for the price of risky assets. Specifically, we would focus on financials and other early market cycle groups.

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Dec 03

Weekly Top Ten Equity Capital Markets – Dec 3, 2023

By Smartkarma Content | Equity Capital Markets

1. Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap

15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, “It was a trap”.
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

2. Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”

Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

3. Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback

Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

4. Asahi Group (2502 JP): The Current Playbook

Since the US$1.3 billion secondary placement announcement, Asahi Group Holdings (2502 JP)’s shares are down -6.2% from the undisturbed price of JPY5,804 per share (16 November).
Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asahi’s shares have followed the pattern of previous large placements.
The offering will likely be priced on 28 November. Investors participating in previous large Japanese placements tend to secure positive returns.

5. Zensho Placement – Good Price to Raise At, at Least for the Company

Zensho Holdings (7550 JP) aims to raise around US$300m via a public offering.
As per the company it will use the proceeds from the deal for potential M&A transactions.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

6. Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
Toyota is the company’s largest shareholder and its largest customer.
We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.

7. Zeekr Pre-IPO – Quick Note – Recent Filing Updates – 007, Earnings on Track

ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the updates from its recent filings.

8. Tata Technologies IPO: Trading Debut

Tata Technologies (TATATECH IN) priced its IPO at Rs500 per share to raise gross proceeds of US$365 million. The shares will start trading tomorrow.
We previously discussed the IPO in Tata Technologies IPO: The Investment Case and Tata Technologies IPO: Valuation Insights.
The market sentiment on the sector has improved. In 2023, Indian IPOs with a >US$100 million raise had an average first-day gain of 28.3%. The IPO price is attractive.

9. LS Materials IPO Bookbuilding Results Analysis

LS Materials IPO price has been determined at 6,000 won per share, which is higher than the high end of the IPO price range (5,500 won).
A total 2,025 institutional investors participated in this IPO book building. The demand ratio was 396.8 to 1. The IPO offering amount is 87.8 billion won.
We believe that its share price is likely to trade higher than the high end of our valuation range (7,953 won per share) post IPO.

10. Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues

Sino-Synergy Hydrogen Energy Technology (9663 HK) (SHET) is looking to raise around US$200m in its Hong Kong IPO.
SHET is a hydrogen fuel cell company in the PRC focusing on research, development, production and sales of hydrogen fuel cell stacks and hydrogen fuel cell systems.
In this note, we will look at the company’s background and talk about valuations.

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Dec 03

Weekly Top Ten Event-Driven and Index Rebalance – Dec 3, 2023

By Smartkarma Content | Event-Driven and Index Rebalance

1. KWEB Index Rebalance: Fenbi (2469 HK) & YSB (9885 HK) Added

The December rebalance of the KraneShares CSI China Internet ETF (KWEB US) will take place at the close of trading on 8 December.
Fenbi Ltd (2469 HK) and YSB (9885 HK) will be added to the index and there are no deletions.
There is a big lock-up expiry in YSB (9885 HK) soon after the index inclusion and this could be an opportunity to access liquidity in the stock.

2. Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

3. Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn

As per Reuters, Toyota Motor (7203 JP) could look to sell up to 10% of Denso Corp (6902 JP) to raise around US$4.7bn before the end of the year.
Toyota is the company’s largest shareholder and its largest customer.
In this note, we will talk about the deal dynamics.

4. CSI Medical Service Index Rebalance: Chunky Flows for Some Stocks

By Sanghyun Park, Clepsydra Capital

There are 4 changes for the CSI Medical Service Index that will be implemented at the close on 8 December.
The constituent changes plus capping result in one-way turnover of 5.9% and in a one-way trade of CNY 1.86bn (US$261m).
Some stocks will have passive flows from global trackers at the end of November while there will be flows from other local passive trackers at the close on 8 December.

5. Breaking Down Korean Regulators’ Official Details on New Short Selling System

Concerning the newly imposed 90-day mandatory repayment period for institutional investors, the elimination of the recall risk during this period is not included in this improvement plan.
The right to re-establish the same short-selling position after the 90-day repayment period is unlimited. We should pay attention to the potential of this creating new trading events.
Institutions borrowing stocks from overseas are not subject to the 105% collateral ratio. However, everyone is subject to the 90-day repayment period, even for investors who borrow stocks from overseas.

6. Asahi Group Placement – Follow Up – Shaping up for a Christmas Cheer

A group of shareholders aims to raise US$1.3bn (JPY197.8bn) by selling their respective stakes in Asahi Group Holdings (2502 JP) via an extended secondary follow-on.
We have covered the background of the deal in our earlier note, Asahi Group Placement – Relatively Small One when Compared to Previous Large JP Secondary Selldowns.
In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.

7. Itoen Pref (25935 JP) – Big Discount, Big Buyback, No Big Governance Change

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

8. CNI Semiconductor Chips Index Rebalance: Yet Another Index Inclusion for Hygon

There are 3 changes for the CNI Semiconductor Chips Index that will be implemented at the close on 8 December.
This is yet another index inclusion for Hygon Information Technology C (688041 CH) – the stock continues to move higher on expected passive buying over the next two weeks.
Over the last 6 months, the adds have underperformed the deletes but there has been a significant improvement in performance over the last 2 months.

9. ChiNext/ChiNext 50 Index Rebalance: Adds Outperforming Deletes Now

There will be 6 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index. Implementation is at the close on 8 December.
There is a lot of overlap between the adds and deletes across both indices with the one-way trade across both indices estimated to be CNY 2.4bn.
The adds and deletes have drifted lower over the last few months. However, the adds have outperformed the deletes significantly in the last month.

10. Merger Arb Mondays (27 Nov) – Origin, OreCorp, Healius, Taisho, JSR, Eoflow, Hollysys, Haitong Intl

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 Eoflow (294090 KS), 111 Inc (YI US), Taisho Pharmaceutical Holdin (4581 JP), Healius (HLS AU), Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Toyo Construction (1890 JP), Tietto Minerals Ltd (TIE AU), Pact Group Holdings (PGH AU), IJTT Co., Ltd. (7315 JP).

Weekly Top Ten Event-Driven and Index Rebalance

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By Michael J. Howell, CrossBorder Capital

Dec 03

Weekly Top Ten Macro and Cross Asset Strategy – Dec 3, 2023

By Smartkarma Content | Macro and Cross Asset Strategy

1. The US Fed May Find It Hard NOT to Cut Rates in 2024

Risk asset markets are driven by rising Global Liquidity and falling inflation. Low inflation in 2024 will be sufficient to justify a significant change in direction by the US Fed
Cyclical analysis points to a further sizeable improvement in Global Liquidity conditions over the next 12-18 months
Investment regime is heading towards its next phase of Calmwhich favors equities and sees steeper yield curves ahead

2. Steno Signals #75 – The 2007/2008 Playbook Is Useful Again

Happy Sunday and welcome to our weekly flagship editorial.
The soft landing narrative has seen material tailwinds over the past 6-8 weeks, while the recession narrative is fading fast.
This is the first prerequisite for an actual recession as a recession never arrives when everyone plans for one.

3. Investment Opportunities From A Global Leadership Review

By Cam Hui, Pennock Idea Hub

Global equities are surging, led by growth stocks. Stay with the current leadership until year-end as hedge funds are likely to engage in a beta chase for performance.
U.S. stocks are still the leaders, especially the megacap growth stocks.
Set-Ups for a new leadership are emerging in Europe and EM ex-China. Wait until early 2024 to re-evaluate the evolution of leadership before making any decisions on rotation.

4. End of Mandatory Lock-Up Periods for 53 Companies in Korea in December 2023

We discuss the end of the mandatory lock-up periods for 53 stocks in Korea in December 2023, among which 6 are in KOSPI and 47 are in KOSDAQ.
These 53 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
Among these 53 stocks, top five market cap stocks include Doosan Robotics, Studio Dragon, Asicland, Manyo Factory, and Curocell.

5. Positioning Watch – All About the Soft Landing Narrative

By Srinidhi Raghavendra, Mint Finance

Hello everyone, and welcome back to our weekly positioning watch, where we as always try to dig down into the latest positioning data and give you an overview of what’s moving narrative currently.
Sentiment and positioning are still skewed towards hopes of a soft landing, with bets being placed on lower yields, a weaker dollar, booming equities and almost non-existent credit spreads – ironically a prime condition for an upcoming recession (which is still our base case for H1 2024).
General media and story counts are also all about the soft landing vs recession, with the mentionings of “recession” back at pre-COVID levels, while soft landing counts are on the rise, although pulling a bit back from recent highs.

6. VIX Isn’t Broken. It Is Diluted by 0DTE Options That Have Shifted Target Risk Windows.

Geo-Politics are tense. Monetary policies are in contraction. Rates are on hawkish pause. Inflation is far from tamed. Financial conditions remain tight. VIX should be anything but sanguine.
Any misjudgment across politicians, central bankers or businesses could send equities tanking or soaring. Yet the VIX is sending a calming signal.
VIX isn’t broken. It has been diluted by rise of Zero DTE (0DTE) options which have shifted risk pricing windows away from VIX target expiry range.

7. 5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics

By Ulrik Simmelholt, Steno Research

We start off this week’s 5 Things We Watch by having a look at the reactions of CBs.
This is followed by talking about EURflation and the upcoming OPEC meeting and we then move on to talking about the Ifo numbers released last week while lastly finishing off with Dutch politics.
The Fed is the most plausible “pauser”.

8. 7 Reasons to Embrace the Melt-Up Into Year-End

By Cam Hui, Pennock Idea Hub

We wouldn’t go as far as to call the current circumstance a generational buying opportunity, but a rare “fat pitch” that comes along only once or twice per decade.
The current episode of strong breadth thrust off the market bottom in late October is a rare and clear, and extraordinary, trading signal of a major market bottom.
We believe investors should, at a minimum, embrace the likely melt-up into year-end and re-evaluate market conditions in January.

9. Vietnam Poised to Be Winner in Global Competition for Investments

By Manu Bhaskaran, Centennial Asia Advisors

Vietnam’s economy is regaining its footing after a difficult first half in 2023. Industrial activity and trade picking up, complementing still-healthy growth in the services sector. y.
Despite the cyclical difficulties, foreign investments into Vietnam are on the up. Advantageous economic geography and diplomacy are powerful pull factors.
However, defective infrastructure, including in transport and utilities, limits the scope of Hanoi’s economic ambitions. These must be fixed if investments are to remain in Vietnam.

10. G3 Central Bank Watch: More Fuel to the 2007 = 2023 Analogy

We have used the 2007 = 2023 analogy a few times already this year and we continue to find coincidental evidence that looks a lot like the emerging pressures built up in the quarters preceding the financial crisis.
The outcome of 2024 is still up in the air, but credit indicators do not look pretty ahead of next year when we combine the impulse in China, the US and the Euro area in an aggregate model and judging from the central bank behavior, we see a lot of similarities to 2007 across the BoJ, the Fed and the ECB.
Let’s briefly explain why in this central bank watch piece!

Weekly Top Ten Macro and Cross Asset Strategy

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Dec 03

Weekly Top Ten Tech Hardware and Semiconductor – Dec 3, 2023

By Smartkarma Content | Tech Hardware and Semiconductor

1. Semiconductors. The Downturn Is Over. Or Is It?

Global semiconductor sales have increased MoM for seven months in a row. PC & Smartphone unit shipments have bottomed and are on the rise. Memory has bottomed.
Silicon wafer inventories are piled high, ASML, TEL facing down zero growth in 2024, foundry utilisations are (mostly) in the doldrums with further ASP cuts looming on the horizon.
Multiple data points suggest we’ll still be talking about this downturn well into 2024

2. TSMC (2330.TT; TSM.US): 2024 High Conviction for Upside >15% YoY

TSMC is expected to experience growth of ~15% YoY in 2024F.
TSMC’s N3 is expected to dominate the market in 2024F, with applications in CPU, GPU, smartphone SoC, and more.
We also estimate that the N2 pilot run will begin in 4Q24.

3. TSMC: Defensive AI Play in Long Upward Re-Rating Trend?

By Douglas O’Laughlin, Fabricated Knowledge

We believe TSMC represents defensive exposure to AI for investors concerned that many other AI-related stocks’ valuations may be too high.
While one may think TSMC seems too obvious as a play, we note that the stock is up only 4.5% over the last six months.
We view TSMC as trading at an inexpensive valuation; even a cheap valuation should our hypothesis that the stock is structurally re-rating upwards turn out to be true.

4. Nvidia’s China Problems, Applied Materials, and Microsoft’s Accelerators

Nvidia’s quarter was surprising to me because it was boring. There were a few incremental pieces, but the big news was everything to do with China.
As you know, there was another round of export restrictions with a myopic focus on AI Accelerators.
This impacted results and the outlook.

5. Memory Monitor: Micron Expects 2025E to Be Best-Ever for Memory; But Valuations Have Run Up a Lot

Memory names have rallied strongly, with Nanya Tech outperforming since the start of November.
DRAM bottomed and NAND flash prices have jumped. Micron says that 2025E could be a record year for the Memory industry.
High valuations make near-term upside for Memory names uncertain. For Long/Shorts one can consider Long Micron vs. Short SK Hynix or Long Micron vs. Short Nanya Tech.

6. Micron. The Rally Is Premature

Improving outlook with Q1F24 revenue forecast slightly above the high end of the guided range
2024 is being positioned as a “recovery year”, helping reset investor expectations about the nature and speed of the recovery
Micron’s share price typically rallies strongest into record revenue years. 2024 will not be a record revenue year. As such, we think the present rally is premature.

7. Taiwan Dual Listings Monitor: Spreads Generally Trading in the Middle of Their Ranges

TSMC: 8.2% Premium — Still Best to Wait for Better Levels
ASE: 6.4% Premium — Wait for 5% as the Level to Go Long the Spread
ChipMOS: -0.5% Discount — Stay Long the Spread if You Started at -2.0%

8. UMC (2303.TT; UMC.US): There Is a Greater Chance for a Rebound in 2Q24F.

Although it is still early to determine the extent of the utilization rate that could be reached in UMC for 2Q24F, there is a greater chance for a rebound.
UMC’s high-end technology, specifically 28nm, has a utilization rate of over 80% in 4Q23F.
MediaTek is UMC’s largest client, dominating in WiFi, TV SoC, Bluetooth, and other areas.

9. Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped

Taiwan Tech companies beat analyst expectations by a high rate in the latest quarter
Semiconductors: Consensus could be underestimating a margin rebound for 2024E
Hardware aggregate forecast earnings growth increased significantly for 2024E as compared to just three months ago

10. Taiwan Tech Weekly: Taiwan AI Top Losers; Dell to Provide PC/Server Color; Post-3Q Results Takeaways

Taiwan AI Plays Top Losers Recently, Dell Results Coming Today U.S. Time to Provide Color for PCs and Servers
Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped
Nanya, Yageo Top Gainers; We Rate the Stocks Outperform and Structural Long Respectively

Weekly Top Ten Tech Hardware and Semiconductor

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Nov 26

Weekly Top Ten Equity Capital Markets – Nov 26, 2023

By Smartkarma Content | Equity Capital Markets

1. Large GS Yuasa (6674) Placement – 20% Dilution, Needs Lots of Love

Today after the close, noted Japanese battery maker Gs Yuasa Corp (6674 JP) announced a public equity offering accompanied by a 3rd party placement to Honda Motor (7267 JP).
Total $300mm+ raise is nearly 20.0mm shares against ~80mm shares out now. That’s 20% EPS dilution at a still-decent discount to book value.
This creates a weird situation of a low ROE stock becoming lower ROE, at a lower PBR, with “more growth ahead” in a hyper-competitive space.

2. Tata Technologies IPO: Valuation Insights

Tata Technologies (TATATECH IN), the largest India-based ER&D service provider, seeks to raise gross proceeds up to US$366 million in a pure secondary offering.
We previously discussed the IPO in Tata Technologies IPO: The Investment Case, Tata Technologies IPO: The Bull Case and Tata Technologies IPO: The Bear Case.
Our valuation analysis suggests that the IPO price range of Rs475-500 per share is attractive. Therefore, we would participate in the IPO.

3. Zeekr Pre-IPO – Thoughts on Valuation

ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.

4. GS Yuasa Placement – Well Flagged but Relatively Large Deal, Liquidity Might Be an Issue

Gs Yuasa Corp (6674 JP) (GSY) is looking to raise around US$240m via a public offering, along with placing shares via third-party allotment with Honda Motor (7267 JP) .
The company formed a JV with Honda Motors earlier this year and will use the bulk of the proceeds for investments in the JV.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

5. DS Dansuk IPO Preview

By Nitin Mangal, India Independent Insight

DS Dansuk is getting ready to complete its IPO in Korea in the next several weeks. The IPO price range is from 79,000 won to 89,000 won.
The book building for the institutional investors will be from 5-11 December. The IPO offering amount is from 96.4 billion won to 108.6 billion won.
According to the bankers’ valuation, DS Dansuk’s valuation would range from 462 billion won to 522 billion won.

6. Flair Writing Industries IPO- Forensic Analysis

Flair Writing Industries (1656496D IN) ‘s INR 5.9 bn upcoming IPO consists of fresh issue worth INR 2.9 bn and OFS worth INR 3 bn (at the upper end).
The company is the largest pen manufacturer in India and one of the top three players in the Indian Writing Instruments Industry.
While the company has shown a handsome growth since the pandemic, some operating metrics pertaining to employees don’t seem to add up.

7. WuXi XDC (2268.HK) – How Long Will the Rally Last?

By Xinyao (Criss) Wang

WuXi XDC’s shares surged since IPO. Obviously, ADC industry is in a “honeymoon period”. The market is optimistic about ADC due to high certainty and growth visibility in short term.
Pharmaceutical companies believe this platform would produce blockbuster products continuously. However, if there’s any “persuasive event” to change optimistic expectations on ADC, it’s time for investors to reconsider WuXi XDC.
“Positive sentiment + non-falsifiable short-term logic” would indeed push WuXi XDC’s shares to a new high. As long as sales of major ADCs are in line with expectations, party continues.

8. Tata Technologies IPO- Forensic Analysis

By Nitin Mangal, India Independent Insight

Tata Technologies (TATATECH IN) awaited IPO is set to launch for subscription this week.
The company is one of the largest ER&D player that is based in India with revenues crossing INR 44 bn in F23.
Balance sheet remains strong and cash rich. There are however, doubts on revenue recognition policy, forex risk and reliance on Tata Group.

9. Zensho Holdings (7550) – ¥50bn Offering Is Not Meant For You

Zensho Holdings (7550 JP) has had a great couple of years in share price movement. And this year is seeing earnings explode to new highs. M&A and FX.
Now they want to build a “war chest” equivalent to 4% of market cap to go do more M&A.
This seems opportunistic. And the shareholder register is extraordinarily lopsided. There is really only one buyer for this deal.

10. Zeekr Pre-IPO – Peer Comparison – Catching up with Little Spending

ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
We have looked at the company’s past performance in our earlier notes . In this note, we will undertake a peer comparison.

Weekly Top Ten Equity Capital Markets

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