Daily Brief Thematic (Sector/Industry): Japanese Megabanks – Time to Get Short? and more

• Revisiting a sector we have liked for the last 2 years
• We discuss current sector dynamics and why they could be  a potential short
• Recent positive earning surprises from the banks have not moved the stocks

• US stocks recovered, with the S&P 500 gaining 0.4% and Nasdaq rising 0.2%, led by a 5% surge in Nvidia.
• Alphabet slumped 7% on weak cloud revenue, while AMD fell 6% after a disappointing data-centre forecast, fuelling AI investment concerns.
• Japan’s Nikkei edged higher, supported by Toyota’s upbeat forecast, but a stronger yen capped gains amid rising expectations of a BOJ rate hike

• Trump delays tariffs on Mexico and Canada for 30 days after border security deal; Mexico sends 10,000 National Guard troops.
• India’s Finance Ministry and RBI to ease FEMA rules, attract foreign investments, modernize regulations, and review non-financial sectors.
• The new direct tax code bill, effective from April, will simplify existing laws, without new taxes or rate changes.

• Microsoft’s focus on AI resulted in throwing themselves under the bus to keep the AI train going.
• Microsoft’s decision to maintain CapEx numbers for AI semis may not align with street expectations.
• Microsoft’s shift away from AI for small and medium businesses indicates uncertainty about the utility of AI for a large part of the customer base.

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• Singtel is considering raising their FY2025 ebit growth guidance to mid-to-high teens, attributed to successful cost cutting efforts according to CGSI.
• IG forecast predicts OCBC stock may reach $19 and UOB may rise to $39.90. RHB increases Centurion’s target price and earnings due to higher rate assumptions.
• CGSI maintains ‘add’ rating for Genting Singapore despite slow tourism recovery. However, DBS and RHB cut CDLHT’s target price due to Singapore hotel oversupply.

• SMCI and server cooling names higher on Blackwell rack announcement.
• Pple suppliers Cirrus and Broadcom up in regular trading but Skyworks -23% and Qualcomm -4% after hours.
• Signs that Minebea Mitsumi may be finally reaching a bottom? 

• In an interview with Reuters, ING’s CEO Steven van Rijswijk said his bank is exploring acquisitions in major European markets, including Germany, Italy, and Spain, to expand its presence.
• “We would be looking firstly at businesses that offer certain products, operate predominantly in geographical markets where we are already active and have a strong digital footprint,” the CEO told Reuters.
• Van Rijswijk declined to name any potential targets.

• Tractor volume continued to be strong in Jan’25. Favorable reservoir level, strong sowing for Rabi season and government support are expected to drive good demand for tractors in medium term.
• We summarize the sales volume published by listed players Mahindra & Mahindra (MM IN) , and Escorts Kubota Limited (ESCORTS IN) in January 2025.
• Positive management commentary augurs well for uptick in tractor OEM stocks and related auto ancillary companies like GNA Axles Ltd (GNA IN) in medium term.