In today’s briefing:
- Quantum Computing Part 1. Christmas Miracles & Multiverse Musings
- Ohayo Japan | Toyota Targets 20% ROE
- “Buy the Worst” HSI Strategy: Another Disappointing Year in 2024, Let’s See 2025
- Prospectus of Robotaxi Outside of China and US Is Bright for Chinese Supply Chains
- Global Autos: Falling Investor Confidence
- China Growth Equity Weekly Wrap (52/2024): Positive Macro, BEV Revival & Good Time to Invest in SaaS
- China Internet Weekly Wrap (52/2024): Visa Free Entry, Social Gift Sending & E-Commerce Tax
Quantum Computing Part 1. Christmas Miracles & Multiverse Musings
- Alphabet subsidiary, Google Quantum AI, launched its latest quantum computing chip, Willow, which can solve a specific problem in <5 mins that would take a supercomputer 10 septillion years
- Share prices of quantum computing related companies soared in December, ranging from 4.5x in the case of IonQ to ~17x for Quantum Computing Inc.
- D-Wave & Rigetti, both threatened with delisting in November, got their Christmas miracle with their share prices surging by 8x and 11x respectively.
Ohayo Japan | Toyota Targets 20% ROE
- Global stocks ended mixed as US markets retreated from yearly highs while Tokyo’s Nikkei soared past 40,000, highlighting diverging year-end momentum between markets.
- Toyota targets ambitious 20% return on equity through share buybacks and reduction of cross-shareholdings, potentially fuelling wave of similar corporate announcements.
- Honda and Nissan’s potential merger talks could reshape Japan’s auto industry and affect thousands of smaller suppliers.
“Buy the Worst” HSI Strategy: Another Disappointing Year in 2024, Let’s See 2025
- 2024 marks another year that our “Buy the worst” strategy underperformed the HSI. The strategy yielded -1.7% YTD, against HSI’s +17.9%. Meituan (3690 HK) is the only winner.
- For 2025, the strategy will switch to Budweiser Brewing (1876 HK), Chow Tai Fook (1929 HK), Hang Lung Props (101 HK), Wuxi Biologics (2269 HK), and CSPC Pharmaceutical (1093 HK).
- The top five HSI winners YTD 2024 have generated an average gain of 92.7%, outperforming the HSI massively. Given their current high valuations, this is unlikely to repeat in 2025.
Prospectus of Robotaxi Outside of China and US Is Bright for Chinese Supply Chains
- US and China are two biggest markets in autonomous driving and robotaxi. However, due to US-China decoupling, each market is off limits to the other;
- This makes non-US/non-China markets heavily contended. Uber and Lyft leads Didi and Meituan in globalization. But Chinese EV makers and ADS vendors might benefit from partnering with the two;
- We expect companies with low priced vehicle production capacity, like BYD, XPEV, LEAP and Zeekr to benefit more. Among ADS vendors, WeRide and Poni.AI stand out.
Global Autos: Falling Investor Confidence
- Global fund positioning in the Motor Vehicles sector has entered a fresh decline following a revival between 2020 and 2023.
- A record-low 10% of active Global funds are now overweight, with the sector holding an average underweight of -1.41%, making it the 4th largest industry-level underweight among active managers.
- Long-Term declines in Japanese autos have hit new lows, while German and US autos have drifted lower since 2023.
China Growth Equity Weekly Wrap (52/2024): Positive Macro, BEV Revival & Good Time to Invest in SaaS
- Macro: China may issue RMB3tn of special treasury bonds in 2025, accounting for 2.2% of GDP, 3rd highest in history;
- EV: BEV sector showed renewed interest with (1) CATL made battery swapping move, (2) Xiaomi gained access to charging network of NIO, XPEV and LI;
- SaaS: After making progress by its own, Beike terminated a major acquisition to save cost. Plus others…
China Internet Weekly Wrap (52/2024): Visa Free Entry, Social Gift Sending & E-Commerce Tax
- Online Travel: Korea and Japan eased tourist visa for Chinese. TRIP.com saw traffic gains in C4Q24;
- Internet Platform: Scalping on government consumption vouchers in Shanghai will shift future programs to major Internet platforms;
- Online game: December game code approval was both big and commercial. NetEase and Tencent games were included.
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