Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Taiwan Semiconductor (TSMC) - ADR / Equity Bottom-Up

<ul>
<li>TSMC’s ADR premium has fallen substantially and is at the lower end of its 3-year range</li>
<li>ASE’s ADR premium is in contrast near the upper end of its range</li>
<li>ChipMOS ADRs are now trading at a discount to their Taiwan shares</li>
</ul>


TSMC’s ADR premium has fallen substantially and is at the lower end of its 3-year range
ASE’s ADR premium is in contrast near the upper end of its range
ChipMOS ADRs are now trading at a discount to their Taiwan shares


Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>As expected, <a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a> will be added to the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> at the close on 10 June replacing <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a>.</li>
<li>We estimate passive trackers will need to buy over 9 days of ADV on <a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a> while selling 11 days of ADV on <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a>. </li>
<li>
<a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a>'s inclusion in the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> could create significant arb opportunities versus <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> on 10 June.</li>
</ul>


As expected, NIO Inc (9866 HK) will be added to the Hang Seng Tech Index (HSTECH INDEX) at the close on 10 June replacing ASM Pacific Technology (522 HK).
We estimate passive trackers will need to buy over 9 days of ADV on NIO Inc (9866 HK) while selling 11 days of ADV on ASM Pacific Technology (522 HK). 

NIO Inc (9866 HK)'s inclusion in the Hang Seng Tech Index (HSTECH INDEX) could create significant arb opportunities versus NIO Inc (NIO US) on 10 June.


Hang Seng TECH Index Rebalance: NIO (9866 HK) To Replace ASM Pacific (522 HK)

Taiwan Tech Focused Senior Analyst

Patrick Liao

ASE Technology Holding   / Equity Bottom-Up

<ul>
<li>In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%.</li>
<li>In the first quarter, ASE Holding already surpassed the historical peak of 27% gross margins. And ASE Holding will see that trend continue.</li>
<li>It's a normal phenomenon that ASE Holding is seeing inventory level being higher than before.</li>
</ul>


In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%.
In the first quarter, ASE Holding already surpassed the historical peak of 27% gross margins. And ASE Holding will see that trend continue.
It's a normal phenomenon that ASE Holding is seeing inventory level being higher than before.


ASE Holding (ASX.US; 3711.TT): 1Q22 Results/ 2Q22 Outlook- 2022 Outlook Is Bright

<ul>
<li>ASE Holding revenue was NTD$144.4bn in 1Q22, which was 20.9% YoY and -16.5% QoQ. We expect the GM is 19.5% in 1Q22.</li>
<li>ASE Holding could target at NTD$148.1bn/20.5% GM in 2Q22. We expect the gross margin of IC ATM and EMS portions are around 26.8%/9.1% respectively.</li>
<li>We think it should be picking up since 2Q22 because of the seasonality, and it's likely to peak out until 4Q22.</li>
</ul>


ASE Holding revenue was NTD$144.4bn in 1Q22, which was 20.9% YoY and -16.5% QoQ. We expect the GM is 19.5% in 1Q22.
ASE Holding could target at NTD$148.1bn/20.5% GM in 2Q22. We expect the gross margin of IC ATM and EMS portions are around 26.8%/9.1% respectively.
We think it should be picking up since 2Q22 because of the seasonality, and it's likely to peak out until 4Q22.


ASE Holding (3711.TT): 1Q22 Results/​​ 2Q22 Outlook- The Hope Might Be in 2H22

<ul>
<li>
<a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO Inc (9866 HK)</a> passes the velocity test and could replace <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a> in the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a> at the June rebalance.</li>
<li>Given the low trading volumes and the large assets tracking the <a href="https://www.smartkarma.com/entities/hang-seng-tech-index" target="_blank" data-smartkarma-citation="entities:31367:1" rel="noopener">Hang Seng Tech Index (HSTECH INDEX)</a>, passive trackers will need to buy around 10 days of ADV on <a href="https://www.smartkarma.com/entities/nio-inc-2d526675-c878-4104-840f-87fed1735e85" target="_blank" data-smartkarma-citation="entities:35652:1" rel="noopener">NIO</a>. </li>
<li>Passive trackers need to sell around 7 days of ADV on <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">ASM Pacific Technology (522 HK)</a>. Given implementation is two months away, sell the stock on rallies. </li>
</ul>



NIO Inc (9866 HK) passes the velocity test and could replace ASM Pacific Technology (522 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the June rebalance.
Given the low trading volumes and the large assets tracking the Hang Seng Tech Index (HSTECH INDEX), passive trackers will need to buy around 10 days of ADV on NIO. 
Passive trackers need to sell around 7 days of ADV on ASM Pacific Technology (522 HK). Given implementation is two months away, sell the stock on rallies. 


Hang Seng TECH Index Rebalance Preview: Big Impact as NIO (9866) Could Replace ASM Pacific (522)

Taiwan

ASE Technology Holding Co., Ltd. offers assembly and testing services. The Company provides outsourced assembly, semiconductor testing, semiconductor packaging, and other related services. ASE Technology Holding operates in Taiwan.

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ASE Technology Holding (3711 TT)

Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch

We take a look at Taiwan dual-listings to identify if there are significant mismatches between foreign and domestic sentiments.

Vincent Fernando, CFA

Hang Seng TECH Index Rebalance: NIO (9866 HK) To Replace ASM Pacific (522 HK)

NIO will replace ASM Pacific in the HSTECH at the close on 10 June. There are large shorts on ASM that could look to cover vs the passives. NIO's...

Brian Freitas

ASE Holding (ASX.US; 3711.TT): 1Q22 Results/ 2Q22 Outlook- 2022 Outlook Is Bright

In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%. ASE Holding already...

Patrick Liao

ASE Holding (3711.TT): 1Q22 Results/ 2Q22 Outlook- The Hope Might Be in 2H22

ASE Holding revenue was NTD$144.4bn in 1Q22, which was 20.9% YoY and -16.5% QoQ. We expect the GM is 19.5% in 1Q22. ASE Holding could target at...

Patrick Liao

Hang Seng TECH Index Rebalance Preview: Big Impact as NIO (9866) Could Replace ASM Pacific (522)

NIO (9866) could replace ASM Pacific (522) in the HSTECH at the June rebal. Passive trackers will need to buy 10 days of ADV on NIO while selling 7...

Brian Freitas

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Taiwan Dual-Listings – TSMC Premium Decline Could Highlight Foreign Vs. Domestic Sentiment Mismatch

We take a look at Taiwan dual-listings to identify if there are significant mismatches between foreign and domestic sentiments.

Vincent Fernando, CFA

Hang Seng TECH Index Rebalance: NIO (9866 HK) To Replace ASM Pacific (522 HK)

NIO will replace ASM Pacific in the HSTECH at the close on 10 June. There are large shorts on ASM that could look to cover vs the passives. NIO's...

Brian Freitas

ASE Holding (ASX.US; 3711.TT): 1Q22 Results/ 2Q22 Outlook- 2022 Outlook Is Bright

In the 2Q22 guidance, the revenue for ATM/EMS is ~NT$76.7bn/NT$61.2bn, the GM for ATM is ~27.5% and OPM for EMS is ~8.8%. ASE Holding already...

Patrick Liao

ASE Holding (3711.TT): 1Q22 Results/​​ 2Q22 Outlook- The Hope Might Be in 2H22

ASE Holding revenue was NTD$144.4bn in 1Q22, which was 20.9% YoY and -16.5% QoQ. We expect the GM is 19.5% in 1Q22. ASE Holding could target at...

Patrick Liao

Hang Seng TECH Index Rebalance Preview: Big Impact as NIO (9866) Could Replace ASM Pacific (522)

NIO (9866) could replace ASM Pacific (522) in the HSTECH at the June rebal. Passive trackers will need to buy 10 days of ADV on NIO while selling 7...

Brian Freitas

ASE Holding (3711.TT): 1Q22 Results/ 2Q22 Outlook- The Hope Might Be in 2H22