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>Taiwan’s tech space fell hard last week, with the tech sector down 5.4%, compared to a 4.9% drop for the overall market. Semiconductors performed the worst, down 6.2%.</li>
<li>Hon Hai, Delta, Lite-On -- EV a major theme for the first-ever Taiwan Expo USA coming October 12th.</li>
<li>Taiwan wafer exports were at an all-time high in August. We note that wafer names have underperformed TSMC.</li>
</ul>


Taiwan’s tech space fell hard last week, with the tech sector down 5.4%, compared to a 4.9% drop for the overall market. Semiconductors performed the worst, down 6.2%.
Hon Hai, Delta, Lite-On -- EV a major theme for the first-ever Taiwan Expo USA coming October 12th.
Taiwan wafer exports were at an all-time high in August. We note that wafer names have underperformed TSMC.


Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

While the major averages are stalling below major resistance and their direction is unclear, there are many individual stocks that continue to act well and that are offering fantastic entry points at current levels. Health Care and Technology remain our two favorite global Sectors, and they are outperforming across all major markets including the US, Europe, Japan, and China. Remain overweight/add exposure. Consumer Staples is another leadership Sector, particularly in the Asia/Pacific region. Lastly, we are also continuing to expand our recommendations to include bottom-up ideas within several other Sectors as the market goes through a bottoming process.

While the major averages are stalling below major resistance and their direction is unclear, there are many individual stocks that continue to act well and that are offering fantastic entry points at current levels. Health Care and Technology remain our two favorite global Sectors, and they are outperforming across all major markets including the US, Europe, Japan, and China. Remain overweight/add exposure. Consumer Staples is another leadership Sector, particularly in the Asia/Pacific region. Lastly, we are also continuing to expand our recommendations to include bottom-up ideas within several other Sectors as the market goes through a bottoming process.

Shenzhen Stock Exchange Composite Index / Technical Analysis

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus as it is one of the few global indexes that is not yet breaking down. Lastly, Turkey (ISE National 100) appears to offer an attractive pullback opportunity. Within EM, we highlight attractive opportunities across the technology, consumer discretionary, health care and communications sectors.

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus as it is one of the few global indexes that is not yet breaking down. Lastly, Turkey (ISE National 100) appears to offer an attractive pullback opportunity. Within EM, we highlight attractive opportunities across the technology, consumer discretionary, health care and communications sectors.

Asia and Global Semiconductor and Tech Research

Andrew Lu

Thematic (Sector/Industry)

<h2>Summary</h2><ul>
<li>Starting October 13, 2016, TSMC will be the first company to report 3Q16 results and provide 4Q16 guidance to kick off semi/tech earnings season. Driven by iPhone 7, <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple Inc (AAPL US)</a> Watch 2 production built, open market smartphones in emerging countries, and <a href="https://www.smartkarma.com/entities/191" target="_blank" data-smartkarma-citation="entities:191:1">Samsung Electronics Co Ltd (005930 KS)</a> Note 7 battery problem, our 3Q16 sales report takeaways suggest y/y strengths in foundry and fabless vendors and q/q strengths in Apple's touch panel/pressure sensor and OEM/EMS vendors.  </li>
<li>
On…</li>
</ul>

Summary
Starting October 13, 2016, TSMC will be the first company to report 3Q16 results and provide 4Q16 guidance to kick off semi/tech earnings season. Driven by iPhone 7, Apple Inc (AAPL US) Watch 2 production built, open market smartphones in emerging countries, and Samsung Electronics Co Ltd (005930 KS) Note 7 battery problem, our 3Q16 sales report takeaways suggest y/y strengths in foundry and fabless vendors and q/q strengths in Apple's touch panel/pressure sensor and OEM/EMS vendors.  

On…


Taiwan Semi/Tech 3Q Sales Takeaway as an Early Indicator for Global Tech Earnings

Despite recent strong performance (17% ytd) across US and Taiwan semiconductor index, we are turning a bit cautious here because Taiwan Semi/Tech July sales are somehow below seasonal and below our expectations. If analysts start to factor in 3-4% appreciation on NT$ against US starting July, earnings prospects in 2H16 for semi and tech companies might not be as strong as market estimated earlier. In conclusion, we believe not much sales momentum left over before we see a seasonal semiconductor…

Despite recent strong performance (17% ytd) across US and Taiwan semiconductor index, we are turning a bit cautious here because Taiwan Semi/Tech July sales are somehow below seasonal and below our expectations. If analysts start to factor in 3-4% appreciation on NT$ against US starting July, earnings prospects in 2H16 for semi and tech companies might not be as strong as market estimated earlier. In conclusion, we believe not much sales momentum left over before we see a seasonal semiconductor…

Insights from Taiwan Semi/Tech July Sales

Taiwan

Formosa Sumco Technology Corporation specializes in testing and manufacture of Silicon chip materials.

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Formosa Sumco Technology (3532 TT)

Taiwan Tech Weekly: Trying to Recover After a Week of Deep Declines

AU Optronics stock suspended, Intel's Mobileye IPO is back, Samsung takes share from TSMC, Taiwan wafer exports are at an all-time high.

Vincent Fernando, CFA

Global Equities: Lower Highs Forming

While the major averages are stalling below major resistance and their direction is unclear, there are many individual stocks that continue to act...

Vermilion Research

EM Outperforming; Favor EM over EAFE

China (MSCI China, Shenzhen A Share) offers a plethora of attractive setups and is a major focus in today’s report. Taiwan (TAIEX) is another focus...

Vermilion Research

Taiwan Semi/Tech 3Q Sales Takeaway as an Early Indicator for Global Tech Earnings

Summary Starting October 13, 2016, TSMC will be the first company to report 3Q16 results and provide 4Q16 guidance to kick off semi/tech earnings...

Andrew Lu

Insights from Taiwan Semi/Tech July Sales

Despite recent strong performance (17% ytd) across US and Taiwan semiconductor index, we are turning a bit cautious here because Taiwan Semi/Tech...

Andrew Lu

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