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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/ind-comm-bk-of-china-h" target="_blank" data-smartkarma-citation="entities:1119:1" rel="noopener">ICBC (H) (1398 HK)</a>, <a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a>, <a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a> and <a href="https://www.smartkarma.com/entities/byd-co-ltd-h" target="_blank" data-smartkarma-citation="entities:20962:1" rel="noopener">BYD (1211 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>, <a href="https://www.smartkarma.com/entities/xinyi-solar-holdings-ltd" target="_blank" data-smartkarma-citation="entities:318:1" rel="noopener">Xinyi Solar Holdings (968 HK)</a>, <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> and <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>. Shorts increased on Communication Services, Energy and Consumer Staples, and decreased on Information Technology, Financials and Consumer Discretionary.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/change-inc" target="_blank" data-smartkarma-citation="entities:27414:1" rel="noopener">Change Inc (3962 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/renova-inc" target="_blank" data-smartkarma-citation="entities:26753:1" rel="noopener">RENOVA Inc (9519 JP)</a> and <a href="https://www.smartkarma.com/entities/shimamura-co-ltd" target="_blank" data-smartkarma-citation="entities:15213:1" rel="noopener">Shimamura (8227 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a>, <a href="https://www.smartkarma.com/entities/kao-corp" target="_blank" data-smartkarma-citation="entities:12933:1" rel="noopener">Kao Corp (4452 JP)</a>, <a href="https://www.smartkarma.com/entities/canon-inc" target="_blank" data-smartkarma-citation="entities:1:1" rel="noopener">Canon Inc (7751 JP)</a> and <a href="https://www.smartkarma.com/entities/bridgestone-corp" target="_blank" data-smartkarma-citation="entities:8914:1" rel="noopener">Bridgestone Corp (5108 JP)</a>. Sectorally, shorts increased on Utilities and Communication Services, while decreasing on Consumer Discretionary, Consumer Staples, Information Technology and Industrials.</p></div><div><p>In Korea, there were short positions put on in <a href="https://www.smartkarma.com/entities/kt-corp" target="_blank" data-smartkarma-citation="entities:1112:1" rel="noopener">KT Corp (030200 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-uplus-corp" target="_blank" data-smartkarma-citation="entities:1113:1" rel="noopener">LG Uplus Corp (032640 KS)</a> and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>, <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a> and <a href="https://www.smartkarma.com/entities/asustek-computer-inc" target="_blank" data-smartkarma-citation="entities:13002:1" rel="noopener">Asustek Computer (2357 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a>, <a href="https://www.smartkarma.com/entities/walsin-technology-corp" target="_blank" data-smartkarma-citation="entities:11084:1" rel="noopener">Walsin Technology (2492 TT)</a>, <a href="https://www.smartkarma.com/entities/richwave-technology-corp" target="_blank" data-smartkarma-citation="entities:18629:1" rel="noopener">Richwave Technology (4968 TT)</a> and <a href="https://www.smartkarma.com/entities/pan-jit-international-inc" target="_blank" data-smartkarma-citation="entities:12501:1" rel="noopener">Pan Jit International (2481 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on ICBC (H) (1398 HK), China Mobile (941 HK), CNOOC Ltd (883 HK) and BYD (1211 HK) while there was short covering on Xiaomi Corp (1810 HK), Xinyi Solar Holdings (968 HK), HKEX (388 HK) and JD.com (HK) (9618 HK). Shorts increased on Communication Services, Energy and Consumer Staples, and decreased on Information Technology, Financials and Consumer Discretionary.In Japan, stocks that saw the most shorts were Change Inc (3962 JP), Advantest Corp (6857 JP), RENOVA Inc (9519 JP) and Shimamura (8227 JP) while shorts decreased on Honda Motor (7267 JP), Kao Corp (4452 JP), Canon Inc (7751 JP) and Bridgestone Corp (5108 JP). Sectorally, shorts increased on Utilities and Communication Services, while decreasing on Consumer Discretionary, Consumer Staples, Information Technology and Industrials.In Korea, there were short positions put on in KT Corp (030200 KS), Samsung Electronics (005930 KS), LG Uplus Corp (032640 KS) and Kakao Corp (035720 KS). Stocks in Taiwan that saw the highest increase in shorts were TSMC (2330 TT), Largan Precision (3008 TT), Pegatron Corp (4938 TT) and Asustek Computer (2357 TT) while shorts were covered on Evergreen Marine Corp (2603 TT), Walsin Technology (2492 TT), Richwave Technology (4968 TT) and Pan Jit International (2481 TT). 

Asia Short Interest: China Mobile, CNOOC, Xiaomi, JD, Change, KT, Samsung, TSMC, Largan

Global TMT analyst with Asia ex-Japan focus.

Mitchell Kim

Thematic (Sector/Industry)

<ul type="disc">
<li>
<strong>In this report, we highlight the best money making ideas by identifying the winners and the losers of the sectors in the 5G value chain. </strong>For investors looking for 5G thematic ideas, we provide a snapshot of the sectors in the 5G value chain.  To distill our ideas, we focus on three positive factors: 1) does 5G generate new customers or revenue sources? 2) does it lead to market share changes? And 3) are the sectors in the upward cycle still in play? </li>
<li>
<strong>The sectors we like in the 5G context are Internet technology platforms, smartphones/devices, 5G infrastructure vendors, PCB and small cell technology providers, and selective telecom operators. </strong>We are bullish on Southeast Asian telcos but bearish on North Asian telcos.  </li>
</ul><ul type="disc"><li>
<strong>Our contrarian buys in the telecom sector are <a href="https://www.smartkarma.com/entities/advanced-info-service-pcl" target="_blank" data-smartkarma-citation="entities:947:1" rel="noopener">Advanced Info Service (ADVANC TB)</a> and <a href="https://www.smartkarma.com/entities/globe-telecom-inc" target="_blank" data-smartkarma-citation="entities:1926:1" rel="noopener">Globe Telecom (GLO PM)</a>.</strong> They operate in markets with low fixed broadband penetration and weak incumbent fixed broadband operators.  5G FWA (fixed wireless access) will allow these operators to expand fixed broadband penetration and also gain market share.  </li></ul><ul type="disc">
<li>
<strong>Avoid North Asia telecom operators.</strong> North Asian telecom stocks languished because they did not generate sufficient returns on 3G and 4G. 5G is no different.    </li>
<li>
<strong>5G provides low priced smartphone maker <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> another opportunity to gain market share as did 4G</strong>, but it will not lead to total handset shipment growth for top brands, in our view. </li>
<li>
<strong>The best time to take a position in telecom equipment vendors is pre-launch and in the first two years of the new generation technology launch</strong>. <strong><a href="https://www.smartkarma.com/entities/zte-corp-h" target="_blank" data-smartkarma-citation="entities:6922:1" rel="noopener">Zte Corp H (763 HK)</a></strong> is trading below its 10-year mean P/E.  </li>
</ul><hr><div class="content-highlight">
<h2>What’s Original?</h2>
<p>We set out in this report to be different from others by avoiding a menu of stocks and the size of the markets in the 5G ecosystem and, instead, recommend several key thematic ideas distilled by analyzing more in-depth the drivers of three key sectors to determine where the market is overly bullish or overlooking the opportunities or where the 5G factor has not yet been priced-in. </p>
<ul>
<li>We analyzed the stock price performances of these sectors to review how they behaved during the 4G deployment to ascertain how they may react to 5G.</li>
<li>We conducted a proprietary analysis of the size of the potential revenue from billions of IoT connections that the industry is touting in the long term.</li>
<li>We provide a RoIC analysis of the Chinese telecom operators' 3G/4G investments to better understand why the Chinese telecom operators invest less in 5G than the figures promoted by the governments or the industry research firms.   </li>
<li>We compare our Capex forecasts with the industry projection to assess the opportunities and risks. </li>
</ul>
</div>



In this report, we highlight the best money making ideas by identifying the winners and the losers of the sectors in the 5G value chain. For investors looking for 5G thematic ideas, we provide a snapshot of the sectors in the 5G value chain.  To distill our ideas, we focus on three positive factors: 1) does 5G generate new customers or revenue sources? 2) does it lead to market share changes? And 3) are the sectors in the upward cycle still in play? 

The sectors we like in the 5G context are Internet technology platforms, smartphones/devices, 5G infrastructure vendors, PCB and small cell technology providers, and selective telecom operators. We are bullish on Southeast Asian telcos but bearish on North Asian telcos.  

Our contrarian buys in the telecom sector are Advanced Info Service (ADVANC TB) and Globe Telecom (GLO PM). They operate in markets with low fixed broadband penetration and weak incumbent fixed broadband operators.  5G FWA (fixed wireless access) will allow these operators to expand fixed broadband penetration and also gain market share.  

Avoid North Asia telecom operators. North Asian telecom stocks languished because they did not generate sufficient returns on 3G and 4G. 5G is no different.    

5G provides low priced smartphone maker Xiaomi Corp (1810 HK) another opportunity to gain market share as did 4G, but it will not lead to total handset shipment growth for top brands, in our view. 

The best time to take a position in telecom equipment vendors is pre-launch and in the first two years of the new generation technology launch. Zte Corp H (763 HK) is trading below its 10-year mean P/E.  

What’s Original?
We set out in this report to be different from others by avoiding a menu of stocks and the size of the markets in the 5G ecosystem and, instead, recommend several key thematic ideas distilled by analyzing more in-depth the drivers of three key sectors to determine where the market is overly bullish or overlooking the opportunities or where the 5G factor has not yet been priced-in. 

We analyzed the stock price performances of these sectors to review how they behaved during the 4G deployment to ascertain how they may react to 5G.
We conducted a proprietary analysis of the size of the potential revenue from billions of IoT connections that the industry is touting in the long term.
We provide a RoIC analysis of the Chinese telecom operators' 3G/4G investments to better understand why the Chinese telecom operators invest less in 5G than the figures promoted by the governments or the industry research firms.   
We compare our Capex forecasts with the industry projection to assess the opportunities and risks. 



Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p>This morning, it was widely reported in several <a href="https://n.news.naver.com/article/016/0001702806?cds=news_edit" target="_blank" rel="noopener">local media</a> that the Robert Strayer (Deputy Assistant Secretary at the U.S. State Department's Bureau of Economic and Business Affairs for Cyber and International Communications and Information Policy ) has formally requested <a href="https://www.smartkarma.com/entities/lg-uplus-corp" target="_blank" data-smartkarma-citation="entities:1113:1" rel="noopener">LG Uplus Corp (032640 KS)</a> to stop using Huawei's telecom products and discontinue all transactions with Huawei since this is a <a href="http://world.kbs.co.kr/service/news_view.htm?lang=e&amp;Seq_Code=155046" target="_blank" rel="noopener">"serious safety issue." </a>Instead, LG Uplus should switch to "trusted vendors." </p><div class="content-highlight">
<p><strong>The most likely issue is to delay as much as possible on making any change to the current structure of LG Uplus continuing to depend on Huawei for a big portion of its 5G telecom equipment products.</strong></p>
<p><strong>Impact on LG Uplus - </strong>We believe that the U.S. government's formal request for LG Uplus to stop using Huawei's telecom equipment products is a clear negative on the share price of LG Plus since it brings into play too much government interference. Operating a major telecom service business is as tough as it is, once you get this much political interference involving the three major countries (U.S., China, and Korea), there are bound to be some negative impact on the perception of this stock in the near term. (Today, LG Uplus's share price has fallen 5% to 11,500 won).</p>
</div>

This morning, it was widely reported in several local media that the Robert Strayer (Deputy Assistant Secretary at the U.S. State Department's Bureau of Economic and Business Affairs for Cyber and International Communications and Information Policy ) has formally requested LG Uplus Corp (032640 KS) to stop using Huawei's telecom products and discontinue all transactions with Huawei since this is a "serious safety issue." Instead, LG Uplus should switch to "trusted vendors." 
The most likely issue is to delay as much as possible on making any change to the current structure of LG Uplus continuing to depend on Huawei for a big portion of its 5G telecom equipment products.
Impact on LG Uplus - We believe that the U.S. government's formal request for LG Uplus to stop using Huawei's telecom equipment products is a clear negative on the share price of LG Plus since it brings into play too much government interference. Operating a major telecom service business is as tough as it is, once you get this much political interference involving the three major countries (U.S., China, and Korea), there are bound to be some negative impact on the perception of this stock in the near term. (Today, LG Uplus's share price has fallen 5% to 11,500 won).


The U.S. Government Formally Requests LG Uplus to Stop Using Huawei Products

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:</p><ul>
<li>6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.</li>
<li>Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.</li>
<li>South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.</li>
<li>The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.</li>
</ul><p>Previous related insights:</p><p><a href="https://www.smartkarma.com/insights/5g-for-the-next-big-turn-of-a-new-decade" target="_blank" data-smartkarma-citation="insights:20444" rel="noopener">5G for the Next Big Turn of a New Decade</a> </p><p><a href="https://www.smartkarma.com/insights/will-2020-see-successful-deployment-of-5g" target="_blank" data-smartkarma-citation="insights:38648" rel="noopener">Will 2020 See Successful Deployment of 5G?</a> </p><p><a href="https://www.smartkarma.com/insights/lockdown-to-accelerate-wifi-6-a-threat-to-anticipated-5g-deployment" target="_blank" data-smartkarma-citation="insights:38696" rel="noopener">Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment?</a> </p><p><a href="https://www.smartkarma.com/insights/5g-delay-and-disappointment-will-murata-suffer" target="_blank" data-smartkarma-citation="insights:40049" rel="noopener">5G Delay and Disappointment - Will Murata Suffer?</a> </p>

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:
6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.
Previous related insights:5G for the Next Big Turn of a New Decade Will 2020 See Successful Deployment of 5G? Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 5G Delay and Disappointment - Will Murata Suffer? 

6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Equity Capital Markets

<p>In this insight, we provide a valuation analysis of <a href="https://www.smartkarma.com/entities/saltlux" target="_blank" data-smartkarma-citation="entities:29011:1" rel="noopener">Saltlux (SLTX KS)</a>. In addition, we provide additional fundamental details of the company, competitors, as well as the market outlook for AI &amp; Big Data services.</p><p>In our view, Saltlux has one of the best technologies in the AI/Big Data sector in Korea. In terms of business model, it is closer to Mindslab and Daumsoft which are privately held. The fact that Saltlux has larger sales than these two competitors is impressive. We think there is likely to be a big acquisition premium on Saltlux going forward.</p><div class="content-highlight"><p>In terms of valuation multiples, we think that a 10x P/S, using 2019 sales (which is 10% premium to Laon People) is reasonable for Saltlux, which would suggest an implied market cap of 184 billion won or 36,000 won, which is 20% above the high end of the IPO price of 30,000 won. As such, we have a positive view of the Saltlux IPO. We are also adding Saltlux to our model portfolio. </p></div>

In this insight, we provide a valuation analysis of Saltlux (SLTX KS). In addition, we provide additional fundamental details of the company, competitors, as well as the market outlook for AI &amp; Big Data services.In our view, Saltlux has one of the best technologies in the AI/Big Data sector in Korea. In terms of business model, it is closer to Mindslab and Daumsoft which are privately held. The fact that Saltlux has larger sales than these two competitors is impressive. We think there is likely to be a big acquisition premium on Saltlux going forward.In terms of valuation multiples, we think that a 10x P/S, using 2019 sales (which is 10% premium to Laon People) is reasonable for Saltlux, which would suggest an implied market cap of 184 billion won or 36,000 won, which is 20% above the high end of the IPO price of 30,000 won. As such, we have a positive view of the Saltlux IPO. We are also adding Saltlux to our model portfolio. 

South Korea

KT Corporation provides telecommunication services including local, long distance, and international calling, satellite communication, data transmission, and wireless telephone services in South Korea.  The Company also offers network portal and high-speed Internet access services using asymmetric digital subscriber lines (ADSLs).

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KT Corp Sp Adr (KT US)

Asia Short Interest: China Mobile, CNOOC, Xiaomi, JD, Change, KT, Samsung, TSMC, Largan

The weekly short interest report looks at large moves across HK, Japan, Korea and Taiwan stocks and helps in determining market interest that could...

Brian Freitas

Road to 5G: How to Make Money in 5G

In this report, we highlight the best money making ideas by identifying the winners and the losers of the sectors in the 5G value chain. For...

Mitchell Kim

The U.S. Government Formally Requests LG Uplus to Stop Using Huawei Products

This morning, it was widely reported in several local media that the Robert Strayer (Deputy Assistant Secretary at the U.S. State Department's...

Douglas Kim

6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this...

Aqila Ali

Saltlux IPO Valuation Analysis

In this insight, we provide a valuation analysis of Saltlux (SLTX KS). In addition, we provide additional fundamental details of the company,...

Douglas Kim

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