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/beijing-kuaishou-technology-co-ltd" target="_blank" data-smartkarma-citation="entities:29725:1" rel="noopener">Kuaishou Technology (1024 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a>, <a href="https://www.smartkarma.com/entities/weimob-inc" target="_blank" data-smartkarma-citation="entities:27394:1" rel="noopener">Weimob Inc. (2013 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a> and <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a> and <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>. Shorts increased in the Materials, Communication Services and Industrials sectors, while decreasing in the Consumer Discretionary, Financials and Information Technology sectors.</p></div><div><p>In Japan, stocks increased on <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a>, <a href="https://www.smartkarma.com/entities/shimizu-corp" target="_blank" data-smartkarma-citation="entities:8530:1" rel="noopener">Shimizu Corp (1803 JP)</a>, <a href="https://www.smartkarma.com/entities/premier-investment-corp" target="_blank" data-smartkarma-citation="entities:19428:1" rel="noopener">Premier Investment (8956 JP)</a>, <a href="https://www.smartkarma.com/entities/screen-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:5563:1" rel="noopener">SCREEN Holdings (7735 JP)</a> and <a href="https://www.smartkarma.com/entities/activia-properties-inc" target="_blank" data-smartkarma-citation="entities:9498:1" rel="noopener">Activia Properties (3279 JP)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/kubota-corp" target="_blank" data-smartkarma-citation="entities:12926:1" rel="noopener">Kubota Corp (6326 JP)</a>, <a href="https://www.smartkarma.com/entities/asics-corp" target="_blank" data-smartkarma-citation="entities:16287:1" rel="noopener">ASICS Corp (7936 JP)</a>, <a href="https://www.smartkarma.com/entities/nabtesco-corp" target="_blank" data-smartkarma-citation="entities:13176:1" rel="noopener">Nabtesco Corp (6268 JP)</a>, <a href="https://www.smartkarma.com/entities/cocokara-fine-inc" target="_blank" data-smartkarma-citation="entities:15447:1" rel="noopener">Cocokara Fine (3098 JP)</a> and <a href="https://www.smartkarma.com/entities/pharma-foods-international" target="_blank" data-smartkarma-citation="entities:10530:1" rel="noopener">Pharma Foods International (2929 JP)</a>. Shorts increased in the Information Technology, Real Estate and Materials sectors while decreasing in the Industrials and Consumer Discretionary sectors.</p></div><div><p>In Korea, shorts increased on <a href="https://www.smartkarma.com/entities/sk-innovation-co-ltd" target="_blank" data-smartkarma-citation="entities:1268:1" rel="noopener">SK Innovation (096770 KS)</a>, <a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a>, <a href="https://www.smartkarma.com/entities/hyundai-motor-co" target="_blank" data-smartkarma-citation="entities:155:1" rel="noopener">Hyundai Motor Co (005380 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a> and <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> while shorts were covered on <a href="https://www.smartkarma.com/entities/doosan-heavy-industries-construction" target="_blank" data-smartkarma-citation="entities:7389:1" rel="noopener">Doosan Heavy Industries &amp; Construction (034020 KS)</a>, <a href="https://www.smartkarma.com/entities/hmm-co-ltd" target="_blank" data-smartkarma-citation="entities:13494:1" rel="noopener">HMM Co., Ltd. (011200 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a>, <a href="https://www.smartkarma.com/entities/samsung-electro-mechanics-co" target="_blank" data-smartkarma-citation="entities:539:1" rel="noopener">Samsung Electro Mechanics Co, Ltd. (009150 KS)</a> and <a href="https://www.smartkarma.com/entities/oci-co-ltd" target="_blank" data-smartkarma-citation="entities:1904:1" rel="noopener">Oci Co Ltd (010060 KS)</a>.</p></div><div><p>In Taiwan, shorts increased on <a href="https://www.smartkarma.com/entities/yang-ming-marine-transport" target="_blank" data-smartkarma-citation="entities:8502:1" rel="noopener">Yang Ming Marine Transport (2609 TT)</a>, <a href="https://www.smartkarma.com/entities/au-optronics-corp" target="_blank" data-smartkarma-citation="entities:6704:1" rel="noopener">AU Optronics (2409 TT)</a>, <a href="https://www.smartkarma.com/entities/yuanta-financial-holding-co" target="_blank" data-smartkarma-citation="entities:685:1" rel="noopener">Yuanta Financial Holding Co (2885 TT)</a>, <a href="https://www.smartkarma.com/entities/quanta-computer-inc" target="_blank" data-smartkarma-citation="entities:2754:1" rel="noopener">Quanta Computer (2382 TT)</a> and <a href="https://www.smartkarma.com/entities/united-microelectronics-corp" target="_blank" data-smartkarma-citation="entities:6450:1" rel="noopener">United Microelectronics Corp (2303 TT)</a> while shorts 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/china-steel-corp" target="_blank" data-smartkarma-citation="entities:962:1" rel="noopener">China Steel (2002 TT)</a>, <a href="https://www.smartkarma.com/entities/wan-hai-lines-ltd" target="_blank" data-smartkarma-citation="entities:14262:1" rel="noopener">Wan Hai Lines (2615 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/wisdom-marine-lines-co-ltd" target="_blank" data-smartkarma-citation="entities:10001:1" rel="noopener">Wisdom Marine Lines (2637 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 Kuaishou Technology (1024 HK), JD.com Inc. (9618 HK), Weimob Inc. (2013 HK), Wuxi Biologics (2269 HK) and Tencent (700 HK) while there was short covering on Meituan (3690 HK), Geely Auto (175 HK), Ping An Insurance (H) (2318 HK), Sunny Optical (2382 HK) and Alibaba Group (9988 HK). Shorts increased in the Materials, Communication Services and Industrials sectors, while decreasing in the Consumer Discretionary, Financials and Information Technology sectors.In Japan, stocks increased on Showa Denko K.K. (4004 JP), Shimizu Corp (1803 JP), Premier Investment (8956 JP), SCREEN Holdings (7735 JP) and Activia Properties (3279 JP) while there was short covering on Kubota Corp (6326 JP), ASICS Corp (7936 JP), Nabtesco Corp (6268 JP), Cocokara Fine (3098 JP) and Pharma Foods International (2929 JP). Shorts increased in the Information Technology, Real Estate and Materials sectors while decreasing in the Industrials and Consumer Discretionary sectors.In Korea, shorts increased on SK Innovation (096770 KS), SK Hynix (000660 KS), Hyundai Motor Co (005380 KS), Celltrion Inc (068270 KS) and Samsung Electronics (005930 KS) while shorts were covered on Doosan Heavy Industries &amp; Construction (034020 KS), HMM Co., Ltd. (011200 KS), Samsung SDI (006400 KS), Samsung Electro Mechanics Co, Ltd. (009150 KS) and Oci Co Ltd (010060 KS).In Taiwan, shorts increased on Yang Ming Marine Transport (2609 TT), AU Optronics (2409 TT), Yuanta Financial Holding Co (2885 TT), Quanta Computer (2382 TT) and United Microelectronics Corp (2303 TT) while shorts covered on Evergreen Marine Corp (2603 TT), China Steel (2002 TT), Wan Hai Lines (2615 TT), Pegatron Corp (4938 TT) and Wisdom Marine Lines (2637 TT). 

Asia Shorts: Kuaishou, JD, Geely, Alibaba, Shimizu, Kubota, ASICS, SK Inno, Hynix, Doosan, Yang Ming

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

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.

Equity Bottom-Up

<p>On March 24, the <em>Nikkei</em> newspaper reported that Tokyo Electron (TEL) (8035 JP), Canon (7751 JP) and Screen Holdings will cooperate with Japan's National Institute of Advanced Industrial Science and Technology (AIST) to develop "<em>next-generation production technology in the 2-nanometer process and beyond by the mid-2020s."</em></p><p>In response to our inquiries, Tokyo Electron and Canon said <em>"No Comment,"</em> but Screen told us that (1) The article is basically true, (2) Only these three companies seem to be involved, and (3) This is a new activity for Screen.</p><p>This should help Japanese equipment makers support TSMC, which is now targeting commercial production with 3-nm process technology in 2022. It is also a reminder that Screen, like TEL, is a long-term investment.</p><p>Screen's share price has risen by 16% since we last wrote on the company at the beginning of February. But there remains 24% potential upside to our ¥12,000 share price target.</p>

On March 24, the Nikkei newspaper reported that Tokyo Electron (TEL) (8035 JP), Canon (7751 JP) and Screen Holdings will cooperate with Japan's National Institute of Advanced Industrial Science and Technology (AIST) to develop "next-generation production technology in the 2-nanometer process and beyond by the mid-2020s."In response to our inquiries, Tokyo Electron and Canon said "No Comment," but Screen told us that (1) The article is basically true, (2) Only these three companies seem to be involved, and (3) This is a new activity for Screen.This should help Japanese equipment makers support TSMC, which is now targeting commercial production with 3-nm process technology in 2022. It is also a reminder that Screen, like TEL, is a long-term investment.Screen's share price has risen by 16% since we last wrote on the company at the beginning of February. But there remains 24% potential upside to our ¥12,000 share price target.

Screen Holdings (7735 JP): Aiming at 2nm Process Technology

<p>New orders significantly exceeded management's expectations in the three months to December and were also greater than we had expected. The large increase in capital spending recently announced by TSMC and the current shortage of semiconductors should help maintain a strong order flow.</p><p>Consolidated sales were down 5.3% year-on-year in 3Q, but efficiency gains led to an increase in operating profit of nearly 60%. Management raised FY Mar-21 operating profit guidance by 17% while raising sales guidance by only 2%</p><p>Looking out to FY Mar-23, we now expect profits to approach their previous cyclical peaks. This suggests 44% potential upside to ¥12,000.</p>

New orders significantly exceeded management's expectations in the three months to December and were also greater than we had expected. The large increase in capital spending recently announced by TSMC and the current shortage of semiconductors should help maintain a strong order flow.Consolidated sales were down 5.3% year-on-year in 3Q, but efficiency gains led to an increase in operating profit of nearly 60%. Management raised FY Mar-21 operating profit guidance by 17% while raising sales guidance by only 2%Looking out to FY Mar-23, we now expect profits to approach their previous cyclical peaks. This suggests 44% potential upside to ¥12,000.

Screen Holdings (7735 JP): New Orders and Efficiency Gains Greater than Expected

<p>Tokyo Electron (8035 JP), Japan's top maker of semiconductor and flat panel display production equipment, is 8% off its all-time high, which was reached in July of this year. In our estimation, it is Overbought.</p><p>Screen Holdings, a major competitor in both markets, is 52% below its all-time high, which was reached in November 2017. It is midway between Overbought and Oversold.</p><div>
<p>Screen's sales and operating profit were up sequentially in the three months to September as business activity in China and elsewhere picked up after COVID-19 lockdowns.</p>
<p>We expect remote work and cell phone upgrades to drive demand for Screen's semiconductor, display and printed circuit board production equipment over the next 2-3 years. Gearing to sales and capacity utilization is high.</p>
</div><div><p>Our forecast brings the forward P/E down to 13x our EPS estimate for next fiscal year and 11x our estimate for FY Mar-23. This suggests 44% potential upside to ¥8,000.</p></div><p>Risks include American interference in China's semiconductor investment plans and economic recession triggered by the new wave of COVID-19 infections in America and Western Europe.</p>

Tokyo Electron (8035 JP), Japan's top maker of semiconductor and flat panel display production equipment, is 8% off its all-time high, which was reached in July of this year. In our estimation, it is Overbought.Screen Holdings, a major competitor in both markets, is 52% below its all-time high, which was reached in November 2017. It is midway between Overbought and Oversold.
Screen's sales and operating profit were up sequentially in the three months to September as business activity in China and elsewhere picked up after COVID-19 lockdowns.
We expect remote work and cell phone upgrades to drive demand for Screen's semiconductor, display and printed circuit board production equipment over the next 2-3 years. Gearing to sales and capacity utilization is high.
Our forecast brings the forward P/E down to 13x our EPS estimate for next fiscal year and 11x our estimate for FY Mar-23. This suggests 44% potential upside to ¥8,000.Risks include American interference in China's semiconductor investment plans and economic recession triggered by the new wave of COVID-19 infections in America and Western Europe.

Screen Holdings (7735 JP): A Highly-Geared Laggard to Tokyo Electron

Semiconductor Manufacturing International Corp (SMIC) / Equity Bottom-Up

Semiconductor Manufacturing International Corp (SMIC)

<p>The Trump administration is considering whether or not to add Semiconductor Manufacturing International Corp. (SMIC, 981 HK) to the Commerce Department's "Entity List" - the same mechanism that was used to restrict the export of American technology to Huawei. </p><p>This would cause SMIC a great deal of inconvenience and further undercut American semiconductor production equipment (SPE) sales to China. A sword is hanging over the share prices of SMIC itself and leading American SPE makers including Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC). </p><p>Another act of economic war intended to cripple China's high-tech industries, it would also convince the Chinese government - if any further convincing is necessary - that eliminating dependence on American technology is an absolute necessity.</p><p>Some form of retaliation also seems likely. Has anyone calculated the valuations of American listed companies assuming no further growth in sales in China, declining sales in China, or no sales in China at all? Not only high-tech is at risk.</p><p>Potential beneficiaries include Japanese and European SPE makers including Tokyo Electron (8035 JP), Lasertec (6920 JP), Screen Holdings (7735 JP) and ASM International (ASM). American commentators have claimed that semiconductors cannot be produced without American technology, but that is not true.</p><p>Nevertheless, the immediate concern is the impact of the U.S-China trade war on semiconductor capital spending, which in the short to medium term at least is negative for all concerned.</p><p></p><p></p><p></p><p><br><br></p>

The Trump administration is considering whether or not to add Semiconductor Manufacturing International Corp. (SMIC, 981 HK) to the Commerce Department's "Entity List" - the same mechanism that was used to restrict the export of American technology to Huawei. This would cause SMIC a great deal of inconvenience and further undercut American semiconductor production equipment (SPE) sales to China. A sword is hanging over the share prices of SMIC itself and leading American SPE makers including Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC). Another act of economic war intended to cripple China's high-tech industries, it would also convince the Chinese government - if any further convincing is necessary - that eliminating dependence on American technology is an absolute necessity.Some form of retaliation also seems likely. Has anyone calculated the valuations of American listed companies assuming no further growth in sales in China, declining sales in China, or no sales in China at all? Not only high-tech is at risk.Potential beneficiaries include Japanese and European SPE makers including Tokyo Electron (8035 JP), Lasertec (6920 JP), Screen Holdings (7735 JP) and ASM International (ASM). American commentators have claimed that semiconductors cannot be produced without American technology, but that is not true.Nevertheless, the immediate concern is the impact of the U.S-China trade war on semiconductor capital spending, which in the short to medium term at least is negative for all concerned.  

Japan

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

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SCREEN Holdings (7735 JP)

Asia Shorts: Kuaishou, JD, Geely, Alibaba, Shimizu, Kubota, ASICS, SK Inno, Hynix, Doosan, Yang Ming

The Insight looks at large short interest movements across HK, Japan, Korea and Taiwan stocks and highlights large increases/decreases in shorts to...

Brian Freitas