This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Portfolio Watch: Are you paying attention to China?
- The Chinese equity trends have really been eye-catching over the past weeks and despite US efforts to flare-up the trade war via new tariffs, the trend has just continued.
- The new Chinese efforts to prop up the sentiment in the Real Estate space have so far been successful and it seems like an attempt that is a LOT more serious and sizy than what we have seen so far.
- We are no longer talking about trial balloons or minor twists.
2. EM Watch: Have Copper markets been hit by a bus full of tourists or by the Chinese economy?
- Copper markets have been on a tear in recent months and our assessment is that the positive sentiment started when Chinese copper stock data points started supporting the notion that China was “hoarding” Copper concentrate ahead of 1) a devaluation, 2) an overhaul of the electrical grid or 3) a power grab on supply chains for EVs, Solar Panels, Data centers and the likes.
- On top of this, we have seen how US officials have highlighted the option of creating a strategic reserve of Copper Cathode in the US, potentially in response to the stockpiling of refined copper seen in China (chart 1).
- Why is the Chinese copper stock not receding here? That is the question macro-managers and geopolitical pundits are asking themselves daily!
3. Positioning Watch – The real world strikes back
- Hello everyone, and welcome back to our weekly positioning watch.
- Markets have been enjoying the easier financial conditions imposed by a weaker than anticipated inflation print, although yields have found their way back to pre-CPI levels.
- The big ongoing theme in markets seems to be the renewed pressures in commodities, as real world demand for crucial metals like copper and nickel has spurred significant flows into broad commodities.
4. Steno Signals #100 – China’s MAJOR power grab on Copper supply chains
- Let me start by dwelling on the fact that Macro generalists such as myself and Thorsten Slok of Apollo suddenly spend countless hours watching Copper trends.
- It is probably a red flag in itself, but it just seems like these developments are so INCREDIBLY important for global macro- and geopolitics these months.
- We have been all over the Chinese copper story in recent months and also traded it with good luck, but we have admittedly been wrong in our call for a weaker CNY (so far).
5. Don’t Let the Bull Throw You Off!
- There is a chance for a correction in the HK markets as latecomers to the party get nervous
- All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.
- Don’t get bucked off that bull by a short-term correction!
6. Technically Speaking: Hong Kong Strategy in the Secular Bull Market
- First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins
- Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap
- Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror
7. Active GEM Funds: Top-Down Country Positioning Latest
- EMEA Momentum: EMEA is experiencing positive momentum across multiple countries, with record investments in the MENA region, strong momentum in Greece, Turkey reversing long-term declines, and Poland nearing new ownership highs.
- Asian Stall: Significant underweight in India suggests caution among investors, China weights remain depressed, Indonesia maintains a strong consensus overweight. Select ASEAN nations show signs of potential comeback.
- LATAM Overweights: Investor sentiment in LATAM remains bullish, with Brazil and Mexico seeing most funds positioned overweight. Argentina hits new highs in fund ownership driven by strong conviction in MercadoLibre.
8. Quant Signals: PCA model and Backtesting Features
- Steno Research PCA model Using a Principal Component Analysis (PCA) model to analyze assets across financial markets provides a powerful framework for investment decisions.
- By mapping out the macro anatomy of a given asset, PCA identifies key trends and underlying patterns that influence price fluctuations and market dynamics.
- In this process, we have defined what we see as the most important global macro factors, ensuring that our analysis is comprehensive and targeted.
9. Portfolio Watch: Trading the next of the rolling melt-ups
- Welcome to our weekly Portfolio Watch.
- We have had a decent week as our short bet on Utilities has started to deliver, while a continued long bet in technology (and ETH) has been the game in town in the risk asset space.
- The liquidity trajectory is slightly murky over the next 2-3 weeks before a major reversal from mid-June and onwards as the net issuance pace of T-bills will be ramped up again into July tapping liquidity from the ON RRP along the way.
10. Energy Cable: Commodities, Freight Rates and Goods Imports Are Rising…
- A soft CPI report was just what Commodities needed to take the next leg higher
- Inflation expectations fat tailed. Commodities on the move, but we still need oil. China to export inflation to Europe?
- Despite last week’s dovish inflation print, we are not sure that it is disinflation that we need to be worried about, both in the short- and long term.
- Let’s discuss three reasons for that.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. TSMC Surges As April Revenue Soars 60% YoY
- April revenue ~NT$236.02 billion, +20.9% MoM & + 59.6% YoY
- It was the company’s second highest monthly revenue ever, made all the more remarkable by the fact that it occurred during its seasonally low first half year
- Our April YoY Taiwan monthly revenue comps are flashing green across the board with just one exception, Globalwafers
2. Intel’s Foundry Chief Runs For The Hills
- In a surprise move, Intel announced that its foundry chief Stuart Pann is to retire from the company effective end of May after just over one year in the role
- He will be replaced by former IBM, Globalfoundries and Marvell executive Kevin O’Buckley, effective immediately
- Mr. O’Buckley now has the dubious distinction of being the third leader of IFS in as many years.
3. Asustek: Margin Beat, Guides More Upside; Qualcomm for AI PCs; Why Asus Confident in AI PC Up-Cycle
- Asus’s 1Q24 earnings beat consensus by 46% thanks to major increase in operating margin driven by costs optimization. Adjusted Asus brand Op profit rose 227% YoY and 98% QoQ.
- Asus will host a major AI PC launch event May 21st, with additional AI PCs launched at Computex in Taiwan June 4th. Will feature Qualcomm Inc (QCOM US) Snapdragon processors.
- Asus confident in an PC upgrade cycle and has guided for sales to rise and margins to expand in the coming quarters. We maintain our Structural Long rating for Asus.
4. Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E
- Hon Hai reported 1Q24 revenue that fell 9% YoY, however the company reiterated its guidance for significant growth in 2024E and said growth now looks stronger than guided in March.
- Hon Hai’s cloud (including servers) business didn’t grow as much as guided due to material shortages; but AI server revenue up 200% YoY and significant growth is guided for 2024E.
- The traditional server market is rebounding, to grow double digits in 2024E. Hon Hai expects to take market share in 2024. Structural Long but near-term gains could be limited.
5. Himax: Signs of Automotive Demand Rebound; Why Demand Strength Is Different Than NXP and Infineon
- Automotive display driver IC leader Himax reported 1Q24 results last week that were ahead of guidance. The company also guided for rising margins.
- Management believes 1Q24 represents a cyclical bottom for the company’s financial performance and expects automotive demand to rise in 2H24E.
- Himax rallied but remains 55% below its 2021 highs, yet its market opportunity larger than ever. Himax could be benefitting from different positioning within automotive chips than NXP & Infineon.
6. Optics Earnings (FN, ANET, COHR, LITE, AAOI)
- To make my content readable, this is an optics-only earnings update.
- I will discuss everything together and put together a high-level overview.
- The specific things I am interested in are Marvell’s ZR and custom silicon.
7. Taiwan Tech Weekly: All Eyes on Nvidia Results Next Week; Microsoft Copilot Edge AI To Be Showcased?
- Taiwan Tech and Nvidia Rally Ahead of Nvidia Earnings Next Week; Microsoft Build Conference Could Showcase Edge AI Copilot
- Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E
- Asustek: Margin Beat, Guides More Upside; Qualcomm for AI PCs; Why Asus Confident in AI PC Up-Cycle
8. Screen Holdings (7735 JP): Guiding for Lower Profits in H2
- FY Mar-24 results were ahead of guidance, but management’s FY Mar-25 forecast has sales flat and profits down in the second half.
- The shares have dropped back 24% from their all-time high, bringing the forward P/E ratio down to 22X.
- China and foundry remain strong while North America and memory pick up. Guidance is probably conservative. Buy into the weakness.
9. Semiconductor Memory. Profits Return & Tailwinds Mount On Surging (& Very Similar) ASP Increases
- Q124 DRAM revenue $18.2 billion, up 6% QoQ and up 88% YoY. NAND revenue $14.1 billion, up 23.4% QoQ and 68.8% YoY
- ASP increases, HBM, NAND for enterprise SSD and looming shortages for legacy products are all mounting tailwinds for the beleaguered memory segment
- First quarter ASP increases for DRAM & NAND for Micron, SK Hynix & Samsung were almost identical. That’s quite a coincidence..
10. Silergy (6415.TT): Rebounding from the Bottom in 1Q24, It Will Witness Normal Orders Since 2Q24.
- Inventory levels were at 90 days by the end of 1Q24, returning to a normal level.
- It is expected to see consecutive QoQ growth throughout 2024, with normal orders observed since 2Q24.
- Although Chinese mature technology is advancing, current analog capacity still falls short of local demand in China.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. YUUUGE Modec (6269) Offering To Stay Listed in TSE Prime – Effectively a Re-IPO
- In March, Modec Inc (6269 JP) announced the TSE had said Modec at 29.3% (end-Dec-23) was below the required 35% tradable shares level required for continued listing on TSE Prime.
- It announced a “Basic Plan” to comply with the criteria which involved convincing one of the three major corporate holders to sell some. They needed to sell about 6%.
- Mitsui E&S has announced it will sell 32%, and 37% including greenshoe. This is overdoing it in a huge way. Mitsui E&S is getting out. This is a re-IPO.
2. Modec Placement – Deal Seems a Little Opportunistic but Not Particularly Expensive
- Mitsui E&S Holdings (7003 JP) is looking to raise approximately US$451m through a secondary follow-on offering, via selling approximately 21.9m shares (32% of TSO) of Modec Inc (6269 JP)’s stock.
- The deal is a large one to digest at 81 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. MODEC (6296 JP): A US$535 Million Secondary Offering
- Modec Inc (6269 JP) has announced a secondary offering of up to 25.2 million shares (including overallotment). The largest shareholder, Mitsui E&S Holdings (7003 JP), is the seller.
- MODEC’s goal with the secondary offering is to reconfigure its shareholder mix to have a diverse base of shareholders who support its long-term strategies and a better tradable share ratio.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will likely fall between 22 and 28 May (likely 22 May).
4. Hyundai Heavy Industries Block – Not Well Flagged and Recent Korean Deals Haven’t Done Well
- HD Korea Shipbuilding & Offshore Engineering (009540 KS) is looking to raise approximately US$258m, via selling 2.6m shares (2.9% of TSO) of HD Hyundai Heavy Industries (329180 KS) stock.
- The deal is a large one to digest at 14.6 days of three month ADV.
- In this note, we will talk about the placement and run the deal through our ECM framework.
5. Giant Biogene Placement – Has Been Doing Well but Doesn’t Need the Cash
- Giant Biogene (2367 HK) aims to raise up to US$205m via a top-up placement.
- We have followed the company since listing and its recent performance has been great. Although it doesn’t seem to need the cash.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
6. ECM Weekly (13th May 2024) – Hyundai Marine, Zeekr, Swiggy, Indegene, Aadhar, TBO, Wuxi XDC, ASMedia
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, after a stellar showing by HD Hyundai Marine Solution (443060 KS), the coming week will be a busy one for India listings.
- On the placement front, there were no major deals during the week. We did look at Asmedia Technology (5269 TT) planned GDR, and Wuxi XDC’s upcoming lockup expiry.
7. Olympus Corp (7733 JP): ¥100B Buyback Plan Offers an Attractive Exit Opportunity Amid Bleak Outlook
- Olympus Corp (7733 JP) has announced a buyback plan for up to 60M shares, representing 5.15% of outstanding shares, by spending ¥100B from May 13 to December 31, 2024.
- The company has posted mixed FY24 results, with revenue beating and operating and net profits missing guidance. Olympus has guided for just 9% revenue growth for FY25.
- Overall business outlook of the company seems to be bleak. With limited upside potential expected, it will be wise to tender shares through the company’s buyback offer.
8. ZEEKR IPO: Strong First-Day Return and Upsized Offering
- ZEEKR, a rapidly growing premium EV maker, has successfully completed its IPO and raised ~$441M. The offering was priced at the top of the range at $21 per share.
- The company sold a total of 21M ADSs, up from the initial target of 17.5M shares. ZEEKR’s stock soared more than 30% following its strong debut on NYSE on Friday.
- Geely Auto, Mobileye and CATL have acquired ~14.3M ADSs and overall investor sentiment was positive. I believe ZEEKR may succeed as a high-volume EV maker worldwide.
9. Lalatech Holdings Limited Pre-IPO – Refiling Updates – Continues to Improve, Valuation Gap Narrowing
- Lalatech Holdings is looking to raise about US$1bn in its upcoming HK IPO.
- Lalatech operates via a marketplace model serving merchants and carriers. Its platform facilitates closed-loop transactions from online shipping order booking to intelligent order matching, and automated dispatching to after-sale services.
- We have looked at the company’s past performance in our earlier notes. In this note we will talk about the updates from its refiling.
10. Aadhar Housing Finance IPO Trading – More Loved by Institutional Investors than Retail
- Aadhar Housing Finance(AHF) raised around US$360m in its India IPO, via selling a mix of primary and secondary shares.
- AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
- We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Japan Post Holdings (6178) – Bigger Better Bullish Buyback With Caveats
- Today, Japan Post Holdings (6178 JP) announced results (and Mar25 guidance) as did its subsidiaries Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP).
- There are a number of interesting things in all the announcements/presentations but the most interesting one for JPH holders is a big buyback. Another one.
- The company has announced a ¥350bn buyback. It is larger than last year’s (¥300bn) buyback and has another important difference.
2. HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
- We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
- Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
- Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).
3. Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
- Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
- If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
- We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.
4. ESR Group (1821 HK): Offer Musings
- Back in February this year, various media sources reported that the key shareholders of warehouse/fund management play ESR Group (1821 HK), were exploring options, including a privatisation.
- Long-Term holders Warburg Pincus and Canadian pension fund OMERS hold 14% and 10.7% respectively. ESR co-founders/directors Jeffrey Shen, Stuart Gibson, Charles de Portes, and Hwee Chiang collectively hold another ~23%.
- Shares in ESR were suspended this morning “pursuant to the Hong Kong Code on Takeovers and Mergers“.
5. KDDI (9433) – Own Share Tender Offer, Toyota To Sell (Gasp!) Redux (Another Buyback in H2 Possible)
- In May 2023, KDDI Corp (9433 JP) announced a ¥300bn buyback program, did nothing for two months, then announced a Tender Offer Buyback to buy shares from Toyota.
- Toyota had increased its stake years before, then KDDI bought back shares from others, so Toyota was backing its ownership down. I discussed the relationships, history, etc, here.
- This year, KDDI announced Friday with earnings that is buying back another large stake from Toyota.
6. L’Occitane (973 HK): On Activism And The Scrip Alternative
- In the 29th April HK$34/share VGO announcement, a share scrip alternative may be afforded if 10% of L’Occitane (973 HK)‘s disinterested shareholders expressed interest by the 15th May
- That pre-condition has been satisfied. However, we are none the wiser whether you receive shares of the levered-up Bidco, at some undetermined scrip ratio; or keep shares of L’Occitane as-is.
- Some shareholders, like Butler Hall, considered terms low-balled. They now have the option to rollover. But there are still other large activists on the register, whose intentions are not known.
7. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June
- Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
- There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
- Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.
8. CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
- The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
- We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
- At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?
9. Japan – Another Big Round of Passive Selling
- There are 15 stocks in Japan that will be sold by passive trackers at the close on 31 May.
- Short interest has been increasing in these stocks over the last few months and there will be covering on implementation date.
- Cumulative excess volume on all stocks has risen in the last couple of months though the pace of the increase has varied.
10. ESR Group (1821 HK): Starwood Capital and SSW Partners Gauging a Privatisation Bid
- ESR Group (1821 HK) is on a trading halt. Press reports suggest a consortium featuring Starwood Capital Group and SSW Partners is considering a buyout.
- Starwood and SSW are approaching other shareholders to join the consortium. The other members are likely Warburg Pincus, OMERS, Jinchu Shen, and Hwee Chiang Lim.
- The offer is likely to be structured as a Cayman privatisation scheme. Our best guess is that an offer of at least HK$14.00 per share would be needed.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Steno Signals #99 – Freddie Mac gearing up to unleash trillions for consumption?
- Last week we learned that the so-called “excess savings pool” from the pandemic had vanished into thin air in the US, or rather that personal savings have been running sub-trend long enough to bring savings back to a normalized state.
- This does not mean that US households have run out of savings, it merely means that savings rates are running below trend, which is not out of the ordinary during late-cycle economies.
- We have recreated the study on German numbers and found much less “alarming” trends in German households, which goes to show that the methodology developed by the San Fran Fed ought to be taken with a pinch, if not even a truckload, of salt.
2. China Watch: No one has noticed that China is exporting INFLATION again..
- Welcome to our weekly EM editorial where we shed light on the most important developments in the EM space in the context of the impulses from the USD markets.
- Things are heating up in the global macro space as we are standing at crossroads.
- Is the macro momentum finally rolling over globally (including in the US) or are we amidst a potential rebound from China that wreaks havoc with the current increasingly dovish Western consensus?
3. Great Game – Why Putin fired Shoigu and Why Biden is going tough on China
- Welcome to this week’s geopolitical update, the Great Game.
- This week we’re covering Putin’s surprise sacking of Defense Minister Shoigu as well as the ongoing global EV war.
- Russian President Putin has replaced his Defense Minister Sergei Shoigu with former economic advisor and Deputy Prime Minister Andrei Beluosov.
4. Positioning Watch – How are Macro Hedge Funds positioned?
- Hello everyone, and welcome back to our weekly Positioning Watch – insights into how market participants are positioned.
- Markets are waiting patiently for the US CPI report today before placing their bets it seems, with little to no action seen yesterday and in European opening hours yesterday.
- As elaborated upon in our “Week At a Glance” on Monday, we see hawkish surprises to both headline and core inflation , which will not be good news for markets, who have seemingly returned to their hopes of rate cut(s) this year.
5. US CPI Review – Everything is soft in April
- Main Takeaways: Core inflation is still way too hot, but this report speaks well to the crowd hoping for rate cuts.
- Food and Shelter are the two dovish surprises… Both are re-accelerating in live data which will likely come into effect laterApril was super soft in real-time activity data and there isn’t much to suggest that it will continue in May, where data is on the rise again… But for now, this feeds the FCI loop in a positive sense, which will allow risk assets to ride the dovish CPI wave for now.
- US Headline CPI rose 0.31% on the month, whilst core inflation increased by 0.29%, with consensus at 0.4% and 0.3%.
6. Quant Signals: Central Bank Sentiment Indicators
- Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year.
- We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.
- We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.
7. Five Reasons to Be Bullish
- A review of technical and sentiment conditions shows that stock prices are setting up for a sustained advance.
- The combination of strong momentum, good breadth and skeptical sentiment points to higher stock prices.
- Key risks are evidence of a disturbing relative strength by defensive sectors and an upcoming CPI report that could upend the bullish narrative.
8. China Takes It up Another Notch-Property Proposals Change the Game
- China is following the Fed’s playbook of keeping market momentum going with good news and actions
- The HK dividend scheme is a prime example of that
- The latest proposal for unsold properties will remove a major barrier to a bottom in the property market.
9. NFIB Watch: 5 KEY charts from the best survey on the US economy
- Our favorite survey out of the US economy was published earlier and it was a pretty decent report overall as the sentiment among SMEs improved, but there are a few trends worth noting in the details, so why don’t we briefly walk you through them here.
- For the first time in a long while, we see a clear net/net decrease in expectations for future price hikes.
- This is conciliatory news for Jay Powell and his ilk for H2-2024 (but not before then..)
10. Long 10Y, Short 2Y on Yield Curve Normalisation
- Fed’s decision to taper its balance sheet runoff has provided support to long-term treasuries, particularly 10-year notes, signaling a potential rise in demand and a move towards yield curve normalization.
- Recent treasury auction results reflect a divergence in demand across maturities; long-term 10-year treasuries show weaker performance compared to strong showings in shorter 3-year and 5-year maturities.
- Data-Dependent Fed is likely to be influenced by improving economic indicators, supporting a normalization of the yield curve. During normalization, the 10Y-2Y spread is the superior instrument for exposure.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results
- TSMC: Premium Fell and Then Rebounded, Now +15.6%; Can Consider Shorting Again
- ASE: Falls to +12.3%; Wait for Higher Level Before Considering a New Short Again
- ChipMOS: -0.6% Discount; Massing of Short Interest Right Ahead of Earnings
2. Taiwan Tech Weekly: Hon Hai New All-Time Highs; Asustek Soars; Leading Chip Testing Firm Exits China
- Taiwan Tech Rallies Along With Rebound In Global Tech; Hon Hai, Asustek Top Gainers; KYEC a Top Loser After Announcing China Market Divestment
- PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle
- ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x
3. Silicon Motion: Leader in Powerful Niche for Edge AI Memory; Plus Key Wins for Data Center Solution
- Silicon Motion’s lQ24 results confirmed the company’s end-demand strength as implied by previous Samsung and SK Hynix management commentary re: solid state memory.
- Management has increased 2024E guidance, citing rising ASPs and strong demand due to its memory controller products’ usage in edge AI applications such as AI PCs and AI smartphones.
- The street upgraded target prices across the board after the results; however we note the stock remains below its past acquistion offer price by Maxlinear and we see further upside.
4. KLAC. Priced For Perfection In 2025 & Beyond
- Q124 revenues of 2.36 billion, $60 million above the guided midpoint, down 5% QoQ and down 3% YoY.
- Current quarter revenue guidance of $2.5 billion representing a ~6% QoQ increase and about the same YoY.
- Share price close to record highs yet CY2024 outlook is tepid while the massive over reliance on China just keeps on going
5. SMIC (981.HK): 1Q24 Outlook Was Improved, and The 2Q24 Outlook Appears to Be Better than 1Q24.
- It’s an exciting 1Q24 result that revenue and GM beat the prior guidance.
- The 2Q24 outlook appears to be better than 1Q24, with revenue expected to increase by 5% to 7% QoQ and GM by 9% to 11%.
- We consider the primary bottleneck is the embargo of EUV machines to China from the Netherlands.
6. KYEC (2449.TT): 1Q24F Was a Seasonal Dip, but 2Q24F Should Be Picking up Below 5% QoQ.
- In 1Q24, it was reported that the revenue growth was -3.35% QoQ, slightly exceeding our expectation of a 5% QoQ decline.
- For 2Q24, revenue is expected to grow, but the increase is projected to be less than 5% QoQ.
- NVIDIA revenue in KYEC is forecasted to reach 15% by the end of 2024F, up from about 2% in 2023, driven by the increasing demand for AI.
7. GlobalWafers (6488.TT): Demand Was Weaker in 1H24F, and We Hope It Will Be Better in 2H24F.
- 1Q24 revenue and GM are in line, but operating income at 24.3% was 1% below consensus.
- GlobalWafers anticipates revenue in 2024 will likely be similar to 2023, which means 1H24 revenue could account for 45% of the 2024 yearly revenue.
- The planned dividend payout for 2024 is NT$19.0, with NT$8.0 from 1H23 and NT$11 from 2H23.
8. Novatek (3034.TT): 1Q24 Sales Inline; 2Q24F Sales Guidance Below Consensuses
- The 2Q24 revenue outlook is NT$24.4-25.5bn, which was below Bloomberg consensuses NTD$26.45bn.
- The company sees more aggressive stocking for TVs in 2Q24, but smartphone demand is soft in 2Q24.
- The dividend payout rate has been maintained at 80-85% over the past few years, with no significant changes expected.
9. AMD’s MI300 Disappointment, Hyperscalers Capex, and FPGAs
I will start with a AMD section. Shares are down ~6-7% on last week’s result. Let’s talk about the result and why it was so disappointing.
- AMD exactly matched EPS, was slightly light on revenue, and guided essentially in line with Q2 guidance.
This also was one of the slightest EPS and revenue beats in recent years. The last time this happened, the PC segment was imploding. This time it’s embedded revenue.
10. Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked
- MHI was sold off last week as FY Mar-24 operating profit fell short of guidance and management guided for a decline in new orders this fiscal year.
- Orders momentum has peaked. Sales and profits will follow. But the latter are still rising and guidance could once again be conservative.
- Consolidation of the share price is likely to continue until orders and profit trends are confirmed.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. ZEEKR (ZK US) IPO: Valuation Insights
- ZEEKR (ZK US), a premium Chinese BEV manufacturer and a subsidiary of Geely Auto (175 HK), has launched an IPO to raise up to US$368 million.
- We previously discussed the IPO in ZEEKR IPO: The Bull Case, ZEEKR IPO: The Bear Case and ZEEKR IPO: Latest Updates as the IPO Process Restarts.
- The IPO price range values ZEEKR at a material discount to peers’ multiples. We would be inclined to participate in the IPO.
2. HD Hyundai Marine Solution IPO Trading – Strong Demand and Peers Continue to Rise
- HD Hyundai Marine Solution (443060 KS) had raised around US$539m in its Korean IPO, after pricing the deal at the top end of KRW83,400/share.
- HD Hyundai Marine Solution (HMS from hereon) is a ship aftermarket service provider that provides necessary services throughout a ship’s life cycle after the delivery of a new ship.
- In this note, we will talk about the demand for the deal and other trading dynamics.
3. Zeekr IPO – Missed Targets and Related Party Deals – We Would Stick to the Bottom-End
- ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$370m in its US listing.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance in our earlier notes. In this note, we talk about the updates from its recent filings and have a relook at valuations.
4. Aadhar Housing Finance IPO – Larger and Slower, at a Reasonable Discount
- Aadhar Housing Finance (AHF) is now looking to raise around US$360m in its India IPO, via selling a mix of primary and secondary shares.
- AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
- We have looked at the company’s performance in our past note. In this note, we talk about valuations.
5. ECM Weekly (6th May 2024) – Aadhar, Indegene, TBO Tek, Super Hi, China Resources Bev, Honasa, Worley
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, a number of deals were launched in India, while HD Hyundai Marine Solution (443060 KS) will list in the coming week.
- On the placement front, the two deals in Australia, WorleyParsons Ltd (WOR AU) and Endeavour Group /Australia (EDV AU) delivered opposing results.
6. Swiggy Pre-IPO Early Look – Innovation Leader, Profitability Laggard
- Swiggy aims to raise US$1.25bn in its upcoming India IPO. The company has filed confidentially for its IPO, which is likely to be launched towards the end of the year.
- Swiggy, along with Zomato, operates a duopoly that has come to dominate the food delivery market in India. In 1H24, Swiggy serviced over 274,000 restaurants via its 370,000 delivery partners.
- In this note, we will take an early look at the company based on the publicly available financials.
7. Innospace IPO Preview
- Innospace is getting ready to complete its IPO in June 2024. According to bankers’ valuation, the implied market cap of Innospace is from 347 billion won to 434 billion won.
- Innospace engages in the satellite launch vehicle production and launch service business.
- The company estimates its sales to increase from 0.2 billion won in 2023 to 2.0 billion won in 2024, 47.8 billion won in 2025, and 97.2 billion won in 2026.
8. Zeekr IPO Trading – Not as Cheap as It Looks but Float Is Tiny
- ZEEKR (ZK US), a premium EV brand by Geely, raised around US$440m in its US listing, after the deal was upsized and priced at the top.
- Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
- We have looked at the company’s past performance and provided our thoughts on valuations in our earlier notes. In this note, we talk about the trading dynamics.
9. Lalatech IPO: New Filing Shows March From Losses To Profits Between 2021 and 2023
- In this insight we show drivers of LalaTech’s +US$1bn turnaround in OpInc
- We also evaluate which drivers are likely to generate future improvements
- Lalatech won’t repeat incredible 2021-23 CoR, OpEx performances, in our view
10. TBO Tek IPO – RHP Updates & Quick Thoughts on Valuation
- TBO Tek (0395045D IN) is looking to raise approximately US$200m in its upcoming India IPO.
- TBO Tek is a global travel distribution platform. Its two-sided technology platform serves companies involved in the travel industry such as hotels, airlines, travel agencies and travel management companies.
- In this note, we provide a summary of its RHP updates and share our quick thoughts on valuation.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Nikkei 225 Index Rebalance Preview (Sep 2024): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ends in July. There could be three changes at the rebalance with sector balance in focus for the additions.
- Depending on the changes, passive trackers will need to buy between 5-16x ADV (10.1%-24% of real float) on the inclusions and sell between 4-42x ADV on the deletions.
- Fast Retailing (9983 JP) will be capped to 10% of the index weight while Tokyo Electron (8035 JP) is also close to the 10% cap.
2. CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
- The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).
- We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
- The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.
3. KKR Deal for Alps Logistics (9055) Appears Imminent
- There was a news article I missed in late February saying Alps Alpine (6770 JP), parent of Alps Logistics (9055 JP) was in the process of selling the logistics unit.
- A deal made sense for a strategic given the upcoming “2024 Problem”. Pre-close, headlines blared, the stock popped 12%, now we’re at double the end-February price.
- Late in the evening,Alps Logistics said it had received a bid from Logisteed but nothing had been decided. This morning we have a few more details, but nothing concrete
4. Shinko Electric (6967) – Break/Gap Risk Early May 2024 Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- 15wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 8wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 3.6% wider than at narrowest, but gap risk has widened as Shinko outperforms, Ibiden.
5. L’Occitane (973 HK): The Rollover Option, And Alternate Listing Valuations
- Concurrent with its HK$34/share VGO, L’Occitane (973 HK)‘s disinterested shareholders may be entitled to a share scrip alternative. IF afforded, up to 5% of shares out can participate.
- The big unknown is whether you receive shares of the levered-up Bidco, at some as yet undetermined scrip ratio; or keep shares of L’Occitane as-is.
- To trigger the rollover option, 10% of disinterested shareholders need to express interest by the 15th May (a Hong Kong holiday btw). A deadline without details.
6. Sigma Healthcare (SIG AU): ASX200 Inclusion Now, MUCH More Squeezy Fun Later. Maybe…
- In early December, pharmacy distributor Sigma Healthcare (SIG AU) arranged a “transformational merger” with mega chain Chemist Warehouse (CWG). Effectively a reverse takeover designed to get CWG listed.
- SIG issued shares, raising cash, enabling it so NEWCO had high enough minimum float upon merging. Financial engineering for the win. SIG popped – a kind of IPO premium trade.
- But plenty of people are against the deal, and ACCC hasn’t yet opined (13 June is the provisional date), but on Thursday, S&P announced SIG would join ASX200 despite risks.
7. CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
- With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
- We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
- The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.
8. SSE50 Index Rebalance Preview: Financials Continue to Outperform
- With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
- We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
- The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.
9. China TCM (570.HK) Update – Despite Doubts, This Privatization Seems “Mandatory”
- Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM’s target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
- At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the “confusion”.
- According to regulatory requirements, it’s expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.
10. STAR50 Index Rebalance Preview: Adds Steamroll Deletes
- With the review period complete, we forecast 3 changes for the SSE STAR50 (STAR50 INDEX) in June. All changes are migrations from/to the STAR 100 Index.
- One way turnover is estimated at 3.4% resulting in a one-way trade of CNY 4.5bn (US$630m). There is a lot to trade from passive trackers, especially on the inclusions.
- The potential adds have outperformed the potential deletions by ~18% over the last month with Hangzhou EZVIZ Network (688475 CH) and APT Medical (688617 CH) moving higher.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Big Fines on Foreign Investment Banks for Naked Short Selling in Korea – Implications
- The FSS mentioned it has uncovered 211 billion won of naked short sales by Credit Suisse and 8 other global banks of Korea-listed stocks between 2021 and 2023.
- The current ban on short selling stocks could be extended to at least 1H 2025.
- The Korean government’s imposing these large fines on the foreign brokers is sending a message to the foreign brokers to not engage in naked short selling.
2. Portfolio Watch – Time for liquidity bets
- Hello everyone, and welcome back to our weekly portfolio watch.
- A slightly positive week for our macro portfolio, which after a couple of days of sell-off in equities have gained ground again after the FOMC meeting Wednesday, revealing the Fed’s intend of lowering the monthly redemption cap on USTs from USD 60 bn. to USD 25 bn.
- The slight dovish narrative is back in market pricing, and the mix of dovish central bank vibes and added liquidity will likely rule markets in the coming weeks, as economic data from the US will continue its run.
3. Outperformance Using Smartkarma Smartscore for KOSPI Stock Screen & Where There Is Smoke, Stay Away
- In this insight, we discuss the use of Smartkarma Smartscore system to screen stocks in KOSPI 100.
- For top 50 companies (in KOSPI 100) in Smartscore rankings, their share prices were up on average 7% YTD. Bottom 50 companies had average share price decline of 7.8% YTD.
- In using the Smartkarma Smartscore system, it may be appropriate to describe it in terms of “WHERE THERE IS SMOKE, STAY AWAY.”
4. USD inflation preview: NO, inflation is not going away folks..
- The monthly inflation reports have proven to be the catalysts for the repricing of USD rates in recent months and we fear another 1-2 sigma event next week.
- Our calibrated nowcasts have settled on the hottest inflation forecast in town, which will likely prove to be a shocker now that USD duration bets are back in fashion.
- Our nowcasts hint at 0.45% MoM headline inflation and 0.38% MoM core inflation, which is well above consensus at 0.3% MoM for both (see full details in chart 7)The uniformity in the early consensus numbers is striking with right about every analyst on earth expecting a 0.3% MoM print, which has oddly turned into the mechanical monthly forecast every single month.
5. Steno Signals #98 – The recession panic is back right as liquidity is returning!
- Happy Sunday from a wet Copenhagen!Let me just admit to it upfront.
- Last week didn’t play out according to my macro thesis.
- The US cycle suddenly showed signs of weakness in surveys, which alleviated some of the pressures in USD rates and in USD versus Asian FX.
6. Macro Regime Indicator May – UP UP UP!
- Welcome to our monthly flagship asset allocation analysis – the “Macro Regime Indicator”.
- Coming into April, we wrote that “The macro environment is turning worse on both inflation -and liquidity metrics, while the growth variable remains positive (measured by the cyclical manufacturing momentum).
- This leaves us in a classic “QT” environment with less obvious “gung ho” risk taking through April compared to the full-on risk positive environment we have seen over the past 4-5 months as continuously flagged and traded via our allocation tools.”Without the growth parameter being a home-run in our models, we mostly got the April correction right and also capitalized decently well on the liquidity withdrawal and the hot inflation report.
7. New Release: Fund Positioning Chart Pack
- Q1 Performance Analysis for active Global EM funds. Country/Sector/Stock Positioning relative to benchmark for Global funds
- Spotlight on Indonesia activity among Asia Ex-Japan investors. Sector Dispersion in USA funds
- Extreme Stock Positioning in UK Small/Midcap funds. Ownership Trends in the Financials sector among MSCI China funds.
8. Energy Cable: Saudis are pushing hard for a new oil bull market
- Freight rates are rising again and it will likely impact USD inflation in Q2 already.
- The Saudis are trying to bring back the oil bulls via keeping the market tight. ‘
- Our models are close to entering a long oil bet again..
9. The Week That Was in ASEAN@Smartkarma – Astra International, Bukalapak, and Bank Negara Indonesia
- The past week saw insights on Bank Negara Indonesia (BBNI IJ), Bukalapak,Astra International,Siloam International Hospitals, Bumrungrad Hospital, Multi Bintang Indonesia, Sai Gon Cargo Service (SCS VN).
- There were also macro insights on Indonesia and Vietnam, and a sector insight on Indonesian banks, and a further insight on Sheng Siong (SSG SP).
- The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.
10. Tectonic Macro Shifts
”Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.”
With this sentence, the Fed announced the tapering of their QT program last week.
The Federal Reserve has been running QT (Quantitative Tightening) since mid-2022: this process is aimed at unwinding the multi-trillion Fed bond holdings accumulated during previous QE episodes
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. AMD. It’s A Marathon, Not A Sprint
- Q124 revenues of $5.5 billion, $100 million above the guided midpoint, down 11% QoQ but up 2% YoY.
- Looking ahead, AMD forecasted the current quarter revenues of $5.7 billion, up 3.6% sequentially.
- Share price down 7% in AH and down 35% from its recent 52 week high. We could see it retest the $100 level in the coming months
2. Taiwan Tech Weekly: Major Week of Earnings; Apple’s Edge AI Could Make Your Current IPhone Obsolete
- Taiwan Tech Rebounds Sharply Alongside Major Nvidia/U.S. Tech Rebound Last Week. Wave of Major Earnings Releases This Week — See Our Key Events Section.
- Apple’s Latest Supplier List Released Last Week — Nanya Tech, Lotes, and Novatek Dropped. New List Shows Apple Struggling to Diversify from China.
- Apple iOS 18 Will Heavily Feature Edge AI Running Locally on the iPhone for User’ Privacy and Security — We Believe This Could Be a Major Driver of Phone Upgrades
3. Key Insights from Qualcomm’s Latest Data; Mediatek Taking Market Share?
- Qualcomm’s latest earnings came in at the high end of guidance with automotive revenue surging and mobile steady. We analyze QCOM results’ key implications for Mediatek.
- Qualcomm’s 2024E global handset market volume guidance remained unchanged vs. last quarter; however we believe Mediatek may have taken some market share in CY1Q24.
- Qualcomm confirmed Mediatek’s view regarding high-end phone demand strength right now, with AI capabilities the likely driver. Combining QCOM + Mediatek color suggests an AI-driven handset upgrade cycle ahead.
4. PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle
- Branded PC makers’ shares have been mostly lower in April, however Intel and Microsoft developments are providing strong signals for a future PC upgrade cycle into AI PCs.
- Over 60% of Fortune 500 companies are now using Microsoft’s CoPilot AI assistant; Intel expects the industry to exceed its prior forecast for AI PC shipments in 2024E.
- CoPilot is the killer app that will trigger a global enterprise PC upgrade cycle; The next generation of CoPilot will be an edge AI app that will require powerful hardware.
5. Taiwan Dual-Listings Monitor: TSMC & ASE Spreads Surge to Extremes; CHT Shorts Massing Pre-Earnings
- TSMC: Premium Soars to +15.2%, Good Level to Consider Shorting the Spread
- UMC: Spread Bounces from Lows to Relatively Extreme High of +1.9%; Good Level to Short
- ASE: Spread Soars to Near All-Time High of +15.5%; Consider Shorting the Spread
6. Mediatek Seeing Massive Rebound in Mobile; Major AI Data Center Driver on the Horizon
- Mediatek Enjoying a Massive Rebound for its Mobile Phone Segment; Most Optimistic About High-End Smartphone Demand
- New AI Data Center Growth Driver on the Horizon; Recent Investment in U.S. AI Server Chip Startup
- Recent Share Price Dip is an Accumulation Opportunity; We Rate Mediatek as a Structural Long
7. Deep Dive Into Samsung’s Memory & Foundry Results: TSMC, AI PC, Server, AI Phone Implications
- Samsung 1Q24 results beat consensus by a wide margin and the company gave strong guidance for its Memory segment, guiding for further strength driven by servers, PCs, & phones needs.
- Guided strong demand for PC/Mobile Memory in 2H24E driven by on-device AI, which supports the case of edge AI hardware beginning to drive demand in addition to cloud/server-based AI hardware.
- Foundry segment’s losses reduced, but still loss-making? Samsung’s order backlog is at an all-time high but Samsung Foundry results suggest manufacturing yield performance likely well behind TSMC.
8. Siltronic Slashes 2024 Sales Forecast As Inventory Woes Worsen
- Siltronic cut its 2024 sales revenue forecast by 10% just days ahead of their Q124 earnings release
- Inventory levels, while gradually improving, are still at all time record highs
- In the case of Siltronic, it seems likely that Automotive end-market weakness is the main culprit
9. Earnings Week of April 26th
This earnings post will be a bit less detailed than usual. I just finished a move mid-earnings, and it was insanely distracting. So, I’ll start with the spark notes before I go into depth.
Industrial (TXN) is possibly bottoming, Automotive is probably bottoming (TXN), but SiC (STM) is doing much worse, and mobile (TER) hasn’t changed quite much. Consumer (NOD) got a substantial call out.
- Telecom (MXL, INTC) is about to bottom imminently. I continue to like MaxLinear and other companies that are exposed to telecom. HBM (TER, SK) continues to be strong. In Semicap, Logic is strong, HBM is strong, and China is declining less than expected.
10. Lasertec (6920 JP): Orders Up, Guidance Down
- The share price has bounced back on strong 3Q orders and long-term optimism, but weak 4Q guidance calls the growth trajectory into question.
- Guidance, which has sales dropping to about half what they were a year earlier, is based on the expected timing of customer acceptance of delivered equipment. It could be conservative.
- At 75X EPS guidance for FY Jun-24, a rate of growth not visible in current trends has already been discounted. Current orders should translate into sales in 2026.