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. Gold’s Next Leg Up And Why It Matters
- Gold price is a reflection of underlying global stress in currency markets
- Gold price is a reflection of actual not reported real rates of interest
- Gold price is a reflection of global increased demand from central banks and consumers
2. Steno Signals #93 – Material Stealth QT Upcoming During a War Economy
- Happy Easter and welcome to our flagship editorial! The tide is turning on USD liquidity and the four most recent bills auctions have seen net negative issuance, which is a harbinger for the trend into April, which is typically strongly net issuance negative due to tax seasonality (see chart 1).
- Only during the first lockdown in 2020, did the net amount of outstanding bills increase through this period, which makes for a solid hit ratio in predicting (much) weaker USD liquidity in Q2 this year.
- We wrote on New Years eve of 2023 that “USD liquidity is likely going to increase massively in Q1 due to a series of technicalities surrounding the BTFP, ON RRP and TGA facilities, which makes us set for a material rally (or a blow off top) in Q1.”, which I guess was as precise as it could be.
3. March Themes and Thematic Portfolio Review
- A monthly review at how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
4. Macro Regime Indicator: From Stealth QE to Stealth QT
- Welcome to our Monthly Macro Regime monitor.
- Coming into March, we wrote that “We see little change to the optimistic and risk-favoring sentiment for March, and we thus remain in the goldilocks ‘Gung Ho’ regime.
- With tailwinds from both liquidity and growth, we continue to see a great case for continuing to move/stay further out of the risk curve when it comes to allocation.
5. Is a Major RMB Depreciation on the Cards?
- Further weakness in the JPY poses a risk to RMB stability
- If major stimulus is unleashed in China, it is likely the RMB will weaken
- Continued incremental easing will benefit the economy in the long term but may disapoint equity investors looking for a quick fix despite Chinese data improving
6. Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend
- With the BOJ’s struggle to support the yen gaining traction, the NKY and TPX both hit major resistance
- Hong Kong finally breaches resistance with a potential move to 20k in the near term
- Diversification opportunities are abundant with potential negative correlation between China/HK markets and US
7. 5 Things We Watch – EUR-Inflation, Central Banks, The Business Cycle, Positioning & Commodities
- Welcome to our weekly ‘5 Things We Watch’, where we take you through 5 of the things we look out for in global macro.
- With markets hawking up Fed expectations, Euro Area inflation surprising on the downside, and commodities breaking out technically, there are plenty of things to shed some light on!
- This week we are watching out for the following 5 topics within global macro:
- EUR-Inflation
- Central Banks pricing
- The Business Cycle
- Fixed Income Positioning
- Commodities
8. Out of the Box: 6 Reasons the Fed Will Be Hiking Rates in 2024
- Even though the Santa rally in US STIRS has largely been reversed, markets are still pricing in 2.5 full cuts by the end of this year or so with the first to come around summer time.
- Currently, one of the most unappreciated risks by markets would be the Fed actually hiking rates in 2024 and thus we thought we would present 6 compelling and thought provoking arguments for why the Fed hiking in 2024 might not be impossible after all (our base case is a hold).
- The first argument has to do with year-on-year inflation seemingly having reached its equilibrium at 3%, a range in which it has found itself for the last year or so.
9. The Stock Market’s Q2 Challenges
- The S&P 500 ended the quarter exhibiting a series of “good overbought” conditions which are signals of strong momentum. Can the bullish momentum continue?
- Equity price momentum in Q2 is dependent on continued rising EPS estimates, a tame bond market response to higher Treasury coupon issuance, and a possible liquidity squeeze.
- The market is vulnerable to a setback. A lot has to go right.
10. Positioning Watch – Steepener bets back on?
- Hello everyone, and welcome back to our weekly positioning watch! Hope you all had a great time off during the Easter break.
- The market narrative has remained more or less intact after the break, with equity sentiment still going strong until today despite a bit of a hiccup delivered from the Fed, with especially Waller but also to a certain extent Powell pushing back on the 3 rate cuts priced in just a couple of weeks ago.
- The scenario with 0 Fed cuts in 2024 is looking to come into play, right as European central banks have likely received the final evidence for them to start cutting rates, with German CPI surprising on the dovish side, and UK Retail Prices collapsed, paving the way for both BoE and ECB to cut rates before the Fed, which admittedly has a more difficult time battling inflation.
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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. Missed The AI Mania Surge? Here’s A Few Options Still Worth Considering
- It’s probably not a good idea to chase the AI mania surge by buying the likes of NVIDIA, AMD, Micron etc at their currently highly elevated share prices
- Taiwan has a large ecosystem of semiconductor companies many of which are critical to the AI hardware supply chain
- We present a range of options with exposure to AI hardware for your consideration including foundry, fabless IC design, server BMC & Copper Clad Laminate
2. Micron’s Earnings and Broadcom’s Accelerators
- I wrote about this in my recent post about HBM, and it seems almost everything I talked about became true. HBM is going to bail out the memory markets meaningfully.
- Let’s talk about earnings, but I was hoping you could keep this post in mind while I discuss Micron.
These are the kinds of beats we start to see when the cycle turns. Now, the stocks have begun to anticipate this, but given the pricing dynamics of HBM, I feel very confident in Micron’s ability to hit a new cycle high in profitability.
3. Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?
- Hon Hai shares have hit a new all-time high and have just risen past our target price of NT$155, surging after investors flocked to Hon Hai on AI news.
- Hon Hai showcased two key technologies at Nvidia’s GTC conference last week: Nvidia-based AI servers with liquid cooling systems and an AI autonomous driving controller using Nvidia’s Orin X processor.
- Hon Hai’s sharp rally appears to have partly been caused by a short squeeze; While we like the long-term fundamentals and increased TP to NT$170, Hon Hai appears near-term overbought.
4. Taiwan Tech Weekly: Key Taiwan Server Names Soar; Raising TSMC Growth Target; Memory Rally
- Key Taiwan Server Names Soar; Delta Electronics Major Winner of Nvidia’s Conference
- TSMC (2330.TT; TSM.US): Raising Growth Target to 25%+ YoY in 2024F
- Memory Monitor: Micron Leapfrogging Into HBM3E for AI; Nanya Lagging Peers But Poised to Benefit
5. Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up
- MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
- A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
- The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored.
6. MediaTek (2454.TT): Dimensity 9400 Unveiled in Sep; 2Q24F Sales Could Be a Bit Higher than 1Q24F.
- Mediatek Inc (2454 TT) Dimensity 9400 is expected to be released in September 2024F.
- Artificial Intelligence (AI) is a trending topic, and MediaTek is adapting by emphasizing Generative AI functionality in its Dimensity 9300 and 9400 smartphone models.
- The smartphone market is expected to recover in 2024F, with MediaTek’s revenue in the second quarter potentially surpassing the first quarter.
7. Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Surges As New AI Play; But Shorts Amassing as Well
- Delta Taiwan Outperforms Delta Thailand After Showcasing Its AI Power Efficiency Solutions at NVIDIA Corp (NVDA US)’s GTC Conference
- Delta Taiwan vs. Thailand Valuation Mismatch Has Corrected Further; Delta Thailand Finally Worth Less Than Its Parent
- Short Interest Spiked for Delta Taiwan; Taiwan Rally Short-Term Overdone Due to AI Concept Stock Hype?
8. Semiconductor Real Time Indicators Update
- Taiwan companies are required to report revenue on a monthly basis. These updates can help us understand how a given quarter is progressing & predict quarterly earnings ahead of time
- Initially we focused on MoM % increase/decrease. This is useful, but one needs to account for anomalies such as seasonality and potential non-linearity month to month within a given quarter
- We now also provide the monthly YoY revenue comparison. This eliminates anomalies due to both seasonality and intra-quarter non-linearity, enabling a clearer perspective on where the industry is at.
9. Mediatek: Accelerating Momentum in Automotive, Data Center, and AI Memory Solutions
- Mediatek is advancing full speed with recent industry collaborations for automotive chips, data center connectivity solutions, and AI memory solutions.
- In particular, the company has entered the market for Co-Packaged Optics (CPO), with partnerships announced with Foxconn and Ranovus.
- While the stock has rallied and re-rated, consensus forward estimates do not appear overly demanding and could still have room to increase further.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. HD Hyundai Marine Solution IPO Preview
- HD Hyundai Marine Solution is getting ready to complete its IPO in KOSPI in May 2024. This will be one of the largest IPOs in Korea in 2024.
- The IPO price range is from 73,300 won to 83,400 won. The IPO offering amount is from 652.4 billion won to 742.3 billion won.
- A key beneficiary of HD Hyundai Marine Solution IPO is HD Hyundai (62% ownership). Our NAV analysis suggests implied price of 95,632 for HD Hyundai (40% higher than current price).
2. Globalwafers GDR Offering – Coming to Market Earlier than Anticipated
- Globalwafers (6488 TT) is looking to raise up to US$681m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
- The deal is a somewhat large one to digest at 20.2 days of three month ADV and the proceeds will be used to purchase raw materials overseas.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
3. Shinhan Financial Group Placement – Another Selldown, Momentum Is Strong but Deal Is Large
- BNP Paribas (BNP FP) is looking to raise around US$680m via selling 3.5% of its stake in Shinhan Financial (055550 KS).
- This will be the fourth selldown for the stock since the start of the year. It will also be the largest one of the lot, so far.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
4. Local Color on HD Hyundai Marine Solution’s Excessive IPO Valuation
- Valuation controversy arises from comparing HD Hyundai Marine Solution, a ship AS specialist, with diverse global companies, leading to a target market cap of ₩5T.
- HD KSOE’s inclusion worsens the valuation controversy. Applying HD KSOE’s last year PER without adjusting for a significant one-off profit seems to inflate HD Hyundai Marine Solution’s PER.
- Currently, major local IPO funds see HD Hyundai Marine’s valuation nearing ₩4T as excessive, despite the industry’s revival and potential growth in eco-friendly ship conversions, impacting the upcoming bookbuilding process.
5. ECM Weekly (25th Mar 2024) – TCS, Akeso, Coforge, ABSL, Tokio Marine, Trial, Migao, Mixue, Reddit
- 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, Trial Holdings (5882 JP) ended up doing better than we expected, while Hong Kong finally got its first US$100m+ listing for the year.
- For placements, India was again at the forefront, this time with a not-so-pleasant results of Tata Consultancy Svcs (TCS IN).
6. Mankind Pharma Placement – Well Flagged, past Deals Have Done Well but Its Expensive
- ChrysCap is looking to raise around US$295m via selling a 2.8% stake in Mankind Pharma.
- MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
- We have looked at the IPO, lock-up release and prior placement in our earlier notes. In this note, we talk about the current deal dynamics.
7. Bharti Hexacom IPO: Valuation Insights
- Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise up to US$513 million at an IPO price range of Rs542-570 per share.
- We previously discussed the IPO in Bharti Hexacom IPO: The Bull Case and Bharti Hexacom IPO: The Bear Case.
- Our valuation analysis suggests that the IPO price range is unattractive. Therefore, we would not participate in the IPO.
8. HD Hyundai Marine Solution IPO – Strong Profitability Growth but Lacking in Disclosures
- HD Hyundai Marine Solution (443060 KS) is looking to raise up to US$555m in its Korean IPO.
- 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 talk about the company’s historical performance.
9. Bharti Hexacom IPO: The Bull Case
- Bharti Hexacom (6597372Z IN), a 70% owned subsidiary of Bharti Airtel (BHARTI IN), aims to raise around US$500 million at a valuation of US$3.3-4.2 billion.
- The offer is a pure secondary offering. The Government of India aims to reduce its stake from 30% to 15% of outstanding shares.
- The bull case rests on market share gains, ARPU growth, low churn rates, improving margins, cash generation and low leverage.
10. Bharti Hexacom IPO – Unexciting and at a Half-Decent Discount
- Bharti Hexacom is looking to raise up to US$513m in its upcoming India IPO.
- Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
- We have looked at the company’s past performance in our earlier notes. In this note, we talk about valutions.
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. Mar24 Nikkei 225 Rebal: Zozo (3092) And Other ADDs Update
- ZOZO Inc (3092 JP) is +10% since the close after the Nikkei 225 inclusion announcement vs Nikkei225 +2%. Fellow upweight Nitori is up too. Disco and Socionext are up less.
- All three inclusions and one upweight see considerable inclusion demand when compared to active holdings. Some more than others.
- Some trades here are more interesting than others, still. Cumulative excess volumes are one guide. Fundamentals, and flow dynamics are another.
2. KDDI Launches Tender To Buy Out Lawson (2651) – Still Far Too Cheap
- KDDI has announced the launch tomorrow of its Tender Offer to buy out the minorities in Lawson Inc (2651 JP).
- It’s still too cheap. It is still a somewhat non-transparent and unfair process as far as I can tell. And it does not adhere to the METI Fair M&A Guidelines.
- There SHOULD BE some activist interest to get KDDI to bump but it is not clear that will show up.
3. Samsonite (1910 HK): Dual-Listing Musings
- It seems like every week, Bloomberg reports a HK-listed company weighing privatisation options. HKBN (1310 HK), ESR (1821 HK), and Samsonite (1910 HK) have all been rumoured of late.
- Last Friday, Samsonite announced it was focused on pursuing the listing of its shares on a second exchange.
- No preferred exchange was mentioned. Nor whether the goal is to secure a dual primary listing, or a secondary listing. A buyout, for now, appears to be on the backburner.
4. Roland DG (6789 JP): Taiyo Hoping for the Best as Brother Plays the Waiting Game
- In response to Roland DG Corp (6789 JP) request, on 22 March, Taiyo said it was considering a revised offer. However, Taiyo has since remained silent.
- Despite discussions with Brother Industries (6448 JP), the Board have not been able to eliminate dis-synergies concerns. The Board has left the decision to accept the Taiyo offer to shareholders.
- While the Board is trying to dissuade Brother, Brother will take its offer directly to shareholders if the Taiyo offer fails. Taiyo’s behaviour suggests a reluctance to bump.
5. Quiddity Leaderboard TDIV Jun 24: 5 Changes; US$1.2bn One-Way
- In this insight, we take look at Quiddity’s expectations for index changes and capping flows for the TDIV Index for the June 2024 index rebal event.
- I currently see 5 ADDs and 5 DELs but there are several names close to the border and expectations could change before the base date as prices move around.
- The estimate for one-way flow in June 2024 is US$1.22bn.
6. MMA Offshore: A$2.60/Share Cash Offer From Seraya Partners
- Marine and subsea services provider MMA Offshore (MRM AU) has entered into a Scheme with Singapore’s Cyan Renewables.
- Cyan, wholly-owned by Seraya Partners, is offering A$2.60/share in cash, a 11% premium to last close and a 31% premium to the 90-day VWAP.
- MMA shareholder approval and FIRB are the key conditions. This Offer will tentatively complete mid-late July.
7. Koito Mfg (7276) – New Medium Term Plan, BIG Buyback, Even Bigger Shareholder Returns Planned
- Koito Manufacturing (7276 JP) is a $4bn marketcap (~$6bn sales) Toyota Group auto parts manufacturer specialising in lighting parts, famous for being a T.Boone Pickens target in the 1980s.
- As Toyota Group’s leaders restructure their cross-holdings and try to get to 1.0x PBR and a high enough ROE to sustain it, capital efficiency is on the block.
- Koito today announced a revised Mid-Term Management Plan, a change in KPIs (higher), a large shareholder return plan, and a large buyback. As always, the fun is in the details.
8. Alteogen: Block Deal Sale of About 3% of Shares
- On 27 March, Alteogen announced that Jeong Hye-shin, former Alteogen Chief Strategy Officer (CSO), sold 1.6 million shares of Alteogen stock in after-hours trading in block deal sale.
- The block deal sale price was 197,770 won. Alteogen’s share price declined by 10.9% today to 195,600 won. Block deal sale amount was about 316 billion won.
- This block deal sale combined with the sharp recent, share price increase are likely to result in a near-term consolidation of its share price in the next several months.
9. Merger Arb Mondays (25 Mar) – APM, Genex, C&F Logistics, Roland DG, IntelliCentrics, China TCM
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: APM Human Services Internation (APM AU), Chilled & Frozen Logistics Holdings (9099 JP), Qantm Intellectual Property (QIP AU), Genex Power Ltd (GNX AU), Probiotec Ltd (PBP AU).
- Lowest spreads: Roland DG Corp (6789 JP), Tietto Minerals Ltd (TIE AU), CPMC Holdings (906 HK), Pact Group Holdings (PGH AU), Vinda International (3331 HK), Snow Peak Inc (7816 JP).
10. SillaJen Rights Offering Worth 34% of Outstanding Shares
- On 22 March, SillaJen Inc (215600 KS) announced that it will conduct a rights offering worth about 129 billion won for R&D and financials improvement.
- The rights offering size is 34.5 million shares, representing 34% of total outstanding shares. The expected rights offering price is 3,750 won which is 26% lower than current price.
- We would not subscribe to this rights offering and we remain negative on the company.
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. 5 Things We Watch – Cyclicals, Baltimore Bridge, ECB, USDJPY & Sentiment
- Loads of stuff are going on in Global Macro, with global equities on the rise yet again, the JPY struggling a bit after unsuccessful attempts from policymakers, including the verbal FX intervention from MoF and BoJ today, and the Spanish HICP numbers, which we hit right on the mark! The benign base effects and dovish outlook has potentially paved the way for a cut in June, but what should you look out for in the meantime?
- We give you 5 topics from our watchlist.
- This week we are watching out for the following 5 topics within global macro.
2. Great Game – Moscow terror, Netanyahu Furious and Biden climbing polls
- Welcome to this week’s Great Game.
- We’re going to try out a slightly new format this time.
- Instead of unfolding one major topic, we will cover a couple stories more briefly, so you are covered on the most important stories in geopolitics right now.
3. Positioning Watch – Time to get out of the cyclical trade?
- Hello everyone, and welcome back to our weekly positioning watch! The weather in Copenhagen is sunny, and so is the mood in markets, with aggregate equity fund flows in the US reaching 2-year highs this week.
- Markets are certainly back into full risk-on mode, with the Fed promising rate cuts amidst reflationary trends in the US, which is a trend that is slowly but surely spreading to the rest of the world.
- The cyclical rebound is not truly there yet in Europe, which means that European indices are starting to get flagged as overpriced in our quant-models.
4. Energy Cable #62: Biden is selling crude straddles, while something is cooking in China
- Last week we took healthy profits in some of our global reflation bets.
- We got out of silver and copper, but remain in the broad materials ETF.
- Data out of China is a bit unclear with some prints being bullish and others bearish and then ambiguous data points such as the BOOMING copper stock.
5. Are Chair Powell and I on the Same Page?
- The ongoing Fed pause puts emphasis on the interactions between financial conditions and headline growth
- My proprietary measure of financial market conditions seems to be broadly consistent with the Fed Board’s indicator of financial conditions
- Chair Powell alluded to the prospect that financial conditions are currently “weighing on economic activity”
6. Explainer: the 3 faces of Chinese consumer pessimism
- Cautious but promising signs emerge from China’s consumer demand landscape.
- According to China’s statistics bureau, consumer prices saw a 0.7% increase year-on-year in February, marking the first rise since August.
- The extended Lunar New Year holiday period, spanning 8 days instead of the usual 7, nearly matched pre-pandemic domestic spending levels.
7. Steno Signals #92 – The head fake reflation?
- It is always lovely to get back on the road and meet a load of fund managers, and it is nice to see that a few reflation skepticals are still found out there.
- I went to London to meet with a bunch of the big funds in town, hot on the heels of Powell’s reflationary Fed meeting on Wednesday.
- It almost annoyed me how “vanilla” my analysis had to be on the back of it, as the Fed is moving the needle lower and lower and lower on the implied Real Fed Funds rate every meeting currently, no matter the underlying developments in inflation and/or growth.
8. Whither the Yen?
- The Bank of Japan is caught between a rock and a hard place
- The JPY’s only hope is a US recession and lower US interest rates
- Japan’s inflation problem to resume as imported inflation bites into purchasing power once again
9. India Deep Dive: Record Allocations Mask Growing Underweight
- Record Allocations Mask Caution: Record investments in India contrast with a rising underweight, as selected managers pare back exposure.
- Valuations Prompt Strategic Pause: Record underweights among Value funds reflect valuation concerns, with growth funds also seeing overweights decline.
- India vs. China: Allocation Shifts: The stark contrast in allocation trends underscores a strategic pivot within EM, highlighting record divergences between the two.
10. Ifo Nugget: What reflation in Germany?
Price expectations in services ex. real estate continued its downtrend and we now find ourselves at 2018-19 levels in what is pointing towards lower core inflation readings in the second half of the year.
Meanwhile price expectations in manufacturing climbed and looks like they have bottomed out at levels consistent with the price mandate of the ECB.
The drop in input prices, the global reflation story and expectations of ECB rate cuts seem to have had an effect and the question now becomes which of the two manufacturing and service price expectations will impact inflation come Summer and Fall the most.
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. Jensen’s World: Compressing Reality
- “It is so much cheaper to do simulations than real experiments, so much more flexible in testing…we can even do things which cannot be done in any lab… So it’s inevitable this trend will continue for some time.” – Richard Hamming, The Art of Doing Science and Engineering.
- Richard Hamming said this to the President of Bell Labs in the 1950s. And I think this insight rings more accurate than ever. Simulations of reality are much more flexible and cheaper than observing and interacting with reality.
- I will assert that LLMs and “AI” are effectively the logical conclusion of this trend. A large language model is trained on the largest amount of data possible, often the entire crawlable Internet, all the books ever written, and so much more.
2. The First Semi-Micron to Guide 2Q24; All Good News Except MOI
- Earlier expectation on Micron will have rooms to raise becoming a reality, largely driven by over 30% q/q NAND bit price jump for storage business in 1Q24.
- 10ppts stronger 2Q24 sales guidance and 3-6ppts higher gross margin guidance are driving free cash flow improvement.
- AI server, PC, and smartphone driving DRAM bit demand and HBM3e/HBM4 and 1-gamma EUV DRAM slowing bit supply growth both are positive except MOI remains 15% above 5 years average.
3. Micron. Back In The Black & No Going Back
- Q224 revenues of $5.8 billion, up 23% QoQ and up 58% YoY. It also well above the high end of the guided range of $5.5 billion.
- Net income turned positive & amounted to $476 million. This compares to a loss of $1 billion in Q124
- Forecasting current quarter revenues of $6.6 billion & gross margin of 26.5% at their respective midpoints
4. Taiwan Tech Weekly: Nvidia Conference; Samsung to Hike NAND Prices; TSMC Adding Capex Due to Demand
- Nvidia GTC Conference This Week Likely to Create Newsflow for Many Tech Names
- Samsung Could Hike NAND Flash Prices by 20%; Silicon Motion for Exposure
- TSMC Reportedly Placing Orders for Additional Advanced Packaging Capacity, Likely In Response to Demand Strength
5. Taiwan Dual-Listings Monitor: TSMC Premium Slumped But Remains Extreme; UMC at a Discount
- TSMC: +15% ADR Premium; Likely to Trend Further Lower Over Time
- UMC: -2.3% Discount; Decent Level to Long the ADR vs. Short Local
- ASE: +11.6% Premium; Continue to Advocate Shorting the Spread Here
6. Micron Earnings: HBM Driving Price Increases in Other Sectors
- Micron Technology reported very positive revenues this quarter and a return to profitability
- A large part of this stems from the impact that HBM demand is constraining production of standard DDR5 DRAM, driving it into a shortage
- This is good news for Micron and its DRAM competitors Samsung and SK hynix
7. NEC (6701 JP): Generative AI (Part 2)
- CEO Jensen Huang’s keynote address at Nvidia’s GTC event on March 18 was a reminder that generative AI is about building secure and reliable systems, not chatting up the future.
- NEC has spent three years developing its own AI supercomputer, creating the best performing Japanese-language large language model (LLM), and testing new AI products in-house before delivering them to clients.
- The introduction of generative AI and LLMs into business- and industry-specific solutions should provide meaningful additions to NEC’s telecom services, social infrastructure, aerospace and national security related businesses.
8. TSMC (2330.TT; TSM.US): Raising Growth Target to 25%+ YoY in 2024F.
- Taiwan Semiconductor (TSMC) – ADR (TSM US) revenue growth target for 2024F is set at 25% or higher.
- TSMC’s dominance in the CoWoS market, with nearly 100% share, positions them well.
- TSMC’s plans to establish a new Fab in Chiayi, Taiwan, reflect the growing end demand.
9. Generative AI. Innovation Turns To Litigation, Licensing & Regulation
- The EU has just launched the World’s first AI Act
- OpenAI claims the NYT tried to hack ChatGPT in order to prove they used their archive material during one of its training phases.
- Google’s licensing of Reddit’s content in advance of the latter’s impending IPO is a win-win for both, and likely how content creators can expect to be rewarded in the future
10. Intel. CHIPS Act Funding Ceremony Overshadowed By Reports Of New Fab Delays
- Intel snags $8.5 billion in direct funding through the CHIPS and Science Act to advance its commercial semiconductor projects in Arizona, New Mexico, Ohio and Oregon.
- Investment Tax Credit (ITC) of up to 25% on > $100 billion in qualified investments and eligibility for federal loans up to $11 billion are also on offer
- Meanwhile, two separate reports suggest delays of up to two years in Ohio and suppliers in Arizona unable/unwilling to meet previous commitments to establish local supply chains. Ouch!
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. TCS US$1.1bn Placement – Relatively Small but Isn’t Well Flagged, Could Have Implications for Others
- Tata Sons, holding company of Tata Group, is looking to raise around US$1.1bn via selling a 0.65% stake in Tata Consultancy Svcs (TCS IN).
- The deal doesn’t appear to be well-flagged although it could be part of Tata Sons’ recent moves to avoid an RBI mandated listing next year.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
2. ECM Weekly (18th Mar 2024) – ITC, Interglobe (Indigo), MS&AD, GlobalWafer, Belle, Auntea, Trial
- 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, Hong Kong appears to be heading towards its first US$100m+ IPO for the year.
- For placements, after a flurry of placements in the prior week, past week was relatively quiet with only the US$2bn ITC Ltd (ITC IN) block.
3. Akeso Biopharma Placement (9926.HK) – Would Investors Be Willing to Take a Gamble?
- Akeso’s product sales grew rapidly in 2023, mainly driven by off-label use of AK104. Since AK104’s commercialization potential on other indications was “overdrawn” in advance, sales growth would slow afterwards.
- The key investment logic of Akeso is whether/how much its BsAb pipelines would grab shares from PD-1. The high valuation has somewhat priced in AK112’s successful head-to-head trial with pembrolizumab.
- If AK112 does beat Keytruda, valuation will reach a new level. If AK112 fails in critical clinical trials, it would cast a shadow on the entire BsAb pipeline of Akeso.
4. Trial Holdings IPO: Trading Debut
- Trial Holdings (5882 JP) priced its IPO at JPY1,700 per share to raise gross proceeds of US$256 million. The shares will start trading on 21 March.
- We previously discussed the IPO in Trial Holdings IPO: The Investment Case and Trial Holdings IPO: Valuation Thoughts.
- The peers have modestly re-rated since the prospectus was released on February 19. The IPO price remains attractive.
5. Trial Holdings IPO Trading – Demand and Valuation Are Towards the Higher Side
- Trial Holdings (5882 JP) (TH) raised around US$259m after pricing its IPO at the top-end in its Japan IPO.
- TH operates a network of retail stores that offer one-stop shopping under its everyday low price model, across a variety of daily necessities, food items and other products.
- We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.
6. Tencent 4Q2023: Gaming Declines Yet Again, Margins Have Further Upside
- Tencent (700 HK) reported 4Q results today. Both revenues and OP increased 7.1% and 42.0% YoY, however, both revenue and OP fell below consensus estimates.
- The company also announced an increase to 2023 dividends and more than doublethe size of the company’s share buyback in 2024 compared to 2023.
- We expect Internet VAS to grow at single-digits in 2024, however, high-margin new products to help boost margins in 2024.
7. Ceigall India Pre-IPO Tearsheet
- Ceigall India (1605242D IN) is looking to raise at least US$100m in its upcoming India IPO. The deal will be run by IIFL Securities, JM Financial and ICICI Securities.
- Ceigall India is an infrastructure construction company with experience in undertaking specialized structural work such as elevated roads, flyovers, bridges, railway over bridges, tunnels, highways, expressways and runways.
- Its principal business operations are broadly divided into EPC and hybrid annuity model (HAM) projects, which are spread across ten states in India.
8. MIXUE Pre-IPO – Initial Thoughts on Valuation
- Mixue Group is looking to raise about US$1bn in its upcoming Hong Kong IPO.
- MIXUE Group (MIXUE) is a freshly-made drinks company providing affordable products to consumers, including freshly-made fruit drinks, tea, ice cream and coffee, typically priced at around one USD per item.
- In our earlier notes, we have looked at the past performance and undertaken a peer comparison. In this note, we provide our initial thoughts on valuation.
9. Akeso Inc Placement – A Small One to Digest, Momentum Has Been Strong
- Akeso Biopharma Inc (9926 HK) is looking to raise US$155m from its primary placement.
- Proceeds from the deal would be geared towards R&D expenditure for its preclinical programs, expediting clinical trials, and towards commercializing its existing approved products.
- Accounting for 3% of shares outstanding, and representing 5.7 days of its three month ADV, the deal would be a relatively small one for the firm to digest.
10. Jeil Machine & Solution IPO Preview
- Jeil Machine & Solution is getting ready for an IPO in April in the Korean stock market. The IPO price range is 15,000 won to 18,000 won.
- The total offering amount ranges from 36 billion won to 43.2 billion won. The book building for the institutional investors will last from 5 to 12 April.
- According to the bankers’ assessment, the implied market cap of the company ranges from 309 billion won to 371 billion won.
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. The Bigly March 2024 “Wednesday-Friday Trade” (Surprising Flows)
- Every year it’s the same trade. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
- But there may be ¥1.0-1.2trln+ to buy on one day into the close later this month, then ad hoc buys of ¥630bn and index sells of ~¥600bn 2 days later.
- Over the past ten years, the two day return on the March trade is great. This year the Nikkei funding trade makes things more complicated.
2. Fast Retailing (9983) – Now At Double Downweight Levels
- Fast Retailing (9983 JP) is the largest weight in the Nikkei 225. On Friday, it closed at 11.36% of the Nikkei 225, putting it well above the 10% cap level.
- If the stock is above 10% on a pro-forma basis on the base date of 31 July 2024, it will get a capping coefficient. 8.4mm shares (US$2.5bn) to sell.
- At Friday’s close, we were borderline above a double-downweight trigger. At Monday’s open, just below. 30mins later? Back well above. Lots of interesting issues and nuances here for a short.
3. JSR (4185 JP) – Launch of The Official Tender Offer (And the Double Arb)
- The Tender Offer is finally here. JIC announced the official launch after the close today.
- JIC appears to be taking on the SUNY RF risk as-is. The Tender Offer details vs the original expectations in the late June 2023 document are unchanged.
- Once started, unless a US court approves an injunction causing regulatory delay, this is done. But there are path events. And of course there is a double arb here.
4. Tokio Marine Cross-Shareholding – At Least US$18bn of Cross-Shareholding to Sell
- The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
- Tokio Marine Holdings (8766 JP) had a stake over US$100m in at least 33 listed Japanese stocks, amounting to a total of US$16.5bn.
- In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.
5. Quiddity Leaderboard S&P 500 Jun 24 Rebal: Many Intra-Review Changes Possible Due to M&A, Spin-Offs
- The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
- The index is reviewed quarterly. The next review will be in June 2024 and the evaluation date for the rankings for the constituent selection process is 6th June 2024.
- In this insight, we take a look at the Potential ADDs and Potential DELs for the June 2024 index rebal event and the intra-review ADDs/DELETEs.
6. Shinko Electric (6967 JP): Tender State of Play
- Shinko Electric Industries (6967 JP) pre-conditional tender offer from the JIC alliance is JPY5,920 per share. The gross spread has narrowed from a high of 10.4% to the current 4.2%.
- The narrowing spread can be attributed to the JSR Corp (4185 JP) tender launch, which suggests likely China SAMR approval, and Ibiden Co Ltd (4062 JP) giving up recent gains.
- Like JSR, we expect China SAMR to allow JIC to withdraw its Shinko merger control filing. There is a good chance the tender launches before the guided late August start.
7. Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM
- Last month, a Cheng family vehicle with 24.06% of Giordano (709 HK), requisitioned an SGM to remove CEO Peter Lau, and install Colin Currie as CEO, plus three other NEDs/INEDs.
- That SGM will be held on the 3rd April. The director resolutions – both the removal and appointments – are “ordinary”, requiring a simple majority vote.
- The outcome will likely pivot off how the shareholders under Halcyon Securities will vote. So I dug a little deeper as to who these shareholders are, with some surprising results.
8. Chilled & Frozen Logistics (9099) – Hostile Takeover Launched by AZ-Com Maruwa (9090)
- Chilled & Frozen Logistics Holdings (9099 JP) last week announced its “Action to Implement Management That is Conscious of Cost of Capital and Stock Price”.
- Today it announced AZ-Com Maruwa Holdings (9090 JP) had announced its intention to launch a Tender Offer on C&F Logistics without having contacted C&F first. A HOSTILE deal. Yum.
- The deal is proposed at a 50% premium, with the goal of getting to a minimum of 50.00%. This will be interesting.
9. IntelliCentrics (6819 HK): Delisting and Special Dividend
- On 9 February, IntelliCentrics Global Holding (6819 HK) announced the disposal of most of its assets to symplr software. On 19 March, the antitrust condition was satisfied.
- The consideration will be distributed to shareholders as a special dividend. The minimum and maximum special interim dividends are US$0.52 (HK$4.08) and US$0.55 (HK$4.30) per share.
- The key condition is EGM shareholder approval. Due to the irrevocables from key shareholders, the EGM vote should comfortably pass. This is a done deal.
10. Quiddity Leaderboard KOSPI 200 Jun 24: Up to Five Changes Possible
- KOSPI 200 is a Korean blue-chip index that tracks the 200 largest and most-liquid names listed in the KOSPI section of the Korea Exchange (KRX).
- In this insight, we take a look at the names leading the race to become ADDs and DELs during the upcoming semiannual review in June 2024.
- There could be up to five changes in the KOSPI 200 index during the June 2024 index rebal event.
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. What Really Matters Is Global Liquidity…But It Looks Set to Zag Before It Zigs Higher
- The main driver of asset prices looks set to stall, albeit temporarily. Global Liquidity is at a new all-time peak, but it is flat-lining
- Global Liquidity compromised by a stumbling US Fed as it copes with the errant RRP and TGA, and by an erratic People’s Bank of China. Q2 could prove tricky
- Look to diversify elsewhere. Commodity markets are on the move. But strong economies do not always have strong financial markets
2. Korean Government Announces Tax Incentives for Shares Cancellation and Dividends
- On 19 March, Choi Sang-Mok announced that the Korean government plans to provide corporate tax reduction benefits to companies that cancel their treasury shares.
- The separate taxation of dividend income is also expected to be promoted. All of these are law amendment issues and must go through the legislative process of the National Assembly.
- At this time, the Korean government did not provide the entire details about the exact amount of corporate tax reductions from share cancellation and separate taxation of dividend income.
3. Back-Testing the Impact of National Assembly Elections on the Korean Stock Market
- In this insight, we provide a back-testing analysis of the impact of the National Assembly Elections on the Korean stock market.
- KOSPI tends to display positive price performance one month and three months prior to the election date leading up to the election date.
- On the other hand, KOSPI tends to decline one month and three months post the election date. We believe that post National Assembly Election, KOSPI could face greater headwinds.
4. Hong Kong: A Tale of Two Markets and When to Re-Enter
- The bad news is that Hong Kong will not have a V-Shaped recovery which will keep market sentiment subdued
- The good news is that Hong Kong will not have a V-Shaped recovery which will contribute to a reduction in overall market volatility
- After an epic bear market, Hong Kong will enter a secular bull market this year
5. Japan Removes Negative Interest Rate Policy – The End of an Era and Long Yen?
- Zooming out reveals that the Bank of Japan has not shifted to a different monetary policy regime.
- The negative relationship between total debt-to-GDP and interest rates has been confirmed once again.
- With the Federal Reserve poised to cut rates more than three times this year, the case for a short yen position is thin.
6. Federal Reserve Signals “Victory” over Inflation Setting the Stage for the Next Round of Inflation
- Three 25 bps rate cuts signaled for the remainder of 2024 and 175bps by the end of 2025
- Bank of Japan, despite a rate hike keeps monetary policy extremely accommodative
- Reported inflation will return making sector selection in equities key
7. Portfolio Watch: Markets sniffing out the Chinese resurgence case
- Macro Portfolio: Markets sniffing out the Chinese resurgence case. Our conviction in pro-cyclical trends have been confirmed in markets this week, and the case for a Chinese revitalisation is becoming increasingly stronger.
- The continued surge in Copper this morning is noteworthy, particularly given the buildup of inventory by China in the past few months.
- An increasing stockpile can be a positive indicator, especially if it results from a deliberate effort by China to restock in anticipation of an economic stimulus.
8. Steno Signals #91 – No more recessions ever!?
- Happy Sunday from Sunny Copenhagen and welcome to our flagship editorial! Is the business cycle dead?
- It is a fair question to ask after what seems like years of recession chasing once again ending in tears for the macro bears.
- This sublime graphic created by the great Lee Coppock is exceptionally telling.
9. Monday Macro – Asset allocation update, the Nvidia show, stubborn rates, and Gold
- I’ve promised to keep updating my asset allocation tables every couple of months – and, on cue, here they are!
- They come in two guises. The first, below, is my overall take on the range of asset classes. There aren’t any changes this time. I’m still wary of equities, especially US equities, though, paradoxically, if I must own US equities, I would rather own the really big mega-cap tech names.
- I have a neutral position overall in equities, which implies a 60/40 equities/bonds balance, which hasn’t changed for a while – I wouldn’t be racing to put even more money to work in equities.
10. Chinese Momentum: Driving Markets or a Crowded Consensus?
- China’s government is targeting an economic expansion of approximately 5% again this year.
- A challenging objective considering the myriad of challenges facing the world’s second-largest economy.
- These challenges include weak consumer spending, a real estate sector in turmoil, efforts by the US to limit its technological advancements, unprecedented youth unemployment rates, and significant debt levels among local governments.