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. Here’s What We Told Hedge Funds This Week – and How We’re Trading It!
- Happy Friday! Every week, we dive deep into macro trends, analyze asset movements, and uncover the best value plays in the world of macro.
- These insights are shared with hedge funds and institutional clients, and today, we’re bringing them directly to you.
- While the macro landscape can be complex, we believe it doesn’t have to be intimidating.
2. Flash Liquidity Update: A USD liquidity PUT is now in place
- We just received the meeting minutes from the November FOMC meeting, which include two important takeaways on liquidity—both of which are positive.
- We have been highlighting for some time that markets are trading close to pain thresholds in USD liquidity (and below them in EUR liquidity).
- The Fed is now acknowledging the need for a “put” on liquidity levels.
3. The Next Four Years…
- The Republican sweep, both in Congress and the White House, seems to have sparked a risk-on attitude across financial markets of late
- But Republican presidencies have coincided more regularly with periods of post-war economic downturns
- And the disparate US equity market performance enveloping presidential cycles is a nagging puzzle
4. EM Fixed Income: Emerging Markets Outlook & Strategy for 2025
- US election outcome and policy proposals causing challenges for emerging markets in 2025
- Expectations for US exceptionalism and potential insularity affecting global trade and growth
- Potential impacts on inflation, monetary policy, fiscal dynamics, and investment environment for EM fixed income in 2025, with short-term opportunities amidst uncertainties.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. Asian Equities: Be Selective – Focus on The “ROE Winners”
- Asia is cheap relative to the US – trading at less than 40% of US’s P/BV – but that’s because Asia’s ROE has consistently declined relative to US’s.
- Over the next couple of years Asian ROEs are forecast to revive relative to the US’s but all Asian markets are not forecast to participate in this recovery.
- The “ROE Winners” (rising forecast ROEs) are Korea, Taiwan, India, Malaysia. Indonesia to stay flat but solidly higher than Asian average. We are skeptical of HK/China and Thailand’s ROE recovery.
6. Japan Funds: Extreme Stocks
- We screen for Japanese companies at the extreme ends of their positioning or momentum ranges among active Japan equity funds.
- Low Positioning coupled with Negative Momentum: Nissan Motor Corp and Misumi Group
- High Positioning coupled with High Momentum: ASICS Corp and Kyushu Railway
7. CHINA TARIFFS: Fact and Fiction
- The US has ramped up its tariff threats months before Trump even takes office. The newly appointed trade representative is a China hawk with some questionable policies ideas.
- China has reduced its dependency on US exports by half over the last several years and is better prepared to handle trade negotiations.
- Although previous trade negotiations during Trump’s first term lasted more than a year, most of the tariffs were never imposed.
8. Steno Signals #127 – We need a bit of bad news for liquidity to improve
- Hope you had a great weekend! Here’s this week’s sneak peek into my thoughts on liquidity trends and how they influence my approach to risk-taking.
- Watching the alt-season unfold from an incredibly wet and windy Copenhagen this weekend has been quite bizarre.
- The weather outside certainly doesn’t bring out my animal spirits, but there’s a certain smell of 2021 in the air in financial markets—especially if central banks decide to print more into this scenario.
9. Positioning Watch – The US Exceptionalism Story Is Back in Play!
- Main point: The current positioning picture is becoming increasingly uniform across asset classes: higher US growth, higher USD rates versus EUR/GBP rates, higher USD vs. peers, and higher US equity returns compared to Europe/Asia.
- The risk/reward of taking the opposite bet is starting to look appetizing.
We have been looking at the explosive increase in US equity positioning for a while, as multiple indicators show that equities are reaching stretched points positioning-wise — CFTC positioning among asset managers skyrocketing, our own data showing increased positioning in US vs. the rest of the world, and surveys starting to indicate that everyone is expecting equities to crawl higher.
10. Deciphering Trumponomics 2.0
- Looking to 2025, market returns are likely to be more uncertain than in the past. The degree of dispersion in the range of forecasts is wider than usual.
- There will be winners and losers. Deregulation should benefit the energy, AI-related technology, and financials.
- Losers include bonds, and construction stocks because of their sensitivity to both rising rates and heightened labour costs from deportation.
Entity | Insights | Analytics | News | Discussion | Filings | Reports |
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. SUMCO Despairs On Legacy Rebound, EVs, China, Visibility Etc…
- The pace of recovery in 200 millimeters appears to have been very weak. Customers continue to respect LTA prices but we have to push out delivery timing which impacts volumes.
- China appears to have developed their own capability to fabricate wafers. Quality does not necessarily appear to be very good but there is strong pressure to comply with “Buy China”
- The recovery in legacy applications has been surprisingly slow. At this stage we don’t know whether it is a slow recovery or in fact that there won’t be a recovery.
2. Taiwan Tech Weekly: Taiwan Firms to Surge U.S. Investment Due to Trump?; AI PCs & Memory Expansion
- Hon Hai, Pegatron, and Quanta Gear Up for Potential U.S. Investment Surge Amid Trump Policy Speculation
- PC Monitor: Asustek & Lenovo Signal Strong PC Growth, AI PC Expansion in Process
- Semiconductor Memory Q324 Revenue Close To Historic Highs Even As Decoupling Intensifies
3. Taiwan Dual-Listings Monitor: Weakness Could Open TSMC Long Level; ASE Short Interest Keeps Surging
- TSMC: +16.7% Premium; Further Market Weakness Could Soon Open Up Good Long Level
- UMC: -2.1% Discount; Good Level to Go Long the ADR Spread
- ASE: -0.1% Discount; Premium Completely Broken Down & Local Short Interest Continues to Surge
4. PC Monitor: Asustek & Lenovo Signal Strong PC Growth, AI PC Expansion in Process
- Asustek Guides for 20%+ YoY PC Revenue Growth in 4Q24E; Lenovo Delivers 17% YoY PC Revenue Growth in CY3Q24
- AI PCs: A Multi-Year Upgrade Cycle with Rising Average Selling Prices; AI PCs 80% of the PC Market by 2027E
- Maintain Structural Long View for AI PC Up-Cycle; Asustek, Acer, & Lenovo Well-Positioned Through 2025E
5. NVIDIA Q3FY25 Growth Story Still On Track But Heed The Flaws In Jensen’s GenAI Vision
- NVIDIA this week reported Q3FY25 revenues of $35.082 billion, up 17% QoQ, up 94% YoY and a full $2.5 billion above the guided midpoint.
- Looking ahead, NVIDIA is forecasting revenues of $37.5 billion, up ~7% sequentially. Gross margins to decline slightly to 73%.
- Contrary to Jensen Huang’s vision, the existing $1 trillion worth of data centers do not need to be “modernized” into AI factories. This is pure fantasy.
6. NVIDIA: Waiting on Blackwell, and the Networking Question
- Nvidia posted earnings yesterday, and guidance was light of buy-side bogeys. I’m not going to step into the mind game of bogeys here, but there are some finer points to focus on.
- NVIDIA reports Q3 EPS $0.81 ex-items vs FactSet $0.75. Reports Q3: Revenue $35.08B vs FactSet $33.17B (2 billion beat like clockwork)
- Q4 Guidance: Revenue $37.5B +/- 2% vs FactSet $37.09B (a bit light). GAAP and non-GAAP gross margins are expected to be 73.0% and 73.5%, respectively, +/- 50 bps. (also light)
7. For Its WFE Q324 Season Finale, AMAT Returns ASML’s Favour & Sinks Semis Yet Again
- Revenues of $7.05 billion were marginally higher than midpoint of $6.93 billion, up 4% QoQ and up 5% YoY. Guided current quarter at $7.15 billion +1.5% QoQ , +10.5% YoY
- Most WFE share prices have retreated to early 2022 levels, matching with when annual revenues first exceeded the $100 billion level
- After a 44% growth spurt in 2021, we have had three years with mostly no growth. We expect the same in 2025. Invest accordingly
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. SF Holdings A/H Listing – Lower End Looks Digestable
- S.F. Holding (002352 CH), China’s largest express delivery company, is now looking to raise around US$800m in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the IPO pricing.
2. Pony AI IPO – Autonomous Valuation
- Pony AI (PONY US), an autonomous mobility solutions provider, is looking to raise up to US$195m in its US IPO.
- As per Frost & Sullivan, Pony AI was among the first companies in China to obtain licenses to operate fully driverless robotaxis in all four Tier-1 cities in China.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
3. Kansai Electric US$3.5bn Deal Updates – Has Delivered a Decent Correction, as Compared to past Deals
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- In our earlier note, we talked about the placement and ran the deal through our ECM framework.
- In this note, we talk about the updates and share price performance since then.
4. DigiCo REIT – The Positives – Hot Sector with Built in Growth
- DigiCo REIT (DIGICO AU) aims to raise over US$1bn in its Australian IPO.
- DigiCo REIT (DREIT) aims to be a diversified owner, operator and developer of data centres, with a global portfolio and broad investment mandate across stabilised, value-add and development opportunities
- In this note, we talk about the positive aspects of the deal.
5. SF Holding H Share Listing (6936 HK): Valuation Insights
- S.F. Holding (002352 CH) has launched its H Share listing at HK$32.30-36.30 per share. Pricing will be on 25 November, and the listing on 27 November.
- We previously discussed the listing in SF Holding H Share Listing: Updates Point to Improving Fundamentals and SF Holding H Share Listing: AH Discount Views.
- Our valuation analysis suggests that the H Share listing range is attractive. We would participate in the listing.
6. SF Holding Pre-IPO: Deal Goes Live in HK, Company Hopes to Raise ~US$800 Mn, Less Than Anticipated
- SF Holding’s HKEX listing launched on Tuesday, November 19th; deal to be priced by 26th
- SF hopes to raise about US$800 mn, less than originally anticipated in financial media
- About one quarter of the offering will be taken up by ten cornerstone investors
7. LG Chem’s Tax Alarm: Pillar Two Tax Could Soar Next Year + LGES Block Deal on the Horizon
- The local market’s buzzing that LG Chem could face a 200-300 billion KRW tax hit from Pillar Two next year, with LGES ramping up U.S. production.
- LG Chem may be reconsidering its plan to sell 2% of its LGES stake, dropping ownership below 80%, shifting the tax burden to LGES instead of itself.
- Flagging this now—LG Chem’s tax burden looms. Consider shorting LGES or a long-short with LG Chem, plus prep for the 2T KRW block deal with the pre-disclosure process.
8. FineToday Holdings (289A JP) IPO: The Bull Case
- FineToday Holdings Co Ltd (289A JP) is a Japanese personal care business seeking to raise up to US$500 million. It will be listed on 17 December.
- FineToday has four product categories: Hair care, Skin care, Body care, and others. Hair care is the largest category, accounting for 49.0% of 9M24 revenue.
- The bull case rests on return to revenue growth, three-pronged growth strategy, top-quartile profitability and top-tier FCF generation.
9. Pre-IPO S.F. Holding (6936 HK) – Thoughts on Valuation and the Outlook
- One important reason S.F. chose to go public on Hong Kong stock market is due to financial pressure, which mainly comes from its heavy asset development model and internationalization strategy.
- Considering the discount of the H-share price versus the A-share price, if the IPO pricing is at the lower limit of the range, then the safety margin would be higher.
- In the short term, S.F. is better than JD Logistics, so its valuation should be higher than JD Logistics and industry average. Future valuation expansion depends on international business performance.
10. KDC REIT Placement – Accretive Acquisitions Should Garner Strong Support
- Keppel DC REIT (KDCREIT SP) is looking to raise S$600m (US$450m) from a primary placement. The proceeds will be used to acquire interest in two data centers in Singapore.
- The deal will be a large one to digest, accounting for 47 days of the stock’s three month ADV. That said, the acquisitions appear to be accretive to bottomline.
- In this note, we’ll run the deal through our ECM framework and comment on deal 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. 7&I (3382) – What If… A Modest Proposal
- A lot of the talk around the news that Ito family scion Ito Junro had proposed to Seven & I Holdings (3382 JP) an MBO was about thwarting Alimentation Couche-Tard.
- Several mentioned that this bid – seemingly uncompetitive at the moment – would make ACT back down. I discussed the bid and its repercussions here.
- Here I suggest an alternate solution which might get everyone what they want.
2. 7&I (3382) Ito Family MBO – New Urgency for ACT
- Days ago we got a dramatic headline about Ito family scion ITO Junro and his family company Ito Kogyo making a bid for Seven & I Holdings (3382 JP).
- The stock popped, then fell. Details were not clear. Was the ¥9trln an EV number? A market cap? Was he serious? How would he get funding. Skepticism was rife.
- Today we get more headlines from NHK. who says the family wants to raise ¥8trln to take 7&i private by end-Feb 2025.
3. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 6 Adds, 5 Deletes, Capping, US$3.5bn Trade
- Using data from the close on 15 November, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 16.9% and a one-way trade of TWD 57.5bn (US$1.77bn).
- Short interest is at the highs in most forecast deletes, while the trend is mixed among the potential inclusions.
4. TIP Taiwan Value High Dividend Index Rebalance: A Lot to Trade This Week
- There are 15 changes for the TIP Taiwan Value High Dividend Index in November. The Yuanta Taiwan Value High Dividend ETF (00940 TT) has an AUM of US$5bn.
- Estimated one-way turnover is 26% and there are 16 stocks with over 4 days of ADV left to trade. The rebalance commenced yesterday and will end on Friday.
- An equal weighted basket of inclusions has outperformed an equal weighted basket of deletions since July. That could continue over the week as the ETF continues to rebalance their portfolio.
5. TIP Customized Taiwan Select High Div Index Rebalance Preview: 32% T/O; US$2.75bn Trade; HUGE Impact
- The TIP Taiwan Select High Dividend ETF (00919 TW) tracks the TIP Customized Taiwan Select High Dividend Index and has an AUM of TWD 284bn (US$8.7bn).
- We forecast 8 changes a side at the December rebalance with an estimated one-way turnover of around 15.8% and a round-trip trade of around US$2.75bn.
- An equal weighted basket of potential inclusions has outperformed an equal weighted basket of potential deletions since beginning September with a pick-up in pace over the last 2-3 weeks.
6. SF Holding (6936 HK): No Index Inclusion till Mid-2025; AH Premium Could Stay Wide
- The S.F. Holding (002352 CH) H-shares are being offered at a price range of HK$32.3-36.3/share, a discount of 20.2%-29% to the A-shares. The max raise (including oversubscription) is US$912m.
- Unlike Midea Group (300 HK), the S.F. Holding (002352 CH) H-shares will not get Fast Entry to any indices. Southbound Stock Connect inclusion will take place on 23 December.
- With no index inclusion in the short-term, the H-shares discount to the A-shares should remain wide. The H-shares could become short sell eligible in February.
7. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for December
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 December.
- With no increase in the number of index constituents this calendar year, there could be inclusions in December. The process of getting to 100 index constituents could drag into 2026.
- Short interest is especially large in Sinotruk, Giant Biogene, Kuaishou Technology, ASMPT and JD Logistics and inclusion could set off some short covering.
8. Fuji Soft (9749): KKR To Launch at ¥9,451, Fuji Soft REJECTS Bain’s Bid – Governance in Shambles
- On Friday 15 November, KKR announced it would launch KKR Tender2 to buy the rest of FujiSoft not purchased in KKR Tender1. Their new price is ¥1 higher than Bain’s.
- Fuji Soft Inc (9749 JP) announced (J) it supported the KKR2 Tender and rejected the Bain TOB Proposal. KKR1 shareholders are “made whole” at ¥9,451/share. Minimum is 53.22%.
- The document, however, is a Governance Disaster – an absolute shambles, effectively gaslighting investors at every turn. And now investors can see it was problematic from the start.
9. Seven & I Holdings (3382 JP): Evaluating the Potential MBO
- Seven & I Holdings (3382 JP) did not dispute the NHK article’s claims that the founding family aims to raise buyout funds by the end of the fiscal year.
- Since 13 November, there have been conflicting press reports on the MBO offer price. The NHK article’s implied offer price of JPY3,082 seems the most credible.
- The MBO’s aggressive completion timeline pressures Alimentation Couche-Tard (ATD CN) to respond by either overbidding, working with the founding family at the back-end or walking away.
10. S&P/ASX Index Rebalance Preview (Dec 2024): Dexus and Spark NZ with Double Deletions
- With the review period nearly complete, there could be one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) in December.
- Both deletes are also deletions from a global index next week and there could be short-term buying/covering opportunities on a drop in the stock price.
- There has been a buildup of cumulative excess volume in all stocks over the last few months. There has been no increase in positioning in CAR Group (CAR AU) recently.
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. 2025 High Conviction Idea: Gold
- Gold prices have staged multi-year breakouts in multiple currencies, indicating a long-term bullish outlook.
- In addition, gold is on the verge of staging relative breakouts against global equity markets that point to multi-year outperformance ahead.
- The U.S. macro outlook calls for a re-acceleration of inflation, which is also positive for gold.
2. Trump Watch: Possible U-Turn on Tariffs?
- Our Geopolitical team is wrapping up an analysis on the escalating Ukraine-Russia conflict.
- In the meantime, here’s a piece we believe markets might not yet be fully tuned into:With Donald Trump and Elon Musk seemingly forming a close alliance, their influence on trade and economic policies has become a hot topic.
- Notably, Vivek Ramaswamy and Musk have thrown their support behind Javier Milei’s economic strategy in Argentina, which includes radical measures such as aggressive spending cuts and a commitment to reducing trade barriers.
3. EM as an Asset Class 2024
- EM sovereign debt has seen significant changes since the pandemic, but no wave of defaults has occurred
- China’s debt numbers are higher than Europe’s for the first time, impacting the global market
- Sovereign debt restructuring remains a complex and idiosyncratic process, with challenges ahead for debt dynamics and growth in the EM market
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
4. The Week at a Glance – The largest company about to report – fuel for the Nasdaq bet?
- Happy Monday! Welcome to our “Week at a Glance” series, where we highlight the key events and trends to watch for the week ahead.
- Monday:BOJ Ueda – Volatility IgnitedBank of Japan Governor Ueda’s remarks today set the stage for rising yen volatility, as he dodged giving markets a decisive signal on December’s rate hike prospects.
- With Ueda emphasizing data-dependency and the challenge of gauging the weak yen’s impact, traders are left grappling with a coin toss for December – keeping uncertainty alive.
5. Overseas Equity ETFs Surpass Domestic Equity ETFs For the First Time in 17 Years
- One of the biggest trends impacting the fund flow in Korea this year has been the huge capital inflow into overseas equity ETFs.
- The net asset value of the listed ETFs in Korea investing in overseas stocks surpassed the ETFs investing in domestic stocks for the first time in 17 years.
- The ETFs that invest in overseas stocks were 35.8 trillion won on 12 November 2024, up 111% from 12 January 2024.
6. Steno Signals #126 – Where did all the liquidity go?
- Happy Sunday, everyone! If you can’t show it in a meme, then it’s not true.
- That’s my modus operandi in the research business, and I stumbled upon this tremendous meme of the business cycle and how JPoww and his ilk respond to it.
- This has been the Fed’s operating model for a while: exaggerating the business cycle in both directions.
7. US Politics: “Liquid Gold”
- Donald Trump is committed to reducing energy prices by 50% within a year.
- However, uncontrollable factors may hinder this goal.
- As such, he may only achieve a modest success, if any.
8. Macro Regime Watch: An In-Depth Look at Regime Trends Across Major Markets
- Welcome back to Macro Regime Watch, where we dive into our nowcasting models to analyze Growth, Inflation, and Liquidity trends.
- Over recent months, we’ve dedicated substantial time to upgrading our models and refining the data we use.
- But the core question remains: how do we interpret the complexities of the macro environment, and how can these insights inform financial market strategies?
9. Major M&A Rule Changes Approved by the Korean Government
- On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by the Korean government.
- Revised rules have three specific goals: Improve rules on calculating and determining merger prices when M&As take place between nonaffiliated business entities, strengthen disclosure duties, and improve external evaluation system.
- If the Korean government is really serious about making positive rule changes, they need to apply these new laws not just for NON-AFFILIATED companies but more importantly for AFFIILATED companies.
10. Portfolio Watch: Stay Composed—The Trump Trade Is Still ON
- Happy Friday and welcome to our weekly Portfolio Watch.
- Many have been puzzled by the weakness in US markets towards the end of the week, with explanations largely pointing to an exhaustion of the Trump trade.
- This trade had been roaring across USD, USD bond yields, USD equities, and Crypto.
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. 2025 High Conviction: AI Chip Spend Slows
- AI spending is fueling today’s semiconductor market, as generative AI demand falls into place
- Hyperscale datacenters are doing the bulk of today’s spending as they invest in advance of demand
- These investments are falling into question, and spending is likely to level off or drop in 2025, leading to a dramatic semiconductor downturn
2. Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR
- Entegris Inc (ENTG US) – Memory spending is happening next year, but MSI remains weak.
- Astera Labs (ALAB US) – This is now the second way to play a levered Trainium ramp, as they have extensive content with Amazon.com Inc (AMZN US).
- Lattice Semiconductor (LSCC US) – Standard kitchen sink; I like the stock long-term.
3. Silergy (6415.TT): It Will Grow in 4Q24, While Auto Is Expected to Grow to 15% by the End of 2025.
- In the 3rd quarter of 2024, revenue was NT$4,284 million, the gross margin (GM) was 55%, the operating profit margin (OPM) was 24%, and the net margin was 15%.
- The Gen-4 product line is ramping up and is expected to contribute around 4% of total revenue by the end of 2025.
- Chinese current economic stimulus programs may impact demand in the Consumer segment.
4. Silicon Wafers Q324 Area Shipments, Revenue, EBIT, Outlook & More
- Silicon wafer area shipments in Q324 amounted to 3,214 million square inches (MSI), up 5.9% QoQ and up 6.8% YoY,
- Q324 saw the combined revenues from the top four players in the segment reaching $2.5 billion, up 0.5% QoQ and up 6.5% YoY
- Top 4 EBIT amounted to just $337 million, up 1.5% QoQ but down 38.9% YoY.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
2. Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
- JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).
4. Swiggy IPO Trading – Decent Anchor but Tepid Overall Demand
- Swiggy Limited raised around US$1.35bn in its India IPO, although the demand wasn’t great.
- Swiggy Limited is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.
5. SF Holdings A/H Listing – Thoughts on A/H Premium and past A/H Listings
- S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, is now said to be looking to raise around US$1-1.5bn in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premium.
6. ECM Weekly (11th Nov 2024)-SF Holdings, Swiggy, ACME, NivaBupa, Sagility, Eternal Beauty, Shuangdeng
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, Indian deals flow seemed to be the only one continuing unbated despite the US elections overhang from the past week.
- On the placements front, there weren’t many large deals but we did look at upcoming lockup expiries.
7. Sagility India IPO Trading – Lackluster Demand
- Sagility India (2058883D IN) raised US$250m in its India IPO.
- Sagility India (Sagility) is a pure-play healthcare focused solutions and services provider to Healthcare Payers and Providers.
- We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the trading dynamics.
8. ISU Petasys Rights Issue: Today’s Wild Price Action Has Opened up a Fresh Trading Angle
- I initially skipped this rights issue due to the tight 15% discount and lack of hedge options, but today’s 20% drop opens up a potential angle worth exploring.
- Today’s selloff stems from pushback on ISU Petasys entering the battery business, not just dilution concerns. This means there’s a high chance we’ll see a lot of leftover, unsold shares.
- The strategy is to grab stock rights cheaply or go for the public offering. The main risk is whether the 15% spread holds until listing, but the case is strong.
9. Initial Thoughts on the Klarna IPO
- On 12 November, Klarna announced that it confidentially filed public offering paperwork. The company is getting ready for an IPO in 1H 2025.
- Klarna’s valuation reached as high as $45 billion in 2021 which declined to as low as $6.5 billion. Its valuation has recently risen to about $14.6 billion.
- Klarna generated 13.27 billion SEK in revenue (US$1.2 billion) in 1H 2024 (up 27% YoY). Operating margin improved significantly from -18% in 1H 2023 to -2% in 1H 2024.
10. SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- SF Holding’s domestic parcel volumes have grown slower than overall market volumes recently; is this strategic, or simply a loss of share?
- SF Holding is not closely aligned with any of the large online retail platforms in China; ultimately, is this independence an advantage or a disadvantage?
- When will SF Holdings’ varied international operations — and there are a few of them — begin to pull their own weight, in terms of profitability and growth?
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. Meituan (3690 HK): Big Passive Selling in December
- The announcement of the changes to the Hang Seng indices is on 22 November, the capping will use the close on 3 December and implemented at the close 6 December.
- Meituan (3690 HK)‘s outperformance over the last couple of months will result in capping of the stock weight in all major indices and passives will sell stock.
- We estimate passive trackers will need to sell 35m shares (US$866m; 0.64x ADV) of Meituan (3690 HK) and that number will change over the next 3 weeks depending on performance.
2. 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
- The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
- There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.
3. KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
- Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
- There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.
4. Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value
- In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
- Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
- The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.
5. Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
- Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.
- Fast Retailing‘s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.
6. INDIA: Index Changes Due to the 45 New Additions to the F&O Segment
- The National Stock Exchange (NSEIN IN) has announced a list of 45 stocks that will be added to the Futures & Options (F&O) segment of the market from 29 November.
- There will be changes to the NIFTY Index, NSE Nifty Next 50 Index, S&P BSE SENSEX Index and the CNXIT Index over the next couple of rebalances.
- There are some interesting situations out there, including a change to the universe for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that could lead to more changes.
7. STAR Chip Index Rebalance Preview: 3 Potential Changes in December; US$450m Round-Trip Trade
- There could be 3 constituent changes for the STAR Chip Index at the December rebalance. There will also be a couple of capping changes.
- Estimated one-way turnover is 5.05% resulting in a one-way trade of CNY 1.6bn (US$225m). Passives need to trade between 0.6-1x ADV in the potential changes.
- The forecast adds have underperformed the forecast deletes over the last month but there has been a marked improvement in performance in the last week. Watch out for more.
8. NASDAQ 100 Index Rebalance: Lovin’ It as AppLovin (APP) Replaces Dollar Tree (DLTR)
- AppLovin (APP US) will replace Dollar Tree Inc (DLTR US) in the Nasdaq-100 Stock Index (NDX INDEX) after the close of trading on 15 November.
- Passive trackers are expected to buy over US$1.6bn in AppLovin (APP US) while they will sell around US$250m in Dollar Tree Inc (DLTR US).
- AppLovin (APP US) is the biggest tech name outside the S&P 500 INDEX (SPX INDEX) now and is a high probability inclusion to the index at the December rebalance.
9. NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
- On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
- The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.
10. CES China Semiconductor Chips Index Rebalance Preview: Three Changes in December
- There could be three changes for the CES China Semiconductor Chips Index at the close of trading on 13 December.
- Based on the assets tracking the index, passive trackers will need to trade between 0.1-0.3x ADV in the stocks.
- There will be selling in Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) to cap the stock at 10% of the index weight.
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 #125: EUR Liquidity Overtakes USD Liquidity – A Historic Shift
- Happy Sunday from Copenhagen.
- Bear with me this week through this long read as we approach an extremely interesting crossroads in sovereign bond markets, impacted by very tight liquidity.
- This story has been somewhat masked by policy events in the US and Germany, but it may nonetheless be the most important narrative for Q4, which is why you need to pay attention to it.
2. New Tariffs and China: THE BARK IS WORSE THAN THE BITE
- Trump’s approach to China will be more transactional based on trade and technology.
- China’s dependence on the US for its exports has declined over the last 6 years. ASEAN and other emerging markets are the engines for China’s export growth.
- The average tariff on China’s exports to the US will increase from its current level of 20% but may be tempered by a reciprocal import agreement with the US.
3. Flash Macro Watch: The Fed has abandoned its 2% target
- Following another reasonably hot U.S. CPI report yesterday, it’s time to dust off the old sell-side charlatan chart comparing today’s inflation to the 1970s.
- Honestly, I find this comparison absurd in many ways, as the drivers of inflation are different now.
- Still, there is an interesting resemblance, which got me thinking…Inflation in the U.S. is trending around 3-3.5%, and the Fed has made no progress over the past 3-4 months toward the 2% target.
4. US Politics: Promises, Promises
- Donald Trump has consistently advocated for the use of tariffs to address what he perceives as ‘unfair’ trade practices causing US trade deficits.
- His stance, whether used as a bargaining chip or not, is based on a Hobbesian view.
- This viewpoint poses a significant threat to the global economy.
5. Second Trump Presidency: Growth Focus Will Support Equities, but Challenge the Fed
- The decisive outcome of the US presidential election has significantly reduced the uncertainty facing financial markets due to their familiarity with President-elect Trump’s policies during his first term.
- President-Elect Trump has a complex past relationship with the Fed. There are fears that pressure will be exerted on the Fed to boost growth at the cost of higher inflation.
- US fiscal policy conduct will be closely monitored by the Treasury market which is discounting fewer policy rate reductions by the Fed in 2025. Fed policy conduct will remain data-dependent.
6. How to Trade the Trump Euphoria Rally
- We expect the stock market to rally into January, driven by corporate tax cut expectations, FOMO performance chasing and buybacks as the post-earnings season window re-opens.
- Expect stock prices to consolidate or pull back just before Inauguration Day.
- That’s when many of the unknowns of the Trump Administration’s initiatives will be better defined.
7. The Drill: A Look at Trump’s Policy and Their Impacts
- Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.
- This reduction hints at an unwillingness to increase production in the near future.
- Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.
8. Asia Geopolitics: Dealing with a More Trumpian World
- Asia Pacific economies benefit from a global order which preserves their sovereignty and allows them to prosper. Trump’s return puts some of these benefits at risk.
- Washington under Trump will continue to pursue its rivalry with Beijing, but Trump’s responses to crises in Ukraine and the Middle East could leave instability in its wake. =
- Washington’s allies in Asia will start “Trump-proofing” their defence strategies. Countries will hedge between the US and China while ramping up military spending.
9. Steno Signals #126: Disentangling the ECB Schnabel Speech – How Will QT Develop from Here?
- We’re at a critical juncture in sovereign bond markets, with liquidity running razor-thin and the game changing fast.
- German Bunds, traditionally rock-solid, are now trading through swaps and nearing zero on cross-currency swaps (ESTRON/SOFR) – a first in modern market history.
- The takeaway? Major central banks, especially the ECB, are pressing too hard on QT, and the markets are about to hit back hard if they don’t ease up soon.
10. Overview #12 – Not Another Trump Trade!Time to Fade?
- A review of recent events/data impacting our investment themes or outlook
- In the markets we follow, China, Gold and the JPY most impacted
- Which ones should we fade and where has the trend changed?