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. Fancl (4921) – Extendy-Extendy-Bumpity-Bumpity
- The Kirin Holdings (2503 JP) Tender Offer to buy out minorities in Fancl Corp (4921 JP) closes today. Or at least the current one does.
- The original deal announced was light, and the stock has traded above terms since the announcement, with one fund buying up to 7.94%.
- I expect Kirin to extend and bump next week, or bump/extend now, depending on their visibility on Fancl Q1.
2. Sep24 Nikkei 225 Rebal Final Predictions – Fastie Capped, Still 1 ADD, 1 DELETE, 1 Dark Horse and ?s
- The Sep 2024 Nikkei 225 Review base date is here. As before, I see one ADD, one DELETE, one capping, and one Very Dark Horse.
- The rules are clear, but not. This causes confusion. There may be unwritten rules keeping the Very Dark Horse out til next time.
- The Nikkei Index Team announced Fast Retailing (9983 JP) would be capped. I didn’t expect that now. That means $2.2bn+ of selling 30Sep and a reverse funding trade.
3. Rio Tinto (RIO AU/LN): Thinking About The “Unification”
- Just shy of three years ago, BHP (BHP AU) announced the unification of its dual-headed corporate structure to make BHP “simpler and more agile”.
- Collapsing DLCs/share-classes was all the rage back then. The prior year, Unilever (UNA NA) collapsed its DLC; and Royal Dutch Shell unified its A and B lines in 2021.
- Rio (RIO AU/LN) is one of only a handful of remaining DLCs. Renewed investor calls to unwind the DLC and the recent UK’s listing regime reform necessitate a rethink.
4. India: Potential Free Float Changes & Passive Flows in August
- Companies in India have disclosed their shareholding pattern as of end-June in July. There are companies with significant float changes from end-December and/or end-March.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- Depending on the date that the shareholding was published, there could be 12 stocks with passive inflows from global trackers while 5 could see passive outflows in August.
5. [JAPAN ACTIVISM] – Murakami Group Bigger and Bolder on Exedy – STILL Room to Run
- In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP). The market dropped. But that was an opportunity.
- There was an announcement, a ToSTNeT-3 buyback, the offering, and more buyback to come. On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.”
- Exedy is up 21% since. On 17 June, activist Murakami-san’s group went over 5%. Then they bought more. Now they have 15%. Or more. Still cheap. Still vulnerable.
6. Nikkei 225 Index Rebalance Preview (Sep 2024): Review Period Done; Fast Retailing Capping Confirmed
- The review period for the Nikkei 225 (NKY INDEX) September rebalance ended yesterday. There could be three changes at the rebalance with sector balance in focus for the additions.
- Fast Retailing (9983 JP)‘s capping in the index has been confirmed and its index weight will drop by around 0.9% resulting in big selling at the close on 30 September.
- Passive trackers will need to buy between 3.5-35x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-42.5x ADV on the deletions.
7. Japan – Passive Selling in a Few Weeks & Shorts Build Up
- Up to 12 stocks could be deleted from global passive portfolios in August. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
- There has been a buildup of shorts on nearly all these stocks though the extent of the pre-positioning varies.
- The increase in shorts is smaller than the estimated passive selling, though there is a fair amount of variability across the names.
8. True Wind Raises Partial Offer for Sun Corp Further, Leaving an Interesting Back End
- On 10 June, Sun Corp subsidiary Cellebrite DI (CLBT US)‘s SPAC sponsor True Wind Capital launched a Tender Offer for 19% of SunCorp at a premium but discount to NAV.
- The price was too low. CLBT shares rose. They lifted the TOB price by 8% to ¥4750. Still too low. It was trading there. Now they have lifted to ¥5500.
- Now a 49% premium to undisturbed, 29.4% premium to all-time high prior to the first tender. Changes in terms means this could get done. More bullish than it looks.
9. Merger Arb Mondays (29 Jul) – China TCM, Canvest, CPMC, GA Pack, Tohokushinsha, Furukawa, Tatsuta
- 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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), L’Occitane (973 HK), Qantm Intellectual Property (QIP AU), Alps Logistics (9055 JP).
10. CPMC (906 HK): Champion’s Offer Now Open. But All Eyes On ORG’s Tilt
- Back on the 6th December 2023, packaging play CPMC Holdings (906 HK) announced a pre-conditional Offer of $6.87/share, in cash, from SASAC/NCSSF-backed Champion.
- The Offer Document is now out. This is not a Composite Document. A “Response Document” is expected in two weeks, which will include the IFA opinion.
- All the above is moot. ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer is currently navigating the necessary regulatory approvals. With irrevocables, ORG has 46.44% in the bag.
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. Absolute Principles of Stock Investment (주식투자절대원칙) – A Book Review
- This insight is a book review of 주식투자절대원칙 (Absolute Principles of Stock Investment), which was written by a famous Korean retail investor called Park Young-Ok.
- Park tries to capture his 30+ years of investing wisdom. I thought this book was excellent, especially because Park included a lot of local flavor of his mindset in investing.
- This insight provides 11 major highlights of the book ‘Absolute Principles of Stock Investment.’
2. The Week At A Glance: Recession or not?
- We are likely approaching the point where the squaring party triggered by USDJPY is starting to impact market pricing and sentiment in nonsensical ways, as deleveraging is ongoing, even if the dust has settled a little.
- Markets are pricing a small “insurance premium” for the September FOMC meeting, leaving more than 25bp in the forward pricing despite a week of mostly hawkish surprises last week.
- Everything this week is about watching USDJPY price action again, as it has the potential to impact all assets.
3. The Tipping Point for China’s Debt
- Concentration of debt, asset prices, and fiscal deficit will determine the tipping point of China’s debt.
- If China does not continue to work on debt de-concentration, prop up its asset prices, or rein in fiscal deficit, China may as well face a debt crisis.
- To examine the conditions for China’s debt situation, it is vital to look at three key indicators of debt sustainability: concentration of debt, currency stability, and fiscal budget.
4. Technically Speaking, Breakouts and Breakdowns: HONG KONG (July 31)
- The energy, materials and tech sectors have lost momentum, while telecoms and utilities sectors lead the market. Consumer sectors are lagging. HSCI has dipped below its 200 day moving average.
- Hong Kong & China Gas (3 HK) breaks to the upside as investors seek safety and yield.
- PetroChina (857 HK) has broken down relative to the MSCI China index and Travelsky Technology Ltd H (696 HK) breaks down from a triangle formation but downside is limited.
5. Nowhere to Run to Baby, Nowhere to Hide! Part 3
- A lack of institutional investor interest in Hong Kong is a positive for once as the market is less influenced by international flows
- Investors are disappointed by the lack of short-term stimulus plans after the Third Plenum session
- What to do after the 17,500 level breached on the Hang Seng index?
6. Nowhere to Run to Baby, Nowhere to Hide! Part 2
- Are we witnessing a short-term carry-trade unwind or a trend change?
- A short-term bounce in the USDJPY will provide an opportunity to reposition
- Industrial metals take the brunt of the unwind in the commodity sector
7. How to Trade the Great Unwind
- U.S. equity investors saw a sudden and violent rotation from growth to value stocks and from large to small caps. The risk unwind is also evident in the currency markets.
- In the short run, some of our short-term equity indicators are oversold and flashed buy signals.
- Our base-case scenario calls for a short-term relief equity rally into August, led by small caps and value stocks.
8. Positioning Watch – Metals bets are finally being squared, but retail is piling in
- Markets remain focused on 2-3 rate cuts from the Fed, growth not rolling over fully, and inflation continuing its downward trajectory.
- There seems to be no way to change this narrative among market participants.
- The slightly hawkish PCE in the US and today’s relatively high German inflation print (in harmonized terms) had a hard time moving rates markets, which are currently pricing more than 2.5 cuts from the Fed and more than 2 cuts from the ECB by year-end, with Fed September pricing even showing a tiny lean towards 50 bps.
9. Heading Towards a Currency War? US and Chinese Policy Outlooks Suggest Trouble Ahead
- The US election campaign has taken significant twists in recent weeks, culminating with the removal of President Biden. Wall Street cannot be ambivalent about who wins in November, unlike 2020.
- The People’s Bank of China (PBoC) has unexpectedly lowered key lending rates, following disappointing Q2 economic growth. More aggressive interest rate cuts could happen once the Fed begins easing policy.
- Exchange rate movements in Q4 could be key to diffusing protectionist sentiment against China. Easier monetary policy in Europe and the US will force the PBoC to support China’s exporters.
10. Asset Allocation Watch – What to buy in the upcoming Fed cutting cycle?
- Markets are currently busy preparing for the upcoming cutting cycle from the Fed, expected to start in September.
- The simple playbook is often used when markets face a “high probability event,” and markets are now acting as if they know what’s ahead.
- A Fed cutting cycle is triggered by a recession; therefore, buy bonds, sell risk assets, and buy gold, etc.
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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. Is the AI Boom Over?
- Nvidia gave guidance for significantly slower Q/Q growth in Q2
- Nvidia and its HBM suppliers have told of shortages, driving hyperscale datacenters to build excess inventory
- At the first sign of softness, Nvidia’s customers are likely to enter a digestion phase, drastically reducing orders
2. ASML Readthrough: Are There Signs of an Industry Slow Down?
- ASML’s results last week indicated continued strength in the semiconductor industry. We analyze the results to identify any potential signs of weakening or pauses in global industry momentum for Taiwan.
- Net system bookings surged 54% QoQ and ASML reported rising utilization levels of its clients’ equipment. Inventory days rose significantly, but this is due to upcoming 2025 orderbook deliveries.
- New US, Europe, and Japan fabs bolster strong revenue outlook into 2026E. Overall, robust industry demand persists according to ASML’s latest data, with no major signs of softness.
3. Taiwan Tech Weekly: Strong TSMC & ASML Data Fails to Rally the Semiconductor Sector
- Taiwan Stocks Fall On Potential New U.S. Tech Restrictions for China & Potential Policy Shift from a Trump White House… Strong TSMC & ASML Results Fail to Rally the Sector
- Even Tighter Technology Restrictions for China? — US Could Use Special Rule to Restrict Selling of Products Made by Foreign Companies
- We See TSMC’s Margins Increasing Much Higher Than Guidance in Long-Term; 2Q24 Shows Apple Ramping Up
4. TechChain Insights: Call with Silicon Motion; QLC NAND Emerging as Key Enabler for AI Devices
- We had a conference call with Silicon Motion; the leading global provider of NAND flash controllers and solid-state storage solutions for the consumer, enterprise, and industrial markets.
- We focus on how Silicon Motion is leveraging advantages of QLC NAND flash memory, which is becoming a critical memory solution for new AI servers, AI PCs, and AI mobiles
- Maintain Structural Long rating for Silicon Motion and $102 valuation. The company is in a leading position to benefit from the rising importance of advanced memory controllers for AI applications.
5. Earnings: TSMC, AEHR, ASML, VAT Group, Export Restrictions
Aehr had a messy print, with the core business actually weaker than expected as they incorporated their recent acquisition. It’s hard to stay bearish, as they have a lot of potential product launches coming.
TSMC beat gross margins despite everything because of higher utilization. The logic cycle is starting to kick off in earnest. I believe WFE Capex will be much higher next year.
ASML talked up high-NA DRAM insertion on 25/26. Only Samsung could do it. Good luck, Samsung!
6. Taiwan Dual-Listings Monitor: TSMC and ASE Premium Trading Range Blow-Outs During Recent Sell-Off
- TSMC: Crashed Then Rebounded to +15.1% Premium; Likely to Break Down Again
- UMC: -0.2% Discount; Earnings Imminent; Notable Decrease in ADR Headroom
- ASE: Rebounded to +9.2 Premium After Major Breakdown; Likely to Drop Again
7. Semiconductor Equipment Stocks: A Bounce Before the Reckoning
- Irate U.S. politicians have gunned down their own tech sector, triggering declines of 7% to 20% among leading semiconductor equipment stocks outside China.
- We expect a bounce after such large declines – and further gains for Naura and AMEC in China.
- Investors now face difficult questions about the future of Chinese demand, the sustainability of the AI boom, and valuations. We are not optimistic.
8. Nidec (6594 JP): Buy into Current Decline
- If further restructuring can be avoided, profitability should return to an acceptable level while sales growth continues.
- The decline of EV prices has probably run its course and global demand for factory automation continues to rise despite weakness in China.
- Projected valuations are at a 10-year low. Investor attention can now shift to economic and operating risks.
9. ASE Color Suggests Widening Performance Gap Between Leading-Edge and Mature Semiconductor Players
- A TALE OF TWO SEMI INDUSTRIES: ASE’s latest earnings commentary indicates that the performance gap between “leading-edge” technologies and “traditional/mature” semiconductor technologies may be widening.
- CAPITAL REQUIREMENT TO KEEP PACE IS RISING: Capacity utilization is starkly different for traditional vs. leading-edge capacity; and capital requirements to keep up in terms of advanced capacity is rising.
- ENTRY BARRIERS RISING: We suspect that smaller players could face significant challenges in keeping up with the investments necessary for leading-edge packaging and testing capacity. ASE needs to invest heavily.
10. ASEH (3017.TT; ASX.US): Selective Products Have Hit Bottom While General Products Lag Behind.
- General products did not show an immediate recovery, but selective products have reached the bottom.
- The 3Q24 sales will grow in the mid to high teens QoQ in EMS, and IC-ATM sales will grow in the mid to high single digits QoQ.
- AI remains strong across all sectors. Despite AI SP driving the replacement cycle, other general demands still show muted recovery in 3Q24.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. ASICS (7936 JP): The Current Playbook
- Since the US$1.4 billion secondary placement announcement, ASICS Corp (7936 JP)’s shares are up 0.9% from the undisturbed price of JPY2,564 per share (12 July).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Asics’ shares have deviated from the pattern of previous large placements.
- The offering will likely be priced on 23 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.
2. ASICS Placement Updates – Share Pop Done, Now Needs to Correct
- A group of shareholders aims to raise around US$1.3bn via selling around 11% of ASICS Corp (7936 JP).
- 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.
3. Timee IPO Trading – Garnered a Strong Demand, Should Pop
- Timee Inc (215A JP) raised US$300m in its Japan IPO. The IPO had been a 100% secondary selldown by existing shareholders.
- Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
- We have looked at the company’s past performance in our previous notes. In this note, we talk about the trading dynamics.
4. Hyundai Motor India Pre-IPO – Thoughts on Valuation
- Hyundai Motor (005385 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we talk about valuations.
5. ECM Weekly (22nd July 2024) – Kokusai, Honda, ASICS, ZIP, Invincible, Hyundai, Premier, Timee, Sanil
- 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 IPO front, the coming week to see two more listing, with both likely to do well.
- On the placement front, Japan continued to dominate the ECM flows, with India, Taiwan and Australia joining in.
6. Korea’s New IPO Bookbuilding & Lockup Results Disclosure Rule, Effective from August
- FSS’s leaked IPO guidelines include new, highly attention-grabbing additions: specifically, the disclosure of extra information from the bookbuilding and lockup results not mentioned in May.
- Institutions submitting prices outside the indicative band must be disclosed by KRX investor type. Additionally, average placed price information for lockup-pledged investors must be disclosed.
- FSS will distribute new IPO guidelines this week and apply them from next month. Major IPOs like K Bank must disclose more detailed bookbuilding and lockup results, impacting trading dynamics.
7. Technically Speaking, Breakouts and Breakdowns: HONG KONG (July 24)
- BYD (1211 HK) shares had a breakout relative to the MSCI China index and showing good momentum during the low volume days of summer.
- POWER ASSETS HOLDINGS (6 HK) has shown a breakout relative to MSCI Hong Kong with a defensive business and 5%+ dividend yield.
- WH GROUP (288 HK) has also shown a breakout relative to the MSCI Hong Kong after its announcement of the spinoff of Smithfield Foods in the US.
8. Amer Sports IPO Lock-Up Expiry – PE Investor Might Look to Trim US$750m Stake
- Amer Sports (AS US) raised around US$1.3bn in its US IPO in Feb 2024, after pricing its IPO below its initial range.
- Amer Sports is a sports and outdoor brands company making clothing and other sporting equipment for use in snow sports, running, climbing, baseball, american football, tennis and other sports.
- In this note, we talk about the upcoming lock-up expiry and deal dynamics.
9. CONFIRMED: Bellevue raising
- Bellevue is raising capital through a placement and share purchase plan at a discount to the last close
- The purpose of the capital raise is to pay off debt and fund future growth, with operational pressure and hedges in place
- The company is shifting to a long-term growth story, with guidance for increased production and costs going forward
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10. Bloks Group Pre-IPO – The Positives – Wide Portfolio of Established IPs
- Bloks Group (1850960D CH) is looking to raise US$300m in its upcoming Hong Kong IPO.
- Bloks Groups (Bloks) operates in the toy segment where it primarily assembles character and brick-based toys.
- In this note, we will talk about the positive aspects of the deal.
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. Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
- Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
- The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
- Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.
2. Furukawa Battery (6937) – Ugly Process in Virtual Take-Under Take-Private
- Today after the close, Advantage Partners announced the intention to launch a TOB to take over Furukawa Battery (6937 JP) at ¥1,400 – a 26% premium to last.
- This will require substantial time to obtain regulatory and foreign investment clearances so it is anticipated the Tender Offer will be launched at end-March 2025. I expect that is conservative.
- The price paid to minorities is a premium. But the price paid by the buyer is actually a takeunder. And it gets worse from there.
3. The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True
- Discounts likely set for a re-rating as market continues to overreact to appointment of CEO amid good set of results.
- The discounts of both Naspers and Prosus have continued to widen since the appointment of Fabricio Bloisi to Group CEO was announced in May (effective 10 July).
- At the end of June, the group released its strongest set of results in years, delivering on consolidated ecommerce profitability ahead of target.
4. Fancl (4921 JP): Evaluating the Potential of Kirin (2503 JP) Offer Bump
- Kirin Holdings (2503 JP)’s JPY8,620 offer for Fancl Corp (4921 JP) closes on 29 July. The shares have traded above terms for 25 out of the 26 trading days.
- MY.Alpha Management has amassed 10.3 million shares (8.51% ownership ratio) with several purchases above terms. MY.Alpha could catalyse other shareholders to rally against a light offer.
- The emergence of MY.Alpha, the high volume above terms, peers re-rating, the required minority acceptance rate, and an offer unattractive to historical trading ranges increase the probability of a bump.
5. Canon Marketing (8060) – Finally Using Its Cash, But It Is Walking The Walk With No Talk Behind
- Today after the close, Canon Marketing Japan (8060 JP) announced a large Tender Offer Buyback from its parent company Canon Inc (7751 JP). Canon will tender 20mm shares (15.42%).
- This is a very capital efficient way to conduct a buyback from a parent, and an even better way for a parent to sell shares of a sub.
- This corporate action will reduce equity by 20%, and partially clean up the messy inter-company transactions which should not exist.
6. KRX’s Plan to Integrate KOSPI & KOSDAQ into a Tiered System: Trading Considerations
- The major framework of this realignment is likely decided, integrating KOSPI and KOSDAQ into a tiered system based on liquidity, market cap, and financial status, with periodic replacements.
- The KOSPI 200’s continued existence is uncertain under the new realignment plan, which may shift its role to the value-up index, resembling Japan’s market restructuring model.
- The first-tier market’s entry requirements will likely reflect value-up index criteria, suggesting greater speculative money movement toward the value-up index starting in September.
7. Tohokushinsha (2329 JP) – 3D Investment Partners Proposes Take-Private
- 3D Investment Partners, known to be activist-ish-y, purchased 18% of Tohokushinsha Film (2329 JP) in the 12 months to March 2024. They started a public activism campaign in February.
- The company has started down a better governance track, but now 3D has made a takeover proposal to Tohokushinsha, which will consider it under Special Committee.
- There are a couple of possible outcomes here which are interesting to consider. There are no other spoilers possible except those friendly to founders and management.
8. NIFTY50 Index Rebalance Preview: Big Flow, Big Impact, Big Positioning
- Trent Ltd (TRENT IN) and Bharat Electronics (BHE IN) are shoo-ins to replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) in September.
- Passive NIFTY Index trackers will need to trade at least 3.3x ADV and 7.7x delivery volume on the stocks. There is some opposite flow from Nifty Next 50 Index trackers.
- Cumulative excess volume has increased in all stocks but there are some stocks where there will still be more positioning over the next few weeks.
9. Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol
- 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: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Asia Cement China (743 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK).
- Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), Hollysys.
10. Sep24 S&P500 Index Rebal – Two Changes Expected; $6bn One-Way Flow and Two Spinoffs?
- 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.
- In this insight, we take a look at the upcoming constituent changes in the run up to the September 2024 index rebal event.
- We expect two regular changes during September. More interestingly, a couple of SP500 members are working on spin-offs which could trigger some high-impact deletions over the next few months.
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 #109 – What if We Are All Wrong on Liquidity, Rates and Commodities?
- Today, I am going to address three main topics of concern for investors given the current conflicting signals from the US economy.
- These are the key questions I will address, and I will summarize both the pros and cons of each viewpoint, including my own bottom line: Is liquidity no longer improving, but rather at risk of weakening in the coming months? Is the economy accelerating rather than slowing? Is the commodity complex heavily undervalued or overvalued?
- The equity rotation paired with the sharp sell-off in Tech has had me thinking, and we therefore need to litmus-test every corner of our current thesis. Follow along below.
2. Trump Trades and the JAPAN Market Are Like Oil and Vinegar
- Japan’s markets have again failed to break to new highs creating a potential for a double-top pattern.
- Trump’s policies which target lower interest rates and a weaker dollar will put pressure on Japan’s markets as can be seen from the high correlation between the JPY and TPX.
- Sectors such as trading companies, autos and semiconductors could see the most pressure under a Trump presidency.
3. The One Burning Question of the Great Rotation
- The stock market recently underwent a Great Rotation. Leadership violently rotated from growth to value, and from NASDAQ stocks to small-cap stocks.
- The reversal was accompanied by a sudden downdraft in the S&P 500. Is this the start of a correction?
- Even though breadth indicators are improving, which is bullish, we would not be so quick to buy any dip that appears.
4. South Korea Plans To Lower Inheritance Taxes
- On 25 July, the South Korean government announced that it plans to lower highest bracket inheritance taxes from 50% to 40%.
- This is a significant move since excessively high inheritance taxes has been one of the key reasons for poor corporate governance in Korea.
- A reduction in the highest bracket inheritance taxes from 50% to 40-45% is likely sometime in 4Q24 to 2025 which should help to improve corporate governance in Korea.
5. Positioning For Trump 2.0
- The betting odds on a Trump victory in November have risen substantially, but the markets haven’t fully discounted such an outcome.
- Investors who want to position for Trump 2.0 should seek long inflation exposure (long gold/short bonds) and short globalization (long domestic producers/short transportation and logistics).
- Notwithstanding the growth outlook, equity returns may be more challenging as Trump 2.0 will see the S&P 500 at more lofty multiples than the P/E ratio of Trump 1.0.
6. False Breakouts and Breakdowns – The Nikkei, Gold, Copper and the JPY
- Gold has signalled a false breakout and is likely to tread water for a couple of months.
- More strength ahead for the Japanese Yen and weakness for the Japanese markets?
- Copper signals further lows to come unless it rallies soon
7. EM Fixed Income: Goldilocks and the US election
- EM assets are being compared to other asset classes ahead of the US elections, with a general presumption that EM will be more negatively impacted by a Trump presidency.
- EM currencies have experienced some risk premium in the lead up to the elections, particularly in Latin America, but overall EM markets have not shown significant underperformance due to US election concerns.
- Valuation models that consider fundamental drivers do not indicate any significant risk premium being priced into EM assets for the US elections at this time.
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8. The Week At Glance: A look at US Cycle indicators. You sure consensus is right?
- Welcome to the “Week at a Glance,” where we examine the key releases and themes for the week ahead through the lens of macro trading.
- China has reduced the 7-day repo rate by 10 basis points, following up with a cut in the loan prime rate.
- This move mirrors the strategy from June 13, 2023.
9. Business Cycle Watch: Why Sweden’s Resurging Momentum is a Must Watch
- In this brief update on the business cycle, we will present a comprehensive overview of the current economic situation in Sweden.
- The Riksbank initiated its first rate cut in May, and we anticipate additional cuts throughout the autumn.
- This makes Sweden an ideal “live-studio” for observing the effects of early rate cuts on the economic cycle.
10. Trading Trump 2.0
- Donald Trump’s running mate, JD Vance, discussed economic policy during his nomination speech.
- Further investigation provides some insight into what these policies might look like in practice.
- However, understanding the specifics of a potential ‘Trump Trade’ policy remains difficult.
SINGAPORE, 26 July 2024: Smartkarma, the independent investment research network, is excited to announce the addition of two distinguished Insight Providers to its platform, further enriching the depth and breadth of coverage available to subscribers.
These new additions will provide actionable, data-backed insights, offering a comprehensive view of the global economy.
Vincy Ip joins Smartkarma with over a decade of experience in the healthcare sector, particularly in the Greater China region. She has held key positions at UBS and CLSA, leading the MedTech sector and achieving top client interaction rankings. Her career also includes roles at BNP Paribas, Goldman Sachs, and Morgan Stanley.
Vincy’s strength lies in her extensive industry connections and her ability to deliver in-depth, actionable insights. She combines a strong regional focus in Greater China with a keen understanding of global healthcare trends, especially in Japan, Korea, and the US. Vincy is also adept at organizing investor trips and field visits to engage with key healthcare players across Hong Kong and China.
Alex Ching-Yiu Ng is a seasoned macro researcher and analyst with a robust background in economic, investment, and quantitative research. He has served as an Asia economist at Continuum Economics and as a researcher at the Asian Institute of International Financial Law. His career includes providing insights into economic and political risks in China and the Asia-Pacific region for clients like Siemens and Daimler.
Alex’s unique edge comes from his diverse experience across government economics, academia, and custodian banking. He founded Fortress Hill Advisors in 2019, leading a team dedicated to delivering premium macro economic and financial research, focusing on regions such as Hong Kong, China, and the US.
Stay in the loop and check out their exclusive insights on Smartkarma.
About Smartkarma
Smartkarma is the independent investment research network that provides differentiated, independent analysis on companies, markets, and industries across the world. Smartkarma’s online platform empowers asset managers and private accredited investors who want to access market-moving, differentiated intelligence; corporates who need to maximise their outreach; and analysts who wish to reach global investors with their written reports and bespoke services. In 2021, Smartkarma received the Knowledge Enterprise Award at the Singapore FinTech Festival Global FinTech Awards. Smartkarma is backed by notable investors such as Sequoia Capital, SGX, Wavemaker Partners, Jungle Ventures, and Enterprise Singapore. Learn more at smartkarma.com
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 Monitor: TSMC Rebounds After Sharp Breakdown; ASE Major Premium Breakdown
- TSMC: +17.9% Premium; Rebounds After Brief Breakdown; Wait for Better Levels
- UMC: +1.8% Premium; Can Consider Shorting the Premium at Current Level
- ASE: +5.5% Premium Represents a Major Breakdown; Can Consider Going Long
2. TSMC (2330.TT; TSM.US): The Outlook of 3Q24 Is Pretty Much In-Line, and GM Could Be Better.
- TSMC expects sales to grow by mid-20% YoY in USD in 2024, compared to low to mid-20% previously.
- The N3/N5 capacity is very tight, and they are even working with customers for 2026 capacity requirements, while N2 is on track to enter MP in 4Q25.
- A16 will enter MP in 2H26, and it’s first process starts adopting backside power.
3. We See TSMC’s Margins Increasing Much Higher Than Guidance in Long-Term; 2Q24 Shows Apple Ramping Up
- Significant revenue guidance hike — TSMC reported 2Q24 results, increasing 2024E revenue growth guidance to exceed ‘mid-20’s’ percent, a significant hike from previous guidance.
- Management is low-balling LT margins — Latest figures and long-term margin color makes us believe that TSMC will be able to increase GM much higher than current official LT guidance.
- Signs of Apple expecting strong iPhone 16 sales — TSMC reported strength in smartphone end-applications and we believe this is reflective of Apple ramping up re: stronger iPhone volume expectations.
4. MediaTek (2454.TT): 3Q24 Might Grow Slightly QoQ, While AI PCs Could Be Delivered in 2H25.
- Mediatek Inc (2454 TT) is forecasted to experience slight growth in 3Q24 compared to 2Q24.
- Qualcomm Inc (QCOM US) is expected to introduce AI PCs in 2024, while Mediatek Inc (2454 TT) scheduled for this product is anticipated to delivered in 2H25.
- The shipment forecast for the Dimensity 9400 is approximately 5 million sets in 2H24.
5. TSMC. Take The Pullback Gift
- TSMC guided Q324 revenues of $22.8 billion at the midpoint, up 9.5% QoQ and up 32% YoY
- Increased full year guidance to be above mid-20% YoY growth in US dollar terms
- Share price has declined ~14% from its 52 week high but still up >2x from its 52 week low. Many will view this pullback as a gift, we certainly do…
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. The Honda (7267) Offering – Much Easier Than It Looks
- At the beginning of this month, we got a scoop from Reuters about a US$3bn selldown of Honda Motor (7267 JP) by P&C insurers and others.
- We knew this was coming at some point. The FSA had pushed the insurers to unwind cross-holdings, and it is otherwise of the zeitgeist.
- It came out as heavily retail-oriented, and the supply/demand details are otherwise interesting. To boot, there is an EPS boost to come.
2. ASICS Placement – Needs to Correct, but Watch Out for the Revision Impact
- A group of shareholders aims to raise around US$1.3bn via selling around 11% of ASICS Corp (7936 JP).
- For the two large banks, this will be a cleanup of their cross-shareholding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Big Honda (7267) Offering – Flow Timing Matters
- The ¥500bn Offering of Honda shares is now priced (¥1,664.5/share) making it ¥497.46bn. Bookbuilding for retail – 80% of the book – is now. The price today closed at ¥1,665/share.
- The Offering has follow-on “non-discretionary” demand which is non-negligible. It is worth understanding the amounts and timing.
- The lockups and non-discretionary demand, along with Honda’s relative cheapness as a large cap OEM and likely upcoming offerings on competitors means it has support.
4. Hyundai Motor India Pre-IPO – Peer Comparison – Doesn’t Stand Out
- Hyundai Motor (005380 KS) is looking to raise around US$3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous note, we looked at the company’s past performance. In this note, we undertake a peer comparison.
5. Honda (7267 JP): The Current Playbook
- Since the US$3.3 billion secondary placement announcement, Honda Motor (7267 JP)’s shares are down 5% from the undisturbed price of JPY1,791 per share (4 July).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Honda’s shares have followed the pattern of previous large placements.
- The offering will likely be priced on 17 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.
6. Timee IPO: Forecasts and Valuation
- Timee has set an indicative IPO price range of ¥1,350-1,450 per share and will raise US$280m (at the midpoint) where existing shareholders will sell down part of their ownership.
- We expect Timee’s earnings to grow as the company is still in its early stages and with further growth in scale, we expect Timee’s margins to continue to expand further.
- Our analysis shows that Timee Inc (215A JP) IPO is valued attractively as the company has better-than-peer margin profile which suggests that there is further upside to implied valuation multiples.
7. Honda Motor Placement – Past Large Deals Analysis – Could Do with a Bit More Correction
- A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP).
- The possibility of such a selldown was flagged by Reuters prior to the deal launch.
- In our earlier note, we spoke about the deal dynamics. In this note, we talk about the updates since then.
8. ECM Weekly (15th July 2024) – Kokusai, Wiwynn, Kelun-Biotech, Timee, Shift Up, Sanil, Avanse
- 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 IPO front, there were a number of listing in the past week, most of which performed as per our expectations.
- On the placement front, Japan continued to dominate the ECM flows.
9. Sanil Electric IPO Book Building Results Analysis
- Sanil Electric reported excellent IPO book building results. The IPO price has been determined at 35,000 won, which is 16.7% higher than the high end of the IPO price range.
- The demand ratio from 2,205 institutional investors was 414 to 1. Sanil Electric (062040 KS) IPO will start trading on 29 July 2024.
- Our base case valuation of Sanil Electric is market cap of 1.8 trillion won or target price of 58,593 won (67% higher than the IPO price of 35,000 won).
10. Gigabyte GDR Offering – Not Wholly Convinced, but Discount at Wide End Is Inline with the Average
- Gigabyte Technology (2376 TT) is looking to raise up to US$307m in its global depository receipts (GDRs) offering. The firm is also looking to raise another US$300m via convertible bonds.
- Similar to previous GDR listings, the firm has undergone a long drawn out process prior to launching the deal, having to jump through a number of board/shareholder/regulatory approval loops.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.