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.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
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.
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. Asics (7936 JP): Huge Forecast Revision to Offset Limited Passive Buying
- 15 shareholders are looking to sell between 73.9-85m shares (US$1.2bn-US$1.38bn) of ASICS Corp (7936 JP) in a secondary offering that will likely be priced on 23 July.
- ASICS Corp (7936 JP) has also announced a huge upward revision to its sales and profit forecasts with EPS expected to increase 61% from earlier estimates.
- Passive buying will be extremely limited in the short-term with the downward pressure offset to a large extent by the sales and earnings revisions.
2. Samson Holding (531 HK): Chairman’s Scheme Privatisation at HK$0.48
- Samson Holding (531 HK) disclosed a Cayman scheme privatisation offer from Mr Samuel Kuo (Chairman) at HK$0.48 per share, a 77.8% and 50.0% premium to undisturbed and last close price, respectively.
- The key condition will be approval by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection). The offer price is final.
- The attractive takeover premium, lack of shareholders holding a blocking stake, and low AGM minority participation rate point to a done deal. However, this is a small cap illiquid stock.
3. China Traditional Chinese Medicine (570 HK): Update Provides Fodder for Bulls and Bears
- China Traditional Chinese Medicine (570 HK)’s monthly update provides ammunition to both the bulls and bears. Since falling on no news on 26 June, the spread has widened to 31.8%.
- The bull view is that while the timelines are delayed, the privatisation remains on track as the update shows ongoing progress in satisfying the pre-condition.
- The bear view is that progress remains glacial, as the consortium wants to withdraw from a binding offer by failing to satisfy the pre-condition before the long stop date.
4. Hong Kong: Stocks Facing the Passive Boot in August
- There are a bunch of stocks listed in Hong Kong that have underperformed the HSCEI INDEX and their peers and could be deleted from global passive portfolios in August.
- The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
- There has been a big jump in cumulative excess volume in some stocks and the A/H premium on a lot of the names has jumped over the last few months.
5. Japan – Yet Another Big Round of Passive Selling Expected in August
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in August.
- The deletion from passive portfolios will lead to a liquidity event at the end of August where passive trackers will need to sell multiple days of ADV.
- Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.
6. Merger Arb Mondays (15 Jul) – China TCM, Canvest, Henlius, Hollysys, Second Chance, Anasarda, Rex
- 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), A8 New Media (800 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP).
7. Doosan Group: Index Implications of the Corporate Restructuring
- The Doosan Group are planning to restructure Doosan Enerbility (034020 KS), Doosan Bobcat Inc (241560 KS) and Doosan Robotics (454910 KS) by reorganizing the business structure to find synergies.
- Doosan Enerbility will spin-off its stake in Doosan Bobcat and merge it with Doosan Robotics. Doosan Robotics will then look to acquire full control of Doosan Bobcat via a share swap.
- There could be an adhoc inclusion to the KOSPI200 INDEX at the end of October and global passives will buy Doosan Robotics (454910 KS) at the time of merger completion.
8. S&P/ASX Index Rebalance Preview: Potential Changes from Now to September
- With nearly 80% of the review period complete, there could be 28 adds/deletes across the S&P/ASX family of indices in September.
- There is a lot of stocks for passive trackers to trade on the index changes with the largest impacts on the potential changes to the S&P/ASX 200 (AS51 INDEX).
- The potential adds have outperformed the potential deletions by a LOT over the last few months and continued positioning could lead to further gains.
9. MMG (1208) – Rights Results Show High Take-Up, Small Unhedged Portion
- Friday post-close, MMG (1208 HK) released the results of its Rights Offering. 3.4654bn Rights Shares at HK$2.62 saw 98.18% take-up. New Rights Shares officially start trading on 16 July.
- The other 1.82% (63.1mm Rights Shares) saw 6.383bn excess Rights Shares applications. EAFs were allocated evenly, so applicants got 0.99% of what they bid for, but hey, free money?
- The new Rights Shares are expected to commence trading on 16 July. Even better, there was good fundamental news out late Sunday which should add to the general wellbeing.
10. Kokusai Electric Placement Updates – Misbehaving
- KKR and KSP Kokusai Investments are looking to raise approximately US$1.7bn through an extended secondary follow-on offering, via selling approximately 22.3% of Kokusai Electric (6525 JP).
- We have looked at the lockup expiry and deal dynamics in our earlier notes.
- In this note, we talk about share price performance since then.
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. Investment Strategy Under Upcoming US Rate Cut
- In face of the recent speeches by several FOMC members, we are changing or non-consensus view of no rate cut this year to one rate cut in September
- Under rate cuts, several asset classes such as real estate stocks, gold, and other safe haven currencies will rise.
- However, we still believe there will not be continuous series of rate cuts in the remainder of this year such that various asset classes listed above will only rise modestly.
2. Launch of Korea Value Up Index in September
- Korea Value-Up index is finally expected to be launched in September 2024 which is likely to include at least 100 companies in KOSPI and KOSDAQ.
- There are expectations that Korea’s Value Up index could resemble JPX Prime 150 index which is a Japanese version of the value up index launched last year.
- We provide 70 stocks in Korea that could be included in the Korea Value Up index. These 70 stocks could outperform the market in the next several months.
3. The Hang Seng Index Is at a Critical Juncture
- In the short-term, meaningful policy reforms needed out of the Third Plenum
- Chinese data continues to be lacklustre as expected while markets tread water
- What can we expect from the Third Plenum to galvanise the next stage
4. Equity Watch: The Trump versus Biden Basket
- We’ve received loads of feedback from our clients regarding our Trump versus Biden basket.
- As a result, we will provide a detailed breakdown of both baskets and explain the rationale behind each.
- We are updating the baskets regularly based on the political proposals of the two candidates.
5. Steno Signals #108 – A messianic Donald
- Happy Sunday from Copenhagen after the atrocious assassination attempt in Pennsylvania late Saturday.
- Trump was apparently struck by some fragments but managed to raise his fist and greet his supporters in a strong show of defiance as he was escorted off the stage.
- This incident will undoubtedly dominate the campaign in the coming days and weeks, transforming his appearance at the upcoming Republican Convention into a near-messianic event.
6. The Week At A Glance: Another inflation shocker in the UK paired with a rebound in US retail sales?
- Morning from Europe! Remember that we release our “Week at a glance” publication instead of the “Something for your Espresso” every Monday before lunch-time.
- Our aim is to digest the release calendar in an actionable way and assess the risk/reward around the macro themes in the context of the economic release calendar.
- This week, we will focus on the US consumer (Retail Sales), UK inflation (CPI) and the EUR rates (ECB meeting).
7. Technically Speaking: Breakouts & Breakdowns: HONG KONG (July 17)
- China State Construction International and Sinopec Engineering have short term reversal patterns indicating profit taking from recent advances.
- China Resources Cement reverses downtrend with volume indicating some near term gains after reporting that 1st half profit was under pressure.
- Yum China continues to show downward pressure given the increasing competition in the retail food segment, while Nongfu Spring collapses on news about the safety of its products.
8. Where US Stocks Are Heading Before Rate Cut
- To assess US equity direction before rate cut, we must first forecast the next rate cut. Our house forecasts that there will only be one rate cut during 2024.
- We believe S&P500, after hitting all-time high this week is due a 10% correction until the rate cut in September. Rate cuts are essential for S&P500 to tread new high.
- But we believe the rate cut is going to be one-off as the labor market remains bullish and inflation still comes off a tad higher than the Fed target.
9. China: Second Quarter 2024 GDP Growth
- China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7%.
- That’s slower than the 5.3% year-on-year GDP increase in the first quarter, and misses the 5.1% expectation.
- Retail sales for June missed expectations, while industrial production figures beat.
10. Great Game – Trump: Election or Coronation?
- We cover the Trump assassination attempt in other spaces, so in this we’ll focus on the political fallout and touch upon other relevant topics, including the Chinese Policy Plenary.
- Firstly some thought on Trump picking J.D. Vance as his running mate.
- As a staunch Trump supporter, Vance represents a more grassroots, anti-establishment figure compared to others like Nikki Haley.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. TSMC’s June Revenue Declined 9.5% MoM. Should We Be Worried?
- June 2024 revenues of NT$207.87 billion, a decrease of 9.5% MoM but an increase of 32.9% YoY
- Q224 revenue of US$20.9 billion, $457 million above the high end, up 10.5% QoQ and up 33.7% YoY. It was also TSMC’s highest revenue quarter ever
- At NT$1,266,154 (around US$39 billion), TSMC’s YTD revenues are up 28% YoY, well in line with the company’s forecast for a >20% YoY increase in 2024.
2. Taiwan Tech Weekly: TSMC Sales Beat High Expectations; Wiwynn GDR Offering; IPhone 17 to Use 2nm
- TSMC June Sales Surge Higher Than Expectations; Apple Will Be Use TSMC’s 2nm Node for Next Year’s iPhone 17
- Wiwynn GDR Offering – US$1.45bn Dilutive Offering, but Momentum Has Been Very Strong
- Silergy (6415.TT): Trial-Run with Vanguard, and Recent Stock Drops Represent an Entry Opportunity.
3. Taiwan Dual-Listings Monitor: TSMC Spread on Brink of Falling to Past Levels; UMC Extreme Premium
- TSMC: +15.1% Premium; Will It Break Down to Lower Past Trading Levels?
- UMC: +2.4% Premium; Can Consider Shorting This Historically High Level
- ChipMOS: -3.1% Discount; Long The Spread Given Historically Extreme Discount
4. TSMC (2330.TT; TSM.US): The 25% YoY Growth Rate Will Be Expected in 2024.
- Taiwan Semiconductor (TSMC) – ADR (TSM US) could reach a growth rate of 25% YoY this year, with a very promising outlook for 2025.
- Artificial Intelligence (AI) remains the primary focus, with plans to continue expanding capacity in 2H24 and 2025.
- The demand from Apple (AAPL US) is expected to drive higher growth in 2H24.
5. An Interview with Wes Cummins, CEO of Applied Digital
- Doug O’Laughlin: Today, on Fabricated Knowledge, I have the privilege of having Wes from Applied Digital on to talk about Applied Digital.
- Today, we’re gonna talk about the change in his business model. The company is experiencing a lot of changes, and there are a lot of new things in the pipeline.
- And so I just wanted to sit him down and have an opportunity to chat about that.
6. Vanguard (5347.TT): The Utilization to Improve over 70% in 3Q24.
- We expect Vanguard’s utilization to improve from around 65% in 2Q24 to over 70% in 3Q24.
- Qualcomm Inc (QCOM US) and Monolithic Power Systems, Inc (MPWR US) are gradually increasing demand volume in 2Q24 and 3Q24.
- Currently, Vanguard is experiencing a correction from above NTD$142 on July 2nd.
7. Automotive: Rev Your Engines
- I’m calling a very definitive bottom in Automotive semiconductor stocks. I’ve been mixed on automotive for quite some time, and as recently as April, I was bearish.
- It all started when China decided to dump cheap EVs globally, which made me extremely concerned about Western automotive companies.
- Hell, I’ve been bearish on WOLF since March of 2023 and wrote not one but two notes about how Silicon Carbide looks like it’s in a rough spot.
8. Nanya Technology: Latest Results & Guidance Make 2024E Consensus Hard to Achieve; Underperform
- Nanya Tech reported a continued net loss in its latest 2Q24 results; the company’s gross margin has rebounded into positive territory but only marginally so.
- Server end demand strong, however PC and mobile remain flattish; the company expects some improvemnt in PC and mobile driven by AI trends but conservative on the impact for 2024E.
- We believe the Street may need to reduce their 2024E estimates; margin rebound is too small and guidance remains very conservative. We see near-term downside risk for Nanya Tech shares.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. KKR To Sell a 20-22% Stake in Kokusai Electric (6525)?
- Today, a Reuters article came out saying that KKR would sell down half its 43% stake in Kokusai Electric (6525 JP) according to “two people familiar with the matter.”
- The article also said Kokusai Electric would buy back shares. Kokusai responded with a TDNET release saying “we did not release this info but we are considering various capital policies.
- It pays to look at the Shareholder Structure as it stands. This is bigger than it looks.
2. Kokusai Elec (6525) ¥300bn+ Offering at ATH – Almost a Second IPO
- Today post-close we got confirmation of yesterday’s Reuters scoop of a secondary selldown on Kokusai Electric (6525 JP) after the stock fell 7.2% in heavy volume.
- KKR HKE LP and KSP Kokusai LLC (Koch) will together sell 52.5mm shares plus another 7.8mm+ in the greenshoe. Split is 50/50 domestic/international.
- This is 60+mm shares against 51mm shares held by non-passive holders ex-Capital (who has been selling). It’s a lot of stock at a high price.
3. Timee Pre-IPO – Thoughts on Valuation – Primed for a Decent Upside at the Current Range
- Timee Inc (215A JP) is looking to raise US$290m in its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
- Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
- In an earlier note, we looked at the firm’s past performance and peer comparison. In this note, we discuss our thoughts on valuation.
4. Kokusai Electric (6525 JP): Rumoured KKR US$1.8 Billion Secondary Offering
- Reuters reported that KKR & Co (KKR US), the largest Kokusai Electric (6525 JP) shareholder, plans to sell about half of its 43% stake, worth around JPY300 billion.
- As Kokusai’s shares are trading at 3.2x the IPO price of JPY1,840, KKR would be tempted to reduce its stake further. The 180-day IPO lock-up period expired on 22 April.
- Kokusai anticipates a return to growth and margin improvement. However, Kokusai trades at a material premium to peer multiples and is fully priced.
5. HUGE Asics (7936) Offering – Big Guidance Boost at ATH So Feed the Ducks When They Are Quacking
- Today after the close, ASICS Corp (7936 JP) announced a very large secondary offering. It points out that as a global brand, it needs global-standard corporate governance.
- As such, it says they’ve been discussing sales with crossholders. But we knew the cross-holders were going to sell. This offering is 85mm shares, ¥210bn at last. That’s big.
- The stock has doubled year-to-date. Today they raised FY guidance BIGLY (+60% OP and NP). Now a huge offering. This seems like a “feed the ducks when they’re quacking” situation.
6. Wiwynn GDR Offering – US$1.45bn Dilutive Offering, but Momentum Has Been Very Strong
- Wiwynn Corp (6669 TT) is looking to raise around US$850m in its global depository receipts (GDRs) offering.
- Similar to previous GDR listings, the deal is a long drawn out process with the firm required 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.
7. ECM Weekly (8th July 2024) – Japan Cross-Shareholding, Honda, Aisin, Timee, Chenqi, Cirrus, Emcure
- 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, we looked at the recently launced offerings of Timee Inc , Chenqi Technology Limited and Cirrus Aircraft.
- On the placement front, this week too was dominated by the cross-shareholding unwinds, this time in Honda Motor (7267 JP).
8. Trading Strategy of Shift Up on the First Day of IPO
- In this insight, we discuss a trading strategy for Shift Up which starts trading on 11 July. Shift Up is one of the most anticipated IPOs in Korea this year.
- Our base case (6 months – 1 year) target price of Shift Up is 95,510 won, which is 59% higher than the IPO price.
- We recommend investors to take some profits (about 50% of invested capital) if the share price shoots higher by 100% or more from the IPO price on the first day.
9. Kelun-Biotech IPO Lock-Up Expiry – Strong Performance Leaves Pre-IPO Investors with Large Gains
- Kelun Biotech (KB) raised around US$170m in its IPO in July 2023, the lockup on its pre-IPO shareholders is set to expire soon.
- KB is a China-based integrated innovative biopharmaceutical company. It has accumulated more than ten years of experience in antibody drug conjugates (ADC) development.
- In this note, we talk about the upcoming lock-up expiry and possible deal dynamics.
10. ASICS (7936 JP): A US$1.4 Billion Secondary Offering
- ASICS Corp (7936 JP) has announced a secondary offering of up to 85.0 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY218 billion (US$1.4 billion).
- Asics’ goal with the secondary offering is to eliminate cross-shareholdings. Asics also announced a material upgrade to full-year forecasts to offset the impact of the offering.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 23 and 26 July (likely 23 July).
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. Nikkei 225 Index Rebalance Preview (Sep 2024): Potential Adds/Deletes, Capping & Funding Changes
- The review period for the Nikkei 225 Index September rebalance ends in three weeks. There could be three changes at the rebalance with sector balance used for the additions.
- Depending on the changes, passive trackers will need to buy between 3-57x ADV (2.4%-24% of real float) on the inclusions and sell between 3.7-8.4x ADV on the deletions.
- Fast Retailing (9983 JP)‘s index weight is currently higher than 10% and that will result in capping in September. Passives will need to sell 6x ADV in the stock.
2. S&P/ASX 100/200 Index Adhoc Rebalance: Potential Replacements for Altium (ALU AU)
- With all regulatory approvals received, the Scheme Meeting for Renesas Electronics (6723 JP)‘ acquisition of Altium Ltd (ALU AU) will take place on 12 July.
- If approved at the Scheme Meeting and at the Second Court Hearing, Altium Ltd (ALU AU) will stop trading from the close on 19 July.
- The replacements for Altium Ltd (ALU AU) in the ASX100/200 indices could be announced late this week with implementation at the close on 19 July.
3. Toyota Group Cross-Holding Structure Primer – Holdings, Unwind Progress, Buyback Policies, Etc
- Last September in the release of its new Mid-Term Management Plan, Toyota Group member Aisin (7259 JP) announced a plan to cut cross-holdings to zero. JTEKT Corp (6473 JP) followed suit.
- It started with a selldown of Denso Corp (6902 JP), then Toyota Industries (6201 JP), now Aisin. Last FY, Toyota Group cos reduced crossholdings by ¥870bn. This year will be more.
- Attached below is a general breakdown of Toyota Group cross-holdings, discussion of cross-holding policies, and analysis of what is next, and what is not.
4. Kokusai Electric (6525 JP): Placement, Buyback & Index Flows
- KKR and KSP Kokusai will offer 52.51m-60.38m shares (US$1.76bn-2bn) of Kokusai Electric (6525 JP) in a secondary offering that will likely be priced on 22 July.
- Kokusai Electric (6525 JP) will also buy back up to JPY 18bn of its shares. At the last close, that is 3.33m shares (1.2x ADV).
- Trackers of one global index will buy stock at the time of settlement of the shares. The (much) bigger buying will come at the end of August.
5. Merger Arb Mondays (08 Jul) – China TCM, L’Occitane, A8 Media, GA Pack, Asia Cement, Hollysys, MMA
- 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), A8 New Media (800 HK), Greatview Aseptic Packaging (468 HK), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Chilled & Frozen Logistics Holdings (9099 JP), Tatsuta Electric Wire & Cable (5809 JP), Kfc Holdings Japan (9873 JP).
6. Fast Retailing (9983) – Great (Bte) Earnings Now Out of The Way; Anticipating End-July Capping Data
- Yesterday after the close, Fast Retailing (9983 JP) reported salutary Q3 earnings, and raised its full-year (to August) guidance and its final dividend forecast (by ¥50/share)
- Q3 revenue and profit gained sharply (Rev +13.5%, OP +31.2%) everywhere but Greater China. OPMs were up, especially in Japan. Early summer has been good, despite FX impact.
- New guidance is above consensus, the ADR popped, and with slightly stronger yen on US CPI, that should help. But we approach end-July. Expect lots of pop-sellers.
7. Shanghai Henlius Biotech Update (2696.HK) – The Story Behind Privatization
- Fosun’s preferred arrangement for Henlius is to list the Company in A-shares.Since IPO in A-shares failed and Henlius has begun to generate profits, Fosun finally feels the need for privatization.
- Due to its “flaws”, undervaluation of Henlius in the Hong Kong stock market is difficult to fundamentally change. So, for conservative/cautious investors, Fosun’s one-time acquisition at a 30% premium is attractive.
- The Potential Share Alternative Offer seems a good option, but it is uncertain whether investors are still willing to believe in Fosun’s “good story” – the future re-listing is uncertain.
8. Details of Two Doosan Mergers Involving Enerbility, Robotics, & Bobcat
- The restructuring plan of Doosan Group announced today primarily consists of two merger events aimed at transferring the stake in Doosan Bobcat held by Doosan Enerbility to Doosan Robotics.
- The 50% price cut on Doosan Enerbility’s share price for merging with Doosan Robotics boosts Robotics’ advantage. This resulted in a swap spread opening with Doosan Bobcat.
- Considering an arbitrage strategy in the Doosan Robotics and Doosan Bobcat swap needs caution due to shareholder approval risks, especially with Doosan Enerbility’s low controlling stake potentially complicating the process.
9. Fy23 GPIF Results and Portfolio Changes – Outlook for FY24
- Last year, the GPIF as a whole returned 22.67% in yen terms. As a whole, GPIF outperformed its benchmarks by 0.04% after paying 0.02% in fees and costs.
- GPIF traded ¥30trln of assets – relatively high turnover for a fund which espouses very low turnover – but there’s a reason for that. There were also sharp active/passive moves.
- This year is the last year in the “cycle” of the “old” Policy Allocation Framework. A new one is likely to be introduced this year.
10. Canvest Environmental (1381 HK): Possible Privatisation at HK$4.90
- Grandblue Environment Co A (600323 CH) disclosed a potential pre-conditional privatisation of Canvest Environmental Protection Group (1381 HK) at HK$4.90 per share, a 20.7% premium to the last close price.
- Completing the capital injection from SOE entities into the offeror is a precondition. Grandblue also proposes that the controlling shareholder roll over 7.23% of its effective 44.75% stake.
- While not a knockout bid, the offer is reasonable. Shareholders with blocking stakes should support a binding proposal. Timing is the key risk.
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 #107 – The 3 indicators you NEED to watch on recession risks
- Happy Sunday and welcome to our flagship editorial!The ISM Services report admittedly made for recessionary reading, and it is not because we have been blind to such risks.
- We just found the risk/reward in betting on them incredibly weak, and we continue to hold that view.
- We actually laid out exactly that roadmap to a recession in Q4 2023, and correctly forecasted that the re-acceleration in cyclical sectors such as Manufacturing would lead everyone to conclude that recession risks were off the table in 2024, with a major bull run in assets accordingly.
2. Positioning Watch – No recession betting in markets yet
- Hello everyone, and welcome back to our weekly positioning watch.
- Economic data from the US has been received by markets with a bit more skepticism after the recessionary ISM services report, and while the NFP report—judging by the markets’ reaction—made everyone from equities to fixed income happy, the overall picture of the US economy is still admittedly gloomier than we anticipated a few weeks back However, with increased access to real-time gauges of the economy, there is currently no reason to worry about a recession—or at least no reason to trade it.
- Recessions are always triggered by something; the economy almost never slow-drifts into one, which makes it impossible to time.
3. Macro Regime Indicator – Growth is the dark horse in July..
- Coming into June, we wrote that the biggest “risk” was that we moved towards a goldilocks scenario.
- While our portfolio returns have mostly mirrored that regime (outside of Crypto), we have to admit that the growth component of the equation has slowed somewhat relative to our model base case.
- We reassess the picture on a macro level and on a quant basis in this analysis.
4. CPI Review: Gung Ho summer! Risk-off fall?
- The inflation report provides a surprisingly soft set of data, aligning perfectly with the FOMC’s hopes, but not with their predictions.
- Back in June, the FOMC projected only one rate cut while hiking the inflation forecast to levels that now seem feasible to undershoot.
- This report, as soft as it gets, shows transportation services down by 0.5% for the month, and shelter prices have only increased by 0.17% MoM.
5. Portfolio Watch: Not worth betting on a recession (yet)
- We haven’t made significant changes to our portfolio in recent days due to a lack of conviction in the current market price action.
- However, we are not blind to the risks currently present in the US economic cycle.
- The job market is normalizing linearly, but the risk is that it normalizes linearly until it weakens exponentially.
6. Technically Speaking: Breakouts and Breakdowns in HONG KONG (July 10)
- Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.
- After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.
- Hautai Securities hits an all time low and becomes a “Catch a Falling Knife” chart.
7. June Themes and Thematic Portfolio Review
- A monthly review of 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
8. Indonesia Economics: Signs of Moderating Growth
- Indonesia saw inflation return to target thanks to a further softening in food inflation. There are however upside risks from imported inflation due to the rupiah’s weakness.
- Demand-Side indicators suggest that the strong run of expansionary activity may be reaching its tail end; the latest PMI reading has only been marginally positive.
- Jakarta’s trade policy erraticism was on full display as ministers contradicted each other on a proposal to slap tariffs on China-origin goods.
9. Japan: Is the Balance Sheet Recession Over?
- Japan has suffered from a balance sheet recession, triggered by a sharp decline in asset value, since the 1990s.
- As the Nikkei treads new height, it raises the question of whther the balance sheet recession is over.
- Though some of the structural challenges remain, the balance sheet recession has improved in recent years.
10. US CPI Preview: Taking clues from China?
- We already addressed the US CPI report in our “Week at a Glance”.
- Tomorrow’s US CPI report is the make-or-break moment we’ve been waiting for.
- To keep the risk asset party alive, we need a soft outcome, and it looks like we might just get it.