Smartkarma Daily Briefs

Arista Networks is well-positioned to take advantage of the rapidly growing opportunities in the artificial intelligence (AI) and cloud computing landscape.
For the first quarter of 2024, the company reported revenue of $1.57 billion, representing a 16.3% year-over-year growth.
Contributing a substantial 16.9% of this revenue was services and software support renewals.

Bangkok Dusit Medical Services (BDMS TB): Thai and International Patients Drives 1Q24 Result

By Tina Banerjee

Bangkok Dusit Medical Services (BDMS TB) posted double-digit growth revenue, EBITDA, and net profit in 1Q24. International and Thai patients reported revenue growth of 12% and 10%, YoY, respectively.
EBITDA grew at a faster pace of 13% YoY to THB6.8B, due to tight cost control. Net profit of THB4.1B beat estimates.
BDMS opened one secondary care hospital with 113 registered beds in March. Phuket Cancer Center is expected to start operation in 3Q24.

The Hershey Company: How Are The Latest North America Confectionery Market Developments Impacting Them? – Major Drivers

The Hershey Company reported optimistic market share trends in their Q1 2024 earnings.
The firm has seen strong performances especially in seasonal sales and takeaway, with innovation being a significant growth driver.
Its Reese’s Caramel product was quite popular among customers, with it not only being well received, but also helping drive strong merchandising especially around the Super Bowl season.

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May 20

Daily Brief Macro: Global Monetary Policy Easing Cycle: Nuanced Challenges Across Jurisdictions and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Global Monetary Policy Easing Cycle: Nuanced Challenges Across Jurisdictions
Why New Highs Can Beget More New Highs

Global Monetary Policy Easing Cycle: Nuanced Challenges Across Jurisdictions

By Said Desaque

Sweden’s central bank joined Switzerland’s in cutting its policy rate due to falling inflation. The Bank of England and European Central Bank could follow in June, ahead of the Fed.
Housing has been adversely impacted due to the global monetary tightening cycle, but capitulating to political pressure to ease the pain by prematurely easing policy could undermine central banks’ credibility.
US political patience towards the Fed’s “higher for longer” policy approach and a stronger dollar could be tested as the presidential election approaches, thereby placing pressure on the Fed.

Why New Highs Can Beget More New Highs

By Cam Hui

Stock prices have achieved fresh all-time highs and there is nothing more bullish than new highs.
Stocks are rising because of strong technical positions, progress on disinflation, and continuing signs of growth.
These three factors are combining to be supportive of high stock prices ahead.

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May 20

Daily Brief Thailand: Bangkok Dusit Medical Services and more

By Smartkarma Daily Briefs | Daily Briefs, Thailand

In today’s briefing:

Bangkok Dusit Medical Services (BDMS TB): Thai and International Patients Drives 1Q24 Result

Bangkok Dusit Medical Services (BDMS TB): Thai and International Patients Drives 1Q24 Result

By Tina Banerjee

Bangkok Dusit Medical Services (BDMS TB) posted double-digit growth revenue, EBITDA, and net profit in 1Q24. International and Thai patients reported revenue growth of 12% and 10%, YoY, respectively.
EBITDA grew at a faster pace of 13% YoY to THB6.8B, due to tight cost control. Net profit of THB4.1B beat estimates.
BDMS opened one secondary care hospital with 113 registered beds in March. Phuket Cancer Center is expected to start operation in 3Q24.

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May 20

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, HD Hyundai Heavy Industries and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
ECM Weekly (20th May 2024) -Lalatech, Go Digit, Aadhar, TBO Tek, Ecopro, Nexus, Modec, Hyundai Heavy

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

By Sanghyun Park

Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

ECM Weekly (20th May 2024) -Lalatech, Go Digit, Aadhar, TBO Tek, Ecopro, Nexus, Modec, Hyundai Heavy

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, Indian IPOs continued to do well, we also looked at two upcoming deals in Hong Kong.
On the placement front, last week ended up being one of the busiest ones so far this year with five deals live just on Thursday night alone.

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May 20

Daily Brief United States: Stellantis NV, Arista Networks, Hershey Co/The, Mckesson Corp, nVent Electric , Occidental Petroleum, Dolby Laboratories Inc Cl A, Teleflex Inc, The Walt Disney Co, Transdigm Group and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

China Consumption (20 May 2024): Leapmotor, Stellantis, GAC, Honda, Li Auto, ZTO, Tencent Music
Arista Networks: Artificial Intelligence (AI) Networking
The Hershey Company: How Are The Latest North America Confectionery Market Developments Impacting Them? – Major Drivers
McKesson Corporation: How Is The Revenue and Profit Growth Across Segments Expected To Evolve? – Major Drivers
nVent Electric: Progress on Electrification
Occidental Petroleum Corporation: Battleground Plant Expansion & Other Major Drivers
Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers
Teleflex Incorporated: Driving Durable Growth through Organic Growth Opportunities and Innovation! – Major Drivers
The Walt Disney Company: DTC Streaming Growth
TransDigm Group: Will Their Core Business Strategy Work? – Major Drivers

China Consumption (20 May 2024): Leapmotor, Stellantis, GAC, Honda, Li Auto, ZTO, Tencent Music

By Ming Lu

Stellantis invested in Leapmotor and their joint venture will sell electric cars in Europe.
Two vehicle producers, GAC and Li Auto, are dismissing employees.
Tencent Music’s music revenue grew by 43% YoY in 1Q24.

Arista Networks: Artificial Intelligence (AI) Networking

Arista Networks is well-positioned to take advantage of the rapidly growing opportunities in the artificial intelligence (AI) and cloud computing landscape.
For the first quarter of 2024, the company reported revenue of $1.57 billion, representing a 16.3% year-over-year growth.
Contributing a substantial 16.9% of this revenue was services and software support renewals.

The Hershey Company: How Are The Latest North America Confectionery Market Developments Impacting Them? – Major Drivers

The Hershey Company reported optimistic market share trends in their Q1 2024 earnings.
The firm has seen strong performances especially in seasonal sales and takeaway, with innovation being a significant growth driver.
Its Reese’s Caramel product was quite popular among customers, with it not only being well received, but also helping drive strong merchandising especially around the Super Bowl season.

McKesson Corporation: How Is The Revenue and Profit Growth Across Segments Expected To Evolve? – Major Drivers

McKesson Corporation’s Fourth Quarter Fiscal 2024 earnings reflect a strong financial year for the company with notable advancements throughout its strategic priorities.
Consolidated revenue increased by 12% reaching $309 billion with adjusted earnings per diluted share increasing by 6% to $27.44 both exceeding the expectations set at the start of the fiscal year.
The company achieved this growth across the enterprise with their differentiated portfolio of assets, innovative solutions, and commitment to quality and operational excellence.

nVent Electric: Progress on Electrification

nVent Electric performed strongly in the first quarter of 2024, delivering impressive volume growth, margin expansion and robust free cash flow.
The company executed its growth strategy, focusing on high-growth verticals, new products, global expansion and acquisitions.
The continued acceleration of artificial intelligence (AI) has also increased demand for the company’s Data Solutions offerings.

Occidental Petroleum Corporation: Battleground Plant Expansion & Other Major Drivers

In the first quarter 2024 earnings, Occidental (OXY) management displayed confidence in their operational execution and diversified asset portfolio.
OXY reported a strong start to 2024, overcoming a challenging third party outage in the Eastern Gulf of Mexico and exceeding the midpoint of their production guidance.
The revenue was driven primarily by robust production results in their oil and gas business and outperformance in their Midstream and OxyChem businesses.

Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers

Dolby Laboratories, Inc., a leader in immersive entertainment technologies, posted its Q2 2024 results, providing significant insights into its performance and future outlook.
The report highlighted that the revenues were on par with their expectations, while the earnings exceeded the forecasted figures.
However, the full-year guidance remained unchanged.

Teleflex Incorporated: Driving Durable Growth through Organic Growth Opportunities and Innovation! – Major Drivers

Teleflex Inc.’s Q1 2024 Earnings revealed promising initial results, led by Liam Kelly, the Chairman, President and Chief Executive Officer, along with Thomas Powell, the Executive Vice President, and Chief Financial Officer.
For Q1 2024, Teleflex achieved revenues of $737.8 million, a 3.8% YoY increase on a GAAP and constant currency basis.
Utilization of the company’s products trend positively and was on par with expectations.

The Walt Disney Company: DTC Streaming Growth

The Walt Disney Company reported a strong performance in the first quarter of 2024.
Disney’s CEO, Bob Iger, and the company’s CFO, Hugh Johnston, discussed their strategic focus on transitioning ESPN into a leading digital sports platform, developing streaming into a profit-generating business, reviving film studios, and enhancing growth in parks and experiences.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

TransDigm Group: Will Their Core Business Strategy Work? – Major Drivers

The TransDigm Group reported their second quarter 2024 earnings and the group highlighted that their strategy remains consistent, focusing on intrinsic shareholder value creation through the different phases of the aerospace cycle.
Approximately 90% of net sales are from unique proprietary products, with most of their EBITDA coming from aftermarket revenues.
This results in higher margins and relative stability during downturns.

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May 20

Daily Brief China: Tencent, L’Occitane, BYD Electronics, Zijin Mining Group Co Ltd H, JD.com , Guolian Securities Co Ltd H, ESR Group , Lalatech Holdings Co Ltd, PDD Holdings and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)
HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade
A/H Premium Tracker (To 17 May 2024): Hs Rally Huge Vs As, Again. Avg A/H Premium Lowest in 4yrs
Weekly Deals Digest (19 May) – ESR Group, L’Occitane, CPMC, Malaysia Airports, I’Rom, Modec
Lalatech Holdings: FCF Growth Accelerated, Margins Improved, Fair Value May Be North of $10B
Pinduoduo（PDD US): Growth Stock Priced as Value Play
BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys

By Arun George

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), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted

BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)

Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK).
Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

A/H Premium Tracker (To 17 May 2024): Hs Rally Huge Vs As, Again. Avg A/H Premium Lowest in 4yrs

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s buy streak was interrupted again this past week, but they still net bought, as did NORTHBOUND. HK stocks continued their rise with liquid Hs outperforming their As by 3.8%.
There were some BIG moves the past two weeks and Average AH Premia are now the lowest in nearly four years vs near 5yr wides less than 12 weeks ago.

Weekly Deals Digest (19 May) – ESR Group, L’Occitane, CPMC, Malaysia Airports, I’Rom, Modec

By Arun George

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Modec Inc (6269 JP)‘s US$535 million secondary offering.
Event-Driven developments: ESR Group (1821 HK), L’Occitane (973 HK), CPMC Holdings (906 HK), Malaysia Airports Holdings (MAHB MK), I’Rom Group (2372 JP), Great Eastern Holdings (GE SP).

Lalatech Holdings: FCF Growth Accelerated, Margins Improved, Fair Value May Be North of $10B

By Andrei Zakharov

Lalatech Holdings, a technology based global logistics company, has updated its application for Hong Kong IPO and disclosed financial results for 2023.
Lalatech Holdings is aiming to raise up to $1B and the company’s IPO looks imminent in the coming months as cash flow growth accelerated, while margins and profitability improved.
My fair valuation of Lalatech Holdings is close to $10B and investors should buy into upcoming IPO given the company’s substantial scale, massive network effects and operating efficiency.

Pinduoduo（PDD US): Growth Stock Priced as Value Play

By Eric Chen

We are more bullish on PDD’s 1Q24 results on the back of better monetization of domestic e-commerce business and fast and quality growth of TEMU.
We now expect 1Q24 adjusted earnings to almost double yoy to RMB20 billion, much higher than our previous estimate of 50% yoy growth and exceeding consensus by ~30%.
Moreover, we believe earnings growth will be steady throughout 2024 instead of slowing down as we thought. 10x FY24 earnings against 80% yoy growth lead us to see 50%+ upside.

BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?

By Osbert Tang, CFA

While historically many new inclusions to the HSI have performed disappointingly after their addition, BYD Electronic (285 HK) looks unlikely to follow such a pattern.
Its share price has underperformed YTD, absolute PER valuations are not stretched and forward P/B multiple is only at the historical average level. These provide a good buffer.
Its industry and business are not at structural and cyclical peaks, with further growth prospects from AI-enhanced products and solutions. A 33% surge in 1Q24 earnings also adds comfort.

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May 20

Daily Brief India: NIFTY Index, Hopson Development and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

EQD / NSE Volatility Update / 13-May-24 to 17-May-24
Morning Views Asia: Hopson Development, Vedanta Resources

EQD / NSE Volatility Update / 13-May-24 to 17-May-24

By Sankalp Singh

Curtail Short Gamma & Short Vega exposure as Vol-regime has switched to “High & Up” state.
Short-Dated IVs traded markedly lower, driven by recovering equities & the 20-May market holiday
Nifty50 vol curve is exhibiting unusual kinked shape. Monthly IVs are commanding a large vol markup relative to rest of the curve.

Morning Views Asia: Hopson Development, Vedanta Resources

By Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

Hopson Development
Vedanta Resources

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May 20

Daily Brief Japan: TSE Tokyo Price Index TOPIX, Hamamatsu Photonics Kk and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

A Market with Small Value Stocks and Investment Opportunities Due to Delisting, Although Taking Time
Hamamatsu Photonics (6965 JP): Look Cautiously to the Long Term

A Market with Small Value Stocks and Investment Opportunities Due to Delisting, Although Taking Time

By Aki Matsumoto

Excluding the special factor of companies applying transitional measures moving to standard, the pace of natural decrease of prime market listed companies is moderate.
Companies with high foreign shareholdings and large market capitalization are already highly valued. Companies that are not have investment opportunities that are often at a discount due to liquidity.
Nearly half of the companies are companies with large shareholders holding more than 20% equity; investment opportunities are expected to increase as companies go private through TOBs and MBOs.

Hamamatsu Photonics (6965 JP): Look Cautiously to the Long Term

By Scott Foster

The company has slashed FY Sep-24 guidance after missing 1H sales and profit targets by wide margins. Dividend maintained, 2-for-1 split planned and buyback under consideration.
Capex has been cut, reflecting lower growth expectations. R&D also. Inventory adjustments will eventually be completed, but Chinese competiton will remain a problem.
The share price has dropped 30% in the past year and 10.5% since May 8, putting the shares on 27 times EPS guidance. Still not cheap, but getting there.

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May 20

Most Read: Yichang HEC Changjiang Pharma, Korea Stock Exchange KOSPI 200, Li Auto , Japan Post Holdings, Tencent, L’Occitane, BYD Electronics, Nikkei 225, Zijin Mining Group Co Ltd H, JD.com and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane
HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
EQD | The Nikkei Can Go Higher From Here
HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)
HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

By David Blennerhassett

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

FSS Head’s Aggressive Remarks for Value-Up at NY Event, Incl. Short Selling Resumption Late June

By Sanghyun Park

Lee Bok-hyun hopes for short selling to resume by late June. Given his influence on the Value-up policy, it’s likely to happen.
Lee expects key tax incentives for the value-up program to be included in the July tax reform bill, showing a market-friendly stance.
Yesterday’s New York event had a very positive atmosphere with more attendees than expected, showing genuine investor interest, likely ensuring sustained interest in Korea’s Value-up program.

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

By David Blennerhassett

There is Japan Post Bank (7182 JP) buyback risk that might cause Japan Post Holdings (6178 JP)/JPB unwinds; though probably a H2 risk.
Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms. Someone appears to be accumulating a stake to block an Exit/Delisting Offer, and force a bump.
L’Occitane (973 HK)‘s scrip pre-condition has been satisfied. But still the Offeror prevaricates.

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Merger Arb Mondays (20 May) – L’Occitane, China TCM, SciClone, Malaysia Airports, I’rom, Hollysys

By Arun George

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), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU), Ansarada Group Ltd (AND AU), Malaysia Airports Holdings (MAHB MK).
Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Mimasu Semiconductor Industry (8155 JP), Boral Ltd (BLD AU).

Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted

BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

EQD | The Nikkei Can Go Higher From Here

By Nico Rosti

The Nikkei 225 INDEX has been rallying a bit last week and closed the week up. A rebound from the previous downtrend is underway.
A temporary bottom may have been established in May, it is not clear if the index is about to go lower or higher, but our pattern model readings suggests higher.
If the index continues to rally, the first major resistance area will be around 40k.

HSCEI Index Rebalance: Zijin Mining In; Xinyi Solar Out; SenseTime Survives (For Now)

Zijin Mining Group Co Ltd H (2899 HK) will replace Xinyi Solar Holdings (968 HK) in the Hang Seng China Enterprises Index (HSCEI INDEX) after the close on 7 June.
An increase in the FAF for SenseTime Group (20 HK) results in the stock avoiding deletion at the June rebalance.
Estimated one-way turnover at the rebalance is 2.9% resulting in a round-trip trade of HK$3.8bn with over 1x ADV to trade on the add and delete.

HSTECH Index Rebalance: Float & Capping Changes Result in 8% Turnover & US$2.5bn Round-Trip Trade

As expected, there are no constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June. However, there are float and capping changes.
Estimated one-way turnover is 8% leading to a round-trip trade of HK$19.2bn (US$2.46bn). There is over 3x ADV to buy in Li Auto (2015 HK).
Short interest is quite elevated on a lot of stocks both in terms of days of ADV and in terms of free float.

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May 20

Daily Brief TMT/Internet: Tencent, BYD Electronics, Taiwan Semiconductor (TSMC) – ADR, Arista Networks, Dolby Laboratories Inc Cl A, Trimble Navigation, Universal Display and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs
Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted
TSMC (2330.TT; TSM.US): A16 Technology Continues to Evolve in 1H27.
BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?
Taiwan Dual-Listings Monitor: TSMC Spread Trading at New High Range, CHT Spread at Short Levels
Arista Networks: Artificial Intelligence (AI) Networking
Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers
Trimble Inc.: Expanding Addressable Market and Ecosystem Approach! – Major Drivers
Universal Display Corporation (OLED): Continued Penetration in the Smartphone Market

HK Connect SOUTHBOUND Flows (To 17 May 2024); Banks, Banks, Banks, Tencent, and Big SOEs

SOUTHBOUND was again a net buyer for HK$18.6bn on strong two-way volumes. The top three net buys of the week were SOE banks. Some may be Central Huijin.
Some of this may be driven by the dividend w/h tax cancellation on H divs and by significant H-share discounts, but high-div CNOOC was the biggest net sell.
No end to the inflows, and HK valuations are not at a place where they would hamper continued flows. Alibaba making HK a Primary will spur more inflows over time.

Hang Seng Index (HSI) Rebalance: BYD Electronics Added; Country Garden Services Deleted

BYD Electronics (285 HK) will be added to the Hang Seng Index (HSI INDEX) after market close on 7 June while Country Garden Services (6098 HK) will be deleted.
Estimated one-way turnover is 1.9% and the estimated round-trip trade is HK$8.46bn (US$1.08bn) with over 1x ADV to trade in the add and delete.
We remain at 82 index constituents and the road to 100 index members looks to be a long and winding one.

TSMC (2330.TT; TSM.US): A16 Technology Continues to Evolve in 1H27.

By Patrick Liao

After Taiwan Semiconductor (TSMC) – ADR (TSM US) N2 technology in 2H25F, A16 technology will be pilot-production in 2H26 and likely unveiled in around 1H27.
TSMC A16 technology will be utilizing best-in-class backside power delivery solution.
Si Photonics co-exists with traditional Substrates packages, linked with fiber.

BYD Electronic (285 HK): Will HSI Inclusion Be a Kiss of Death?

By Osbert Tang, CFA

While historically many new inclusions to the HSI have performed disappointingly after their addition, BYD Electronic (285 HK) looks unlikely to follow such a pattern.
Its share price has underperformed YTD, absolute PER valuations are not stretched and forward P/B multiple is only at the historical average level. These provide a good buffer.
Its industry and business are not at structural and cyclical peaks, with further growth prospects from AI-enhanced products and solutions. A 33% surge in 1Q24 earnings also adds comfort.

Taiwan Dual-Listings Monitor: TSMC Spread Trading at New High Range, CHT Spread at Short Levels

By Vincent Fernando, CFA

TSMC: +17% Premium; Has Remained Above 15% for Over Nearly Two Weeks
ASE: +11.8% Premium; We Continue to View 14%+ as Range to Short From
CHT: +0.6% Premium; Can Consider Shorting the Spread at Current Level

Arista Networks: Artificial Intelligence (AI) Networking

Arista Networks is well-positioned to take advantage of the rapidly growing opportunities in the artificial intelligence (AI) and cloud computing landscape.
For the first quarter of 2024, the company reported revenue of $1.57 billion, representing a 16.3% year-over-year growth.
Contributing a substantial 16.9% of this revenue was services and software support renewals.

Dolby Laboratories Inc.: Will The Increased Demand for Dolby Atmos and Dolby Vision Technology Last? – Major Drivers

Dolby Laboratories, Inc., a leader in immersive entertainment technologies, posted its Q2 2024 results, providing significant insights into its performance and future outlook.
The report highlighted that the revenues were on par with their expectations, while the earnings exceeded the forecasted figures.
However, the full-year guidance remained unchanged.

Trimble Inc.: Expanding Addressable Market and Ecosystem Approach! – Major Drivers

Trimble, in the first quarter of 2024 results, highlighted three key areas: performance exceeding expectations, a strategic portfolio highlight involving divestitures and joint venture, and the implementation of its new reporting segments.
Trimble posted a solid performance with all its three segments surpassing expectations.
Its annual recurring revenue (ARR) grew 13% organically alongside a strong free cash flow of $227 million.

Universal Display Corporation (OLED): Continued Penetration in the Smartphone Market