Daily Briefs

Trex Company Inc., a leading manufacturer of wood-alternative decking and railing, reported mixed results for its second quarter of 2024.
The financial performance showcased both strengths and challenges primarily influenced by changing consumer behavior and varying demand across product lines.
On the positive side, Trex experienced robust demand for its high-end products, with double-digit growth in the sell-through of premium offerings like Trex Transcend Lineage decking and Trex Signature lines.

Consumer Tales Aug Wk#3: Ola’s Dream Ride, Shopee’s SE Asia Lead, Jollibee’s Joyful 2Q

By Devi Subhakesan

Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
Ola Electric (OLAELEC IN) has surged 75% from its IPO issue price. For investors wondering about potential upside, we present our base-to-bullish case valuation range for Ola Electric’s stock price.
Sea (SE US) revised Shopee’s 2024 GMV growth outlook to the mid-20% range. Jollibee Foods(JFC PM)‘s impressive June quarter results stand out against broader trend of weaker sales in QSR sector.

Shopify Inc.: Will The Acquisition of Checkout Blocks Further Push Their Growth? – Major Drivers

Shopify’s Second Quarter 2024 Conference Call offers a detailed insight into the company’s performance and future directions, signifying another strong quarter underpinned by significant growth and strategic advancements.
Shopify has shown robust growth in its Q2 2024 results, driven by a 25% increase in revenue (excluding logistics) and a notable improvement in gross profit which has surpassed revenue growth.
The company reported important structural changes, particularly the unification of its platforms, emphasizing ease and efficiency for merchants expanding internationally or offline.

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Aug 19

Daily Brief Credit: Morning Views Asia: China Hongqiao and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Morning Views Asia: China Hongqiao, China Jinmao Holdings, Citicore Renewable Energy

Morning Views Asia: China Hongqiao, China Jinmao Holdings, Citicore Renewable Energy

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.

China Hongqiao
China Jinmao Holdings
Citicore Renewable Energy

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Aug 19

Daily Brief Event-Driven: Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows
Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔
Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)
Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall
Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru
Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500
Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some Changes to Expectations

Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises

There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.

HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)

As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK).
Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.

HSCEI Sep24 Rebal – Two ADDs, Two DELETEs, Two Surprises, Middling Flows

By Travis Lundy

The HSCEI is famous but has less AUM tracking it passively than you’d think. Nevertheless it is well-known and well-watched.
J&T Global Express (1519 HK) and New Oriental Education & Techn (9901 HK) were ADDs. JD Logistics (2618 HK) and SenseTime Group (20 HK) are DELETEs.
PICC Property & Casualty H (2328 HK) was NOT included. This was a surprise. We may see some disappointment this week from pre-positioning getting sold.

Hang Seng Index Sep24 Rebal – No Name Changes, Some Capping, 1% One-Way Flow – Total 0️⃣🍔

By Travis Lundy

The Hang Seng Index Committee its slow move (lack of movement) towards 100 names and sector rebalancing to tech and healthcare. This is really disappointing.
This time? We get nothing. No name changes. Some capping flows. 6 FAF changes.
Minimal flows on the HSI rebalance to be effective on 9 September.

Hang Seng Index (HSI) Rebalance: Meh (Or Will We Ever Get to 100 Stocks?)

In a surprise (maybe should not have been!), there are no constituent changes for the Hang Seng Index (HSI INDEX) in September. However, there are float and capping changes.
Estimated one-way turnover is 1% and estimated round-trip trade is HK$3.73bn (US$478m). There are no stocks with over +/-0.5x ADV to trade but flows could add to/offset other index flows.
We remain at 82 index constituents and the road to 100 constituents appears to be a long drawn out torturous one. At this glacial pace, could be an eternity away.

Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation

Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.

Sep24 HSTECH Index Rebal – ASMPT (522 HK) ADDed as Expected, After Post-Earnings Fall

By Travis Lundy

HSTECH sees one ADD, one DELETE and several capping and re-capping actions. One of the re-caps is already an un-recap (i.e. a new capping), to be updated.
The ADD is ASM Pacific Technology (522 HK), as expected, with significant ADV impact to buy. The DELETE is Ping An Healthcare and Technol (1833 HK), also a big sell.
Across the three major indices, Alibaba Group Holding (9988 HK) is the big dollar sell and HSTECH changes are the biggies in terms of ADV impact.

Merger Arb Mondays (19 Aug) – China TCM, Henlius, Canvest, CPMC, JTower, Fuji Soft PropertyGuru

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), JTower (4485 JP), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Capitol Health (CAJ AU).
Lowest spreads: Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).

Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500

By Dimitris Ioannidis

Free float is forecasted to increase from ~94% to 100% in S&P 500 and other US and Global indices after Berkshire halved its stake in Apple (AAPL US) .
Forecasted demand from S&P 500 and S&P TMI is 164.2m shares, $37.1bn and 3.0 ADV at the close of 20 September 2024.
Materialization of the free float increase is uncertain due to debatable strategic shareholder classification. ETF ratios and current free float improve the confidence of the forecast.

Quiddity Leaderboard ChiNext & ChiNext 50 Dec 24: US$417mn One-Way; Some Changes to Expectations

By Janaghan Jeyakumar, CFA

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.

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Aug 19

Daily Brief Macro: Four Reasons To Be Tactically Bullish and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Four Reasons To Be Tactically Bullish
The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 16)
Overview #7 Speculative Positioning Review
Back to a Soft Landing
Bank of Japan and Next Liberal Democratic Party Leader Must Create a New Nexus
Iron Ore Tracker (19-Aug-2024): Major Testing Point of 95 USD/Ton, Broken For Iron Ore
Copper Tracker August 19th, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness
FOMC Minutes Preview: Increasingly Balanced Risks

Four Reasons To Be Tactically Bullish

By Cam Hui

The U.S. stock market is poised for a period of continued strength.
Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive internals.
We continue to favour non-Magnificent Seven leadership for the next bull phase.

The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (August 16)

By David Mudd

Japan equity ETF flows have not recovered from the carry trade sell off. Hong Kong Southbound Connect flows continue to be positive this month.
Qifu Technology (3660 HK) , Q Technology Group (1478 HK) and JD Logistics (2618 HK) all advanced on strong 2Q earnings announcements.
Tencent Music Entertainment Group (1698 HK) disappointed on earnings and monthly user numbers. Country Garden Services (6098 HK) declined in anticipation of a large drop in earnings in 2Q 2024.

Overview #7 Speculative Positioning Review

By Rikki Malik

A review of recent events/data impacting our investment themes or outlook
Expectations for future US interest rate cuts get dialed back – JPY impact
CFTC data shows speculative froth has come out of some markets

Back to a Soft Landing

By Cam Hui

Our assessment of the U.S. economy is a “not too hot, not too cold” Goldilocks scenario that’s supportive of risk assets.
We have an economy that’s showing decelerating, but not recessionary, growth and the start of a rate cutting cycle.
Even though forward P/E valuations are somewhat elevated compared to historical norms, this should not be a concern as interest rates fall and EPS growth continues.

Bank of Japan and Next Liberal Democratic Party Leader Must Create a New Nexus

By Said Desaque

Looming political changes in Japan could impact the conduct of monetary policy, following earlier and intense pressure to arrest the sharp decline in the yen during 2024.
The four contenders for becoming the new Liberal Democratic Party (LDP) leader do not all share the same views on the BoJ’s attempt to normalise policy settings.
An extended policy adjustment pause by the BoJ could be detrimental to its credibility, analogous to what befell the Fed after the infamous 2013 taper tantrum.

Iron Ore Tracker (19-Aug-2024): Major Testing Point of 95 USD/Ton, Broken For Iron Ore

Iron ore found no support at the 95-100 USD/ton range for the first time in a while and broke through it, gapping down 8.8% WoW to 92 USD/ton.
This break is a major short-term bearish signal for iron ore prices, as market participants would lose confidence in the theory of cost support at 95-100 USD/ton.
TSF data and mill margins ( -575 RMB/ton) from China also do not inspire much confidence in the near-term outlook for iron ore.

Copper Tracker August 19th, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness

With increasing market volatility, base metals continue their rocky weekly performance. Copper is up marginally, taking it past 9000 USD/ton.
Copper inventories continue to pile at the exchanges, with ~500k tons combined at Comex, LME, and Shanghai, up almost 7% in the last two weeks.
We believe accumulating names like Southern Copper (SCCO US) and Ivanhoe Mines (IVN CN) with good long-term fundamentals is a great strategy.

FOMC Minutes Preview: Increasingly Balanced Risks

By Alex Ng

FOMC minutes from the July 31 meeting are due on August 21
We expect the minutes will show a cautious tone on inflation, needing to see more data before easing, but increasing concern over rising unemployment, which July non-farm payroll data show.
Still, the tone on inflation is likely to be cautious enough to suggest that a 50bps move in September remains unlikely.

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Aug 19

Daily Brief United States: Apple , Copper, Trex Company, Sunrun Inc, Ingredion Inc, Inter Parfums, Lumen Technologies, Mosaic Co/The, nVent Electric and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500
Copper Tracker August 19th, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness
Trex Company: How Are They Executing Market Expansion and Penetration? – Major Drivers
Sunrun Inc.: Adopting A Strategic Approach to Market Expansion and Customer Acquisition! – Major Drivers
Ingredion Incorporated: Will They Survive The Risk of Market Saturation in Texturizing and Healthful Solutions? – Major Drivers
Inter Parfums Inc.: Will The Management’s Enhanced E-commerce & Digital Strategy Yield Dividends? – Major Drivers
Lumen Technologies: Exploitation Of Digital Infrastructure Capabilities & Other Major Drivers
The Mosaic Company: Enhanced Potash & Phosphate Projections & Their Expected Impact On The Top-Line! – Major Drivers
nVent Electric plc: Expanded Electrification Capabilities With The Acquisition Of Trachte! – Major Drivers

Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation

Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.

Apple (AAPL): Berkshire’s Sell-Off Triggers $37bn Demand from S&P 500

By Dimitris Ioannidis

Free float is forecasted to increase from ~94% to 100% in S&P 500 and other US and Global indices after Berkshire halved its stake in Apple (AAPL US) .
Forecasted demand from S&P 500 and S&P TMI is 164.2m shares, $37.1bn and 3.0 ADV at the close of 20 September 2024.
Materialization of the free float increase is uncertain due to debatable strategic shareholder classification. ETF ratios and current free float improve the confidence of the forecast.

Copper Tracker August 19th, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness

With increasing market volatility, base metals continue their rocky weekly performance. Copper is up marginally, taking it past 9000 USD/ton.
Copper inventories continue to pile at the exchanges, with ~500k tons combined at Comex, LME, and Shanghai, up almost 7% in the last two weeks.
We believe accumulating names like Southern Copper (SCCO US) and Ivanhoe Mines (IVN CN) with good long-term fundamentals is a great strategy.

Trex Company: How Are They Executing Market Expansion and Penetration? – Major Drivers

Trex Company Inc., a leading manufacturer of wood-alternative decking and railing, reported mixed results for its second quarter of 2024.
The financial performance showcased both strengths and challenges primarily influenced by changing consumer behavior and varying demand across product lines.
On the positive side, Trex experienced robust demand for its high-end products, with double-digit growth in the sell-through of premium offerings like Trex Transcend Lineage decking and Trex Signature lines.

Sunrun Inc.: Adopting A Strategic Approach to Market Expansion and Customer Acquisition! – Major Drivers

Sunrun Inc.’s second quarter 2024 earnings displayed a strategic dedication to a storage-first approach, reflective of broader transitions and consumer preferences within the solar power industry.
The company achieved significant progress toward their goal of becoming the trusted provider of renewable energy solutions across America.
This focus has led to record storage installation rates and a robust increase in customer growth, specifically in adding battery systems to existing setups.

Ingredion Incorporated: Will They Survive The Risk of Market Saturation in Texturizing and Healthful Solutions? – Major Drivers

Ingredion Incorporated reported second-quarter 2024 earnings that surpassed expectations, highlighting a robust recovery in volumes and significant growth in profitability.
Adjusted operating income saw an 8% increase while gross margins expanded by 240 basis points, despite a 9% reduction in sales mainly attributable to lower raw material costs and a previous divestiture in South Korea.
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.

Inter Parfums Inc.: Will The Management’s Enhanced E-commerce & Digital Strategy Yield Dividends? – Major Drivers

Inter Parfums’ second quarter earnings for 2024 provides a comprehensive update on the company’s performance and strategic direction in the fragrance market.
CEO Jean Madar discussed the strategic product launches and collaborations with notable brand ambassadors such as John Legend, Victoria Song, and Jayson Tatum, aimed at leveraging celebrity influence to enhance brand value and appeal, particularly among younger demographics.
The introduction of John Legend as the face of Montblanc Legend and the continuation of partnerships like those with Victoria Song for Jimmy Choo highlight the company’s effort to marry traditional and modern advertising tactics.

Lumen Technologies: Exploitation Of Digital Infrastructure Capabilities & Other Major Drivers

Lumen Technologies provided a comprehensive overview of their strategic advances and financial performance in their latest quarterly earnings call.
The discussion revealed a company at a pivotal juncture, keen on leveraging emerging technologies and enhancing infrastructure to bolster its market position.
However, like any transformation of this magnitude, the journey involves both potential and challenges.

The Mosaic Company: Enhanced Potash & Phosphate Projections & Their Expected Impact On The Top-Line! – Major Drivers

The Mosaic Company’s second quarter 2024 earnings were a mixed set of results amidst striving for strategic and operational enhancements during a challenging operational backdrop.
The company reported an adjusted EBITDA of $584 million and revenues of $2.8 billion, which, when compared with the previous year’s $744 million EBITDA and $3.4 billion in revenues, marked a noticeable decrease.
This decline is reflective of the tougher conditions in the market yet shows resilience given the macroeconomic pressures and fluctuating demand patterns across different geographies.

nVent Electric plc: Expanded Electrification Capabilities With The Acquisition Of Trachte! – Major Drivers

NVT’s Q2 2024 earnings reveal a company in the midst of significant operational and strategic transitions.
Their decision to divest the Thermal Management business and the recent acquisition of Trachte aligns with their goal of focusing on high-growth areas like electrical connection and protection, which plays into broader industry trends of electrification and digitalization.
This strategic repositioning appears geared towards capitalizing on sectoral shifts and enhancing long-term growth prospects.

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Aug 19

Daily Brief South Korea: Classys and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Classys (214150 KS): Solid 2Q24 Result Fuelled by Strong Demand for Aesthetic Medical Devices

Classys (214150 KS): Solid 2Q24 Result Fuelled by Strong Demand for Aesthetic Medical Devices

By Tina Banerjee

Classys (214150 KS) posted strong 2Q24 result, with quarterly revenue and operating profit reaching record highs, mainly driven by the growth in sales of aesthetic medical equipment.
Revenue from Classys medical devices increased 36% YoY and 44% QoQ to KRW30B (51% of revenue) as demand for core platforms has increased significantly in major global countries.
If 1H24 momentum continues (which seems to be quite possible), the company will handily beat 2024 sales guidance of KRW225B, driven by both devices and consumables.

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Aug 19

Daily Brief Australia: Iron Ore and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Iron Ore Tracker (19-Aug-2024): Major Testing Point of 95 USD/Ton, Broken For Iron Ore

Iron Ore Tracker (19-Aug-2024): Major Testing Point of 95 USD/Ton, Broken For Iron Ore