Daily Briefs

ENEOS Holdings (5020 JP) announced its deal for affiliate Tatsuta Electric Wire & Cable (5809 JP) 18-plus months ago. China approvals held it up more than a year.
Last month, they launched. The sector was up a lot. TOPIX was up a lot. The stock had recently been trading through terms. But ENEOS didn’t bump the price.
A month later, and the tender was supposed to have closed Friday 19 July. It didn’t. ENEOS extended, for no reason, which suggests they don’t have the shares.

ASICS Placement Updates – Share Pop Done, Now Needs to Correct

A group of shareholders aims to raise around US$1.3bn via selling around 11% of ASICS Corp (7936 JP).
In our earlier note, we talked about the placement and ran the deal through our ECM framework.
In this note, we talk about the updates and share price performance since then.

ECM Weekly (22nd July 2024) – Kokusai, Honda, ASICS, ZIP, Invincible, Hyundai, Premier, Timee, Sanil

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, the coming week to see two more listing, with both likely to do well.
On the placement front, Japan continued to dominate the ECM flows, with India, Taiwan and Australia joining in.

The Goal of 30% Female Board Members Is Somewhat Hard to Achieve Given the Current Situation

By Aki Matsumoto

The fact that institutional investors consider whether a company has zero female board members when voting has led to decrease in the number of companies with zero female board members.
Since fewer companies have zero female board members but a minority of companies have at least two female board members, achieving 30% female board members seems somewhat of a hurdle.
While tenure and concurrent service of female board members are problematic, the starting point is to ensure that women have a 30% voice on the board and to promote diversity.

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Jul 22

Daily Brief Quantitative Analysis: HK Short Interest Weekly: Tencent and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

HK Short Interest Weekly: Tencent, Nongfu Spring, China Shenhua, Petrochina, New Oriental
A-H Premium Weekly (Jul 19th):Wuxi Apptec, Air China, China Longyuan, Smic, Yofc, Flat Glass
Hong Kong Connect Flows (Jul 19th): ICBC, China Hongqiao
Northbound Flows (Jul 19th): Midea, Zhongji Innolight, Mindray
TWSE Short Interest Weekly (Jul 19th): Kinpo Elec, L&K Engineering, Asia Cement, Unimicron Tech
TWSE Foreign Holding Weekly (Jul 19th): Wiwynn, TSMC, Quanta Computer, Mediatek, Gigabyte Tech
KRX Foreign Holding Weekly (Jul 19th): Samsung Heavy In, Samsung Electronics, Doosan Bobcat

HK Short Interest Weekly: Tencent, Nongfu Spring, China Shenhua, Petrochina, New Oriental

We analyzed the latest HK SFC report for aggregate short position as of Jul 12th.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short changes in Tencent, Nongfu Spring, China Shenhua, Petrochina, New Oriental.

A-H Premium Weekly (Jul 19th):Wuxi Apptec, Air China, China Longyuan, Smic, Yofc, Flat Glass

We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 107.8% as of Jul 19th.
The average A-H premium changed by 2.0ppt week-on-week, led by communication services, energy, utilities and offset by consumer staples, information technology, real estate.
We highlight weekly changes in A-H premium for Wuapptec, Air China, China Longyuan, Smic, Yofc, Flat Glass, Ganfeng Lithium.

Hong Kong Connect Flows (Jul 19th): ICBC, China Hongqiao

We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of July 19th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight flows for ICBC (1398 HK), China Hongqiao (1378 HK).

Northbound Flows (Jul 19th): Midea, Zhongji Innolight, Mindray

We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of July 19th.
We estimate the weekly outflows to be US$2,388.5 million, led by consumer discretionary, industrials, financials.
We highlight flows for Midea (000333 CH), Zhongji Innolight (300308 CH), Mindray (300760 CH).

TWSE Short Interest Weekly (Jul 19th): Kinpo Elec, L&K Engineering, Asia Cement, Unimicron Tech

We analyzed the changes in short interest of TWSE Stocks as of Jul 19th which has an aggregated short interest worth USD21.0bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
We highlight short interest changes in Kinpo Elec, L&K Engineering, Asia Cement, Yageo, Unimicron Tech, Ctbc Financial, Auo.

TWSE Foreign Holding Weekly (Jul 19th): Wiwynn, TSMC, Quanta Computer, Mediatek, Gigabyte Tech

We analyzed the changes in foreign holdings of TWSE Stocks as of Jul 19th which has an aggregated holding worth USD965.9bn.
We estimate that foreign flows to be outflows of USD3,489mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
We highlight foreign changes in Wiwynn, TSMC, Quanta Computer, Mediatek, Gigabyte Tech.

KRX Foreign Holding Weekly (Jul 19th): Samsung Heavy In, Samsung Electronics, Doosan Bobcat

We analyzed the changes in foreign holdings of KRX stocks as of Jul 19th which has an aggregated holding worth USD563.2bn.
We estimate that foreign flows to be outflows of USD350mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
We highlight foreign changes in Samsung Heavy In, Sk Hynix, Samsung Electronics, Doosan Bobcat.

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Jul 22

Daily Brief ESG: The Goal of 30% Female Board Members Is Somewhat Hard to Achieve Given the Current Situation and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

The Goal of 30% Female Board Members Is Somewhat Hard to Achieve Given the Current Situation

The Goal of 30% Female Board Members Is Somewhat Hard to Achieve Given the Current Situation

By Aki Matsumoto

The fact that institutional investors consider whether a company has zero female board members when voting has led to decrease in the number of companies with zero female board members.
Since fewer companies have zero female board members but a minority of companies have at least two female board members, achieving 30% female board members seems somewhat of a hurdle.
While tenure and concurrent service of female board members are problematic, the starting point is to ensure that women have a 30% voice on the board and to promote diversity.

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Jul 22

Daily Brief ECM: ASICS Placement Updates – Share Pop Done and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

ASICS Placement Updates – Share Pop Done, Now Needs to Correct
ECM Weekly (22nd July 2024) – Kokusai, Honda, ASICS, ZIP, Invincible, Hyundai, Premier, Timee, Sanil
Pre-IPO Elpiscience Biopharmaceuticals – Will Investors Still Buy in These Stories?

ASICS Placement Updates – Share Pop Done, Now Needs to Correct

A group of shareholders aims to raise around US$1.3bn via selling around 11% of ASICS Corp (7936 JP).
In our earlier note, we talked about the placement and ran the deal through our ECM framework.
In this note, we talk about the updates and share price performance since then.

ECM Weekly (22nd July 2024) – Kokusai, Honda, ASICS, ZIP, Invincible, Hyundai, Premier, Timee, Sanil

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, the coming week to see two more listing, with both likely to do well.
On the placement front, Japan continued to dominate the ECM flows, with India, Taiwan and Australia joining in.

Pre-IPO Elpiscience Biopharmaceuticals – Will Investors Still Buy in These Stories?

By Xinyao (Criss) Wang

Elpiscience is incubated by LAV from the very beginning.The Company has strong capital operation capabilities, but the story of “founding team’s decent background + star cornerstone investors” doesn’t work anymore.
Elpiscience’s pipelines are still in early stage. However, investors are rational. They will no longer believe in those “good stories”, but focus more on cash flow and drug sales revenue.
Elpiscience’s business model has raised concerns about its future product sales scale and profits.The market may not recognize the post-investment valuation of US$599 million if check the valuation of peers.

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Jul 22

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Will the Rotation to Small Caps Continue? and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Ohayo Japan | Will the Rotation to Small Caps Continue?
Semiconductor Equipment Stocks: A Bounce Before the Reckoning
Chinese Airlines: Diverging Performance
GEMWeekly (19 Jul 2024): China’s Third Plenum; India, Malaysia Macro; Kakao, Samsung Electronics

Ohayo Japan | Will the Rotation to Small Caps Continue?

By Mark Chadwick

The S&P 500 dropped 0.7% and the Nasdaq Composite declined 0.8%, both marking their worst week since April
Speculative short positions in the yen have dropped significantly following Japan’s suspected yen-buying intervention
Effissimo Capital Management, an activist investment fund, acquired 6.03% of Teijin’s shares

Semiconductor Equipment Stocks: A Bounce Before the Reckoning

By Scott Foster

Irate U.S. politicians have gunned down their own tech sector, triggering declines of 7% to 20% among leading semiconductor equipment stocks outside China.
We expect a bounce after such large declines – and further gains for Naura and AMEC in China.
Investors now face difficult questions about the future of Chinese demand, the sustainability of the AI boom, and valuations. We are not optimistic.

Chinese Airlines: Diverging Performance

By Osbert Tang, CFA

All three Chinese airlines trimmed their losses in 1H24, suggesting a pick-up in sector fundamentals. However, their 2Q24 bottom line displayed different trends.
Air China Ltd (H) (753 HK) is performing the best, with QoQ improvement in both reported and recurring losses (reduction by 41.7% and 7.4%, respectively).
China Southern Airlines (1055 HK), however, dipped back into red in 2Q24 after making a profit in 1Q24. With Air China underperforming YTD, there is room to revenge in 2H24.

GEMWeekly (19 Jul 2024): China’s Third Plenum; India, Malaysia Macro; Kakao, Samsung Electronics

By Wium Malan, CFA

The Global Emerging Markets Weekly summarizes the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
Macro data points: Chinese GDP growth, retail sales, and industrial production, Indian inflation data, and Malaysian GDO growth.
Companies mentioned:Kakao Corp (035720 KS), Samsung Electronics (005930 KS)

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Jul 22

Daily Brief Event-Driven: Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True
ENEOS Extends Tatsuta Electric (5809) Tender Offer Means They Don’t Have The Shares
Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol
GAPack (468 HK): Grinding Towards a Stalemate
A/H Premium Tracker (To 19 Jul 2024): SB Bought, NB Sold, HK Crushed Vs A-Shares
HK Connect SOUTHBOUND Flows (To 19 Jul 2024); Tencent the Big Buy, but Few Banks and a Long Tail
EQD / NSE Vol Update / IVs Marked Higher & Vol Curve Inverts … Its All About the Budget
Private Equity Interest Is Back
Mainland Connect NORTHBOUND Flows (To 19 July 2024): A Big Broad Sell in Third Plenum Week

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed

By Brian Freitas

Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.

The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True

By Charlotte van Tiddens, CFA

Discounts likely set for a re-rating as market continues to overreact to appointment of CEO amid good set of results.
The discounts of both Naspers and Prosus have continued to widen since the appointment of Fabricio Bloisi to Group CEO was announced in May (effective 10 July).
At the end of June, the group released its strongest set of results in years, delivering on consolidated ecommerce profitability ahead of target.

ENEOS Extends Tatsuta Electric (5809) Tender Offer Means They Don’t Have The Shares

ENEOS Holdings (5020 JP) announced its deal for affiliate Tatsuta Electric Wire & Cable (5809 JP) 18-plus months ago. China approvals held it up more than a year.
Last month, they launched. The sector was up a lot. TOPIX was up a lot. The stock had recently been trading through terms. But ENEOS didn’t bump the price.
A month later, and the tender was supposed to have closed Friday 19 July. It didn’t. ENEOS extended, for no reason, which suggests they don’t have the shares.

Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Asia Cement China (743 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK).
Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), Hollysys.

GAPack (468 HK): Grinding Towards a Stalemate

Since announcing Shandong Xinjufeng Technology Packaging (301296 CH)’s pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65 per share, the gross spread has increased.
The Board’s strategy is to rally shareholders against a hostile offer. However, the recent AGM protest votes suggest that the Board cannot easily thwart the offer.
Shandong Xinjufeng’s renewed efforts to secure Board representation suggest that its offer is in trouble. Meanwhile, China Mengniu Dairy Co (2319 HK) seems disinclined to engage in a bidding war.

A/H Premium Tracker (To 19 Jul 2024): SB Bought, NB Sold, HK Crushed Vs A-Shares

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 inflow strong but SOEs not leading and Hang Seng down hard. Bank buying minimal. NORTHBOUND saw significant selling, but A-share indices generally strong on the week. Window-dressing?
AH Premia rose 3.3% on average. Really bad week for H vs A as Liquid Hs underperformed their As by 4%. Stunning week really. Relative performance a sea of red.

HK Connect SOUTHBOUND Flows (To 19 Jul 2024); Tencent the Big Buy, but Few Banks and a Long Tail

SOUTHBOUND was again a net buyer, for HK$19.2bn this week, on smallish two-way volumes. Tencent and ETFs stood out as large net buys.
I’ve thought national team was buying banks for months. This week, no banks showed in the top five net buys, and only 1 in the top ten.
It is somewhat perplexing that the flows just stopped. But that may be a sign of things to come. Confirmation may require a week or two.

EQD / NSE Vol Update / IVs Marked Higher & Vol Curve Inverts … Its All About the Budget

By Sankalp Singh

Weekly IVs marked significantly higher. Options demand returns post holiday-shortened week. Market focuses on 23.07.2024 Budget & Corporate Earnings announcements.
Put-Call Ratio compression + Rising IVs indicative of call-buying activity. Significant Open-Interest buildup seen in 25000 calls.
Vol Term-structure: Entire curve in Backwardation. Much of which can be attributed to the India Budget event. Curve expected to flatten out post event.

Private Equity Interest Is Back

By Jesus Rodriguez Aguilar

SoftwareONE is currently considered a special situation case by the market, with its new Board of Directors being more receptive to a potential transaction, possibly above CHF 20/share.
Compelling stock narrative: strong balance sheet (10.3% of market cap in net cash&equivalents), low valuation (8.7x EV/NTM EBITDA, 17.5x Fwd P/E), shareholder return policy (buyback and dividend), and ongoing recovery.
My fair value estimate is CHF 20.04/share, which implies an undemanding 9.8x EV/Fwd NTM EBITDA. SoftwareONE releases Q2 and H1 results on 21 August. Long.

Mainland Connect NORTHBOUND Flows (To 19 July 2024): A Big Broad Sell in Third Plenum Week

The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
Last week saw NORTHBOUND net SELL RMB +19.3bn of A-shares. NORTHBOUND sold everything. Consumer, Finance, and Energy hit hardest.
Net flows as a percentage of value traded are clearly “short gamma”, but the net buys this week were of stocks previously a net sell.

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Jul 22

Daily Brief Equity Bottom-Up: TSMC. Take The Pullback Gift and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

TSMC. Take The Pullback Gift
ASML Readthrough: Are There Signs of an Industry Slow Down?
Taiwan Tech Weekly: Strong TSMC & ASML Data Fails to Rally the Semiconductor Sector
Xiaomi Corp (1810 HK): Tops India Smartphone Market; Samsung Falls to Third
Korea Small Cap Gem #29: Com2Us
Xiaomi (1810 HK): 2Q24 Shipments – High Growth and High Market Share
China Consumption Weekly (2024 Jul 22): Xiaomi, Guangzhou Automobile, NIO, AAPL, Starbucks
NRG Energy Inc.: Initiation of Coverage – Expansion of Smart Home and Consumer Energy Platforms Is A Key Growth Catalyst! – Financial Forecasts
Blue Moon Group (6993) – Monday, Apr 22, 2024
Brookfield Renewable Corporation: Initiation of Coverage

TSMC. Take The Pullback Gift

By William Keating

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…

ASML Readthrough: Are There Signs of an Industry Slow Down?

By Vincent Fernando, CFA

ASML’s results last week indicated continued strength in the semiconductor industry. We analyze the results to identify any potential signs of weakening or pauses in global industry momentum for Taiwan.
Net system bookings surged 54% QoQ and ASML reported rising utilization levels of its clients’ equipment. Inventory days rose significantly, but this is due to upcoming 2025 orderbook deliveries.
New US, Europe, and Japan fabs bolster strong revenue outlook into 2026E. Overall, robust industry demand persists according to ASML’s latest data, with no major signs of softness.

Taiwan Tech Weekly: Strong TSMC & ASML Data Fails to Rally the Semiconductor Sector

By Vincent Fernando, CFA

Taiwan Stocks Fall On Potential New U.S. Tech Restrictions for China & Potential Policy Shift from a Trump White House… Strong TSMC & ASML Results Fail to Rally the Sector
Even Tighter Technology Restrictions for China? — US Could Use Special Rule to Restrict Selling of Products Made by Foreign Companies
We See TSMC’s Margins Increasing Much Higher Than Guidance in Long-Term; 2Q24 Shows Apple Ramping Up

Xiaomi Corp (1810 HK): Tops India Smartphone Market; Samsung Falls to Third

By Devi Subhakesan

Xiaomi Corp (1810 HK)‘s smartphone shipments to India surged in Q2 2024, reclaiming the top spot, while Samsung slipped to third.
Consumer discretionary sales, including smartphones, were weak during the quarter due to elections, subdued demand, and extreme weather.
The upcoming festive season is crucial for sales, with customers anticipating new launches and better bargains. 5G device upgrades continue to drive growth in 2024.

Korea Small Cap Gem #29: Com2Us

By Douglas Kim

Com2Us’s net cash (including long-term financial investments) is 151% of its market cap. It is trading at P/B ratio of only 0.45x.
The company paid out 2,600 won in DPS in FY23. If we assume the same DPS, this would suggest a dividend yield of 6.7% at current price of 38,900 won.
Com2Us is a turnaround story. It had an operating profit of 1.2 billion won in 1Q 2024, improving from an operating loss of 13.3 billion won in 1Q 2023.

Xiaomi (1810 HK): 2Q24 Shipments – High Growth and High Market Share

By Ming Lu

Xiaomi (XM)’s shipments increased by 29% YoY in 2Q24, which is the most rapid growth among the global top five.
Xiaomi is the only clear gainer of market share among the global top five.
We believe the stock has an upside of 35% and the target price is HK$22.30 for the end of 2024.

China Consumption Weekly (2024 Jul 22): Xiaomi, Guangzhou Automobile, NIO, AAPL, Starbucks

By Ming Lu

Xiaomi’s global market increased to 15% in 2Q24 compared with 13% in 2Q23.
GAC Aion began to be produced in Thailand to bypass the new tariff barriers from the US and the European Union.
Cotti Coffee plans to extend its “RMB9.90” sales to three years.

NRG Energy Inc.: Initiation of Coverage – Expansion of Smart Home and Consumer Energy Platforms Is A Key Growth Catalyst! – Financial Forecasts

NRG Energy, Inc. recently reported a strong start to 2024, with business performance exceeding expectations and an affirmation of the 2024 financial guidance.
Management highlighted transformative trends in power demand, primarily driven by electrification, generative AI, and data center growth, which open promising prospects for the power sector.
Furthermore, NRG is strategically positioned to benefit from tightening supply and demand dynamics in key markets, leveraging its diversified generation portfolio and consumer technology platform.

Blue Moon Group (6993) – Monday, Apr 22, 2024

By Value Investors Club

Blue Moon started with a kitchen spray cleanser in 1994, but now focuses on liquid detergents in China
While they have strong marketing and scale, their competitive advantages are weak compared to domestic competitor Liby
Intensifying competition and various factors have led to a decline in Blue Moon’s market share, raising uncertainty about their future in the industry

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Brookfield Renewable Corporation: Initiation of Coverage

Brookfield Renewable reported mixed results in its fourth quarter 2023 earnings, presenting both challenges and advancements in its operational and financial strategies.
The company, a leader in renewable energy solutions, demonstrated robust operational success by increasing its funds from operations, driven primarily by organic growth and strategic acquisitions.
Notably, the deployment of $9 billion into diverse opportunities highlights Brookfield Renewable’s aggressive capital investment strategy, aiming to enhance its global footprint in the renewable sector.

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Jul 22

Daily Brief Macro: Positioning For Trump 2.0 and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Positioning For Trump 2.0
US Financial Markets: Preparing for a Changing of the Guard
The One Burning Question of the Great Rotation
Biden Leaves Presidential Race, Endorses VP Harris; Contest to Tighten if Dems Unite
John Greenwood Model of Debt Crisis in Three Phases
Copper Tracker July 22nd, 2024: Physical/Equity Screens And Trades, Copper Weak
Iron Ore Tracker July 22nd, 2024: Doing The Dance Between 95-130 USD/Ton, Use Iron Condors
Steno Signals #109 – What if We Are All Wrong on Liquidity, Rates and Commodities?
Global Commodities: 2024 US Election Watch—Reassessing Implications for Commodities Under a Red Wave

Positioning For Trump 2.0

By Cam Hui

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.

US Financial Markets: Preparing for a Changing of the Guard

By Said Desaque

The media are universal in their belief that a second Trump presidency will produce higher inflation. Fed Chairman Powell would serve the remaining segment of his current term if elected.
A further reduction in corporation tax and making the 2017 personal income tax cuts permanent are key fiscal policy goals of President Trump if elected for a second term.
Import substitution will raise inflation pressures unless there is supply-side transformation in the economy. Protectionism will reduce capital flows to the detriment of long-term interest rates and dollar exchange rate.

The One Burning Question of the Great Rotation

By Cam Hui

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.

Biden Leaves Presidential Race, Endorses VP Harris; Contest to Tighten if Dems Unite

By Prasenjit K. Basu

24 days after his catastrophic debate, and 29 days before the Democratic convention, President Biden dropped out of the presidential race and endorsed VP Kamala Harris as the Democratic nominee.
The latest polls showed Trump leading Biden by 3pp in the average of polls, including big leads in all seven battleground states. Harris is marginally closer in match-ups against Trump.
Trump-Vance have momentum after RNC. To be competitive, Harris (if endorsed by DNC) would need to pick an exciting, moderate candidate (eg, PA governor Shapiro) and hew to the centre.

John Greenwood Model of Debt Crisis in Three Phases

By Alex Ng

John Greenwood, the Father of the Hong Kong Linked Exchange Rate System, has formed a model for debt crisis. And that framework is predicting monetary contraction in the U.S. economy.
As leveraging goes down and the monetary conditions contract, the market can experience a sharp correction in stage 3.
Since the monetary conditions in the U.S. easily find its way to Hong Kong through the Linked Exchange Rate System, There might be a rough outlook ahead for Hong Kong.

Copper Tracker July 22nd, 2024: Physical/Equity Screens And Trades, Copper Weak

By Sameer Taneja

Copper retreated by more than 5% due to China’s weak print on TSF. The plenum’s lack of concrete stimulus measures also did not help matters.
Check out our initiation, Copper Primer: What We Like About Copper And What to Play, where we provide our long-term bullish outlook on copper.
Also, see our initiation, Southern Copper: In a League of Its Own. The company reported a stellar Q2 FY24, beating the street estimates by 20%.

Iron Ore Tracker July 22nd, 2024: Doing The Dance Between 95-130 USD/Ton, Use Iron Condors

By Sameer Taneja

Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher cost curve at around 100 USD/ton.
Last week, quarterly operational updates released were for Vale, BHP, Kumba, and Mount Gibson. Except for BHP, all companies were disappointed due to provisional pricing impacts and mix changes.
Read our recent production preview Fortescue Metals Group (FMG AU): High Dividend Yield of 9%, What to Expect From Q4 FY24, to be declared on the 25th of July.

Steno Signals #109 – What if We Are All Wrong on Liquidity, Rates and Commodities?

By Andreas Steno

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.

Global Commodities: 2024 US Election Watch—Reassessing Implications for Commodities Under a Red Wave

By At Any Rate

Shift to the right in favor of Trump accelerated after assassination attempt
Republican momentum challenging expectations for a divided Congress
Gold and oil likely to benefit under GOP control, with potential increase in demand and production respectively

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Jul 22

Most Read: Kokusai Electric , Zhihu Technology, Prosus NV, Fancl Corp, Intouch Holdings, Tatsuta Electric Wire & Cable, China Traditional Chinese Medicine, Samsung C&T, Greatview Aseptic Packaging, Taiwan Semiconductor (TSMC) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed
Zhihu (ZH US/2390 HK): Negative EV Play Launches a Share Buyback at HK$9.11/US$3.50
The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True
(Mostly) Asia-Pac M&A: AIS/Thaicom, Capitol Health, Alumina, Ansarada, TCM, CPMC, Fancl, Hollysys
Weekly Deals Digest (21 Jul) – Intouch/Gulf, China TCM, Huafa, Samson, Zhihu, Asics, Kokusai, Timee
ENEOS Extends Tatsuta Electric (5809) Tender Offer Means They Don’t Have The Shares
Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol
Examining Market Interest in the Potential Samsung C&T and SDS Restructuring
GAPack (468 HK): Grinding Towards a Stalemate
TSMC. Take The Pullback Gift

Kokusai Electric (6525 JP): Placement Price Could Be Determined Today; Index Impact Could Be Delayed

By Brian Freitas

Kokusai Electric (6525 JP) could price their secondary offering after market close today. The stock is down 10.5% since the rumors of the placement began 7 trading sessions ago.
The Philadelphia Stock Exchange Semiconductor Index (SOX INDEX) has been dropping over the last few days and is 8.6% lower over the last 8 trading days.
Kokusai Electric (6525 JP) has been trading higher on expectations of index inclusion in August, but that could move to November now.

Zhihu (ZH US/2390 HK): Negative EV Play Launches a Share Buyback at HK$9.11/US$3.50

Zhihu Technology (ZH US) has launched a conditional share buyback offer to acquire a maximum of 46.9m Class A ordinary shares (15.93% of outstanding shares) at HK$9.11 (US$3.50 per ADS).
The offer is conditional on shareholder approval by a majority of votes cast at the EGM. There is no minimum acceptance condition. The EGM vote is done due to irrevocables.
Zhihu’s share buyback returns 19% of cash not subject to government controls, below Douyu International Holdings (DOYU US)’s comparable 34%. The minimum pro-ration is expected to be around 34%.

The Naspers/Tencent & Prosus/Tencent Stub: Entry Levels so Attractive It Looks Too Good to Be True

By Charlotte van Tiddens, CFA

Discounts likely set for a re-rating as market continues to overreact to appointment of CEO amid good set of results.
The discounts of both Naspers and Prosus have continued to widen since the appointment of Fabricio Bloisi to Group CEO was announced in May (effective 10 July).
At the end of June, the group released its strongest set of results in years, delivering on consolidated ecommerce profitability ahead of target.

(Mostly) Asia-Pac M&A: AIS/Thaicom, Capitol Health, Alumina, Ansarada, TCM, CPMC, Fancl, Hollysys

By David Blennerhassett

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals discussed this week on Smartkarma: Samson Holding (531 HK)‘s Scheme, and VTOs for Advanced Info Service (ADVANC TB) and Thaicom Pcl (THCOM TB).
Key updates took place on Capitol Health (CAJ AU), Alumina (AWC AU), Ansarada (AND AU), TCM (570 HK), CPMC (906 HK), Fancl (4921 JP),and Hollysys Automation Technologies (HOLI US).

Weekly Deals Digest (21 Jul) – Intouch/Gulf, China TCM, Huafa, Samson, Zhihu, Asics, Kokusai, Timee

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: ASICS Corp (7936 JP) and Kokusai Electric (6525 JP) placements; Sanil Electric (062040 KS) and Timee Inc (215A JP) IPOs.
Event-Driven developments China Traditional Chinese Medicine (570 HK), Huafa Property Services Group (982 HK), Samson Holding (531 HK), Zhihu Technology (ZH US), Intouch Holdings (INTUCH TB), Gulf Energy Development (GULF TB).

ENEOS Extends Tatsuta Electric (5809) Tender Offer Means They Don’t Have The Shares

ENEOS Holdings (5020 JP) announced its deal for affiliate Tatsuta Electric Wire & Cable (5809 JP) 18-plus months ago. China approvals held it up more than a year.
Last month, they launched. The sector was up a lot. TOPIX was up a lot. The stock had recently been trading through terms. But ENEOS didn’t bump the price.
A month later, and the tender was supposed to have closed Friday 19 July. It didn’t. ENEOS extended, for no reason, which suggests they don’t have the shares.

Merger Arb Mondays (22 Jul) – China TCM, GA Pack, Huafa, Samson, CPMC, Fancl, Tatsuta, Capitol

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Asia Cement China (743 HK), Canvest Environmental Protection Group (1381 HK), Greatview Aseptic Packaging (468 HK).
Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Alumina Ltd (AWC AU), Fancl Corp (4921 JP), Mimasu Semiconductor Industry (8155 JP), Infocom Corp (4348 JP), Hollysys.

Examining Market Interest in the Potential Samsung C&T and SDS Restructuring

By Sanghyun Park

Maximizing Lee Jae-yong’s dividend income is crucial, making Samsung SDS’s ₩5.5T cash assets key, thus prompting the merger of Samsung C&T and Samsung SDS’s BPO division.
With no legal risks for Lee Jae-yong, Samsung C&T needs the merger to increase assets and avoid forced holding company conversion, making the acquisition of Samsung SDS’s BPO division necessary.
We should target a setup for likely appraisal rights for C&T. Monitor and capture the spread between the stock price and appraisal rights exercise price.

GAPack (468 HK): Grinding Towards a Stalemate

Since announcing Shandong Xinjufeng Technology Packaging (301296 CH)’s pre-conditional voluntary offer for Greatview Aseptic Packaging (468 HK) at HK$2.65 per share, the gross spread has increased.
The Board’s strategy is to rally shareholders against a hostile offer. However, the recent AGM protest votes suggest that the Board cannot easily thwart the offer.
Shandong Xinjufeng’s renewed efforts to secure Board representation suggest that its offer is in trouble. Meanwhile, China Mengniu Dairy Co (2319 HK) seems disinclined to engage in a bidding war.

TSMC. Take The Pullback Gift

By William Keating

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…

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Jul 22

Daily Brief Utilities: Nrg Energy Inc, Brookfield Renewable , Avangrid , Aes Corp, Essential Utilities , Evergy , Atmos Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

NRG Energy Inc.: Initiation of Coverage – Expansion of Smart Home and Consumer Energy Platforms Is A Key Growth Catalyst! – Financial Forecasts
Brookfield Renewable Corporation: Initiation of Coverage
Avangrid Inc (AGR) – Sunday, Apr 21, 2024
The AES Corporation: Initiation of Coverage – Does It Have A Sustainable Competitive Moat? – Major Drivers
Essential Utilities Inc.: Initiation of Coverage
Evergy Inc.: Initiation of Coverage – Is Its Focus on Economic Development and Large Load Customers Paying Off? – Major Drivers
Atmos Energy Corporation: Initiation of Coverage – What Is Their Core Business Strategy? – Major Drivers

NRG Energy Inc.: Initiation of Coverage – Expansion of Smart Home and Consumer Energy Platforms Is A Key Growth Catalyst! – Financial Forecasts

NRG Energy, Inc. recently reported a strong start to 2024, with business performance exceeding expectations and an affirmation of the 2024 financial guidance.
Management highlighted transformative trends in power demand, primarily driven by electrification, generative AI, and data center growth, which open promising prospects for the power sector.
Furthermore, NRG is strategically positioned to benefit from tightening supply and demand dynamics in key markets, leveraging its diversified generation portfolio and consumer technology platform.

Brookfield Renewable Corporation: Initiation of Coverage

Brookfield Renewable reported mixed results in its fourth quarter 2023 earnings, presenting both challenges and advancements in its operational and financial strategies.
The company, a leader in renewable energy solutions, demonstrated robust operational success by increasing its funds from operations, driven primarily by organic growth and strategic acquisitions.
Notably, the deployment of $9 billion into diverse opportunities highlights Brookfield Renewable’s aggressive capital investment strategy, aiming to enhance its global footprint in the renewable sector.

Avangrid Inc (AGR) – Sunday, Apr 21, 2024

By Value Investors Club

AGR minority-squeeze out arbitrage presents a profitable opportunity for arbitrage investors
Buffett’s endorsement of arbitrage as a cash management strategy adds credibility to potential returns
Current premium AGR is trading at indicates confidence in a higher offer, making it an attractive short-term investment opportunity for higher returns

The AES Corporation: Initiation of Coverage – Does It Have A Sustainable Competitive Moat? – Major Drivers

AES Corporation held a financial review for the first quarter of 2024, wherein they discussed the company’s performance and future plans extensively.
The company announced adjusted EBITDA with tax attributes of $863 million, adjusted EBITDA of $635 million, and adjusted earnings per share (EPS) at $0.50.
These results show AES Corporation’s ability to meet its targeted outcomes and reflect resilience amidst prevailing economic conditions like high interest rates and inflation.

Essential Utilities Inc.: Initiation of Coverage

Essential Utilities has reported a robust first quarter for 2024.
The company, during this period, achieved GAAP earnings of $0.97 per share, benefiting significantly from the gain on sale resulting from the closure of energy projects earlier in January.
Despite the warmer weather impacting the demand for its gas utility, Essential Utilities has shown strong operational performance across both its Gas and Water sectors.

Evergy Inc.: Initiation of Coverage – Is Its Focus on Economic Development and Large Load Customers Paying Off? – Major Drivers

Evergy, Inc. reported its financial results for the first quarter of 2024, indicating a mix of strengths and challenges impacting its performance.
The company delivered adjusted earnings of $0.54 per share, down from $0.59 per share in the same period the previous year.
This reduction in earnings per share can be attributed largely to increased costs, including higher operations and maintenance expenses, depreciation and amortization expenses, and interest expenses.

Atmos Energy Corporation: Initiation of Coverage – What Is Their Core Business Strategy? – Major Drivers