Thematic (Sector/Industry)

• US stocks concluded the week on a downward trend as concerns over inflation persisted, diminishing hopes for interest rate cuts.
• In the upcoming holiday-shortened week, investors await insights from the Federal Reserve minutes on monetary policy direction; NVIDIA’s results
• Son-San looking to raise $100 billion to fund an AI chip making venture. 

• Various statistics suggested that China’s tourism and hospitality industry has staged a significant recovery during the 2024 CNY holidays, with traffic surging high double-digit.
• While consumers are more cautious about retail product spending, they are willing to spend more on traveling. Such a trend will continue to bode well for the sector.
• We like OTAs including Tongcheng Travel (780 HK) and Trip.com (9961 HK) despite their YTD surge in share prices. Meanwhile, Air China Ltd (H) (753 HK) stays as the top pick.

• Generated with AI While Japanese stocks have had a banner 2023 and are off to a good start in 2024, the opportunity in Japan remains compelling.
• Especially in the dirt cheap small cap space.
• You can still buy net-nets with 20 years of net income profitability for under 9x earnings , Nichia Steel (TYO 5658) remains a double net-net , and even non net-nets like Nissin (TYO 9066) which announced a big buyback (18% of outstanding shares) trade at 0.

• The Nikkei hasn’t been this high since the Berlin Wall came toppling down. The Nikkei was up over 4% on the week and stands 15% higher YTD.
• There were plenty of reasons not to be higher. US stocks closed marginally lower; AI stocks like  SMCI crashed on Friday; 
• Japanese stocks were higher but that hides significant divergence between the winners and losers after a heavy week of earnings releases. Perhaps a pause for breath next week.

• The podcast hosts discuss various topics, including their interests and the future of artificial intelligence.
• They mention that earnings season is currently underway, with companies implementing layoffs to boost profit margins.
• While layoffs receive a lot of attention in the headlines, the hosts note that the labor market data overall looks positive.

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• China insurance sector may seem like there is strong growth prospects due the population, but relatively long term data on insurance premium growth is not robust in recent years.
• Aggregate impairment losses on assets of insurance companies have been soaring in recent years, well higher than in the GFC, which can continue with weak CRE, investments.
• Ping An Insurance has seen sharp fall in operating income in the past 2 quarters, with levels near quarterly lows in the past five years. Lower rates may hurt further.

• ADX Energy (ADX AU) C ; target price of £A$0.65 per share: Drilling update in Austria – The well site construction at the Welchau-1 drill site is complete.
• The drilling rig is expected to become available to ADX on 14 February. The rig move and rig assembly will take ~6 days after rig release.
• Drilling operations are expected to commence on 20 February with a duration of ~39 days.

• US Stocks surged to yet another record high as a surge in energy propelled a broader market rally, bolstering sentiment following economic data hinting at potential consumer weakness.
• Company spotlight: Kose’s stock has been pummeled following earnings miss and below-expected guidance. If Travel Retail & China can show some signs of life could be interesting value play
• Japan may have slipped from the Third largest to Fourth largest economy, but the stock market doesn’t seem to care.

• Sam Altman is reportedly looking to raise $5 to $7 trillion for a semiconductor project, but it is unclear who he is talking to or how realistic this goal is.
• The speculation is that Altman and OpenAI may be in negotiations with Nvidia over purchasing their chips, but the terms offered were not satisfactory, leading to Altman’s desire to build their own chips.
• There are concerns about the feasibility of raising such a large amount of money and finding the necessary talent to undertake this project. Intel may be open to partnering with Altman, but the investment potential and business viability are uncertain.

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• China’s luxury market last year failed to recover to 2021 levels amid a slowdown in economic growth and as more consumers made purchases overseas, but a modest pick-up from the previous 12 months has inspired optimism among major luxury houses, according to a new report and brand forecasts.

• The sector grew 12% year-on-year in 2023, indicating a recovery from the previous year’s pandemic-induced decline, consultancy Bain & Co. Inc.’s latest report about the market shows.

• “The solid double-digit rebound is commendable, but China’s luxury market has not fully recovered to its 2021 levels,” said Bruno Lannes, a senior partner at Bain & Co.

• Despite Colombia facing challenges growing oil & gas reserves on a national level, the country’s independent operators are scaling up.
• Relative to the size of national oil & gas reserves, Colombia’s onshore discoveries in recent years may look marginal at best.
• However, the size of the discoveries can be meaningful for smaller operators.

• Seeing as though it is Chinese New Year week, I thought it might be appropriate to conduct a brief analysis of US-listed China plays.
• According to a recent US-China Economic and Security Review Commission report, 265 Chinese companies were listed on the NYSE, Nasdaq and NYSE American exchanges in January 2024 worth US$848bn. 
• That’s down from 252 companies worth US$1.03tn a year ago, a 17.5% decline. 91% of the total market capitalization of Chinese firms listed on U.S. exchanges use VIEs.

• US stocks surprisingly resilient after sell-off. 10Y bond yield edges lower; Nikkei futures point to strong open
• Sony’s outlook for profit growth in the coming year looks unappealing. Management transitions the PS5 to end-of-life care.
• Japan’s diplomats are watching the yen – don’t they always; last intervention was at 152 to the dollar

• In officially decided cases concerning dissentient shareholders in privatised US-listed China plays, the uplift to the merger price versus time value of money and legal costs, is less than ideal. 
• The outcome for each case will turn on the underlying facts. But it would appear iKang Healthcare Group (ADR) (KANG US) is following a similar trend.  
• Reportedly the uplift to the iKang merger price is just 10%. Dissenters can still lodge an appeal.

• Dow loses over 500 points, its biggest daily loss in over 10 months, as Treasury yields surged 14bps to 4.3%
• Shimano announces disappointing 2024 earnings guidance, well short of street estimates. Perhaps time to do more on capital allocation
• Sapporo looks like it is bowing to pressure from activist, 3D Partners, regarding a potential sale of non-core real estate

• In the second of our series of spotlights on psychedelic therapies, we look at 3,4-methylenedioxymethamphetamine (MDMA), a Schedule I substance that is leading the psychedelic charge to therapeutic legitimacy.
• MDMA, better known as ecstasy or molly, is a pure human- made synthesized compound that uniquely combines the characteristics of a stimulant with hallucinogenic properties.
• No other psychedelic shares those characteristics. The parallel release of dopamine and serotonin brings together a positive mood and prosocial effects. 

• S&P slips slightly on Monday after closing above 5,000 for the first time on Friday
• Diamondback Energy +9% after announcing tie-up with Endeavour worth over $50 billion
• Recruit reported Q3 results post close on Friday. US hiring remains in the doldrums, but cost cutting pushes EBITDA above expectations

• Welcome to this week’s earnings. My spark notes are the NXPI and IFX did better than I feared, but I continue to be unconstructive on automotive.

• Fabrinet and Coherent both achieved good results, but Fabrinet disappointed expectations for Nvidia’s pluggable revenue. Is this a weak read-through? Unlikely. Marvell should have an amazing year if Coherent’s TAM is remotely correct.

• MKSI put up the exact results I was looking for, and this continues to be my favorite idea. As WFE increases, inventory builds will happen, and then financial and operational leverage will take care of the rest.

• Mattress sales and companies tied to the mattress supply chain showed weakness in sales results reported last week.
• After market close on Thursday, supplier Leggett & Platt (LEG) reported 4QFY23 adjusted EPS of $0.26.
• On January 16, management disclosed a massive restructuring plan, causing analysts’ estimates to change before the “print”. 

• After five straight positive weeks, we were due for a pullback. The US cannabis MSOS ETF fell 5.68%, while the global YOLO ETF fell 3.95%. YTD, MSOS is +37.37% and YOLO is +20.86%.
• The potential for Schedule III and 280E removal is driving the outperformance of US names. For the week, MSOS had $44.07 million in inflows.
• Ascend (CSE: AAWH, OTCQX: AAWH) gained 11.41% this week and was finally added to the MSOS ETF. 

• 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 CPI and PPI inflation data points.
• Companies mentioned:Hyundai Motor (005380 KS), Semiconductor Manufacturing International Corp (SMIC) (981 HK), Tencent (700 HK), Taiwan Semiconductor (TSMC) (2330 TT), Baidu (9888 HK)

• JD/BABA/PDD : JD increases salaries for customer service staff (-)
• 700 HK: News has surfaced indicating that Tencent is in the process of developing a mobile game adaptation of “Elden Ring.” (+) 
• 700 HK/LKNCY: Tencent’s <Dream Star> has collaborated with Luckin Coffee for a co-branding initiative (+)

• The podcast features Lance Bronstein, head of Aladdin engineering at BlackRock, and Rob, discussing the impact of AI on business operations.
• They highlight the importance of using technology to amplify human capabilities and redefine roles, while also focusing on upskilling the workforce and recalibrating risk management and client interactions.
• They acknowledge that AI is not a new concept, but the recent advancements in data, compute power, and technology have enabled transformative changes in how people interact with computers, particularly through language and conversation.

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• ATAT/TCOM: Tourism: Local government will issue RMB600mn travel consumption subsidies during CNY(+)
• 9995 HK/BGNE/9926 HK/1801 HK/1877 HK:The National Medical Insurance Administration issued new regulations on the initial price of newly launched drugs to protect the independent pricing of innovative drugs.(/)
• 300750 SZ：Porsche’s new Taycan doubles cruising range, uses CATL Shenxing battery(+)

• Chariot (CHAR LN)C; target price of £0.50 per share: Receiving EIA approval for onshore drilling in Morocco – Chariot has received approval for its EIA for a total of 20 well at Loukos, onshore Morocco.
• The approval covers the initial drilling campaign of two exploration wells (Gaufrette and Dartois) as well as 17 further well locations and the re-entry of an existing gas discovery.
• Operations are expected to start at the end of 1Q24 as indicated previously.

• China’s cloud software vendors are feeling the brunt of the sharpest drop in venture capital (VC) investment in the sector in a decade, with many rushing to cut prices or costs to tide them over.
• The country’s current 13 software as a service (SaaS) unicorns — startups valued at more than $1 billion — raised just 495 million yuan ($69 million) from investors last year, the lowest amount since 2014, according to ITjuzi, a domestic provider of data on tech companies and investments, based on announced deals.
• The amount pales in comparison to the peak of 9.3 billion yuan they raised in 2021, when the Covid pandemic boosted demand for digital services.

• Arm Holdings shares +47% on surprise earnings announcement, suggesting AI driving a recovery in the industry
• Shimizu Corporation, Taisei Corporation and Toray lowered their forecasts due to rising material costs and deteriorating market conditions. NTT reported lower than expected profits. 
• Subaru raised their forecast on higher US sales. Daifuku also revised up their forecast on strong EV investment.

• We highlight the latest policy developments with the wave of developer projects getting whitelisted for financing support.
• There is plenty of local news about city-level project approvals and a growing number of developers announced how many of theirs have been whitelisted.
• The big question is what proportion of the whitelisted projects will get the actual loans.

• US-domiciled Global Systemically Important Banks (G-SIBs) have seen their credit risk profiles improve over the last quarter of 2023 towards the median credit risk faced by all US- banks.
• The downward trend in the Criat Credit Cycle Index (CCCI) for G-SIBs was largely driven by improvements in their equity performance, which has improved their financial position comparative to its peers.
• As can be seen from Chart 1, although the G-SIB CCCI is trending lower since late September-2023, their aggregate credit profile is still close to the upper quartile credit risk of the US banking industry.

• In this webinar, part of Real Estate Foresight’s 12th annual China Property Outlook, we share our views on 2024 for the China housing markets
• We explore several themes, incl. the latest Whitelist approvals by local governments and a wave of related announcements
• The webinar presentation was recorded on Feb 6, 2024. You can also view this 3-minute version with a few highlights.

• China was the world’s top auto exporter last year, cementing its position after overtaking Japan as No. 1 earlier in 2023, thanks largely to strong demand for new-energy vehicles (NEVs), increased deliveries to Russia and escalating domestic competition that forced automakers to accelerate their overseas expansion.
• China’s auto exports surged 57.9% year-on-year to 4.91 million cars, as reported by the China Association of Automobile Manufacturers (CAAM) last month.
• By comparison, Japan exported 4.42 million vehicles in 2023, up 16% from a year earlier, according to data from the Japa

• We joined WTR’s Head of Business Development Tim Regan on this week’s Water Tower Hour Podcast to recap what happened in the chemicals and materials technology industries in 2023 and to provide an outlook for 2024.
• Those interested can listen to the podcast on Apple Podcasts, Google Podcasts, Spotify, or on our website.
• WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.