Thematic (Sector/Industry)

• OVERSEAS.  Equities sink on China Worries; China enacts emergency rate cuts; Stops publishing youth employment data; Strong US Retail sales pushes Yields; New US Bank regulation to hit profits
• JAPAN. NKY Futures -1% discount vs Cash; USDJPY 145.6; Japan watching Yen – to take appropriate action says Fin Minister; JP GDP beats expectations; Typhoon Lan rips Western Japan
• NUGGET.  Japan Post Holdings -300 billion yen share buyback;  With a pile of cash from Japan Post Bank Sale (1.2 trillion to be exact), we think this just the start

• BABA/VIPS/JD/PDD/3690.HK: Catering was the top growing consumption category in July (-/-/-/+)
• 1810.HK/2454.TT: Xiaomi launches new products at annual Lei Jun conference (+)
• Property sector update: New home sales in July remain weak, and expect the landing of supportive policies（/）

• It’s the first time in nearly thirty years for the State Council to directly issue The Guidelines giving specific instructions on attracting foreign investment. Therefore, it’s necessary to interpret the signals behind.
• The core requirement is for foreign companies to bring their production capacity/core technology to China (e.g. Tesla, Moderna). The ultimate goal is to help China’s industry upgrade, achieve technological breakthroughs.
• However, the investment logic of “import substitution” naturally conflicts with attracting foreign investment and guarantee the “national treatment” of foreign-invested enterprises. So, investors may need to change thinking mode/strategies.

• This earnings season has highlighted the robust performance of older-generation (“trailing edge”) companies.
• Their inventories have also been rising. At the same time, there’s a noticeable demand slump in China.
• Surprisingly, Chinese semiconductor firms are increasing their investments in older technology, known as the “lagging edge” capacity. Put the pieces together, and there’s a big story here.

• OVERSEAS.  US Equities rebound led by Tech as NVIDIA +7% gets boost from MS report; China troubles persist: Country Garden suspends bond trading; Foreign Investors losing interest in China
• JAPAN. NKY Futures +0.7% vs Cash; USDJPY 145.5;  Yen Weakens be beyond 145 to USD, heads to 146 on widening spreads; JP M&A Boom as Cos seek improvements; Dentsu Miss
• NUGGET. Activism-Japanese Firms Expect It ! June’s Reuters survey of companies in Japan revealed this fact. At the very minimum, an implicit acknowledgement that there is room for improvement

• Foundry segment is on track to decline 15% YoY with no prospects of a meaningful H2 recovery
• Inventory levels across smartphone, PC and consumer electronic supply chains remain elevated, plagued by lack-lustre end user demand. 
• At least some of the key players appear to be lowering prices but this is highly unlikely to stimulate end user demand and may actually make things worse

• The slew of negative economic data for July traces its root to the inadequacy of industries Chinese government wants to promote towards generating employment, income and investments;
• With overwhelming advantage in financing, US’s reshoring initiative is bound to succeed in its first iteration. 
• For China, boosting demand is no longer an option. Exporting deflation might be the only answer.

• ACMR/981.HK/1347.HK: US outbound investment restrictions likely to exempt publicly traded securities (+/+/+)
• NIO/1211 HK: Geely’s sub-brand Zeekr cut price of its 001 model (-/-)
• XPEV/NIO/BYD: Tesla China cuts Model Y prices and offers insurance subsidy for Model 3 (-/-/-)

• OVERSEAS. Uncertainty reigns as SPX closed flat Friday; US Treasury Yields rise as Yield Curve flattens on strong producer price data; Headwinds Mount in China’s Economy;  Oil Demand reach record.
• JAPAN. Nikkei Futures -0.1% vs Cash; USDJPY 145; Kishida Cabinet approval down; Wholesale prices slow; Japanese firms opt to go private rather than face activists; Inbound Boost from China.
• NUGGET. Honda has a robust earnings structure that we think will be resilient to the increasing investment spend on BEV, with motor bike profitability

• China’s announcement of the third batch of international destinations for the resumption of outbound travel will serve as another important catalyst for the rebound of outbound tourism.
• The generally weak performance of tourism-related stocks YTD is unjustified. Fosun Tourism (1992 HK) and China Travel International (308 HK) have both issued positive profit alerts for 1H23.
• Air China Ltd (H) (753 HK) is also an important beneficiary as international passenger capacity recovers. The release of pent-up demand will have positive implications on passenger yield.

• The start of the second half of the year so far has seen a change in the market themes versus the first half of the year.
• Microsoft’s declaration in January 2023 that AI would emerge as the next computing platform coupled with Nvidia’s shocking earnings guide up last quarter, coupled with a weaker dollar and decline in bond yields, provided fuel in the first half of the year for the technology sector and garnered investor eyeballs to anything closely associated with AI.
• However, on Microsoft’s most recent earnings call on July 25th, CFO Amy Hood stated “Even with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales and our copilots reach general availability dates. So for FY ’24, the impact will be weighted towards H2.”

• Lower-Than-Expected policy stimulus/disappointing financial data led to sharp decline in A-share. This is because China is in the midst of economic structural transition, from rent economy/real estate to digital economy.
• China has considered risk prevention, which is the golden time for investors to timely clean up assets under the old development model and allocate assets under the new economic structure.
• The risk of a financial crisis remains. Share price in A-share could continue to fall. Therefore, we suggest that investors wait for the bottom to appear. Rebounds would come next.

• The Global Emerging Markets Weekly provides a summary of the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
• Macro data points: Indonesia and Philippines GDP growth, China trade data.
• Companies mentioned:Paytm (PAYTM IN), Ant Group (6688 HK), NVIDIA Corp (NVDA US)

• Q2’23 silicon wafer shipments amounted to 3,331 MSI,  + 2.0% QoQ, -10% YoY 
• Customer inventory levels remain at all time record highs with memory being the worst offender
• No change in our outlook for 14% overcapacity in 2023 with supply demand balance likely taking until 2026.

E-commerce platforms worldwide, including Chinese-owned fast-fashion rivals Shein and Temu, are embracing a novel business model that offers merchants the advantages of selling their goods overseas at a lower cost and higher convenience.

And mainland-based companies stand to benefit as the platforms come in search of reliable suppliers in China’s manufacturing hubs.

The model, known in China as the “full-service consignment model,” (全托管模式) sees online platforms take care of nearly all aspects of the selling process from setting the price of products and storing them to marketing, processing orders, and delivery.

• A weekly curated selection of Chinese news articles and company announcements focused on developers in distress
• We look for their deals, updates, specific project progress news (‘local signals’), as well as relevant local research commentaries about the market
• We do not verify the underlying data or provide any opinion, we only select and summarize the information; see direct links to sources

• DRAM Q2’23 revenues amounted to ~$11 billion, up 14.6% sequentially but down 56% YoY.
• NAND Q2’23 revenues amounted to $9 billion, up 7.7% sequentially but down ~50% YoY.
• Despite the modest uptick in Q2’23, there’s a long and winding road back to sustainable profitability…

• Meituan/Ctrip.com/Atour: MCT announce the third batch of destination list for outbound group travel, bodes well for outbound travel recovery
• ZTO: Cainiao Guoguo launches RMB 1.3bn in logistics subsidies for new Taobao/Tmall SMEs (-)
• Tencent held the 2023 WeChat Advertising Ecology Partnership Conference (+)

• The re-emergence of AI as a topic of hype, caution and investment contains, in equal parts, the re-discovery of a pre-existing technology, but now on steroids, plus all the excitement of the race among the top 5 techs to invest enough in order to dominate the field .
• The 2000 Dot.com boom involved hundreds of IPOs of start-ups, all with the word “internet” in their names, except now the AI boom involves mostly buying up existing startups by the big Techs.
• The re emergence of AI will undoubtedly change a lot of the ways in which data are used and monetized, it will make Google search far more client-friendly and it will step up the capacity of software to program themselves. 

• OVERSEAS.  US Major Equity Indices fall over night with Tech leading the sell off; Oil prices (and Stocks) in the other direction; Negative China CPI-Deflation confirmed.
• JAPAN.  NKY Futures -0.2% vs Cash; USDJPY 143.7;  China to allow Group Tours to Japan; EARNINGS: Positive Inpex and Nexon: Strong earnings and Buyback; Sony  earnings down on M&A hangover
• NUGGET. Yesterday’s CPI print confirmed that China in Deflation. Looking for more aggressive stimulus. Monetary unlikely to work. Looking for A BIG FISCAL STIMULUS(at some point). Remain cautious China related.

• 1810. HK: Takeaways for Xiaomi from Apple’s F3Q23 earnings (-)
• NIO:  local benchmarking platform revealed NIO phone’s core specs (+)
• LKNCY: Luckin Coffee sold 7.39mn cups on the Start of Autumn（+）

• Results for FY2022-23 provide a snapshot of winners and losers in Japan’s retail sector.
• The data shows a big improvement in performance for retailers with sales of ¥250 billion or more and the outlook is positive for most, particularly for profits.
• This also means that market concentration is intensifying, particularly in sectors like drugstores but also now in supermarkets. We highlight the winners in each sector.

• OVERSEAS. Moodies Downgrade of US banks drive Equity Sell off on concerns around the financial system, economy; Weak China Trade Data; NVIDIA introduces new AI chips – extending its lead
• JAPAN. Nikkei Futures -0.3% vs Cash; USDJPY 143.4;  Japan Current A/C surplus rises +ve; But Real Wages fall – not great for BOJ exit; Earnings: Beats from Asics, Shiseido.
• NUGGET.  China – are things worse than the data suggests ? Indications are that we are not out of the woods yet with China, and not at a turning point.

• 9950HK/BGNE: BioNTech signed another ADC from Durality, negative to RemeGen and BeiGene（-）
• 9926HK/BGNE/9995HK/ZLAB/1801HK/1877HK: National Audit Office’s special audit on auditing Guangdong’s pharmaceutical consumables showed breadth and depth of the current anti-corruption probe（+/+/-/-/-/-）
• BABA/SE:TikTok is in early talks with regulators to obtain a payments license in Indonesia.(-)

• Luckin Coffee: Luckin Coffee “store transfer” program achieved preliminary result
• CPNG/BABA: Statistics Korea published 2Q23 cross-border ecommerce data (- /+)
• 3690.HK: Douyin taking measures to boost local services business (-)

• LI: Li Auto adds L9 Pro trim to L9 series (+)
• BABA/JD：Cainiao started half day delivery in 8 cities（+ / -）
• 3690HK/TCOM: Meituan established a strategic partnership with Amadeus to expand the outbound travel market（+/-）

• Global semi sales for the month of June 2023 amounted to $41.5 billion, +1.7% MoM but still down ~17% YoY.
• Nanya reported monthly revenue for July 2023 of NT$ 2,437 million, a slight decrease MoM and still down 44.5% YoY:
• For the YTD through July, ASPEED’s revenue is down 47% YoY. This translates into a similar percentage decrease in global server sales YoY in 2023. 

• OVERSEAS. All Major US Equity Indices rose: SPX +0.7%; Dow 1.2% after a last weeks sell off; US 10Yr yields rise on anticipated increased sales; Mgmt Transition worries at Tesla?
• JAPAN.  NKY Futures +0.5% vs Cash; USDJPY  142.5;  METI releases guidelines on developing AI HR; Toshiba tend to start (finally!); Broker upgrades to MHI(7011) (A bit late to the party)
• NUGGET. ENEOS to collaborate with Total Energy (France) to produce SAF. SAF has huge potential and we think its worth paying attention to as Japan pushes its carbon-zero agenda.

• We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro environment to be conducive; 
• Our China Internet top picks are Meituan and Tencent, and investors could buy PDD and NetEase after 2Q23 earnings. 
• Domestic consumption will also bottom out, but sustainability only confines to a few, our top picks in China consumer names are Miniso, Luckin Coffee, and Atour.

• Let’s first talk about Intel. Intel reported earnings last week, and what a surprise; they managed to have a beat and raise!
• I wrote about this in “Is this the Intel Inflection,” noting that, for once, they had low enough hurdles to jump over.
• Most of this quarter’s strength came from Client computing, while Datacenter looked better than feared. There is a slight restocking event with the back-to-school season, which implies that the worst is done for PC CPU inventories.

• OVERSEAS.  SPX500 fell on Friday, and closed -2.3%WoW;  July jobs report showed cooling in the labor market;  Apple -4.8% weighed on market sentiment; Reports that Buffet buying short dated UST.
• JAPAN. NKY Futures -0.8% vs Cash; USDJPY 141.8; Strong JP earning season so far- NP +20%YoY; Investors favor Japan>  China;  Oasis’s Fischer says still more to be done with Governance.
• NUGGET. Honda is ahead of their motorcycle electrification strategy vs Japanese competitors.  With the #1 global share and 2.7 trillion yen in sales, they CANNOT afford to be left behind.

• Retail results for FY2022-23 are now in and a summary analysis of all major retail sectors and retailers is available below. 
• The data shows a big improvement in performance for retailing overall, with the highest growth rates since 1990, even if some of this growth was thanks to higher prices.
• 2023 already looks like being another strong year across both consumer discretionary and staples.

• XPEV/NVIDIA: Xpeng ADAS head to join Nvidia ( – /+)
• Real Estate Industry Update: Zhengzhou announced 15 supportive policies on real estate industry, including suspending the home selling restrictions, and others. Minor positive: KE Holdings (BEKE US, BUY, TP US$22）
• ATAT: Popularity of summer vacation continued in July, and the supply shortage resulted in the surge of hotel ADR（+）