Thematic (Sector/Industry)

• OVERSEAS. US Back to Equity Declines as Fed Minutes indicate  more hikes coming;  Yield Rise across the curve; SPX -0.2% with Cyclicals hit hardest; New Car Sales up Again
• JAPAN. NKY Futs -0.7% vs Cash; USDJPY 144.7;  RENGO confirms largest wage Hikes in 3 decades;  Rakuten Securites IPO=¥100bn? is it enough for parent?; Big Buyback from Leopalace(8848)
• NUGGET.  Nintendo Switch Sales still has more to run ? it would seems so -as IP is driving sales to new records in its 7th YEAR !

• Some assets in A-share that were considered to have long-term growth but are not anymore. Then the logic of capital’s allocation in A-share isn’t based on growth, but on liquidity.
• There’s no real separation between local finance and medical insurance fund. So, there could be “surprises” during the promotion of DRGs policy. Then a slump in sentiment and valuations is possible.
• For China healthcare, there’re structural opportunities and rebounds this year. We analyzed the possible trajectory of stock price fluctuations in different sectors, and also our top pick.

• The USDA surprised the market with a 5% lower-than-expected planted soybean area in 2023, with soybeans rallying 7%.  
• The U.S. Midwest drought remains in focus. Dry areas are by far the greatest since 2002 and soybean crop ratings are at historic lows for this time of year. 
• With the budding El Niño, supply risk to edible oils in 2024 continues to rise. Reiterate the positive call on Plantations and the bullish CPO price forecast. 

• OVERSEAS. US out for Independence Day – not a lot to report; European Stocks gain, and volumes 1/3 of normal;  META to Launch “Thread”, to compete with Twitter
• JAPAN. NKY Futs -0.8% vs Cash; USDJPY 144.5; NKY -1% as JP succumbs to profit taking; Toyota to cut Solid State battery costs by 50%; Rakuten to list Securities biz
• NUGGET.  Lawson – if management can execute on their MTP, the stock is super cheap. Potential growth, Yield, Take out play ?

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Providers, Pranav Bhavsar and Nitin Mangal. They will be sharing with us their Top Stock Picks in India. From trends, current opportunities, and insights on their picks, join us as we get the full picture from Pranav and Nitin.

The webinar will be hosted on Wednesday, 12 July 2023, 17:00 SGT/HKT.

Pranav Bhavsar is the Founder of ASA Capital Management, focusing on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.

Nitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed a product for Institutional Investors named as “Analysis Beyond Consensus” during his association with Edelweiss Securities Ltd, Mumbai. 

• Europe has seen some remarkable energy prices in recent days with record negative electricity prices in the North Western part of the continent, while Saudi Arabia strikes again and prolongs the supply cuts into August.
• Read along in our weekly Energy Cable, where Steno Research and 3Fourteen Research share their thoughts on Energy markets. As usual, we don’t quite agree.
• At yesterday’s auction for the day-ahead German baseload electricity prices turned outright negative and we wonder if this could be a signal of deflation to come like we saw in the gas markets last fall where the short end of the curve absolutely nosedived once we realized filling the storages was not going to be a problem.

• The growth of China’s semiconductor industry is inevitable and ever increasing sanctions on advanced semi supply chain components are adding fuel their self-sufficiency aspirations
• Most Chinese semi stocks P/E ratios are sky high & volatile to boot. Many US semi stocks have peaked as far as their exposure to China growth is concerned. 
• One sub-segment of the WFE sector may provide China semi growth exposure at reasonable valuation with relatively low risk. 

• OVERSEAS. SPX eakes out gains despite weak ISM Manufacutring in light trading ahead of July 4th Independence Day Holiday; TESLA +6.9% on big 2Q delivery numbers
• JAPAN. NKY Futs -0.4% vs Cash; JPYUSD 144.7; Strong BOJ Tankan print drives NKY to new highs;  JP land prices continue to rise; Support for JP foundry goals from IBM
• NUGGET.  Japan’s passing of the GX Promotion Law enables the issuance of ¥20 trillion in bonds and promotes ¥150 trillion of decarbonization investment over the next decade. Investment opportunities abound!

• A collapse of real estate speculation destroyed the balance sheets of Chinese households, leading to downward spiral in consumptions. A tremendous stimulus package can reflate the economy, 
• But it doesn’t solve the structural problems; Unlike semiconductor and biotech, inputs to renewable energy are many and supply chains are long.  To stay ahead, Chinese companies must keep themselves 
• Cost competitive,  which means they can neither realize profits nor retaliate US containments. But their equities offer the long-term hope to replace real estate as nest eggs of Chinese retirees.

• 2252HK:   NHC issued the “14th Five-Year Plan for Large-Scale Medical Equipment Allocation” ,  the planned quota of laparoscopic robots is slightly lower than our estimated (-)
• 1801HK/LEGN:Innovent/ISAO co-developed CAR-T received approval in China ahead   of Legend’s CARVIKTI, might try to squeeze in NDRL list this year (+)
• LKNCY: Luckin Coffee reported 50mn monthly transacting customers in June(/)

• OVERSEAS.  Strong close to Month, Quarter and Half Year as SPX rose +1.2% on Friday; AI Trade Back as NDX100 hit  $5trn Mkt cap; Apple now >$3 trill !
• JAPAN. NKY Futs +0.7% vs Cash; USDJPY 144.3; Tokyo Inflation print 3.2% raises questions on national inflation and BOJ’s next steps;  Tokyo heats up as Power conservation measures implemented
• NUGGET.  We believe Toyota’s concerns regarding BEVs are valid. We see them having the technology and manufacturing prowess at scale, strong branding, and global reach to eventually overtake Tesla

• ZLAB: Laekna Therapeutics IPO’ed in HK with two AKT inhibitors. We believe it will complement PARP inhibitor (+)
• LKNCY: COTTI Coffee opened its No.4k store，but may lack sustainability(/)
• 002202CH/601615CH：Siemens Gamesa’s wind turbine suffers quality recall, may benefit Chinese vendors (-)

• In any portfolio, it’s always good to have a listing of up and coming companies on hand which you may be interested in which may have recently IPO’d, did a significant acquisition, or has introduced a new and exciting product or service.
• These companies may also have parabolic forward Wall St. estimates for both revenue and or profits.
• I generally refer to this listing as my “wild broncos” listing and they generally can have wild price and volume swings (based upon earnings releases, press releases, investor day presentations, or analyst upgrades) and sometimes can often come under attack by short seller reports.

• New HDFC Bank appears to have far better returns and credit metrics that large Asian peers
• Pro-Forma amalgamation puts HDFC Bank as 2nd largest bank in Asia Pacific in market cap 
• Comparably large banks in Asia are concentrated in China, where credit metrics are opaque

• Oasis has launched a hostile campaign against Tsuruha, one of the largest drug store chains in Japan
• The company’s corporate governance needs a serious overhaul – the board is entrenched and dominated by the founding families
• Shareholders will need to elect a Board with more independence and a greater skillset to navigate industry consolidation

• The National Health Commission released “14th Five-Year Plan for the Configuration of Large Medical Equipment”, which should drive the upgrading of the whole industry chain and accelerate the import substitution.
• The gap between Chinese and Western hospitals can lead to many differences in the logic of future commercialization, such as surgical robots and other high-priced innovative medical devices in China.
• The efficacy/safety standards of GLP-1 drugs have been raised sufficiently high. If latecomers’ products fail to be better than Semaglutide/Tirzepatide/Orforglipron, it’s difficult to gain market share through “fast-follow strategy”.

• Micron said we bottomed, wrung their hands a ton about gross margins and comparability, and said oh, inventory accounting has helped us out
• Oracle had a huge announcement that majorly snubbed Intel.
• There’s another rumored AI winner. Amkor was rumored (heavy emphasis, Digitimes can be untrustworthy) to be helping Nvidia with packaging.

• 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

• We suggest that both Tencent and NetEase will launch blockbuster new games in their pipelines during this year’s summer vacation, with NetEase slightly surpassing Tencent.  
• Although iQIYI, Kuaishou, and BILI each have new games, their contributions are relatively small, so we maintain a SELL rating for these three companies;
• Investors can also pay attention to Nexon and Netmarble, two Korean game companies that are expected to benefit from the launch of new games;  

• OVERSEAS. SPX +0.4% AS Banks lead after passing Fed’s stress test= PAYOUTS ! 2 Fed hikes more likely says Swaps markets; US 1Q GDP REVISED UP to 2%.
• JAPAN. NKY Futs +0.3% vs Cash; USDJPY 144.8; End of Month/Quarter; Flat NKY Today = +18.5% QTD..best Quarter in a Decade !  Big Japan AGM Week -Biz leaders get heat.
• NUGGET. Kandenko(1942) set to benefit from the massive drive to decarbonize by  key client TEPCO.  Co is still trading below book, is net cash, with earnings set to grow !

• NIO: NIO’s new order intake in June exceeds 20k units (+)
• XPEV: Xpeng is likely to slightly beat 2Q23 guidance (+)
• BEKE：Property transactions in June is weak, but likely to bottom-out(-)

• 2618.HK/002352.CH: Cainiao launching its own national express delivery network (-/-)
• 3690.HK/PDD: Meituan planning to launch “Summer War” in community group buying (-/-)
• BEKE: Beike is planning to extend business to real estate upstream, exploiting extra value beyond new home sales channel(-)

• New World Resources Ltd (ASX:NWC) is developing the Antler copper deposit in northern Arizona and the earlier-stage Javelin copper project which lies about 75kms to the south- east of Antler.
• The company has recently released an updated scoping study (May 2023) in which it upgraded the production profile by 30% to 15.4Mt at 1.3Mtpa for 13 years at an average grade of 3.0% copper equivalent (Cu Eq.) for capex of US$252m to deliver 381,400 tonnes of Cu Eq metal.
• The study identified that over the life of the project, Antler should produce US$3.0bn in revenue and US$1.5bn in free cashflow with a pre-tax IRR of 40.2%. New World is also undertaking a pre-feasibility study on the project and intends submitting mine permit applications in Q3 2023.

• OVERSEAS. SPX Flat as Chips stocks sell off on potential new China restrictions;  Fed Chair Powell keeps hawkish stance saying more hikes on the horizon; Micron calling bottom on Memory.
• JAPAN. NKY Futs +0.1% vs Cash; USDJPY 144.4; Japan FX Tsar concerned saying govt will  respond “appropriately” on excessive weakness; Final Fantasy 16 off to a solid start
• NUGGET. Katitas – specialist in remodelling vacant homes. 40% YTD underpeformance vs TPX. Govt stepping up support of vacant home sector – supportive of Katitas’s business.

• PDD/1024.HK/700.HK: PDD adds an entrance that is dedicated to viewing live broadcasts (+/-/-)
• Luckin Coffee: Luckin Coffee cooperate with OneContract Cloud to develop internal contract management system, which is intended to improve the efficiency of franchise store opening.
• BILI: Bilibili Will Change Video Display Metrics to Measure Watch Time Instead of View Counts (-)

• Sequential monthly increases in Macau GGR presages arrival at near 2019 pre-covid levels earlier than many have forecast. This keeps entry points attractive.
• China economy inching up to projected 4.5% GDP growth for 2023 and 5% for 2024 supports underlying confidence of continuing cycle of recovery for Macau.
• Added room, gaming and non-gaming amenities will kick in later this year and for 2024 will keep positive momentum going.

• Investors appear to have lost faith in China healthcare following a plunge in CXO shares.But seeing the decline in CXO orders as indicator of industry’s prosperity is a lagging view.
• The logic of CXO is tied to biotech on the one hand and to overseas relationships on the other. But Biotech remains the cornerstone of the overall logical chain. 
• According to the primary market situation, we’re not optimistic about CXO’s domestic business to achieve a significant recovery next year, but the overseas recovery/financing situation may improve a bit faster.

• WTR-CMI last week. In a week when the broad market index (Russell 2000) declined 3.6%, our WTR-CMI index of 30 chemicals and materials technology companies modestly outperformed, dropping 2.3%.
• This nonetheless trailed the large-cap S&P 500 index, which lost only 1.8% of its value during the week.
• Benefiting from improved investor sentiment on possibly higher summer sales of insecticides, improving automotive and construction markets, and lower raw material costs that we discussed last week, ag-chem and coatings companies led the performance of our index.

• OVERSEAS. SPX +1.1% rebounds on Tech and Consumer led rally post strong housing, consumer confidence numbers; AI led names back strong after recent profit taking; China Primier says more stimulus
• JAPAN. NKY Futs +0.8% vs Cash; USDJPY 144.1;  Speculation grows on MoF Yen intervention as Japan appoints official who led last years intervention; Nintendo Family Office prevails over Toyo Construction
• NUGGET. KEPCO(9503) formed a 50-50 JV with US DataCenter specialist CyrusOne. Will look to get 900MW over then next 10 years.  Could be significant future earnings driver for KEPCO.

• This report is the first in an ongoing series we plan to publish on a monthly basis to provide our view and analysis of current issues and/or longer-term trends where appropriate.
• This will include issues relevant to the overall healthcare economy with a focus on healthcare services and medical devices.
• For this issue, we provide our view on the four key ‘mega trends’ that underpin the stability and growth of the health economy.

• In May, the recovery in outbound travel remained strong, but not surprisingly so
• Meanwhile, improvement in domestic travel activity appears to have lost steam
• Six months in, we simply do not see any positive surprises in the travel boom

• It is fair to say that our central bankers are out of practice when it comes to the hiking cycle.
• Traditionally they took away the punchbowl just as the party was getting going.
• This time they didn’t. In response to the pandemic, they printed money like never before in history, doubling their balance sheet in the process to a trillion pounds.

• Japan is the darling of the moment. To those who haven’t kept track of the story, a series of market reforms in January encourages companies with a price-to-book ratio below one to create a plan to achieve capital efficiency.
• Given that half of the companies at the time were trading below 1x P/B, this is a big deal.
• And this has driven a massive wave of buybacks and changes, leading to the Nikkei finally breaking a 30-year high.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Robert Ciemniak. Robert will be sharing with us his insights into China’s Real Estate Outlook. From trends picking up in the industry, its current opportunities, and insights to stay on top of, join us as we hear more from Robert.

The webinar will be hosted on Wednesday, 5 July 2023, 17:00 SGT/HKT.

Robert Ciemniak is the Founder-CEO & Chief Analyst of Real Estate Foresight Ltd (REF) (www.realestateforesight.com), an independent analytics, research, and consulting firm based in Hong Kong and focused on the Mainland China property markets. Since 2012, REF has been helping investors with market research, project due diligence, and strategy development. This has ranged from detailed assessments and estimates on distressed developers’ project portfolios to market due diligence on specific projects to macro-level questions linked to demand for commodities. The unique combination of the housing markets and developer data from data partner China Index Academy in Beijing, primary research, and technology-powered alternative data collection from public sources result in a valuable content set used in REF analytics and reports.

• OVERSEAS. SPX -0.4% down again; NASDAQ -1.4%  as hope for early rate cuts fade with sticky inflation;   Russian political drama continues spurring geopolitical uncertainty; Raft of Tesla -6% rating downgrades.
• JAPAN. NKY futs -0.4% vs Cash;  USDJPY 143.5 steady as Japanese officials start verbal intervention; BOJ official wants review of YCC; Deal effectively done JSR(4185) to be taken private
• NUGGET.  Japanese Auto majors are ramping up on software engineer headcount to respond to the critical software requirement of EVs.  Internal retraining is proceeded a pace, but the question remains..

• High-Frequency data for balance sheets of US banks is just released
• Contra-Asset account, loan loss reserves, rapid rise suggests far worse credit metrics 
• US banks can see hits on all fronts: volume, funding, credit costs, regulatory capital

• The latest commercial census published this Spring shows that Japan’s wholesale sector remains more dominant than in many other major economies, partly explaining the low margins in some retail sectors.
• Wholesale sales fell 8% between 2016 and 2021, but were still 10% higher than in 2012 due to survey changes over the previous decade.
• Consolidation of wholesaling into the hands of larger corporations, with correspondingly higher power within the supply chain, is increasing and opportunities for M&A and margin growth are significant.

• NTES：NetEase announced that the international version of “Harry Potter: Magic Awakened” on June 27
• 1024HK： Kuaishou E-commerce Platform will adjust its service fees for “Try Before You Buy” orders，which will have a positive impact on its profit（+）
• ZTO: MOT reports weekly express parcel volume for the period ending June 25, 2023 (+/+)

• Recently, many Chinese sellers on Amazon have reported a  decline in their store’s performance, including order volume and profits.
• According to their feedback, the adjustment of Amazon’s advertising rules, the use of AI, and competition from platforms like Temu are likely important reasons for this decline.
• We suggest the trend could be interpreted as something unfavorable for Amazon but beneficial for Temu/PDD.

• MUFG has assets of USD2,909,711m compared with USD471m at Mandala Multifinance
• MUFG’s profit is USD8,880m compared with USD44m at Mandala Multifinance
• There is nothing wrong with expansion outside Japan, but perspective is key

• Global equities finished the holiday-shortened week lower.
• The MSCI World Index declined 2.01%, while the S&P 500 fell 1.42%.
• This snapped a six-week winning streak for the S&P 500, which is still up 13.25% YTD.

• NTES/700.HK: China’s NPPA publishes list of 89 domestic game code approval
• 9995HK/1801HK：RemeGen explored ADC-PD1 combination theray for its RC88 and RC108 with Innovent (-)
• LKNCY/2150HK/ATAT/3690HK: Tourism spending maintain stable growth during Dragon Boat Festival, indicating sustainable recovery in service oriented consumption in China.(+)