Thematic (Sector/Industry)

• 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.(+)

• OVERSEAS. SPX -0.8% on Friday, -1.8%WoW as recession fears resurface post -ve EU PMI, amidst rate hikes to combat inflation; Carmax +10% on earnings beat, but used car px falling
• JAPAN. NKY Futs -0.6% disc to Cash; USDJPY 143.7 reflecting disparity between Japan rates vs Global; Yet JP inflation remains elevated; JIC ¥1trn bid for JSR(4183); Oriental Land hikes px-es
• NUGGET. Cosmo Energy(5021) – set back for Japan corporate governance. The Fourth Estate – Your turn.

• A weekly curated selection of around 10 local Chinese news articles or 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 

• The latest Economic Census for the Japanese retail and wholesale industries was published recently, five years on from the previous survey.  
• The survey provides a wealth of data on the distribution industry, offering a snapshot macro view of the number of stores, businesses, employees, sales and sales space in Japan
• The key trend is a decline in store numbers but, while e-commerce is expanding, it will not eclipse stores in Japan where a unique model of omnichannel retail is emerging.

• 1st chart shows us the 2023 % returns & the holdings weightings while the 2nd table is a return attribution analysis which tells us exactly that 10.25% (1025 b.p basis points) are due to just 7 stocks, the M7 (Magnificent Seven) tech stocks: Apple, Microsoft, Nvidia, Amazon, Tesla, Meta/Facebook & Google/Alphabet. Let that sink in!
• The laggard are the following top 7 stocks: their weight is small in the index, but note the individual returns which are materially negative in 2023
• To continues smoothly here, the S&P 500 with the stocks above their 52-week lows & below their 52-week highs: tech, AI, semiconductors and consumer discretionary are leading and hot, while energy, cruises & travel cooled off in the last year

• This past week, the S&P 500 snapped a five-week winning streak and Nasdaq snapped an eight-week winning streak.
• Last week also saw the Nasdaq post 4 consecutive days of net new lows, signaling caution.
• A healthy and much needed pullback could offer opportunities ahead of the upcoming second quarter earnings season.

• 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: China, Indonesia, and Philippines interest rates, South Korea exports
• Companies mentioned:Mediatek Inc (2454 TT), JD.com Inc. (9618 HK), Alibaba Group Holding (9988 HK), NIO Inc (9866 HK), XPeng (9868 HK), Li Auto (2015 HK)

• Has Larry Fink just jinxed the Japanese equity market? Is a slight thawing of relations between the US and China a sign that the Japanese equity market has peaked?
• Japanese stocks ended the week down 2.7% as foreigners turn net sellers for first time in 11 weeks
• Marubeni Corp (8002 JP) stock price is up 71% year to date. The equity buyback story could continue for the foreseeable future. 

• XPEV/LI/NIO/1211HK/TSLA: China extends NEV purchase tax exemption until end of 2025 (+)
• NTES: NetEase’s  racing game “Racing Master” officially launched（ – ）
• 700HK： Tencent Cloud launches its own Industry-Specific Large Language Models to Drive Intelligent Upgrades for Enterprises（+）

• Excess supply of SPACs continues to dwindle. SPAC IPOs continue to be few and far between, with the sole pricing thus far in June being media & entertainment focused ESH Acquisition Corp.
• (ESHA) priced on June 14, with the SPAC raising $115 million including take-up of the underwriter’s green shoe option.
• This brings the total to 16 IPOs as we approach the end of the first half of 2023.

• The NOAA has confirmed that the world is at the start of an El Niño, which means less rainfall in Southeast Asia and pressure on oil palm yields.   
• Early signs point to a severe event, which would cause a significant edible oil deficit in 2024. Ongoing drought in the U.S. is a budding wild card, affecting soybeans. 
• The report projects a 40% YoY higher average crude palm oil price in 2024. Given depressed consensus expectations and undemanding valuation, the risk-reward is bullish on a 6-12 month horizon. 

• OVERSEAS. Hawish Powell wraps up testimony; Global Rate Hikes – from UK to Norway; SPX +0.4% gains despite rise in Yields;  Confirmed- Titanic Sub Crew confirmed dead
• JAPAN. NKY Futs +0.5% vs Cash; USDJPY weaknes to 143 handle amid rise in US yields; Foreigners continue to buy Japan;  Corp Governance loss  as Cosmo(5021) approve Poison Pill
• NUGGET. Daikin(6367)- A Global Best in Class and winner – but waiting for a pull back to jump in.

• Danish Consumers stronger than its neighbors due mortgage structures and lower inflation rates
• Norges Bank selling too many NOK’s in the market compared to its income from dividends and oil & gas
• Sweden’s high beta industry suffering under inflation and rates shock 

• Swedish electric vehicle maker Polestar Automotive Holding UK PLC said Monday it is entering into a strategic agreement to set up a joint venture with Chinese smartphone and consumer electronics company Xingji Meizu Group to build an operating system for Polestar cars sold in China.
• The joint venture will develop Xingji Meizu’s Flyme Auto system into a new operating system that can support in-car apps, streaming services and intelligent vehicle software, Polestar said in a statement.
• Polestar will own 49% of the joint venture, with the remaining 51% controlled by Xingji Meizu. Both Polestar and Xingji Meizu are owned by Zhejiang Geely Holding Group Co. Ltd.

• WTR-CMI last week. As the markets continue to recover from the 2022 doldrums, both the S&P 500 and the Russell 2000 posted weekly gains of 3.1% and 0.5%, respectively.
• Our WTR-CMI index of 30 chemicals and materials technology stocks appreciated 1.4% over the last week.
• YTD, our index is up 8.1%, above the Russell 2000’s 7.3% appreciation, but below the large-cap S&P 500’s 15.3% recovery.

• Chinese regulators approved 89 new video games in June, the largest batch this year, bringing the number of new approvals in the first half to 521 and topping the total for all of last year.
• NetEase, China’s second-largest gaming company, received a license for Where Winds Meet, an interactive open world action-adventure game, for mobile and personal computers.
• Tencent Holdings Ltd., the world’s largest gaming company, was absent from the list after it received several approvals earlier this year.

• This note addresses the April 2023 mattress import data posted on the Department of Commerce (DoC), US International Trade Commission DataWeb at https://dataweb.usitc.gov.
• We track imports for three specific 10-digit Harmonized Tariff Systems (HTS-10) that define adult mattresses.
• The DoC normally posts detailed HTS import units and customs values on its website ~70 days after the month-end of the month being reported.

• OVERSEAS. SPX -0.5% with Tech highflyers bearing the run of the decline; Fed Chair Powell thinking two more hikes this year; Tesla downgraded as rally not backed back fundamentals
• JAPAN. NKY Futs -0.1% Disc to Cash;  Expect Japan tech to take the signal from the US; Kishida vow to deliver on wage growth; Panasonic and Mazda do battery deal
• NUGGET.  Mitsubishi Motors(7211) – Issues in China fully capture the stuggles for OEMs without a competitive BEV product/strategy.

• Chip revenues have been up for two months in a row.  Could this be the start of a trend?
• Commodity prices indicate that the “Collapse” phase of a price downturn has ended, and that prices will now follow costs
• DRAM and NAND makers should remain unprofitable until mid 2024, although their revenues can begin to steadily rise.  Other chip makers will do better.

• OVERSEAS.  SPX -0.5% with most Sector in the Red; Residential Construction STRONG; China Rate Cut disappoints; TESLA +5.3% bags Rivian for Charging Network.
• JAPAN. NKY Futs -0.9% vs Cash; Blackrock’s Fink say Japan benefitting from China Flight; Labor market loosing as JP workers shying away from liftime employment; Yamato HD exits mail delivery
• NUGGET. Nintendo(7974) – Doing a Disney..using its IP…Now Mario out, Rumour are “Legend of Zelda” Movie in the works.. 

• While Intel was allegedly actively discouraged from further AT investment in Chengdu, Micron has just announced a significant investment in Xi’An. 
• Micron’s Xi’An investment announcement happened on the same day as Intel’s surprise Poland AT investment. 
• Following the Poland announcement, Intel now gets the enhanced Magdeburg deal they held out for.  

• The Japan stock market is at ~33 year highs with TOPIX now at July 1990 levels
• Japan’s banks can see greater gains on stocks as they divest sizable holdings
• Vast differences how stocks holdings compare with profit, equity, assets

• Based on our channel research, we maintain our previous estimation that the results of the 618 promotions are not as bad as some investors described
• We estimate that the GMV growth rates during the 618 period for Taobao+Tmall, JD, Pinduoduo, Vipshop, and Kuaishou are approximately 3%, 15%, 20%, 20% and 35%, respectively.
• However, it remains to be seen whether consumer spending will decline after the major promotion, possibly due to excessive consumption.

• With MDMA-Assisted Therapy (MDMA-AT) for post-traumatic stress disorder (PTSD) highly anticipated to become the first Schedule 1 psychedelic-based therapy to be federally legalized in the US by 2Q24, once approved, affordability becomes the key condition for mainstreaming the use of the therapy.
• Progress toward a more robust payor coverage for and broader-based accessibility to psychedelic-assisted therapies (PATs) has taken a major step forward with the recent approval by the American Medical Association (AMA) for the assignment of the first-of-its kind Current Procedural Terminology (CPT) code, an insurance billing code for long-form PAT.
• PAT will be assigned a Category 3 CPT code, effective from the start of 2024, for which payor reimbursement is discretionary.

• A pause in interest rate hikes drove global equities higher.
• Last week, the MSCI World Index gained 2.64%, while the S&P 500 increased 2.22%.
• The S&P 500 earned its fifth consecutive positive week and is now 24.68% off its October 12, 2022, low.

• During the week ended June 16, 2023, the WTR Sustainable Index outperformed the broader market, rising 5.9% W/W versus the S&P 500 Index (up 2.6%), the Russell 2000 Index (up 0.5%), and the Nasdaq Composite Index (up 3.2%).
• Advanced Transportation Solutions (74.4% of the index) drove the index’s performance, rising 7.0%, while Energy Technology (6.8% of the index) was up 5.3% and Industrial Climate and Ag Technology was up 2.0%.
• Valuation: Based on forward 12-month consensus estimates, the current P/E ratio of the WTR Sustainable index is 25.2x versus 20.5x for the S&P 500.

• OVERSEAS.  EUR STOXX600 -1% as hikes, recession fears, overbought markets sap risk;  US-China Tensions Eases after Blinken China Trip; Ford Chairman Says US still can’t Compete with China on EVs
• JAPAN. NKY Futs -0.2% vs Cash; Japan likely starts on backfoot US out and European Sell off;  Interest in investing in Japan spreading to start-ups; Uniqlo headwinds-China, China
• NUGGET. Nikkei reported that Japanese Retail (Mrs Watanabe) fx traders turned momentum in FX; Watch for when that happens in Equities…

• One reason the Global Fund Manager Survey is interesting is that it often contains contradictions concerning investor positioning.
• Global Fund Managers are joining the AI boom, are heavily overweight tech stocks, but only 54% of them expect AI to boost company profits.
• We believe global fund managers are long tech stocks because of strong momentum and the market extrapolation of artificial intelligence impacting earnings and sales growth, not because of superior fundamentals. 

• OVERSEAS.  SPX -0.4%  1st down day  7 as Markets price in Peak rates/rate declines;  SPX Looks risky here(More BELOW); China revamps NEV subsidies; Putin places tactical Nukes in Belarus..mmm
• JAPAN. NKY Futs flat vs Cash;  USDJPY 141.8 post-BOJ on Friday;  NKY wins for 10th week; Kishida survives no-confidence motion; TEPCO goes full into Renewables; Lawsons makes a China push
• NUGGET. SBI HD(8473) – Carbon Trading, Jumping in Early in what sets up to be a major opportunity

• Both the State Council and NDRC reiterated last week the importance of introducing economic stimulus measures. These measures should benefit the infrastructure construction companies.
• 1Q23 new contract growth, ranging between 6.3% and 15.8%, is healthy. With issuance of special purpose bonds up 16.5% in 4M23, new contract momentum looks to accelerate.
• We view China Communications Construction (1800 HK) most positively, given its diversified sub-segment coverage, highest overseas exposure, and best forward pipeline.

• The ITB US Home Construction ETF is now up 33% YTD and represents one of the biggest market surprises for me so far in 2023.
• This group has flashed relative strength vs. the S&P 500 since December 2022 and continues to one of the top performing groups.
• After undergoing correction in 2022, the homebuilders sector has tons of weekly charts breaking out of long and healthy weekly bases in strong uptrends

• All 6 ETFs positive in 2023 while ARKW ARKF ARKK ARKQ booming with 35%, 27%, 25% & 17% respectively.
• Risk appetite for the Innovation/Hyper Growth thematic is on!
• Enhanced Price Action view: Ark 6 ETFs 2023 Returns & Rebounders from their 52-week low + I added S&P 500 (SPY) and the Nasdaq 100 (QQQ) for comparison