Thematic (Sector/Industry)

• OVERSEAS.  SPX +1.7% as Regional Bank rebounded  as Calmer heads prevailed;  CPI Print at 6% provides a dose of reality; Meta Culls again; Another Big Boeing Order.  
• JAPAN.  NKY Futs flat vs Cash; USDJPY 134.2;  Surprising JP Bank Sell -off yesterday to reverse;  BOJ buys ETFs for 2nd Day; Companies hiking Wages better than expected.
• NUGGET. iSpace – Japan’s key hope to conquer space. IPO slated for early April, and a moon landing just after. Could be big.

• Semiconductor revenues through January are behaving as Objective Analysis predicted in October
• There has been a slight delay in the collapse, but overall, the collapse is very nearly following its predicted course.
• Large memory makers will be the hardest hit, followed by processor vendors

• OVERSEAS.  Shares of US regional banks crash; Flight to safe haven assets as US2Yr yield crash; Also, strong Yen bid; Nomura expects Fed to CUT next (now that’s original).
• JAPAN. NKY Futs -2.2% vs Cash; USDJPY strengthens to 133.21; Masatoshi Ito – founder of Ito-Yokado dies at 98; Nidec -Leadership Transition take shape; Japan Post Bank priced; Komatsu upgrade
• NUGGET.  JAL EXCEEDS union demands with wage settlement.  Inflation may act as the slayer of inefficient companies as weaker companies will just not be able to keep up.

• Intel’s CFO had reiterated his support for maintaining the dividend on multiple occasions since December 2022, most recently at the latest earnings call on January 26 last.
• On February 22, Intel issued a press release announcing a 66% dividend cut. 
• What caused Intel to change their position on the dividend over the course of three weeks last month?

• 2022 was characterised by a historically strong H1 followed by a far weaker H2
• The current downturn is impacting memory, PC and smartphone shipments the hardest
• 2023 is shaping up to be the reverse of 2022, i.e. historically weak H1 with recovery in H2

• Affordability is an important condition for broad-based accessibility to psychedelic-assisted therapy (PAT), both now (ketamine) and in the future (MDMA, psilocybin, et al.).
• This makes the evolution of payor coverage as critical a part of the development of PAT as the clinical trial outcomes and the progression toward a more accommodative regulatory environment.
• Current payor coverage for ketamine-assisted therapy (KAT) is inconsistent at best.

• The liquidations count continues to rise. While the SPAC IPO market appears to have gone back into its slumber with no pricings to report yet in March, the main theme of the SPAC market continues to be liquidations, as it has been particularly since October 2022.
• So far in March, 26 SPACs are slated to liquidate their trusts (of which half have already been liquidated), which makes it the second-highest monthly total ever, only behind the excise tax panic-stricken December 2022 rush of 89 liquidations.
• Based on the current count for March, which we suspect will not be the final number, $8.5 billion will be returned to Class A shareholders.

• PDD: Temu launches in Australia and New Zealand (+); CPNG: Coupang withdraws from delivery service in Japan (+)
• ZTO/PDD: Logistics companies increased parcel prices in Yiwu City (+/-)
• BILI:BILI hold content creator seminar to discuss video metrics (+)

• The unfolding crisis is unlikely to have far-reaching impacts on Asia financial names, given their more robust deposit franchises and sector diversification.
• That said, the Taiwanese financial holdcos do seem to be substantially more exposed than their peers in other markets owing to the USD fixed-income exposures at their life insurance units.
• In a flight-to-quality scenario, we expect Fubon FHC to outperform the more geared Shin Kong FHC.

• OVERSEAS. US stocks hit again on contagion fears as Fed takes control of Silicon Valley Bank; Lots of activity over the weekend to shore up confidence. 
• JAPAN. NKY Futs -2.2% vs Cash. USDJPY strengthened to 135. With all activity in the US to shore up confidence,  Japan likely bottoms early; Ueda confiremed as BOJ Governor.
• NUGGET. Dainippon Print(7912)  – Confluence of Target, Timing and Tactics. A spectacular win for Elliot, Activism in Japan and for Japan  

• SVB has special institutions in China and its business mode is Venture Lending. The closure of SVB could make it harder for Chinese startups to raise money from US investors/banks.
• The scale of SVB is small, but it cannot be said that it has no impact on the fundamentals of China healthcare companies. Investors need to reassess the potential risks.
• SVB’s woes would not be a serious blow to the US if government takes timely action. However, if BRICS currency is established, it would be real fatal for the dollar.

• The oil majors – CNOOC Ltd (883 HK), China Petroleum & Chemical (386 HK) and PetroChina (857 HK) – are interesting plays on government’s plan to boost capital market valuations.
• Higher dividend payout, privatisation of undervalued subsidiaries, return to A-shares, share buyback and upping stake by major shareholders are just some example of supporting tactics.
• The government may possibly mobilise more offshore funds of SOEs to add stakes. We think ROE expansion and capital market valuations to gain importance in senior management KPIs.

• After breaking above the bear market trend line resistance area, last week’s banking sector contagion fears, spotlighted by Silicon Valley Bank’s (SVB) collapse, pushed the S&P 500 back below its 200 day moving average on high volume.
• Startup-focused lender SVB Financial Group is the largest US bank failure since 2008 and was the 16th biggest in the U.S. at the end of last year with about $209 billion in assets.
• Silicon Valley Bank’s failure is the largest since Washington Mutual went bust in 2008.

• 1877HK/BGNE： Coherus announce FDA inspection of Toripalimab manufacturing facility in China in C2Q23（+）
• 700HK：Honour of Kings (HOK) International Version first launches in Brazil (+); 
• PDD/3690HK: PDD begins recruiting merchants for its local life services business (+/-)

• On Friday 10 March, Svb Financial (SIVB US) suddenly collapsed, becoming the largest bank to fail in the United States since the 2008 financial crisis.
• In our view, the collapse of SVB Financial will likely have a negative near-term impact on the Korean banks. 
• Three ways that this will negatively impact Korean banks include risk-off investment sentiment, greater excuse to hold on to cash by Korean banks, and lower interest rate spreads. 

• The successful transformation of biotech into large pharmaceutical enterprises needs to meet three conditions, but many biotech enterprises could actually meet only the requirements of the first two.
• If investors cannot understand the basic logic of marketing in China pharmaceutical industry, they would never understand or “anticipate” the future potential collapse of valuation of some companies. 
• The barriers formed by DS-8201 deserve investors’ attention. For those ADC players that are in the range of head-to-head competition with DS-8201, they should at least “revise the story” .

• 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: Chinese growth targets and inflation, South Korean inflation, Malaysian interest rates
• Companies mentioned:Kakao Corp (035720 KS), S.M.Entertainment Co (041510 KS), HYBE (352820 KS)

• Dongfeng announced 12%-35% subsidy on its retail price to reverse weak sales which has seen most of its factories suspending production
• This has triggered a price war with more than 30 brands joining with similar ranges of price discounts/subsidies, most of which are JV brands – some upto 50%
• We see a possibility that some of the JV brands exit China this year

• US banks face more than just Silicon Valley risk, namely with net interest income
• Credit costs are also running substantially higher in January monthly data
• Bank loan data suggests a strong economy, not overly positive for rates

• 9926HK：Akeso and China’s 2nd largest pharmaceutical distributor signed collaborative R&D agreement（+）
• XPEV: Xpeng to officially unveils facelift of P7 on Friday (+)
• 981.HK/1347.HK/ACMR: Netherlands announces intention to ban only “state-of-the-art” ASML DUV tools (+/+/+)

• Risk-Off in global markets due to collapse of Silvergate Capital and Silicon Valley Bank
• Japanese stocks tumbled on Friday, but were still up for the week. BoJ Governor Kuroda has timed his exit to perfection. 
• No major moves in our universe, but can Japanese stocks remain relatively uncorrelated with global risk, given strong balance sheets and desire to lift shareholder returns

• OVERSEAS. Equity Risk-off ahead of NFP; Banks hit on default risk worries and Silvergate Collapse; Bitcoin hit hard (Silverate); Aggressive GM restructuring
• JAPAN. NKY Futs -2.2% vs Cash; USDJPY Strengthens to 136.1 as pare risk ahead of Kuroda’s final policy decision today;  MORE ACTIVIST WINS-Massive buyback from DNP;  Seven & I Restructuring.
• NUGGET. NISSAN, TAKING IT FROM ALL ANGLES. Nissan’s bonds downgraded to junk this week; but its worse than you think..company faces serious headwinds.

• After stellar growth in 2020, the e-commerce market grew much slower in 2021 but still outpaced all other channels and set the second highest increase in four years.
• At this rate, by 2025 e-commerce should become the largest retail channel, overtaking chain stores.
• Japan’s easy access to retail stores means shops aren’t about to disappear anytime soon and Japan will become a model for omnichannel retailing with stores still playing a key role.

• Due to the fluctuating levels of energy produced on an hourly basis by renewable energy sources, energy storage is required to smooth out supply and demand
• The grid is becoming increasingly unstable due to its old age and extreme weather conditions, and is not set up to accommodate a net-zero system
• Small and mid-cap players in the space are down over 60% since 2021, making today’s valuations a great entry point Intermittent Supply from Renewables Solar and wind energy cannot produce energy 24/7 since there is not constant sunshine or wind in most regions.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Devi Subhakesan as she shares more about her thoughts on the Top Opportunities in Indian Consumer Discretionary in the year 2023. From the trends in the industry, to its major players and catalysts, join us in this next installment as we dive deep into the topic alongside Devi.

The webinar will be hosted on Wednesday, 22 March 2023, 17:00 SGT/HKT.

Devi Subhakesan  is an Equity Analyst with an Asia Consumer Sector Focus. She has been part of Buy-side and Sell-side Institutions, and has covered Oil, Gas & Coal, Media, Textiles, and Consumer Discretionary sectors across ASEAN, India, and North Asia. 

• AI is an exciting area of technology that has the potential to change how industries operate and consumers live their lives
• There is a huge TAM, but it can be difficult for equity investors to gain meaningful exposure
• We identify 22 Japanese stocks that are engaged in AI. We have two top picks 

• On Monday evening in the US, Trip.com (TCOM US) reported Q422 results that beat low expectations, but shares in the US traded down about 3% in Tuesday’s session
• As for guidance, management offered few specifics but noted a sharp improvement in booking activity early in 2023, but also highlighted an outbound capacity bottleneck at the airlines
• Just as Covid’s negative impacts papered over the secular challenges facing Trip.com, the dramatic near-term recovery in travel activity also obscures longstanding threats

• OVERSEAS. Softer tone from Powell; US equities find support; BUT, Rates extend sell off; Yield Curve -1.08%..screams recession; Shocker from EU as Germany blocks legislation banning ICE sales from 2035.
• JAPAN. NKY +0.6% vs Cash; USDJPY 137.4;  Japan set to extend rally for 5th day on weaker yen; Asahi Kasei books ¥185bn impairment loss; Another BUY call on Fanuc
• NUGGET. Rakuten stock has been in the doldrums thanks deep losses in domestic mobile ops. Losses likely peaked. Now, Rakuten Symphony is clearly gaining traction. Time to revisit?

• We recently conducted a round of interviews of Chinese start-up gaming companies, and we see an overall loosening in the regulatory environment, although near-term hit titles are still absent.
• We are positive on Tencent because of the increasing possibility of DNF mobile launch. We raise NetEase’s TP to US$ 99, and it’s one of our top picks now
• Other gaming companies that have upward trends include Kingsoft, Lingxi Games (under Alibaba), Koei Tecmo, Nexon, and Mihoyo. Companies with a downward trend include BILI and Garena (under SEA).  

• (2821.SZ/6821.HK)/(1177.HK/SBHMY): F-Star cleared CFIUS investigation, suggesting US criteria on China investments (+) 
• ATAT: Corporate travel demand recover quickly in hotel sector (+)
• BILI/1024.HK/Douyin: People’s Daily criticizes vulgar internet slangs rampant in short videos. (-/-/-)

• OVERSEAS.  Powell Testifies. 50bp hike more likely  as inflation higher than expected. Sparks repricing in markets: US Equities hit, UST dumped, USD rises – Choas all round.
• JAPAN.  NKY Futs -0.4% vs Cash; USDJPY weakens to 137.1 as Powell tesimony digested;  H3 failure-blow to JP space hopes; “My Number” Use expanded;  Dentsu UK M&A; Many Rating D/Gs
• NUGGET. Carbon Capture is a key part of the decarbonization mix; Expect significant spend locally and globally. We look at the opportunity and the firms likely to benefit. 

• There has been a sharp increase in unsold housing units in Korea. There were 68k unsold housing units in Korea at the end of 2022, up 278% YoY
• Unsold housing units is likely to get worse in Korea in the coming months driven by higher housing units supply, stubbornly high interest rates, and increasing probability of global recession. 
• We believe there is a sound trading opportunity of shorting a basket of large construction stocks including Hyundai E&C, GS E&C, and Daewoo E&C over the next 6-12 months.

• Disappointing FY22 result from raw milk company AustAsia Group (2425 HK) should be well expected, but the issue is its guidance that FY23 industry outlook will stay challenging. 
• Raw milk price is still coming down and 1H23 dairy product demand recovery is slow. Capacity influx will disrupt demand-supply balance, but feed costs pressure seems to have moderated. 
• Consensus profit projections for the sector are overly optimistic and there is earnings downgrade risk after FY22 result announcement. We will shy away in the near term.

• China’s GDP growth target of 5% for 2023 is a “deliberate decision”.Chinese authorities may have seen potential downside risks of economy and hope to restore the credibility of growth target.
• If investors fantasize about low interest rates would continue in the future, they could be disappointed. This means that investors’ strategies and mentality may need to be changed in time.
• For China healthcare, the expansion of high-quality medical resources in grassroots markets would be a big opportunity, involving reform of State-owned Enterprise-run hospitals and increasing market penetration of medical device/TCM. 

• We recently conducted a round of interviews of several major Chinese online advertising agencies. We conclude that there has been slower-than-expected recovery in February.
• Among major advertisers, travel, local service, medical service, and eCommerce have better performances. Gaming, automobile, and FMCG remain weak.
• Tencent is still our top pick; maintain BUY to Baidu and Weibo; SELL to Kuaishou and BILI

• OVERSEAS.  SPX Clings to Positive gains – barely; Powell Testimony in Focus;  Commodities Weak on dissappointing China growth target; GS upgrade Apple to BUY; Telsa cuts prices (again)
• JAPAN. NKY Futs Flat vs Cash; USDJPY 136; Progress on Japan-S.Korea Relation normalization; Public increasingly supports nuclear restarts;  Toyota rolls out BEV in China; Win for Rakuten in “Open Ran”
• NUGGET. AI Development platforms are being rolled around across Japan’s manufacturing sector to improvement R&D efficiency. This has the potential to drive significant value, especially in Japan Big Pharma

• China’s defense budget will reach Rmb1.55trn in 2023, a 7.2% YoY increase and up from 7.1% in 2022. This also equals to 1.22% of GDP, vs. 1.2% in 2022. 
• AviChina Industry & Technology H (2357 HK) has the most direct exposure to China’s aerospace and defense developments given its holdings in A-share defense stocks.
• Avic Shenyang Aircraft (600760 CH) will benefit from its unique position as the key manufacturer of aircraft, parts and components for China’s combat fighter fleet.

• Indigo and Spice Jet have turned to profits in Q3FY23.
• Indian Aviation sector is at infancy and the large market is consolidating. 
• However, rising ATF costs may restrict profit recovery, thus while valuations are reasonable and there is a long runway, it’s not yet the time to go aboard.

• WTR Sustainable Index: During the week ended March 3, 2023, the WTR Sustainable Index performed in line with the broader market, rising 2.0% W/W versus the S&P 500 Index (up 1.9%), the Russell 2000 Index (up 2.0%), and the Nasdaq Composite Index (up 2.6%).
• Energy Technology (8.5% of the index) drove the index performance, rising 4.4%, while Advanced Transportation Solutions (69.6% of the index) was up 1.2% and Industrial Climate and Ag Technology was up 3.4%.
• Valuation: Based on forward 12-month consensus estimates, the current P/E ratio of the WTR Sustainable index is 25.0x versus 18.3x for the S&P 500.

• OVERSEAS. Strong Beta Close in US Markets, with SPX +1.6%; US 10YR Yield retreated to under 4%; Tech  w/SOX +1.5%, led by BroadCom. +5.7%;  Ford +4% on strong EV demand
• JAPAN. NKY Futs +0.9% vs Cash; USDJPY strenthens 135.8;  Expect follow on Beta/Semi bid on Broadcom sentiment lift; Govt to restrain EPCO px Hikes; Renesas, OAL, JAL added to NKY
• NUGGET: Advantest looks best positioned to benefit from the emerging boom in Generative AI.

• Although 5% GDP growth target for 2023 is at the low end of market speculation of 5.5-6%, we think this reflects the government’s conservative stance amid post-COVID recovery. 
• A 0.2pp higher budget deficit and a special purpose bond quota of Rmb3.8trn suggested that government spending will stay as important economic driver.
• Consumption is another major stimulus for economic growth, and more supportive measures will be rolled out – we have seen many cities planning to hand out consumption vouchers.

• 2M2023 retail sales of passengers vehicles down 21% yoy, the biggest decline in 10 years.
• Demand recovery is expected from March with signs of warming up starting in NEV segment after price cuts and local supportive police’s introduced 
• Cost friendly models would continue be preferred. i.e demand in mass market may be stronger than luxury market, PHEV segment may do better than BEV segment

• AI has been the talk of the town in 2023, and two products in particular, ChatGPT and Dall-E 2, have been making waves with their massive popularity and usage.
• ChatGPT hit the incredible milestone of 100 million users in just two months, so it’s no wonder investors and creators are excited about the productivity boosts and potential outcomes that AI can bring in the near future.
• Even mainstream media and tech leaders are heralding AI as the next big thing after the iPhone.

• One area that appears to be picking up steam is market participants increasingly seeking out alternative non-government published data to inform real time indicators on the health of the US economy, jobs, and inflation.
• There are many reasons alternative data sources are picking up importance including declining survey participation rates, significant and material revisions of prior published data, revisions to weightings or calculation methodologies, among others.
• In particular, the steady structural decline over the past decade of survey responses can lead to inaccurate signals and conclusions with high error rates.