Thematic (Sector/Industry)

• OVERSEAS. Crisis Over !Bailouts from US to Europe, Stocks rally as Contagion fears wane; Major Banks rescue First Republic Bank; Swiss Central Bank protects Credit Suisse; ECB raises by 50bps
• JAPAN. NKY Futs flat vs Cash; USDJPY 133.8; Expect Japan Equities to start the road to recovery with macro fears subsiding;  Japan-Korea move fwd on trade/security.
• NUGGET. Orix – one of the Biggest Renewables Plays in Japan. Riding the Decarbonization MegaTrend

• Several major automakers in China are racing to slash prices on both new-energy (NEV) or conventionally powered vehicles, hoping to survive an escalating price war as consumer demand weakens amid policy changes.
• The price war intensified at the start of March, when state-owned Dongfeng Motor Group Co. Ltd. launched a promotion in its home province of Hubei by offering steep discounts on some of its models
• The promotion, which came two months after U.S. electric-vehicle (EV) giant Tesla Inc.’s eye-catching price cuts, set off a chain reaction across the industry

• ZTO Express (ZTO US) met consensus Q422 EPS estimate despite a miss on Revenue
• Management expects to exceed industry volume growth (around +10%) in 2023
• Likely obstacles to a sharp earnings recovery are: ASP momentum, “new-old” competition, and a lack of demonstrated cost control

• China’s struggling property market is showing glimmers of improvement as the protracted decline in housing investment and sales slowed during the first two months this year
• Property investment by developers dropped 5.7% in the first two months of 2023, narrower than the 12% decline in December and the 10% slump for all of 2022.
• Housing sales also showed signs of recovery in the first two months. Total property sales by floor area fell just 3.6% from a year earlier, compared with a 24% decline for the whole of 2022

• 1024HK：China’s consumer rights gala exposes problems of livestreaming industry, Kuaishou receives a warning（-）
• BIDU：Baidu ERNIE bot press conference is held， there result is not promising（-）
• Gaming Industry: Game-related proposals during Two Sessions indicate positive attitude for gaming industry (+)

• H2 2022 was a brutal half year for memory. H1 2023 doesn’t look any better.
• We anticipate a trough in Q1 2023, sequentially flat Q2 followed by modestly increasing revenues through H2.
• Micron’s upcoming earnings on March 28 will be the next significant data point regarding the state of the memory segment. 

• OVERSEAS. Credit Suisse Rattles Markets; Spurs Equity sell off in flight to Safety trade;   UST 2Yr Yld back below 4%;  Crude Extend losses amid Banks sector worries;
• JAPAN. NKY Futs -2.6% vs Cash;  USDJPY 133.4.  NKY Futs surprisingly weak given JP untouched by turmoil; Govt considers Cash transfers to poor households; Inbound recovery Continues
• NUGGET.  As Japan Hosts “Defense and Security Equipment International (DSEI) JAPAN”  trade show this week,  it will highlight opportunities for local defense contractors overseas.

• The IVF industry is booming, driven by couples having children later in life as well as infertility problems.
• There should be plenty of opportunities for IVF clinic operators, including for Jinxin Fertility which may benefit if the Chinese government introduces subsidies for IVF procedures. But the acquisitive nature of many IVF-related companies has caused their returns on equity and earnings per share growth to be weak.
• One stock that trades at a low multiple with fat profit margins is Organon, though be aware of its ongoing patent cliffs, which may be the reason it was spun off in the first place.

• Svb Financial has collapsed and Credit Suisse is on the verge of collapse. We discuss a trading strategy on Korean banks amid the ongoing turbulence on the global banking system.
• Our trading strategy is to go long on a basket of three largest banks in Korea (KB, Shinhan, Hana) and go short on a basket of five smaller banks. 
• Post collapse of SVB Financial, one clear signal appears to be increasing global capital allocation to the “too big to fail banks” and reduced capital allocation to regional banks.

• Worldwide silicon wafer shipments declined ~4% sequentially in Q4 2022. We anticipate a further 10% sequential decline in area shipments in Q1 2023
• For 2023, we expect wafer shipments to decline by around 5% YoY with weakness in H1 offset by strength in demand in H2.
• Despite the decline in area shipments, we expect the sector to remain strongly profitable, bolstered by the impact of Long Term Agreements and customer prepayments. 

• We highlight 14 stocks in Thailand that look interesting to us based on our FVMR Methodology
• Portfolio changes: Five stocks remain, nine new join the fray
• Since inception, it has gained 96% versus the SET 100 Index’s return of 29%

• PDD: PDD reveals ambitious goal in Temu offline conference (+)
• BABA/JD/VIPS/3690.HK: 5% YoY rebound in January/February retail data, but slower than expected (-/-/-/+)
• TikTok：TikTok is ready to launch search ads, minior impact to Google

• The WTR Sustainable Index underperformed the broader market, falling 10.3% W/W versus the S&P 500 Index (down 4.5%), the Russell 2000 Index (down 8.1%), and the Nasdaq Composite Index (down 4.7%).
• Advanced Transportation Solutions (67.9% of the index) drove the index underperformance, falling 12.4%, while Industrial Climate and Ag Technology (23.6% of the index) was down 3.4% and Energy Technology was down 10.3%.
• Top 10 Performers: WWR, ABML, EFOI, LPEN, AMYZF, FCSMD, REE, PPSI, JEV.V, TPIC

• This note addresses the January 2023 mattress import data posted on the Department of Commerce, US International Trade Commission DataWeb at https://dataweb.usitc.gov.
• We track imports for three specific Harmonized Tariff System 10-digit codes (HTS-10) that define adult mattresses.
• HTS import unit and customs value data are normally posted ~70 days after the month-end of the month being reported.

• 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