Thematic (Sector/Industry)

• OVERSEAS.  SPX  stays positive; Energy leads as Russia cuts oil production; CPI print in focus – as market looks for Fed Pause clues; TEREX – solid print/outlook..what Recession?
• JAPAN. NKY Fut -0.3% vs Cash;  USDJPY 131.36; Shock at Professor Ueda as BOJ Gov; Yen rallies then weakens post his Presser;  Govt to guarantee 15% margins for Defense suppliers?
• DAILY NUGGET. Fun take – ChatGPT on BOJ Governor to be Kazuo Ueda.

• We welcome the regulators’ formalization of financial asset classifications. This will gradually remove regulatory arbitrage and pave the way for further bank reintermediation.
• The new rules will likely have limited impacts on bond holdings that have active secondary markets, but illiquid debt investment plans will come under more intense regulatory and auditor scrutiny.
• We see an impact of 10-15bp on the listed banks’ reported NPL ratios. That said, a handful of banks may be at risk of capital shortages if the environment worsens. 

• The three companies we write about this week are L’Oreal SA (OR FP) , Electricite De France Sa (EDF FP) and 10X Genomics (TXG US) 
• For the twelve weeks since inception ended 10 Feb the combined innovation portfolio was +3.3%, versus DJIA +0.4%, S&P500 +3.2%, Nasdaq +5.1%, Russell2000 +3.7%, MSCI-ACWI-ETF +4.4%, all in US$ terms
• Researchers from The University of Queensland found the lion’s mane mushroom had a significant impact on the growth of brain cells and improving memory

• Microsoft news of rolling out ChapGPT into its Bing search browser and eventually into its Microsoft Office product suite has dominated the news cycle the past few weeks as AI computing has garnered Wall St.’s full attention.
• Within two months, OpenAI’s ChatGPT app has registered 100 million users – nearly one-third of the U.S. population.
• Microsoft has not hidden it plans to challenge Google search dominance and erode its existing market share.

• Global stocks generally headed lower in the week as investors fretted about the prospect of further Fed tightening. 
• Japanese stocks eked out a small gain on strong domestic earnings and robust corporate outlooks. 
• The yen strengthened after it was reported that Kazuo Ueda will be appointed as the next BoJ Governor. He is generally considered more hawkish than his predecessor. 

• 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 GDP, Thailand inflation, Indian interest rates, Chinese inflation, Malaysian GDP growth
• Companies mentioned:Samsung Electronics (005930 KS), Baidu (9888 HK), Kakao Corp (035720 KS)

• Deal terminations return to the spotlight. The past couple of months have seen a pickup in abandoned IBC deals.
• Following nine deal cancelations in December, the second-highest monthly total in 2022 behind 10 in August, the first five weeks of 2023 have seen eight deals bite the dust—four in January and four in the first week of February.
• There have been 69 deal terminations, with an aggregate deal value of ~$90 billion since the start of last year.

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Shawn Yang as he shares more about his top picks in the Chinese internet space. He’ll be touching on major players in the industry, the latest trends, and business opportunities of these major players.

The webinar will be hosted on Wednesday, 15 February 2023, 17:00 SGT/HKT.

Shawn has extensive experience in internet industry and investment banking and his research findings were published in well-known websites and media outlets. Shawn mainly covers China internet sector; he joined Blue Lotus in October 2015. Shawn has been frequently interviewed by various financial medias like CCTV, Bloomberg, WSJ and CNBC. Prior to joining Blue Lotus, Mr. Yang served as the director of strategy for CMGE, a mobile game company, and was responsible for strategic research and investor relations. Mr. Yang also worked for HSBC Asset Management and Goldman Sachs. Mr. Yang graduated from Tsinghua University with a bachelor’s degree and received his master’s degree from the Hong Kong University of Science and Technology.

• China’s luxury market contracted 10% in 2022, ending a five-year streak of growth as Beijing’s “zero-Covid” policy and a slowing economy hit spending
• Repeated Covid-related lockdowns starting in the second quarter curbed travel and consumption, with shopping mall traffic falling by 30% to 35%
• Sales at Hainan’s duty-free shops operated by state-owned China Duty Free Group Co. Ltd. were expected to drop 30% to 35 billion yuan ($515 million) last year.

• China’s top state assets administration imposed minimum prices for tickets on seven state-owned airlines, slamming the door on ultra-low-cost promotions launched as travel plunged during the pandemic
• The commission put a floor under prices to preserve and increase the value of state-owned assets and to pare operating losses, a senior industry insider said.
• The move is a way for SASAC to exercise its rights as a majority shareholder of the state-owned airlines.

• This article studies the dynamics of the market, the growth drivers, the camping industry chain, and the future opportunities and challenges of China’s camping business.
• After three years of following strict rules and reducing travel as much as possible, Chinese consumers’ desire for outdoor activities, social interactions, and new experiences has never been keener.
• These needs bolstered the flourishing camping business. Search volume for the term “camping” on the Chinese search engine Baidu has climbed to a higher level since May 2021, soared in May 2022, and remains higher than the four-year average level, according to statistics from Baidu Index. 

• GT (Cell and Gene Therapy) is a sector with high growth potential.
• CAR-T, as one of the main CGT currently, presents great value for both doctors and patients.
• This article showcases the industry pain points and opportunities faced in the CAR-T sub-sector.

• OVERSEAS.  Back to Macro US Equities Refocus on Rate rises; SPX breaches 4100 support; US 2Yr Yields hit 2.5% – need to watch this;  TESLA back as shares Px doubles!
• JAPAN. NKY Futs -0.2% vs Cash; USDJPY 131.62; New BOJ Governor nominees  by Feb 14; Apple/Google warned  by Japan FTC;  Earnings Festival: Positive TEL; Renesas; Nippon Steel
• DAILY NUGGET. Chart of the Day: Tokyo Electron(8035) share price has underperformed vs US Peer AMAT. BTE Results could close the Gap

• OVERSEAS. SPX -1.1% as Fed Hawks rhetoric ratches up; All 11 Sectors -ve as Beta Sold; ALPHABET-7.7% AI fails to impress; Disney +8% after-hours with earnings beat/job cuts.
• JAPAN.  NKY Futs -0.8% vs Cash; USDJPY 131.41; Japan looking to ease restrictions for China Inbound;  EARNINGS: Pan Pac/SMM Strong vs weak Subaru which -ve production cut; Toyota out today.
• DAILY NUGGETS. EPIC fail from Alphabet’s “BARD”. Aren’t these events supposed to  be choreographed ????

• OVERSEAS.  SPX resumes rally as Powell Speech affirms 5% Peak rates;   Beta dominates as Energy and Tech lead; Oil rebound as EIA sees higher Oil +  Saudis lift prices
• JAPAN.  NKY Futs -0.1% (flat) vs Cash;  Inbound headwinds as China excludes Japan from Group tours;  Son skips Softbank brief in wake of Vision fund disaster; Nintendo/Switch – its Over!
• DAILY NUGGETS. Nintendo – Game Over. Is our view.  The Switch is getting old and we are past the peak..

• Since the US and China could not agree beforehand, it would be useless for Antony Blinken to come. Or only discuss the balloon?
• Many people are worried about the escalation of Sino-US confrontation. The key to the occurrence of the Taiwan Strait War is who will become the new president of the US.
• The three crises of the US dollar in the past 50 years have been redeemed by war, including “various forms of war”.Perhaps, we should get ready for a new era. 

• OVERSEAS.  SPX Pulls Back for 2nd day as Spy Balloons dominate – mkts just stretched;  Google responds to ChatGPT with BARD; Dell cuts headcount as PC struggle continues
• JAPAN. NKY Fut flat vs Cash; USDJPY 132.63; Govt denies BOJ-Amamiya claim(really !); Son to skip Softban earnings call; Masa Takafumi wins Grammy with Sakura!
• DAILY NUGGET. MHI  formalizes exit from Spacejet. No surprise as it has been on ice for 2 years.   Opportunity to put a positive spin on the $7bn failure.

• According to BeSpoke investment firm research, the top 10% of the most heavily shorted stocks are up an average of 36.3% so far this year.
• This includes troubled retailer Bed Bath & Beyond (BBBY) whose shares surged by more than 18% Thursday, a day after they missed a Feb. 1 interest payment and warned that it might file for bankruptcy within weeks.
• Other stocks like online car dealer Carvana and any company which has anything remotely associated with artificial intelligence (AI) have seen similar spikes.

• According to the Semiconductor Industry Association (SIA), global semiconductor industry sales totaled $573.5 billion in 2022, the highest-ever annual total and an increase of 3.2% compared to the 2021 total of $555.9 billion.
• Monthly semiconductor sales peaked in May of 2022, reaching an all time high of %51.
• This marked the culmination of almost two years of sequential monthly semiconductor sales growth, driven in large part by the pandemic-driven return to growth in both PC and smartphone unit sales.

• OVERSEAS.  SPX Caps another winning week – now 4/5 for the year;  Blow out Jobs report but Wages slowing – Goldilocks ? Powell speaks this week as DIS, UBER report.
• JAPAN.  NKY Futs +0.4% vs Cash; Yen weakens to 132 handle as Amimiya forerunner for BOJ Governor;  Inbound resurgence reflecting in skyrocketing hotel rates;  Earnings this week – Watch Softbank
• DAILY NUGGETS. NO ROCKING OF THE BOAT – BOJ Deputy Amamiya is set to take the mantle of leadership at the BOJ.

• With an average gain of 26.3%, China’s A-share consumer staples outperformed the Shanghai Composite Index by significant margins in the last three months.
• Shanxi Xinghuacun Fen Wine Factory Co (600809 CH) and Fu Jian Anjoy Foods Co Ltd (603345 CH) both issued express announcement on decent 4Q22 and FY22 results.
• Both Foshan Haitian Flavouring & Food (603288 CH) and Inner Mongolia Yili Industrial Group (A) (600887 CH) are likely to have weak 4Q22, but outlook for FY23 should improve.

• January’s big beat in Macau GGR indicative of our bull scenario call for a US$18b 2023 GGR.
• Despite recent upside moves, we continue to believe Macau-centric stocks present a solid entry point level at this time.
• The sector remains oversold as forward EBITDA estimates do not entirely bake in what we believe are continuing strong catalysts for the sector.

• The three companies we write about this week are Thermo Fisher Scientific Inc (TMO US), Ford Motor Co (F US) and Sonoco Products Co (SON US) 
• For the eleven weeks since inception ended 3 Feb the combined innovation portfolio was +4.6%, versus DJIA +.5%, S&P500 +4.3%, Nasdaq +7.7%, Russell2000 +7.3%, MSCI-ACWI-ETF +5.7%, all in US$ terms
• Ironically or aptly it was at “China Lake” in California that the infrared technology in the AIM-9X Sidewinder missile that brought down the “spy/weather” balloon was developed.

• 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 PMI data, South Korean imports, exports, and inflation.
• Companies mentioned:Baidu (9888 HK) (to launch ChatGPT bot, BlackRock ups its stake)

• Travel and Tourism was one of the forefronts in the 2023-24 union budget speech.
• While majority of the sectors have seen revival, the travel and tourism sector is still in recovery mode that awaits extraordinary growth.
• Given the recent uptick in sectoral tailwinds and the conscious push by the government, travel and tourism looks set to be one of the ‘Theme of the year’.

• Wage pressures continue to build in Japan. The country’s largest employer of part-time workers, AEON, is raising wages. Same goes for systems operator, TIS
• It has been a disappointing year for shareholders of Z Holdings – perhaps a management change and new round of restructuring will help
• Divergent fortunes for SPE names Screen and Lasertec. Suspect this has more to do with short term positioning. The fundamentals are broadly similar

• A primer to Life Insurance industry in India – industry size, breaking down key concepts, valuation.
• A relatively better consumption theme compared to other expensive names with strong fundamentals, underlying growth and valuations.
• However, it’s a late cycle play and while downside is protected, upside is capped as well.