Thematic (Sector/Industry)

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Michael J. Howell as he shares more about his thoughts on the global liquidity outlook for 2023. From questions like why liquidity is so important for investors, to tracking the global liquidity cycle, join us in this next installment as we dive deep into the topic alongside Michael.

The webinar will be hosted on Wednesday, 1 March 2023, 17:00 SGT/HKT.

Michael J. Howell is Managing Director at CrossBorder Capital, an investment advisory firm specialising in macro-investing. Founded in 1996 with an international client base, CrossBorder focuses on monitoring and understanding global liquidity and capital flows.

• OVERSEAS. SPX +0.5% in Choppy session; Tech leads as 7/11 sectors rose in a Beta rebound; NDVIA +14% on AI/Chat GPT prospects; All eyes on Friday’s PCE Deflator print
• JAPAN. NKY Futs +0.4% vs Cash; USDJPY 135 level; Tech to lead after yesterday’s holidays; BOJ Gov designate Ueda speaks the Diet today;  Analysts bullish with 11 BUY Upgrades
• DAILY NUGGET.  What does Roll-Royce, +24% overnight, say about Japan’s IHI(7013) ? The rise in prospects positive for IHI.

• This is our fourth review of TCM DAF Australia and the second since the merger between asset management firm TCM and technology firm Trovio, to form Trovio Group.
• Following the merger, we believe the resources available to Trovio Group have substantially increased.
• This belief has been reinforced as the enhanced investment team has further reinforced risk controls and strengthened the risk and investment culture.

• Shoppers are facing a further round of price increases this month, with leading companies raising prices on more than 4,000 items. 
• Price inflation on FMCG is now at its highest level since the 1980s and there is growing caution among shoppers: 85.3% feel burdened by price hikes according to a Nomura survey.
• With incomes falling again, many households are now holding back on all but essential spending, seeking out bargains and avoiding supermarkets that are seen as too expensive.

• JD: JD launched JD Grocery channel in JDDJ platform (-)
• SE: TikTok launched TikTok Shop Mall in Southeast Asia (-)
• PDD：Comments on reports about Shein’s financials and potential listing (-) 

• OVERSEAS.  SPX -2% overnight to close below key 4090 suport;  Bonds sell off, USD Bid as cyclicals hit on sticky inflation view; Walmart, Home Depot downbeat outlook hits Sentiment
• JAPAN. NKY Futs -0.8% vs Cash; USDJPY weakens to 135; Inflation here too as JGB 10Y breaches 0.5%;  Toyota EV Move;  Japan Condo px-es hit records; Bullish Machinery Sector Upgrades
• DAILY NUGGET. Toyota EV shift has started. Rather than Toyota, watch the supply chain – Denso in particular stands to benefit.

• JD:JD is reported to launch “RMB10bn subsidy” channel in March(-)
• 241HK/6618HK:Shanxi stops allowing first medical consultation to be online, other provinces may follow suit(-)
• 1024HK:Kwai recruitment releases performance of serial New Spring Recruit Event（+）

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Osbert Tang, CFA as he shares more about his top trade ideas in China, the latest trends, and business opportunities in the space.

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

Osbert Tang is an equity analyst with over 20 years of experience with focuses on China transport, infrastructure, industrials and utilities sectors. He has been based in Shanghai since 2003, accumulated nearly 20 years of on-ground knowledge on the Chinese economy and financial markets, and has a wealth of contacts with China corporates and government entities. Osbert has received votes from top-tier institutional investors and has been a highly-ranked transport and infrastructure analyst in the Asiamoney, Institutional Investors and Greenwich surveys. In addition to his extensive experience with international investment banks including RBS, ABN AMRO (both served as Shanghai Chief Representative), Paribas Asia Equity, Maybank Kim Eng and DBS Securities, he has been a senior analyst with Moody’s Investors Service with focus on ratings of China infrastructure and related LGFV issuers. He has also worked in the area of strategic development at Sun Hung Kai Properties Limited. Osbert holds a BBA from the Chinese University of Hong Kong, an MBA from the University of Texas at Austin and a MSSc in Applied Psychology from the City University of Hong Kong. He was accredited with the CFA charter in 1997, and is a member of both British Psychological Society and Hong Kong Psychological Society.

• OVERSEAS.  SPX Futs -0.3% as US OFF ON FOR PRESIDENT’S DAY as Biden makes the trip to Ukraine;  Markets still focused inflation/rate hikes; Europe Resource Stocks bid on China Recovery
• JAPAN. NKY Futs -0.2% vs Cash; USDJPY 134.29; North Korea launches  2 more missiles as Japan cries foul;  Defense stocks in focus today? BOJ March Surprise? 
• DAILY NUGGET. Toto(5332) – Bottoming here?  Pricing in all of the US near term downside and ignoring the upside to a China recovery ?

• The launch of Hang Seng Stock Connect Hydrogen Energy Index highlights the growing importance of hydrogen energy use and will stimulate more interest in this emerging sector. 
• Weichai Power (2338 HK), ENN Energy (2688 HK), Power Assets (6 HK), Wuxi Lead Intelligent Equi-A (300450 CH) and Ningxia Baofeng Energy-A (600989 CH) are the five largest constituents. 
• We believe many of these companies are just generating a tiny portion of revenue and profit from the hydrogen initiatives, but the long-term prospects are positive. 

• The pricing trend is expected to experience higher sequential decline 1) parcel pricing is at a high point; 2) alleviated cost pressure; 3) delivery companies try to capture parcel volume. 
• The collaboration with PDD’s Temu could provide J&T a source of international order volume. For its potential IPO, J&T’s overseas operation gives more room of imagination than its domestic business.
• We downgrade SFH to SELL with TP of RMB48 due to Fengwang’s unpromising outlook .Our top pick of the Logistics sector remains ZTO. We are a buyer to JD logistics.

• OVERSEAS.  SPX sees Red for 2nd week; Short yields rise again last week as hot Macro/Fedspeak drive inflation narrative; GM sets sights on Tesla; MSFT AI gets ..well Emotional !
• JAPAN. NKY Futs Flat vs Cash; USDJPY 134.15; Expect little from Japan today with US off for President’s Day;  Stealth Immigration as JP loosens up..barely;Deere 2023 outlook Negative Kubota
• DAILY NUGGET.  Kubota +15% from the bottom but comments from Deere +7.5% on Small Tractors not supportive.

• 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 loan growth, Indian inflation, Thailand GDP
• Companies mentioned:Alibaba Group (9988 HK), Tencent (700 HK), Posco Chemical Co Ltd (003670 KS), Samsung SDI (006400 KS), NetEase (9999 HK), China Renaissance Holdings (1911 HK)

• The three companies we write about this week are Nike (NKE US) , Capital One Financial (COF US) and Under Armour (UAA US) 
• For the thirteen weeks since inception ended 17 Feb the combined innovation portfolio was +2.4%, versus DJIA +0.2%, S&P500 +2.9%, Nasdaq +5.8%, Russell2000 +5.2%, MSCI-ACWI-ETF +4.3%, all in US$ terms
• This week the large-cap portfolio underperformed on a mini Taiwan Semiconductor (TSMC) – ADR (TSM US) sell-off while 10X Genomics (TXG US) was strong in the small caps group. 

• Herein we address the December 2022 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 on the USITC data website ~70 days after the month-end of the month reported.

• [Daily 1]    3690HK：Meituan is testing short video and live streaming function for food delivery (+);  [Daily 2]   PDD: Shein is to launch its online marketplace in the US(-) 
• [Daily 3]    700HK/WB：WeChat official account makes key updates on image formatting（+/-）
• [Daily 4]    700HK:Supercell 2022 topline down 6% YoY with several challenges(-)

• Stickier For Longer? Inflation continues to be top of mind for the Federal Reserve and investors as recent economic data continues to throw a wrench in the market’s previously perceived Fed plans for them to pause and then cut interest rates in the back half of 2023.
• The Fed has hiked interest rates from almost zero to nearly 5% within the past year in response to inflation running at historic highs, and it expects to lift them even higher in the coming months.
• Meanwhile, Fed speakers continue to move the terminal rate goalposts by signaling 5.5% or thereabouts terminal rates will cause the “immaculate disinflation” as if this magical fed funds interest rate level and only at this level will inflation continue to moderate downward.

• Semiconductor memories, the most volatile part of the chip market, have declined dramatically since June
• During downturns memory chip prices typically collapse until they hit cost
• NAND appears to be selling at or near cost, but DRAM still has room for further declines

• The newly released national medical insurance account reform will undoubtedly have a big impact on the development of China healthcare industry. We analyzed related impact on companies.
• In 2023, we think that CXO is not suitable for long-term hold any more but only for short-term trade. Comparatively speaking, the situation of pharmaceutical companies is better.
• Investment is a process of constantly recognizing and breaking through oneself. In fact, it is to use a large number of “certain costs” to exchange for a few “fuzzy earnings”.

• The six renewed licensees of Macau casinos have pledged US$15b to expand non-gaming attractions that will be difficult to monetize quickly.
• The challenges will have to be met by government as well in expanding the infrastructure of available flights from more originating points in and out of the Asia-Pacific.
• Macau GGR will recover and ramp beyond 2019 baseline GGR by 2025.27 but tourism as a key driver of that increase will pose more complex development initiatives.

• Recovery in face-to-face education stocks will accelerate as Chinese international students return on-campus
• International K-12 schools will perform strongly as hubs like Dubai and Singapore are booming.
• Service providers like IDP Education (IEL AU), Flywire Corp (FLYW US); schools like Taaleem; and tertiary China Education Group (839 HK) , Laureate Education (LAUR US),  and Icollege Ltd (ICT AU) will outperform.

• Japanese stocks ended the week down around 60bps. Global risk assets down on stronger US economic data and rate hike fears
• Japan posted its largest trade deficit since 1979. The Japanese yen weaker at 134.5/$
• We highlight the stocks that moved the market over the past week

• OVERSEAS.  SPX -1.4% post hot PPI print;  Fed’s Meister looking at 50bp hike; Tesla: Model Y sells out but Co issues big vehicle recall; AMAT after hours- looks good !
• JAPAN.  NKY Futs -0.7% vs Cash; USDJPY 133.95;  Japan set to give up yesterday’s gains but equities look good; Bridgestone earnings-solid; Good AMAT = Good TEL; Citi cuts Fujitsu
• DAILY NUGGET. Future looks bright for Panasonic, supplier of batteries to Tesla in the US. As the IRA takes effect, Tesla’s sales are going through the roof. 

• 3690HK：WeChat is testing delivery platform in Guangzhou and Shenzhen (-)
• Gaming Industry: China Game Industry Annual Conference (GIAC) is held（+）
• BEKE：Home price decline narrowed in Jan 2023, where first tier turn positive MoM, and new home outpace existing home (+)

• Liquidations continue at historically elevated levels. This week produced two more SPAC IPO pricings, with each IPO raising initial gross proceeds of $60 million.
• This brings the total number of pricings in February thus far to five, a number we have not seen since last May.
• However, the revolving door of SPACs continues to register far more exits in the form of liquidations than new entrants.

• OVERSEAS. SPX Rise as Cycicals/Tech bid; Higher Rates; Strong USD, No problem !   Market seems to have concluded that higher rates+strong economy is a workable outcome.
• JAPAN. NKY Futs +0.4% vs Cash; USDJPY weakens to 134.1; Weak Yen Narrative to dominate; Do not say to “Mr Yen” who sees 120 ;  BULLISH Inbound but priced in
• DAILY NUGGET. BayCurrent Consulting (6532) – Still lot of tailwinds..still BULLISH.

• Positive to PDD: Temu aired its commercial at the Super Bowl
• Negative to FUTU: Bright Smart Securities downsizing the mainland account
• Positive to BIDU: Updates on Baidu’s ChatGPT-similar product “ERNIE Bot”

• EMS – offers a four-fold opportunity over the medium term
• Know the risks and challenges to attaining this strong growth
• Read this note for opportunity, risks, incumbent positioning and valuations

• China’s Central Document No.1 emphasizes the need to boost the agricultural industry and improve well-being of the peasants. We see the directions positive for the agricultural sector.
• Direct beneficiaries are Sinofert Holdings (297 HK), China Xlx Fertiliser (1866 HK), First Tractor Co H (38 HK) and Xinjiang Tianye Water Saving Irrigation (840 HK). 
• Growing rural affluence is positive to BYD (1211 HK), Haier Smart Home (6690 HK) and Pinduoduo (PDD US), while cold chain network buildout is good to Shenzhen Intl (152 HK). 

• This note addresses the Business Institutional Furniture Manufacturers Association’s (BIFMA) Monthly Market Pulse (MMP) of incoming orders and sales for December 2022.
• Normally, ~50+ BIFMA member companies voluntarily submit monthly sales and orders to a national accounting firm that aggregates and reports composite data.
• Neither BIFMA nor any individual member ever has access to the raw data.

• WTR Sustainable Index: During the week ended February 10, 2023, the WTR Sustainable Index outperformed the broader market, rising 0.2% W/W versus the S&P 500 Index (down 1.1%), the Russell 2000 Index (down 3.4%), and the Nasdaq Composite Index (down 2.4%). Advanced Transportation Solutions (70% of the index) drove the outperformance, rising 1.7% , while Energy Technology (9% of index) was down 5.0% and Industrial Climate and Ag Technology was down 2.2%.
• Valuation: Based on forward 12-month consensus estimates, the current P/E ratio of the WTR Sustainable index is 24.5x versus 18.4x for the S&P 500.
• Consensus estimates changes: During the week ended February 10, 2023, there were five increases (three in Energy Technology and two in Industrial Climate and Ag Technology) 2022 revenue estimates. There were decreases in 2022 revenue estimates for two companies each in Advanced Transportation Solutions and Industrial Climate and Ag Technology.