Thematic (Sector/Industry)

• The Nikkei traded up half a percentage point this week, while the JPY strengthened 3% to Y127/$
• US stocks (and hence global) rallied after data showed that inflation cooled in December, easing pressure on the Fed. 
• Lower inflation, interest rates, and China’s reopening are providing a decent backdrop for Japanese equities

• OVERSEAS:  CPI slows, Fed Pause narrative strengthens; Yields fall; DXY weakens; Equity rally continues; TSMC Optimism add fuel Semis
• JAPAN: NKY Futs -1.0% vs Cash;  USDJPY ¥129.24; BOJ to end YCC narrative gather steam – Banks rally; Foreigners Selling JGBs; Earnings: Seven &I beats; Fasty misses;  We are bullish
• DAILY NUGGETS: Our meme below says it all – we leave it to the experts to breakdown the data but the evidence indicates  INFLATION DEFEATED.

• Consumption in China is expected to grow 6% to 7% in 2023 from the previous year on the back of reviving confidence and the release of pent-up demand after three years of stringent Covid restrictions
• For the first time since the pandemic hit, China’s consumption growth this year will outpace the country’s economic expansion, which is projected at around 5%
• The growing demand partly reflects Chinese households’ rising deposits during the pandemic, when restrictive measures reined in spending

• Airlines are struggling to keep up with surging demand for international travel after the Chinese government reopened the country’s borders and abolished the quarantine requirement for inbound travelers.
• The number of flights to and from the Chinese mainland rose to 273 on Wednesday from 205 on Sunday when quarantine requirements were lifted
• International flight tickets remain in short supply. Almost all direct flights throughout January from South Korea to China are sold out, according to state broadcaster CCTV

• Badan Pengawas Obat dan Makanan (BPOM), Indonesia’s national food and drug agency, told Tech in Asia that it holds the electronic pharmaceutical system operators – or PSEF – responsible for the sale of prohibited drugs on their platforms.

• Licensed online pharmacies are accountable because they have “full control over the content and products that are displayed,” the regulator said.

• This implies that as a marketplace, Halodoc is not responsible for the sale of any restricted drugs, but BPOM’s responses indicate otherwise.

• We highlight five stocks that we have talked about in the past year
• We continue to like small cap GROWTH and we think that decarbonization will remain a key thematic
• NEC is a standout value name where we see a potential catalyst over the coming year in Open RAN

In this next webinar we will discuss Smartkarma Insight Provider, Tina Banerjee‘s high conviction ideas from Indian healthcare sector, with solid fundamental profile and strong growth prospects. Nifty Pharma index plunged ~6% from its recent peak in November. With COVID-related high bases gradually behind us, lesser pricing pressure in the U.S. market, new product launches gaining momentum, and continuous recovery in the domestic healthcare market, we expect recent pullback offers attractive entry opportunities for long-term investors. 

The webinar will be hosted on Wednesday, 18 January 2023, 17:00 SGT/HKT.

Tina Banerjee is an equity research analyst with more than 15 years of experience, and an interest in fundamentally strong global healthcare companies. She has been helping investors to find future winners in healthcare space to grow their wealth by focusing on the strength and potential of the business models of the companies. Her initiating coverage reports and pitch help investors to know ‘what to buy’, ‘why to buy’, and ‘when to buy’. Tina’s clients always remain on top of the sector with the help of her timely and detailed notes on earnings or any news update. Tina also provides a broader view on the entire healthcare sector through periodic thematic reports.

• OVERSEAS: SPX +1.3% SOX +1.3%; Optimism on soft inflation print drives stocks; Consumer+Tech lead; Apple to introduce touch screens for Mac; Off-Shore Wind Giant Vesta leads in Europe
• JAPAN: NKY Futs +0.3% vs Cash; USDJPY steady at ¥132.45; Biz lobby urgest firms to lift wages above inflatio;  Buy U/G in Lastertec, TEL,  Nexon and D/G to Nintendo
• DAILY NUGGETS:  Fast Retailing has raised the bar for corporate Japan with with their wage hikes.

• The most obvious opportunity in China healthcare at the current stage is import substitution. If import substitution is fully realized, it can bring a clear performance increase to the companies.
• In 2023, we are optimistic that China healthcare would gain more household expenditure in the “Long COVID” effect, thus generating excess returns under the logic of expanding domestic demand.
• We would recommend investors consider making layout in those non-COVID related companies in 2023.  We analyzed the outlook, investment logic and investment opportunities in medical device, biotech and CXO sectors.

• Within three months, Tesla cut its car prices twice in China.
• We believe this indicates demand in China’s auto demand might be much weaker than expected until Covid impact is eased
• Model Y’s price cuts may only hurt AITO M5. While Model 3 may challenge customers’ interest on Xpeng P7, BYD Seal and Ora Lightning Cat.

• We expect oilfield service stocks to continue to outperform in 2023 and beyond based on supportive oil price fundamentals, rising capex levels amongst E&Ps, and pricing power leading to margin expansion 
• Despite the sector’s strong fundamental tailwinds and the probability for a multi-year commodity supercycle, oilfield service companies are still trading at trough-level multiples In order to end the oil supply deficit, additional rigs are required to be deployed; providing organic growth and pricing power for oilfield service names.
• This will create another year of margin expansion for oilfield service stocks as they take advantage of operating leverage.

• OVERSEAS: SPX +0.7%  SOX +1.35; Beta rally continues on lower CPI print expectations;  Cyclicals lead 10/11 SPX Sectors positive; MSFT considers $10bn OPEN AI investment; Record Boeing orders in 2022.
• JAPAN: NKY Futs +0.3% premium to Cash; USDJPY steady ¥132.1; Hot Tokyo CPI print; Big wage hikes at Fast Retail;  Travel – China strikes back; +ve JP Boeing supply chain.
• DAILY NUGGETS: Hydrogen – a clean alternative. Japan is set to lead as companies ramp up R&D protection with a view to commercialisation.

• At the dawn of the EV-revolution, Bolivia is at risk of being the first failed lithium state. 
• Elon Musk has been pointed out as one of the key suspects behind political crisis in the country.
• Read why there is still a bullish case for Bolivian lithium.

• Estimates of total GGR for the first recovery year ahead vary from a low of US$9b to US$18b.
• Starting with baseline 2023 shares of market we project projected revenue for 2023.
• Non-Gaming revenue was 10% pre-pandemic. Macau official goal is 20% of GGR, not likely in 2023 but some properties will gain share because of room capacity.

• Government-Owned companies contributing to overall banks’ loan growth as growth rate is higher as compared with the private sector companies
• Loan growth of private sector companies appears mainly for working capital purposes
• Fresh private sector investment to stimulate the economy appears unlikely on account of poor future demand

• OVERSEAS:  2 Day SPX gain +2.2% (Japan view; Tech leads SOX 2-Day +6.7%; Metals rally on  China normalization  Slower wage growth + falling Used Car prices supports slower Fed hikes
• JAPAN:  NKY Futs +0.8% vs Cash; USDJPY ¥131.89;  Looking for strong Tech/SPE (SOX) + Commodities (China) bid to start; Go-To-Travel resumes; Continued strong news flow on #Decarbonization spending.
• DAILY NUGGET:  Afeela – a winner ? Get used to it. This is the first result of the Sony Honda Mobillity JV. 

• Xinjiang Goldwind Science & Technology (2208 HK) performed badly in 2022 and with sustained pressure on WTG price, earnings will stay under pressure. We will only pick up post-FY22 result.
• Removal of “zero COVID” policy and consumption recovery should revive sportswear business of China Dongxiang Group (3818 HK). Improvement in equity market will boost its investment portfolio value.   
• Valuation retreat for China Longyuan Power (916 HK) has made it more attractive. Rebound in electricity demand, continued green energy push and potential asset injection are drivers. 

What does 2023 have in store for the Chinese healthcare industry? In the next webinar, we speak with Insight Provider Xinyao (Criss) Wang on just that, as she shares with us the landscape of the Chinese healthcare industry in 2023. From its outlook in 2023, to the opportunities present, Criss will share with us her thoughts and insights in this next episode of our Webinar Wednesdays. Have any burning questions about the Chinese healthcare industry for 2023? Get them answered in the live Q&A that will conclude the session. 

The webinar will be hosted on Wednesday, 11 January 2023, 17:00 SGT/HKT.

A Hong Kong/China Healthcare Analyst, Criss has over 13 years’ worth of experience in both finance and healthcare. She covers clinic operations, investment and equity research in both the Chinese and overseas markets.

• We again write about one stock each from the large, mid and small cap portfolios, briefly giving the reasons for their inclusion.
• The three companies we write about this week are Abbvie Inc (ABBV US), Becton Dickinson and Co (BDX US) and Ciena Corp (CIEN US) 
• For the seven weeks since inception ended 6 Jan the combined innovation portfolio was +1.6%, versus DJIA -0.3%, S&P500 -1.8%, Nasdaq -5.2% & MSCI-ACWI-ETF +0.1%, all in US$ terms

• Centralized procurement of interprovincial dental implants would open the bid on Jan.11. Korean brands and European brands are all included. There is “no safe haven” for products with consumption attributes.
• In 2023, we are optimistic that China healthcare would gain more household expenditure in the “Long COVID” effect, thus generating excess returns under the logic of expanding domestic demand.
• 2023 should be better than 2022. There’re strong expectations but weak realities in 2023Q1-Q2, during which more trading opportunities occur. However, in Q3-Q4, investors may need to be careful.

• Many newcomers are trying to replicate Shein’s path, but none has proven to be successful, as Shein’s moat in supply chain requires longterm down-to-earth work. 
• PDD’s Temu will be Shein’s biggest challenger because it is pursuing a different model. Instead of penetrating into the supply chain, Temu offers value-for-money, fair quality products from all categories.
• Although Shein’s foundation remains solid (ladies’ apparel + developed countries), growth is slowing down. We reiterate BUY to PDD and BABA and SELL to SE and VIPS after studying Shein.

• A troubled local government financing vehicle (LGFV) located in Guizhou, one of China’s most indebted provinces, has secured approval from banks to delay repayment.
• Since 2021, Zunyi Road and Bridge has been impacted by the prolonged nationwide housing crisis.
• As of June 2022, the LGFV had accrued 45.9 billion yuan in interest-bearing debts, of which 14.1 billion yuan were due within a year.

• ‘Agflation’ to buoy India’s Ag economy, linking of crop to fuel key inflation catalyst
• Low capital formation, high capital productivity – a paradox, improving cashflows to drive capex led consumption growth
• Companies that cater to farm economy are primed for accelerated multi-year growth and valuations don’t adequately capture future earnings potential

• Douyin eCommerce next important step is Douyin Shopping Mall, an in-app page like Taobao/PDD. 
• We are conservative about Douyin Shopping Mall’s potential, and we suggest that it could only reach 20% of Douyin eCommerce GMV in the long term.  
• We suggest that the slowdown growth of Douyin eCommerce will be positive to BABA mostly, and then followed by PDD and JD. Kuaishou is encountering similar issues with Douyin. 

• We update our China online advertising model and forecast that the industry will reach RMB 1,167 bn with 9.3% YoY in 2023, rebounding from 2.7% YoY in 2022.
• Bytedance’s slowdown, Tencent’s Video Account, and some sectors’ uneven faster-than-expected recoveries will be three key themes that could generate investment opportunities in 2023.
• We recommend BUY Tencent, BABA, PDD, and Meituan within the sector.

• China will manage COVID-19 with measures against Class B infectious diseases, instead of Class A infectious diseases, in a major shift of its pandemic response policies. Zero-COVID policy has ended.
• In 2023H1, China could still be in the period of pandemic adjustment/recovery. However, this does not mean that there is no good trading opportunity. We’re optimistic about the upcoming rebound.
• Due to favorable policies, the market would continue the playbook of economic recovery in short term.Compared with other countries, China’s still one of the few growth engines in the world.