Daily Brief Thematic (Sector/Industry): AI-Driven Semiconductor Rally Leaves Small-Cap Chipmakers Behind and more

• Chipmakers and chip-making tool providers are set to continue benefitting from the surge in demand that has rallied the equity prices for the companies that are at the forefront of AI-related semiconductor research, development, and production.
• One of the key drivers in the resurgence of new chip demand is the acceleration of upgrade demand for PCs and smartphones to meet the novel generative AI needs, while companies build up storage and data center capabilities to transition to utilizing generative AI capabilities in their operations.
• However, so far, the benefit of the market rally has been disproportionately felt across the industry.

• US equities fell slightly on Monday as US Treasury yields rose; oil prices higher on shipping disruptions
• Nikkei 225 hits record highs, up 0.35% on Monday. NKY Futures point to a positive open in Japan; key inflation data in Japan today
• Fujikura stock surges 40% post-earnings; Quarterly results prompted upward full-year outlook revision. Several LT structural drivers; Stock cheap versus global peers

• The announcement of “Draft for Comments on the Regulations on the Management of off-campus Training” has led to a 43.6% rebound of the education sector from the 2024 trough.
• The “Draft” has cleared regulatory worries on after-school tutoring of high school students and non-academic subjects. For higher education space, we like China East Education (667 HK). 
• New Oriental Education & Techn (9901 HK), TAL Education (TAL US), and Gaotu Techedu (GOTU US) are the most direct beneficiaries of the “Draft”.

• We compare the performance of the top-4 global online travel agents (OTA) from the recently concluded 2023 result
• All the OTAs recorded strong 2023 and 4Q23, but the forward outlook indicates growth rate is slowing in North America and Europe while Asia is picking up speed  
• Trip.com is indeed comparatively most attractive among the big-4 global OTAs; our fellow Smartkarma Insight provider’s conviction is justified

• Record number of UK funds now exposed to Real Estate sector.
• CT, BlackRock and Quilter Among Funds Adding to Exposure Since Mid 2023.
• SEGRO and Land Securities the key holdings and the drivers behind the recent rotation

• US natural gas market seeing production reduction by Chesapeake, but overall storage trajectory only slightly affected
• European natural gas market showing signs of rebound in industrial demand, with companies reporting higher demand in key countries like France and Germany
• Weather forecasts and production reductions in the Lower 48 indicating potential for lower prices for longer in the natural gas market

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• Despite working in various headquarters in European banks, my work likely did not reach directly more than 500 people at any time (confidential/secretive/sensitive etc), hence a 10x bigger reach now is quite crazy and interesting for sure!

• Let’s begin with 2 charts on US monetary policy and inflation that I was humbled to have them liked and retweeted on Twitter by the great Danielle DiMartino Booth (CEO & Chief Strategist, QI Research LLC, Fmr Federal Reserve insider, Economist): M2 with a negative growth of -2.04% working to make inflation low / back to target

• note how the -4.63% growth last year was a rate that meant it was the fastest pace of money supply compression since Jan 1933 … let that sink in!

• The US cannabis MSOS ETF broke a two-week slide and gained 6.77% over the holiday-shortened four- day trading week.
• Once again, the global YOLO ETF lagged at just 0.27% over the same stretch. MSOS is +37.23% YTD, while YOLO is +22.18%.
• The discrepancy shows the increased interest in US cannabis due to the potential for rescheduling and the continuing difficult environment for most Canadian operators.

• Direct selling as a business model has a large global presence.
• According to the World Federation of Direct Selling Associations (WFDSA), approximately 77% of global direct sales were conducted outside the US in 2022.
• Therefore, foreign currency exchange rates can have a significant impact on reported earnings and cash flows for the dollar-based direct selling platforms, such as NUS, HLF, USNA, and LFVN.