In today’s briefing:
- Ohayo Japan | Dow Closes 200 Points Higher; Wireless EV Charging Is the Future
- Weekly Earnings (ASML, LRCX, TSMC, Nanya)
- EM Semiconductors: Positioning Deep Dive
- US Banks – Mtg Loan Applications Index -15% from July | Mtg Loans 23% of Total | Growth Can Turn -Ve
- Investment in Chinese Real Estate Dropped 9.1% in First Three Quarters
Ohayo Japan | Dow Closes 200 Points Higher; Wireless EV Charging Is the Future
- Overseas: SPX +0.7%, Nasdaq +1%; Alphabet drops 6% post market as cloud business missed expectations
- Today: NKY Futs +0.6% v cash. JPY 149.9/$; Weak yen has unmistakable impact on profits; Dept. store sales +9% in Sept.
- JapanX: Wireless EV charging is being tested in Kashiwa, offering convenience, reduced battery sizes, and environmental benefits, with plans for broader adoption
Weekly Earnings (ASML, LRCX, TSMC, Nanya)
- TSMC results came in much better than feared. Revenue was slightly weaker than expected and below consensus. This quarter’s big story was margins driven primarily by FX changes.
- Revenue was slightly below Taiwan Dollar (TWD) expectations, but margins were ahead of consensus. The big driver of this margin beat was FX, as the dollar weakened against the TWD.
- The margin beat happened despite the 3nm ramp, a meaningful headwind. As N3 becomes a larger node, the headwind should increase, especially next quarter.
EM Semiconductors: Positioning Deep Dive
- Semiconductors are the 2nd largest industry allocation and the 6th largest overweight among EM active managers. However, the momentum witnessed between 2019 and 2021 has stalled.
- EM Growth funds remain overweight, but Value and GARP funds switch from an equal weight to an underweight.
- TSMC is the dominant stock holding whilst SK Hynix and Mediatek occupy a 2nd tier. Alchip Technologies has captured inflows, whilst EM funds are closing LONGi Green Energy Technology exposure
US Banks – Mtg Loan Applications Index -15% from July | Mtg Loans 23% of Total | Growth Can Turn -Ve
- Weekly mortgage loan applications index in the US is declining rapidly as is the weekly mortgage loan volume index. This gives a good forward view of growth.
- Mortgage loans remain one of the most important segments for US banks at 23% of loans in the most recent week, so their decelerating growth is meaningful.
- Given the high level of 30-year mortgage rates – not moving lower fast – decelerating mortgage loan growth should continue, and is likely to turn negative soon.
Investment in Chinese Real Estate Dropped 9.1% in First Three Quarters
- Investment in Chinese real estate contracted 9.1% in the first nine months of 2023 from a year earlier, official data showed Wednesday, a bigger drop than in the first eight months of the year.
- The decline means developers are spending less buying land and building housing. Construction starts measured by floor area fell 23.4% year-on-year, and total ongoing construction area dropped 7.1%, according to data released by the National Bureau of Statistics (NBS).
- The declines reflect developers’ lack of confidence amid a prolonged crisis in the sector. Property sales by floor area decreased 7.5% in January-September from a year earlier, compared with a 7.1% contraction in the first eight months.
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