Daily Brief Thematic (Sector/Industry): Ohayo Japan | Fed Signals Two More Rate Cuts in 2024 and more

• U.S. stocks closed with modest losses on Wednesday after the Federal Reserve cut interest rates by 50 basis points
• The Fed’s projections suggest a fed funds rate of 4.4% by 2024, with further easing into 2025
• Japan’s exports grew 5.6% in August, marking the ninth consecutive month of increase. Semiconductor-related goods drove growth

• Paladin fission deal facing opposition from CGN Mining, a subsidiary of China General Nuclear Power Corp
• CGN previously invested $82 million for a 19.9% stake in fission in late 2015
• Detailed background to the agreement between Paladin and fission revealed in 444-page information circular, showing fission’s eagerness for the deal and competitive process involved.

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• While maybe deflation may not be a concern right now, we believe that high real rates will be a consideration of the Fed
• With average lending rates at 8.5% in August and the All Urban CPI Index recording 2.5% inflation in the August, real lending rates are high at 5.97%
• When figures were similar, it was July/August 2007 – rarely has there been a time in recent years, where real loan rates have been so high, without Fed reaction

• Don’t expect initial ‘sell the fact’ reaction to Fed’s best-case 50 bps cut to weigh on Japan, with a lot of money on the sidelines in Asia to be deployed.
• Shin-Etsu via its PVC sub Shintech and the Japanese home builders with high US exposure continue to look attractive as rate cut plays.
• Further US export controls for allies on chip making equipment are imminent and names with lower China sales ratios remain the safer SPE plays.

• Hindalco to Invest INR 2,450 Crore in Gujarat Copper and E-Waste Projects
• JK Cement Plans INR 30 Billion Capacity Expansion by FY26
• Hindustan Zinc Unveils $2.5 Billion Expansion Plan to Double Output