Daily Japan: Semiconductor WFE Billings Decline Reverses Course in December, First Bullish Signal in Six Months and more

In this briefing:

1. Semiconductor WFE Billings Decline Reverses Course in December, First Bullish Signal in Six Months
2. Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming
3. Japan Stock Weekly
4. GER Upcoming EVENTS and Earnings Calendar
5. LNG Producers Outperform as More LNG from the US Is Coming into the Market

1. Semiconductor WFE Billings Decline Reverses Course in December, First Bullish Signal in Six Months

On January 24’th 2019, SEMI announced that Wafer Fab Equipment (WFE) billings for North America-based manufacturers of semiconductor equipment amounted to $2.11 billion worldwide in December 2018. This represents an 8.5% MoM increase, although still lower YoY by 12.1%. December’s data marks the reversal of a six month long downtrend in monthly billings, a bullish signal that the WFE segment has bottomed and better times lie ahead. 

This latest billings data coincides with WFE bellwether Lam Research (LRCX US)‘s latest earnings report which slightly exceeded guidance with revenues of $2.5 billion, up 8.7% sequentially. On the call, company executives stated that first quarter CY 2019 would mark the trough from a gross margin perspective, strongly implying that it would be the same for revenues. 

LRCX shares surged 15.7% in overnight trading triggering a rising tide that lifted large swathes of semiconductor stocks, particularly those within the WFE sector. Two swallows don’t necessarily mean it’s Spring, but for now, the markets are betting that it does. 

2. Global Ex-U.S. Equity Strategy: MSCI EM in Early Stages of Bottoming

Our overall global outlook remains cautious and continued downward pressure on global equities remains our expectation. One bright spot is EM (more on this below), which continues to give us hope that global equities can bottom out.  We provide a technical appraisal of major markets and highlight actionable setups within the global Utilities and Staples Sectors.

3. Japan Stock Weekly

Tosei (8923) BUY – a very cheap small cap real estate developer 

Hikari Tsushin (9435) BUY – 25% off recent highs, this is essentially a stock business that will continue to add to its installed base and grow profits. 

Don Quijote (7532) BUY – oversold on the failure of FamilyMart bid and poor December sales. 

4. GER Upcoming EVENTS and Earnings Calendar

Next week promises to be a large catalyst driven week, with Apple Inc (AAPL US), NTT Docomo Inc (9437 JP) and Tesla Motors (TSLA US) expected to report results, among others. We have provided a list below of the key equity catalysts for next week as well as potential drivers for M&A deals and stubs. If you are interested in importing this directly into Outlook or have any further requests, please let us know. 

Kind regards, Rickin Arun and Venkat

5. LNG Producers Outperform as More LNG from the US Is Coming into the Market

On the back of a growing LNG global trade volume, LNG producers have outperformed the US market and their E&P peers including the oil majors over the last two years. As global LNG production reaches a record 316m tonnes in 2018, a 9.6% increase year on year, new capacity additions set to come online in the next three years will be dominated by the US. This insight will examine how the recent entry of US LNG in the market is transforming the LNG industry and which emerging players are driving the change.

Exhibit 1: LNG Producers Outperform the US Market