From an Asia Long/Short Update, to Alibaba (BABA US), to Grab (GRAB US) and more, here's what you need to know this week.
The Smartkarma Weekly Starter is a newsletter published every Sunday and pulls together the ten top research notes published over the last 7-days from across our platform.
In this week's edition of the Smartkarma Weekly Starter, we get a quick rundown on the top engaged insights for the week.
Start your week off on the right foot with:
Top longs have been India and Australia. Top shorts HSI and Korea. Korea's bearish wedge is maturing and stands out as macro risk. USD upside breakout is front running a softer equity bias.
- Top longs have been India and Australia. Top shorts HSI and Korea. Korea's bearish wedge is maturing and stands out as macro risk.
- Turned neutral the Nikkei above 29,200. 29,500 represents from buy support to threaten 31,000. Near term top at 31k for a pullback try.
- USD upside breakout is front running a softer equity bias in Asia for June. SPX 4,200/20 top zone throw over probable.
By Thomas Schroeder in Technical Analysis
Alibaba Group Holding Ltd. outlined timetables for several key business units to complete spinoffs or pursue independent share sales, kicking off...
- Alibaba Group Holding Ltd. outlined timetables for several key business units to complete spinoffs or pursue independent share sales, kicking off major moves in a sweeping reorganization to break up the gigantic conglomerate and unleash new growth momentum.
- Alibaba’s board of directors approved a full spinoff of its cloud services division while exploring initial public offerings for the logistics and grocery arms, the company said Thursday.
- The e-commerce giant plans to carve out the Cloud Intelligence Group within 12 months through a stock dividend distribution to shareholders, meaning it could relinquish control of China’s biggest cloud services platform.
By Caixin Global in Equity Capital Markets
Despite markets' focus on near-term growth weakness, we stick to our bullish call on BABA on sustained recovery, well-executed reorganization unlocking value and investors' renewed risk appetite.
- Weaknesses of BABA stock and China tech sector in general post their strong earnings recovery for March quarter suggest market’s concerns centering around growth outlook.
- BABA fundamental has tracked well to our projection since last November. P/E multiple contraction - which priced in too much pessimism - prevented our bullish call from materializing, for now.
- We stick to our thesis that March quarter results set stage for BABA re-rating on sustained recovery, well-executed overhaul effectively unlocking value and investors’ renewed appetite for China assets.
By Eric Chen in Equity Bottom-Up
Grab's1Q2023 made for positive reading with rapid revenue growth and a quickening of progress towards profitability. Too much time dwelling on slower GMV growth misses the point.
- Grab's1Q2023 made for positive reading with rapid revenue growth and a quickening of progress towards profitability but the focus perplexingly seemed to be drawn to the ethereal measure of GMV.?
- The delivery segment saw the most significant GMV slowdown, impacted by a high base and seasonality but saw rapid revenue growth and record margins. Mobility remained the cash cow.
- Grab's profitability improved considerably in 1Q2023 across all segments, with management upgrading the outlook for FY2023 for adjusted EBITDA and maintaining its breakeven target for 4Q2023, which now looks conservative.
By Angus Mackintosh in Equity Bottom-Up
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
The company sees US$1 trillion of data center upgrades ahead. Our AI Leaders Basket constituents TSMC and ASML are rising as well.
- Nvidia's results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
- The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
- Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.
By Vincent Fernando, CFA in Equity Bottom-Up
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USD breakout of the DXY bull wedge (Euro bear wedge) is gaining traction and will find additional fuel in June when the SPX faces a weaker cycle. USD vs SGD and IDR saw key macro turns (KRW lead).
- USD breakout of the DXY bull wedge (Euro bear wedge) is gaining traction and will find additional fuel in June when the SPX faces a weaker cycle.
- Euro turn at macro resistance has legs. USD/JPY bull call from 130 has macro implications on follow through strength and will bleed into Asia FX.?
- USD vs SGD and IDR saw key macro turns. KRW and commodity currencies have led. USD/ZAR was out top pick in EM and is on fire.
By Thomas Schroeder in Technical Analysis
The agenda of the G7 and the subsequent scheduled but cancelled meeting of the Quad in Australia highlights the rising risk of a new Cold War 2.0 that decouples China from the West.
- The agenda of the G7 highlights the rising risk of a new Cold War 2.0 that decouples China from the West.?
- Tensions are likely to rise in 2024 as U.S. electoral politics will encourage both sides to show how tough they are on China.?
- Under such a scenario, the global economy would be split into a China bloc and a U.S. bloc that resolves in global stagflation??
By Cam Hui in Cross Asset Strategy
Several indicators point to approaching World recessionary trough and even an early pick-up. Chinese monetary policy easing may be enough to lift the World economy higher over coming months.
- Several indicators point to approaching World recessionary trough and early pick-up. Chinese economic recovery since late-2022 ‘re-opening’ may help explain this
- Chinese Liquidity injections have slowed from their early year pace, but no evidence of deliberate tightening. Also visible acceleration in shadow bank lending
- Switch from last year’s Chinese tightening to this year’s policy easing may lift the World economy higher over coming months. We should look for confirming evidence from other Asian markets
By Michael J. Howell in Cross Asset Strategy
Weak share price is unjustified given healthy earnings, net cash position and undemanding valuations. It will benefit from government's push to raise household appliance penetration in rural areas.
- The weak share price performance of Haier Smart Home Co Ltd (6690 HK) is unwarranted given the healthy earnings trend, solid net cash position and undemanding valuations.
- The 15.9% 1Q23 recurring earnings growth showed its low correlation with the property market while demonstrated the achievement in cost control and rising premium product contribution.
- It is set to benefit from government's push for higher penetration of household appliances in rural areas. Meanwhile, recent Rmb depreciation may bring exchange gain for 1H23.
By Osbert Tang, CFA in Equity Bottom-Up
The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed during the week, you might have missed.
- Expect some upset on SBI Shinsei Bank (8303 JP)'s Offer, the possibility of some activism, but it all plays out in the back end. Not the front end.
- Rakuten (4755 JP) is doing a large equity offering to get the monkey off its back with regard to over-leverage, near-term debt refinancing, and WC for Rakuten Mobile.
- Fund manager China Everbright (165 HK)'s implied stub and simple ratio (CEL / Everbright Securities Co (A) (601788 CH)) are at multi-year lows.
By David Blennerhassett in Event-Driven
?? HAPPENING NEXT WEEK:
- In the next?#webinar?Wednesday, we are glad to welcome Smartkarma Insight Provider? Alexis Dwek , as he shares with us his insights on the opportunities in Europe equities. Join us, as Alexis shares with us the developing trends in Europe, the opportunities that lie ahead and what's next for equities in Europe. Register now: https://skr.ma/eg6fR
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