From HDFC Bank to Anta Sports (2020 HK) to Recession Playbook, here's what you need to know this week.

The Smartkarma Weekly Starter is a newsletter published every week 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:

CPI watch: 6 charts on a soft’ish inflation report

The CPI report is like to surprise on the dovish side. Especially used cars and transportation services will surprise on the low side. The Fed is very uncommitted to hiking rates here.

• The CPI report is like to surprise on the dovish side. Especially used cars and transportation services will surprise on the low side.
• The Fed is very uncommitted to hiking rates here. The USD story could take a short-term beating on a weak CPI
• The US inflation report in August turned out to be “hot” due to sharp increases in gasoline -and diesel retail prices,? as we anticipated.

By Andreas Steno in Macroeconomics

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium

Foreign investors have sold HDFCB post merger leading to foreign room crossing 20%. The ADR premium has dropped to 7% and could drop further. There will be some passive buying in December and March.

• Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
• HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
• There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.

By Brian Freitas in Event-Driven

Anta Sports (2020 HK):? Strong 3Q23 Update

Anta Sports reports strong 3Q23 operating data, with both Anta and Fila brands performing well despite challenging macro conditions.? Other brands also showed significant growth.

• Anta Sports Products (2020 HK) announced a set of strong 3Q23 operating data yesterday after market close.
• Both Anta and Fila brands performed well in a challenging macro environment in China in 3Q23, with 3Q22 being a high base.?
• Another bright spot is that other brands outside of Anta and Fila grew 45-50% yoy in 3Q23, with Descente up 40-45% yoy and Kolon up 65-70% yoy.

By Steve Zhou, CFA in Equity Bottom-Up

Saizeriya (7581 JP):? Japanese Company + Fast Casual Italian Food = China Growth Story?

Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.

• Saizeriya (7581 JP) is a Japanese restaurant chain of fast casual Italian food, with currently the majority of operating profit and growth coming from China.?
• The Asia segment, which is primarily restaurants in China, nearly doubled operating profit in FY23 (year ending August) from pre-COVID FY19.
• The company is trading at 27x FY24E PE, with more than 80% expected growth in operating profit in FY24.?

By Steve Zhou, CFA in Equity Bottom-Up

Kokusai Electric IPO: Lower Price Range Is Reasonable

Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO's attractiveness.

• Kokusai Electric (6525 JP) has trimmed its IPO price from JPY1,890 to JPY1,830-1,840 per share to raise up to US$727 million. The IPO price will be determined on 16 October.
• We previously discussed the IPO in Kokusai Electric IPO: The Bull Case, Kokusai Electric IPO: The Bear Case and Kokusai Electric IPO: Valuation Insights.?
• Our base-case DCF valuation is JPY2,058 per share. Peers have modestly re-rated, and a lower IPO price range helps increase the IPO's attractiveness.

By Arun George in Equity Capital Markets

Steno Signals #68: There is NOT enough buyers for bonds amidst all this

A deal between the US/Israel and Saudi Arabia seems off the table after this weekend. Oil markets are physically tight still, but there are some signs of cracks in demand

• A deal between the US/Israel and Saudi Arabia seems off the table after this weekend
• Oil markets are physically tight still, but there are some signs of cracks in demand
• Nat gas markets have started to rally, which is another issue for EUR, GBP and JPY markets

By Andreas Steno in Macroeconomics

Regional Geopolitics: The Middle East in Crisis and Its Implications for Asia

The war between Israel and the Hamas forces is unlikely to impact Asian economies as the 1973 war, to which the current fighting has been compared, did.

• The ongoing Israel-Hamas conflict will be a critical turning point for the Middle East, but its economic impact on Asia is likely to be limited, unlike in 1973.?
• The key consideration for Asia is how the events may alter the foreign policy calculus in Washington, including implications for the US' security guarantees in the Asia Pacific.?
• There may be domestic spillovers in regional politics. Inflamed religious sentiment may affect the political dynamics in countries such as Indonesia and Malaysia.?

By Manu Bhaskaran in Macroeconomics

Recession Playbook: Here is how we think the recession will pan out

We have refrained from taking a decisive stance on the recession timing through the year and have generally had the view that recession risks (for...

• We have refrained from taking a decisive stance on the recession timing through the year and have generally had the view that recession risks (for the US economy) were overcooked by the economic consensus.
• We are now starting to see stars aligning in our framework and expect the US recession to arrive in Q1-2024 with the final confirmation arriving early in Q2-2024.
• Here is our recession playbook and how we see markets developing alongside it.

By Andreas Steno in Macroeconomics

October 2023 TOPIX Free Float Review - $22.6bn to Trade and JPB (7182) The Biggie

The TOPIX October 2023 Free Float Weight Review is out. Japan Post Bank is the biggie at US$2bn and 23 days of ADV to buy. $2bn across 4/5 of the top trading cos. $22bn total to trade on 30 Oct.

• The TOPIX October Free Float Weight Review details are out. This is the biggest FFW review of the year. This year, it's $11.3bn a side.?
• As discussed in Japan Post Bank (7182) - The October TOPIX FFW Adjustment, JPB is the big buy. $2bn/23d of ADV. There is $2bn to buy of trading cos too.
• There are lots of large names to trade in both directions. If you have interests to sell the buys and vice versa, it is good to know the flows.

By Travis Lundy in Event-Driven

Merger Arb Mondays (09 Oct) - Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys

This week, the highest gross spreads are Haitong Intl (114.1%), 111 (45.2%), Eoflow (40.5%), Hollysys (20.4%), IMAX China (15.9%), BPLANT (11.5%), JSR (9.3%), UMW (5.9%), NWS (5.6%), Estia (5.3%).

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads - Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
• Lowest spreads - Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).

By Arun George in Event-Driven

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