What’s Going on with Credit Spreads? Is China E-Commerce Still a Dead Cat? Bye Bye Inflation, Hello Layoffs? 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:

Credit Watch - What’s Going on with Credit Spreads?

While we have been vocal about an upcoming credit crunch, credit spreads are not moving whatsoever. Are the markets wrong, and what’s keeping credit spreads low?

• Credit spreads remain low amidst banking turmoil and a weakening economy (despite the job market)
• The current risk appetite in the equity space and other markets spills over to credit spreads
• Shorting everything cyclical and going long defensives would be THE play if spreads increase

By Andreas Steno in Cross Asset Strategy

China E-Commerce: Is Still a Dead Cat

Positive surprises in profitability in Q1 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization.

• Positive surprises in profitability during Q1 2023 failed to reverse the long-term decline of Chinese e-commerce, possibly due to market recognition of the temporary impact of cost-cutting and monetization efforts.
• In our opinion, robust growth in GMV is fundamentally essential to reverse the long-term downward trend of the Chinese e-commerce sector.
• Chinese e-commerce sector no longer discloses GMV, but Express delivery volume indicates a 20% decline in parcel volumes compared to 2021, potentially reflecting a decrease in GMV.

By Oshadhi Kumarasiri in Equity Bottom-Up

Cross Asset Watch - Bye Bye Inflation, Hello Lay-Offs? Here Is What to Trade..

When headline inflation wanes fast, real wages grow, while corporate profits shrink. This is now the base case for H2-2023 while Chinese and Turkish political developments MUST be watched..

• Inflation is now waning fast in headline terms in both the US and Europe
• Could lower inflation prove to be a trigger for lay-offs?
• And which sectors and geographies are likely to perform in such an environment??

By Andreas Steno in Cross Asset Strategy

Trip.com Q123 | Revenue Surges Past Q119 Level | Decade-High Margin | But Our Thesis Is Unchanged

Trip.com posted a strong result in Q123, with Revenue finally above pre-Covid levels and core margins at a decade-high. But management seemed to hint at slowing momentum in the remainder of 2023.

• Q123 Net Revenue was strong, exceeding Q119 (pre-Covid) levels by over 12%
• Almost six months into recovery, Trip.com (TCOM US) has also managed SG&A expenses well
• A good result for the company, but we see no reason to alter our long-term view

By Daniel Hellberg in Equity Bottom-Up

Semiconductors H2 Rebound? Curb Your Enthusiasm!

The H2'23 recovery will likely be muted. Downgraded our FY'23 outlook for Foundry, PC, Smartphone and Silicon Wafer segments. While most semis are expensive, we propose a handful that aren't...

• The extent to which Smartphone & PC unit shipments will rebound in H2 is as yet unknown.?
• Most semi companies forecasted a muted H2 recovery. After earnings, we downgraded our FY'23 outlook for Foundry, PC, Smartphone and Silicon Wafer segments.
• Many semi stocks are priced for a H2 rebound that's proving notoriously elusive but there are still some bargains to be found

By William Keating in Thematic (Sector/Industry)

A Global Market Review: Risks and Opportunities

Now that the U.S. debt ceiling drama is over, it’s time to take a quick trip around the world to review the state of global equity leadership and reveal the risks and opportunities around the world.

• It’s time to take a quick trip around the world to review the state of global equity leadership. U.S. equities have surged, but the leadership is narrow.
• Japan appears to be on the verge of a relative breakout that could become a global leader. The weakness in China may not be as dire as the headlines indicate.
• Europe has pulled back, but it remains the global leaders and should be bought.

By Cam Hui in Cross Asset Strategy

Next USD Trade

USD rise met tactical rally objectives. USD dip/rally sequence in play with a focus on adding to the USD near DXY 103 and gunning for 105.80. Secondary USD rally fuel to stem from an equity dips.

• USD rise met tactical rally objectives. USD dip/rally sequence in play with a focus on adding to the USD near DXY 103 and gunning for 105.80.
• Euro, NZD, AUD. USD/JPY. ZAR. Re cycle game plan. Sterling and SGD our USD dip bets to overlap with USD long reduce zones.
• US 10yr 3.80% yield top call with 3.40% pocket support. Yield will be pivotal in a near term USD dip sequence.

By Thomas Schroeder in Technical Analysis

Last Week in Event SPACE:Tax-Loss Selling In Australia, China Conch/Anhui Conch, Canon, Rakuten

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.

• Australian tax-loss selling is a thing. Retail investors will take gains on things that run up in price, or get taken over, then look for losses.
• The China Conch Venture Holdings (586 HK) / Anhui Conch Cement (600585 CH) ratio is at an all-time low. The implied stub is re-testing its all-time low.
• Historically, Canon (7751 JP)'s buybacks are aggressive. It may pay to observe market data to see when they are done. It may also pay to look at peer outperformance cycles.?

By David Blennerhassett in Event-Driven

Index Rebalance & ETF Flow Recap: CSI300/500, Chinext, China Semi Chips, Nifty Next50, SET50, REMX

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight large flows into and out of Asia focused ETFs.

• It was a busy week with index rebalance implementations and announcements of index changes.
• The coming week has the KOSPI200 and KOSDAQ150 rebalancing on Thursday and a bunch of onshore China indices rebalancing on Friday.
• There were big inflows to China ETFs during the week while the largest inflows went to the Tracker Fund of Hong Kong Ltd (2800 HK) ETF.

By Brian Freitas in Event-Driven

Shopee Faces Decision on Brazil Amid Tax Changes

Sea Ltd's track record of accepting failures and closing businesses raises the likelihood of Shopee exiting the Brazilian market if they cannot resolve the proposed tax issue.

• Most Brazilian e-commerce platforms evade taxes by treating orders as individual transactions instead of business operations, despite the 60% tax on international e-commerce shipments by companies.
• The Brazillian government plans to address this tax loophole by strengthening oversight and implementing administrative measures.
• If Sea (SE US) cannot find a viable solution to navigate this tax, there is a strong possibility that Shopee will exit the Brazilian market.

By Oshadhi Kumarasiri in Equity Bottom-Up

?? HAPPENING NEXT WEEK:

In this next installment of our #webinar Wednesdays, we welcome Smartkarma Insight Provider,? Nicolas Van Broekhoven , as he shares his thoughts and insights on three different small cap stock ideas. From Hong Kong to Canada, tune in as Nicolas delves deeper into stock ideas from across the globe.

Register now: https://skr.ma/cQ41F

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