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SmartKarma: Taiwan Tech Weekly – Micron results ahead; Taiwan AI plays slump but still neat Nvidia last 3 months (September 24)

This piece leads with a preview on Micron earnings (Now out) but then goes onto look at TaiwanAI names which have weakened in recent weeks with previous AI-rally beneficiaries continuing to be some of the top losers. Interestingly, Taiwan AI-names have still outperformed Nvidia over the last three months. Click here if you would like to speak to the analyst.

Bank of America: Can China avoid “Japanification”? (September 21)

China’s sluggish growth and weak CPI prints have stirred concerns over its future growth prospects, says Miao Ouyang at Bank of America Global Research. She says many investors worry that China is on the verge of Japan-style stagnation in the long term, given many similarities between China today and Japan back in the early 1990s before the onset of its “lost decades”. Ouyang reckons the risk of “Japanification” for China is on the rise, considering the tumbling property sector, weak confidence, and insufficient policy response so far. Arguably, she says China faces similar, or even stiffer, structural headwinds as Japan did in the 1990s— demographic deficit, elevated leverage ratio, property market downtrend and trade tensions with the US.

However, Ouyang says several key differences set China apart from Japan’s case, in her view, leaving China better positioned than Japan was three decades ago. One major difference is that Japan’s economic recovery from the bubble burst was impeded by a chronically overvalued yen induced by US pressure, she says. In contrast, China has a higher degree of monetary policy autonomy and does not face the same kind of currency shock, says Ouyang. Meanwhile, unlike Japan in the early 1990s, she says China hasn’t built up massive asset bubbles that mirror Japan’s case, doesn’t face imminent threat of a systemic banking crisis despite the property market downturn, and has a closed capital account that insulates itself from any swift capital flight. Click here if you would like to speak to the analyst.

Washington Analysis: US/China – Commerce finalises allowed activities for global semiconductor companies in China (September 25)

The US Commerce Department has released its final rule on what activities non-Chinese semiconductor firms [Intel (INTC), Taiwan Semiconductor (TSM), Samsung (005930.KS), SK Hynix (000660.KS), etc.] are able to undertake in China and still maintain eligibility for US subsidies, according to Saad Kamal at Washington Analysis. In general, he says the US is maintaining the ability of these firms to undertake up to a 10 percent expansion of existing advanced projects in China as well as unlimited expansion of legacy technology, but with some strings attached to prevent them from contributing to the expected global overcapacity. Click here if you would like to speak to the analyst.

Emkay: India global bond index inclusion – Godot has arrived (September 22)

The much-anticipated inclusion of India in JP Morgan GBI-EM index will be effective from 28th Jun’24, accounting for post-announcement operational lags, according to Madhavi Arora at Emkay. She says India’s weight of 10% will be staggered over 10 months, leading to passive inflows of USD22bn (USD26bn accounting for addition in other smaller indices). The actual flows though may be higher, according to Arora, contingent on market dynamics and active flows. Structurally, she says this will lower India’s risk premia/cost of funding, enhance the liquidity and ownership base of G-Secs and help India finance its fiscal and current account deficit. Click here if you would like to speak to the analyst.

J Capital Research: China’s fintech sector – slouching to irrelevance (September 26)

Was Chinese fintech a bubble phenomenon, asks Anne Stevenson-Yang at J Capital Research. As long as money sloshed around in the Chinese economy, she says start-ups were going to put it to work. But rates are down, loan demand is low, and it may just be that fintech is in its sunset, according to Stevenson-Yang. ­She says payments should be the bread and butter of fintech. But, despite the massive market, Stevenson-Yang notes Tencent reports losses in this segment, and Alibaba takes a “who knows?” stance, since payments go through its Ant affiliate. This is no longer an issue of market maturity, she says. ­ The regulatory environment encourages grey dealings, according to Stevenson-Yang, and fintech thrives in China because banks are bureaucratic dinosaurs. Private companies arise to skirt the regulations and fill in gaps, she says. But their very nimbleness gets them in trouble, and they operate under a regulatory cloud, according to Stevenson-Yang, while many also misrepresent their financial health in order to pull away from the stifling Chinese environment. Click here if you would like to speak to the analyst.

Benchmark Minerals: Two-fifths of cobalt could come from nickel mines by 2030 (September 15)

The proportion of global cobalt supply that is mined as a byproduct of nickel could increase from 25% this year to 41% in 2030, driven primarily by the rise of production in Indonesia, according to Benchmark Mineral’s Cobalt Forecast. The majority of cobalt is currently mined as a byproduct of copper, with this accounting for three-quarters of this year’s forecast cobalt production, according to the firm. This could drop to 57% in 2030. This form of cobalt production almost entirely takes place in the Democratic Republic of Congo. Although Benchmark’s Cobalt Forecast shows that the cobalt market is currently oversupplied, a structural deficit is forecast from 2027 onwards meaning it is key that new supply planned in Indonesia comes online. We thought the above was relevant given your holding of Nickel Industries and their shift into Cobalt mining. You might also read a piece from ReOrg here on how Nickel Industries is in the process of seeking project financing for Excelsior Nickel Cobalt, or ENC, project in Central Sulawesi, Indonesia.

Radio Free Mobile: Open AI – Haymaker; would you invest in a company with a monthly cash burn of $1.1bn (September 27)

When a company that has issues with making profits can raise money at a valuation of $85bn, it becomes abundantly clear that investors in generative AI have taken leave of their senses, says Richard Windsor at Radio Free Mobile. He says Open AI is reportedly raising money at a valuation of $80bn to $90bn which to him looks like an opportunistic event for two reasons. First, Windsor has doubts that Open AI actually needs the money. It was only 9 months ago, he explains, that Microsoft invested $10bn in OpenAI meaning that if it has run out of money already, then it has a cash burn of $1.1bn per month. Second, Windsor thinks this raise is opportunistic in that the markets have given OpenAI an opportunity to capitalise on its fame and popularity. He says most telling of all is that employees will also have an opportunity to sell some of their shares as part of this transaction. Insider stock sales are often an indicator that the insiders think that the valuation of the shares has hit a peak and at $85bn this is pretty hard to argue against, says Windsor. Click here if you would like to speak to the analyst.

Smartkarma: Sea Ltd – glass half full again? A beneficiary of Indonesia banishing TikTok (September 26)

The news that the Indonesian Government will target social commerce in Indonesia, as well as placing additional scrutiny on imported products sold through digital channels will impact TikTok hard, says Smartkarma. The firm says TikTok Shop will not be allowed to operate in Indonesia in its present guise given the requirement to split social media and e-commerce, which will benefit peers Shopee and Tokopedia. Sea Ltd through Shopee will be the biggest beneficiary, adds Smartkarma, given it will require less promotional spending in Indonesia and it has also re-entered the Indian market with FreeFire. Click here if you would like to speak to the analyst.

Trivium China: China tech wrap

We’re including Trivium’s informative Daily Tech newsletter editions for the past week below.

Click here for the September 20 edition, which covers the release of Chinese R&D spending for 2022.

Click here for the September 21 edition, which covers the release of a laundry list of complaints regarding US cyber-misconduct from China’s Ministry of State Security.

Click here for the September 22 edition, which covers the release of opinions on speeding up smart highway construction from China’s Ministry of Transportation.

Click here for the September 25 edition, which covers the release of finalised national security guardrails to prevent the improper use of CHIPS and Science Act subsidies by the US Department of Commerce.

Click here for the September 26 edition, which focuses on the second annual “EU-China Digital dialogue” summit.

Click here if you would like to speak to the analyst.