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J Capital Research: How advanced is China’s IC industry? (September 12)
You may have seen Gavekal’s piece today. In this piece from earlier this week J Cap look at China’s 7 nanometer chip and what it means, or doesn’t mean. SMIC is now producing a state-of-the-art 7 nm chip: This chip, reportedly used in a Huawei smartphone and as Geely SUV, challenges the U.S., which wants to keep high-end IC technology out of China. J Cap say that China has top-notch tech talent but is stymied at the company level. Despite nationalist rhetoric, the current government’s vigorous attempt to curb the private sector makes it less rather than more likely that China will compete at the 7 nm level, whether or not sanctions work, the note says. In the end, 7 nm chip may be more an advertisement for China’s tech development than a practical advance. But don’t dismiss it too quickly, say J Cap. Serious technologists have tested high-end chips being designed and fabricated in China and found them to be of high quality. Manufacturing at scale may be a problem, but small batches of tiny chips and densely layered 3D NAND are clearly within reach. Watch this space.
CLSA: Mr and Mrs Indonesia (August 31)
Indonesia’s growing middle class, demographic advantages, and increased financial inclusion present numerous investment opportunities for investors, say CLSA. With Digital finance acting as the main conduit, CLSA detail the consumer trends that will provide a tailwind for companies such as Bank Central Asia, Cimory, GoTo, and Surya Citra Media which they say are poised for growth in finance, consumer, tech, and media sectors.
PRC Macro: Restocking Key to Debt Reflation: Energy Transition, Affordable Housing and Steel Exports
Last week we sent you this note from PRC Macro that looked to explain what was behind the resilience of China steel prices amid the slump in China real estate markets. This seemed counterintuitive and PRC provided evidence of how China was exporting steel to other markets. We wanted to provide some further depth to this issue this week from PRC, and how this fits into a broader policy by policymakers, in what PRC Macro describe as ”Energy is the New Property” as a growth driver. See the back end of this July report and in more detail also see this presentation from August.
But to summarize, PRC Macro’s view is that Chinese companies are going out into the global south, and they are convinced this has been under the auspices of the BRI /new GDI, which itself is being revamped from large mega infrastructure projects to leaner, smaller more profitable, commercially run projects like the energy transition etc., which will help Chinese producers export excess manufacturing capacity despite the domestic slowdown.
The perfect example is steel this year, and PRC think it is wrong to treat steel and iron ore demand strictly as a function of property new starts in China. The combination of China’s manufacturing upgrading and outbound investment in infrastructure, driven by smelters’ attempts to de-risk from weaker domestic demand and rising geopolitical tensions, will dictate future steel and iron ore demand. PRC called it “China new demand”, and they expect export demand will account for at least 8% of China’s total steel output, largely offset slacks from steel demand by domestic property slowdown.
Trivium China: Delivering a ”Slow Bull” equity market (September 13)
The team at Trivium provide a solid walkthrough on the playbook China policymakers will employ to boost the China equity market, or what has been termed a ”slow bull’ market. Will it work? As Trivium write, ”Given policymakers’ striking lack of available tools to otherwise boost business and household confidence – and thereby jolt consumer spending back to life – we expect they’ll give it a serious go over the coming weeks.”
Sino Auto Insights and Eurasia Group: China Auto’s European invasion (September 11)
Previously we’ve highlighted research on the expansion of China Automakers into global markets. This week we highlight this topic in regards to Europe. The always excellent Tu Le from Sino Auto Insights recently attended the IAA Mobility trade fair in Munich and he details his observations, where he observes ”China Auto Inc feels pretty welcome in Germany. Judging by the number of companies and CEOs that showed up to represent, I’d say that they see a tremendous opportunity for growth here.” That said, not all of the automakers will get traction, he writes. Furthermore, European policymakers will seek to protect their own auto industry. In this note, published yesterday, Eurasia Group provide some analysis on EU executive’s announcement yesterday to launch an anti-subsidy investigation into Chinese electric vehicle (EV) exports to the bloc.
China Merchants Bank: In-depth Analysis II of Interim Reports 2023 of A-share Companies (September 14)
Based on the interim reports 2023 of A-share companies, this report has examined and rated financial indicators, meso-prosperity, valuation level, fund holdings and other indicators and comprehensively evaluated the fundamentals and prosperity level of each industry to finally select subsegments with good performance and upward prosperity.