This is a follow up of an earlier note by ATEC on the APEX50 Asia regional index.
After a rather long period of correction (since mid-February), it is looking increasingly likely to ATEC that Asia indices might be ending their corrective moves.
Despite increasing news of fines and regulations, it is our observation that the Tech Titans of China are no longer reacting negatively. The Huarong debt debacle turned out to be a non-issue, since Beijing had pretty much given them a lifeline.
ATEC will now progressively reduce our downside hedge and increase our long exposure in anticipation of an impending rally in the region.
With a global shift towards EVs, renewables and the tremendous amount of infrastructure spending around the world, ATEC believes that copper companies can re-rate.
This is especially so given the benign supply outlook for the commodity in the immediate few years.
Copper is already at close to multi-year highs, yet Jiangxi Copper is far from it. So long as HK$17.50 holds, we anticipate new highs for the stock from here.
Estun Automation (002747 CH): The deep correction fuelled by PBoC’s tightening stance looks to have exhausted itself.
Yet, automation remains one of the secular themes which in ATEC’s view is still at its nascent stage. China’s labour shortage and cost escalation is well documented and is made even worse in a post-CoVID world. Hence, ATEC believes this to be the right timing and opportunity to gain exposure in this thematic.
So long as CNY 29 area holds, ATEC anticipates Estun’s stock price to potentially exceed its previous peak in the months ahead.
Rakuten’s stock has retraced a fair bit following their mid-March announcement of a tie-up with Japan Post, and investments into the company by Tencent and Walmart.
Even as the street worries about their 5G business traction, ATEC thinks we should now be looking forward to concrete plans for Rakuten’s logistics (and hence core e-commerce) business.
We anticipate a substantial improvement in competitiveness from here. We believe much of any potential business upside is not currently reflected in most analysts’ estimates.
Longer term, we believe Rakuten’s open-RAN approach towards 5G will prove viable.On the technical aspect, so long as 1350 holds, ATEC believes a new uptrend is forming.
For now, we anticipate an initial target above JPY1,700.
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Semiconductor chips remain in the spotlight of late.
The capacity constraint faced by all foundries globally threatens to drag the pace of digitisation, even as more and more nations are jumping on the bandwagon.
This is why the White House has decided to put its weight behind this issue. This is also part of the reason why Intel recently decided to create a Foundry business.
With this backdrop in mind, ATEC is of the view that any plausible solution to the current situation must intricately involve TSMC. …
ATEC notes that Asia (using MSCI APEX50 as proxy), after a brief rebound in the first few days of April, has been unable to catch any sustained bid as we enter into deeper April.
The technology heavy-weights such as Tencent, Meituan continue to be weighed down by regulatory overhang concerns. China’s tightening mode is also not helping with regional sentiment.
News around Huarong Asset Management’s difficulties with their US$7 bn bonds re-financing/repayment this year adds another layer of worry.
With cyclical sectors such as container shipping and steel, also already much over-bought, ATEC thinks there is now a heightened risk we see another round of sell-off in the broader market from here. We believe it is best to pare back our long books, and tighten stops on our positions.
ATEC notes that with Amazon workers voting down the Union drive at the company’s Alabama warehouse last week, the sentiment surrounding the company could have turned decisively positive.
We note that the since September 2020, Amazon’s stock had gone essentially nowhere, weighed down by the threat of anti-monopoly investigations, as well as money rotation into the sexier Disruption plays such as EV’s or Renewables. There is a good chance this is about to change.
A decisive move on the stock above 3,400 from here will suggest the stock has resumed its uptrend, with a minimum upside target of 3,810 in ATEC’s view.