Equities are bouncing back; semiconductors and crypto review
Head of Equity Strategy
Summary: The European equity market is up 3% this week despite high volatility and maximum uncertainty related to the war in Ukraine and the fallout from unprecedented sanctions against Russia. Putin said earlier today that he sees "positive movement" in the peace talks with Ukraine and the equity market being extremely sentiment driven these days are running higher on this comment. However, there are still many reasons to be cautious on equities and we are not changing our defensive stance. In today's equity update we are also highlighting changes we have made to our semiconductors and crypto theme baskets are reviewing them.
European equities muster first weekly gain since early February
STOXX 600 is up 3% this week as commodity markets have pulled back from their recent gains and today sentiment got another boost as Putin said he sees “positive movement” in the peace talks with Ukraine. The equity market has gone from modelling the future cash flow to become completely sentiment driven and we must reiterate that investors should not at this point read too much into these headlines moving markets. We are still in a maximum uncertainty environment and the outcome of the war in Ukraine is still incredible unpredictable. In addition global equities are still valued 0.8 standard deviations above its average historical valuation and as such considerable downside is still a risk. In addition to valuation risks, the inflationary pressures are not going away anytime soon and that will continue to put pressure on equity sentiment and making the operational environment for companies very difficult.
Theme basket review: Semiconductors see big changes
We are still in the process of reviewing all of baskets and today we are updating two of our theme baskets. The semiconductor basket is seeing the biggest changes with 11 companies being replaced. The semiconductor industry has been challenged this year from rising input costs and bottlenecks in the production. The semiconductor theme has also been caught up in the general rotation out of technology stocks and into themes such as commodity, defence, logistics, and cyber security.
The companies that have been removed either due to sanctions, too low market value, acquisitions, or their business found to be a less good exposure versus the theme:
- MediaTek, Semiconductor Manufacturing International, Xilinx, Teradyne, ASM International, MKS Instruments, SUMCO, Azenta, SOITEC, Tianshui Huatian Technology, Siltronic
The companies that have been added are:
- Samsung Electronics, LONGi Green Energy Technology, Marvell Technology, Synopsys, Cadence Design Systems, Will Semiconductor, GLOBALFOUNDRIES, ON Semiconductor, Tiankin Zhonghuan Semiconductor, Skyworks Solutions, Kyocera
The table below shows the new updated table of constituents in the semiconductor basket.
|Name||Mkt Cap (USD mn.)||Sales growth (%)||EBITDA growth (%)||Diff to PT (%)||5yr return|
|Taiwan Semiconductor Manufacturing Co Ltd||539,144||18.5||19.3||56.0||290.8|
|Samsung Electronics Co Ltd||338,487||18.1||29.5||31.9||87.5|
|ASML Holding NV||249,675||33.1||59.0||37.5||402.4|
|Advanced Micro Devices Inc||173,249||68.3||141.2||42.0||665.3|
|Texas Instruments Inc||159,543||26.9||44.0||13.6||145.1|
|Applied Materials Inc||110,398||32.8||59.5||39.6||249.0|
|Micron Technology Inc||84,790||34.2||56.6||47.3||201.5|
|Analog Devices Inc||78,790||44.1||19.9||37.0||102.2|
|Lam Research Corp||69,341||38.5||48.9||46.0||344.6|
|Tokyo Electron Ltd||70,986||46.4||84.3||19.7||420.9|
|LONGi Green Energy Technology Co Ltd||68,766||74.8||NA||22.0||1,258.0|
|Marvell Technology Inc||55,319||50.3||134.3||45.8||317.5|
|NXP Semiconductors NV||47,388||28.5||55.6||35.6||80.5|
|Cadence Design Systems Inc||41,451||11.4||16.5||21.4||376.0|
|Infineon Technologies AG||41,351||24.8||62.7||63.6||78.3|
|Microchip Technology Inc||38,836||21.6||34.5||37.3||103.7|
|Will Semiconductor Co Ltd Shanghai||30,693||32.8||NA||55.8||NA|
|ON Semiconductor Corp||24,925||28.3||89.1||27.7||278.6|
|Tianjin Zhonghuan Semiconductor Co Ltd||24,120||90.5||NA||34.2||479.3|
|Skyworks Solutions Inc||21,562||28.7||28.9||41.4||44.5|
|Unigroup Guoxin Microelectronics Co Ltd||20,154||45.3||NA||37.8||585.4|
|Aggregate / median||3,643,121||32.8||54.9||37.4||263.8|
Theme basket review: Crypto shreds three companies
We have also reviewed our Crypto & Blockchain theme basket and have decided that three companies will be removed. Voyager Digital is being removed because it is at reduce only in our trading systems. Monex Group is removed because we have decided that it does not have enough exposure to the crypto market. Future FinTech Group has too small a market so this company has also been removed.
The table below shows the new updated table of constituents in the crypto & blockchain basket.
|Name||Segment||Market Cap (USD mn.)||Sales growth (%)||Diff to PT (%)||YTD return (%)||5yr return|
|Coinbase Global Inc||Crypto exchange||37,963||513.7||74.9||-31.5||NA|
|Signature Bank/New York NY||Bank||19,355||15.2||42.3||-4.2||107.3|
|MicroStrategy Inc||Investment firm||4,753||6.2||51.6||-22.7||125.2|
|Galaxy Digital Holdings Ltd||Crypto services||4,141||NA||146.2||-28.3||542.9|
|Silvergate Capital Corp||Bank||4,143||77.8||45.0||-11.6||NA|
|Marathon Digital Holdings Inc||Crypto mining||2,551||3,353.0||129.6||-24.7||17.2|
|Bakkt Holdings Inc||Digital assets platform||1,408||NA||31.6||-37.5||NA|
|Riot Blockchain Inc||Crypto mining||1,925||1,497.4||168.8||-26.1||438.5|
|Northern Data AG||Infrastructure *||1,164||62.7||357.1||-40.9||NA|
|Hut 8 Mining Corp||Crypto mining||921||203.9||222.7||-30.4||-12.7|
|Hive Blockchain Technologies Ltd||Crypto mining||754||426.5||172.5||-29.7||2,240.0|
|Bitfarms Ltd/Canada||Crypto mining||690||7.0||NA||-30.6||NA|
|Canaan Inc||Infrastructure *||861||1,013.9||NA||-2.7||NA|
|Stronghold Digital Mining Inc||Crypto mining||507||NA||212.4||-18.2||NA|
|Argo Blockchain PLC||Crypto mining||396||131.5||236.1||-34.0||NA|
|Coinshares International Ltd||Digital asset management||541||NA||NA||-6.3||NA|
|Bit Digital Inc||Crypto mining||231||NA||321.7||-45.4||NA|
|Bitcoin Group SE||Crypto broker||198||163.2||NA||-11.7||387.7|
|DMG Blockchain Solutions Inc||Investment firm||85||2.7||NA||-17.7||333.3|
|Digihost Technology Inc||Crypto mining||70||NA||NA||-39.9||NA|
|Taal Distributed Information Technologies Inc||Blockchain platform||84||NA||207.9||-14.0||NA|
|Quickbit EU AB||Crypto payment services||45||-3.7||56.0||-12.5||NA|
|Safello Group AB||Crypto broker||13||NA||NA||-22.1||NA|
|Aggregate / median||82,798||131.5||157.5||-24.7||333.3|
* Infrastructure segment means physical computing applications for crypto mining
Latest Market Insights
Outrageous Predictions 2023: The War Economy
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Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
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USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.
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