SK Hynix land in New York

00:00:00: Hi and welcome to SwissCodes!

00:00:02: daily market talk.

00:00:03: It's Friday, the tenth of July.

00:00:05: oil prices gave back this week's geopolitical lead gains as easing supply concerns and renewed U.S.-Eran talks outweighed tensions in the Strait of Hormes.

00:00:14: lower energy prices on other hand pulled global bond yields lower.

00:00:19: enhanced improved overall markets sentiments.

00:00:21: so it is with improved mood that tension now turns to.

00:00:24: SK Heineck records US debut while Chinese technology stocks are also extending gains thanks attractive valuations there and growing AI ambitions.

00:00:34: Further down the road, investors are also looking ahead to U.S.

00:00:37: earnings season due kick off next week with big US bank earnings where strong headline growth is expected driven almost entirely by energy and AI.

00:00:47: but even their questions swirl in investor's minds.

00:00:50: So we will talk about that more.

00:00:52: But before we do as always please keep in mind that opinions on my own And this not financial advice This show is brought to you by Swiss Quo.

00:01:07: So the spike in oil prices remained short-lived and quite contained this week, even though traffic in the Strait of Hormis came to a near halt again.

00:01:16: The ceasefire today is in jeopardy, but the technical talks between the US and Iran to find peace in this complex jungle of Middle East geopolitics will continue according to latest news.

00:01:27: The latter along with supply blood in some key oil markets helped keeping oil prices unchecked.

00:01:32: this week U.S.

00:01:33: credit is full percent yesterday bouncing lower from its two hundred day moving average tested before and it's consolidating near the seventy-two and a half dollar per barrel level This morning, at the time I'm talking here.

00:01:48: Global yields on the other hand come lower and relief that the latest spike in energy prices won't reverse a recent pullback.

00:01:55: The Japanese ten-year yield fell more than ten basis points today to below two point eighty percent level And that despite a rise In June produced their price inflation in Japan above seven percent To tell how strongly the energy prices are driving market moves right now.

00:02:12: Meanwhile, the Japanese Finance Minister Katayama said that the government is willing to encourage pension funds, to invest more in domestic assets.

00:02:21: That's exactly the kind of news global investors hate to hear because this sizeable fund repatriation from big Japanese investors like Pension Funds is exactly what triggers their reverse carry trade and yen positions threatening global risk appetite as well Because these funds are heavily invested in equities bonds And other assets across the globe.

00:02:43: But that worry is not on the headlines today because Dollar Yen has sharply down to around one hundred sixty-one point fifty levels supported by strong PPI REIT, but also Supported By a brogue based pullback of The U.S.

00:02:54: seller following the easing oil prices and easing concerns regarding further escalation Of the Middle East tensions or at least their impact On oil prices.

00:03:04: And although the latter could come back in force At any time Today the mood and attention Is elsewhere.

00:03:10: Cosby is up by five percent The company's ADR, so the American Depository Receives World Price at One hundred and fourteen nine dollars each, pointing at a twenty-six and half billion US dollars debut today.

00:03:36: That's more than ODI Bobas' twenty five billion US dollar debute back in September.

00:03:40: two thousand and fourteen on the largest ever first time share sale for foreign company in the United States.

00:03:46: to all eyes are on SK Heinecks.

00:03:48: Today The Company stock price is up by three point seventy five percent in home Korea.

00:03:54: Elsewhere investor sentiment has improved in last trading day of a hectic week.

00:03:59: Remember, this week kicked off with increased geopolitical tensions and quite negative reaction to jaw dropping.

00:04:06: these strong results from Samsung.

00:04:08: And technology stocks were under pressure, especially chip makers.

00:04:11: But the major European and US indices were better.

00:04:13: but yesterday on falling yields The technology stock slide gains.

00:04:17: So speaking of technology On the flip side of the world Chinese technology companies also extended their early month advance in Hong Kong With Hansang Index there up by one point eighty six percent at a time.

00:04:29: I'm talking here this morning with Chinese chipmakers Especially leading games on Chinese government's ambitions to build a or infrastructure, but also on the rising possibility that the Chinese chip makers will be allowed to sell their chips to foreign companies given how high the memory chip prices spike from traditional providers.

00:04:50: Remember Apple in this context was seeking approval to buy memory chips from China and he made a squeeze.

00:04:56: margins as such of the Chinese convergent trade seems to be continuing And if it continues further there will be room for further gains giving the valuation gap between the Chinese technology companies and their traditional western Taiwanese and Korean peers.

00:05:13: For those who watch these shows regularly, I was saying yesterday thirty seven and a half level which is three times hansengs with the price to sales ratio of six point twenty-three.

00:05:36: So that's four and a halve time, so one for Hanseng.

00:05:39: That means investors are willing to pay more than four and half times as much For each dollar of revenue generated by a nasaic hundred company then for one in The hansen index.

00:05:51: the poor chinese consumer health A severe property crisis on country And alarming demographics along With the Chinese government terrible track record in the past.

00:06:01: Remember, the crackdown on technology.

00:06:04: companies are obviously responsible for this valuation gap.

00:06:07: so whether investors could look path to two-speed Chinese growth and government risk is to be seen.

00:06:14: but I still continue to like the Chinese companies because i think they're extremely promising now speaking of revenue if investors are willing resilient to the latest jitters in the Middle East.

00:06:32: This is what earnings expectations for the upcoming earning season in the US suggest, according to Fox said The S&P five hundred companies are now expected to print twenty-two and a half percent earnings growth In the second quarter of this year A quarter marked by strong rise in energy prices due to the Iran War Hating inflation expectations as a result of it And rising yields.

00:06:55: So that sounds great but there's a catch because the energy sector is expected to print an earnings increase of one hundred and twenty-one percent thanks through this surge that we saw in energy prices.

00:07:06: In the Iranian war, while the technology sector will likely print an earning growth up around sixty two percent The rest of the industries, however may be less lucky.

00:07:18: PepsiCo for example tanked more than three percent in yesterday's trading session after warning that consumers are increasing laying off impulse purchases and convenient stores where they've seen a correlation with what would-be buyers paying at the pump.

00:07:34: In simpler words, the company said that higher gas prices at the pump discourage people to buy that extra PepsiCo drink and that the companies sales didn't grow as much they would love them to grow.

00:07:46: As a result of their price cutting strategy to boost sales by suspect we will see similar announcements from plenty of companies especially those who are client facing companies.

00:07:56: The question is does it really matter in market?

00:07:59: That has been driven by technology stocks and technology and AI acquisition.

00:08:03: I'm Nels So sure, because AI enablers have been largely responsible for the strong earnings growth since two thousand twenty three.

00:08:10: That's when Chatchapati came alive and our lives in a blank of an eye as massive AI spending from that point on particularly by big technology companies directly flew into the package of AI enabblers like chip makers For example.

00:08:23: but a recent Bank Of America chart is making the rounds among investors these days And it's ringing alarm bells.

00:08:30: The chart actually shows how quickly The hyperscaler, so the big technology companies free cash flow has been and is expected to dive transferring into these smart conductor industry through relentless AI infrastructure spending.

00:08:45: Bank of America calls it a generational transfer in free cash flow.

00:08:49: The problem is that the hyper-scalers are clients for smite conductor companies, they're the ones who buy these chips!

00:08:57: And as they run out of free cash and take on more debt important questions emerge… Is AI buildout creating enough returns?

00:09:09: and how the chip makers boom come at expense of their biggest customer's balance sheet.

00:09:14: It seems that is the case, so can the chip maker boom continue?

00:09:17: like this at the speed and if so, how far?

00:09:20: And How long it would go.

00:09:22: I guess The time will tell for now is obviously very frustrating to sit on the sidelines and watch these companies Go To The Boon!

00:09:30: This Is Why We Do Have This FOMO Sentiment Which Is So Present Right Now That There Is Some Juice To Be Squeezed.

00:09:37: How Much I Cannot Really Tell But Today SK Hynex Will Give An Early Answer To My Earlier Question This Week Of How Much Juice Can The Company Squeeze Out of the US markets provided that its share price in Korea rose more than seventeen hundred percent, and a bit more then year.

00:09:55: The answer is few hours from now!

00:09:58: So this all for today's episode.

00:09:59: I'm Ipeko Skardishkaya.

00:10:01: Thank you so much for joining me And thank you to all your beautiful and supportive comments.

00:10:06: This episode of Market Talk has been helpful and insightful.

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00:10:37: So I will meet again next week and until then good day trading have a lovely weekend.

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