Close Your Eyes and Buy – Market Updates

Tian Xuan Zhou (Oliver)
Bachelors Student, New European College – Munich

Last week was spot on, the greed was good. However this ceasefire agreement only lasts for two weeks, need to watch out because it seems fragile, as we’ve seen continuous Israeli aggression against Lebanon and previously not honoring cease fires.

Asia markets

Japan

Nikkei and Topix seeing rebounding, actually didn’t shed much of the year to date gains, risk appetite has once again strengthened, definitely the main market to watch from now, since momentum in the start of the year was super strong. There should also be a short squeeze momentum as investors unwind their positions, whether they were hedges or shorts in general, that East Asia is to be more affected by this oil and energy crisis, however as mentioned before, reserves for these countries are huge.

The defense supercycle should pick back up if not increase. Japan has been reliant for many years for American military equipment and support as a source of their defense. I doubt that after this Iran conflict, it has surely shown that this American economy is not built or prepared for a conflict let alone a war. The two names to buy remain IHI corporation 7013 and Mitsubishi Heavy Industry 7011.

With the geopolitical tensions with China ramping up and the question of Taiwan (KMT, the sworn enemy of the CCP after losing the civil war, left the mainland and formed Taiwan, is now looking to make peace with China in a bid to win the election). We are more likely than not going to see Japan invest more into the domestic defense sector, and going over the self imposed political guideline spending limit of 2% of GDP on defence (previously 1%), which they already are.

Buying back in general, construction with Obayashi 1802, one of five super general contractors in Japan, Tech with Fanuc 6954 rebounding and outperforming the index, and Daikin Industries 6367 with cooling technology, which didn’t shed off much at all this year.

HK/CN

If anything, China seems to benefit from this conflict. If this is to be a solution for peace for a while in the middle east, China will surely tempt the middle east countries with reconstruction deals, after all China has been buying out most of the oil from Iran from years past. Perhaps it is also a push to become more self-sufficient, that is why I think holding onto onshore oil and gas producers in China is still a good idea, such as ENN Energy 2688HK mentioned before, hoping for support and investment into this sector. Economic data was also supporting, with the PMI read in March returns to expansionary, 50.4 vs 50.1 consensus.

Another major beneficiary are Chinese EVs and its already strong momentum. It is almost certain that the oil price is never going to go back to the price it was before the Iran conflict, at least not in the near future, and it is having a major effect on drivers all around the world. So the obvious momentum is with EVs, Chinese EVs, BYD EVs.

Some of the biggest trades this year are the disruptors, and BYD is coming to North America within a year, and with Tesla’s first quarter deliveries being the lowest in the past year, rest assured, Chinese EVs are coming. So BYD 1211HK, worth a look again, after skidding much from highs due to problems with domestic growth. Xiaomi 1810HK, also as an EV name, went through the 32 HKD mark but rebounded sharply, back to around 32 HKD.

Tech, TCL Electronics 1070HK, huge momentum, confirmed with volume last Wednesday, very good buy, has had significant success in globalisation into the mid to high end tier, with plans of further expansion like the 290 Million USD factory in Guang Zhou that just opened. Alibaba 9988HK, worth a look, as mentioned in previous articles, the persistence of an AI chip shortage in the near future, Alibaba, partnered with China Telecom, is now launching data centers to produce their own chips within China which will feature 10,000 of Alibaba’s Zhenwu semiconductors chips.

US market

Traded as low as 6,300, unbelievable it actually was what happened. Momentum is back, earnings momentum remains at an all time high in growth. With the SPX trading currently around 6,600 and higher, however as mentioned before, both sides have to honor the cease fire AND find a solution before the two weeks end, otherwise it will be like nothing has happened.

The main concern will still be fed and rate cuts, now most definitely looking past this Iran conflict, and looking much more into the state of the economy, a rolling recession, as we saw what happened in 2024, the correction is more or less over, probably seeing de-risking in semi and crowded longs, a repositioning reset to seal the bottom of this correction.

I favor financials and consumer discretionary names, especially NIKE, are you kidding me? A -15.51% move as an April fools joke. Just close your eyes and buy it, yes the financials has been terrible but with the economic recovery of China in play, just buy it, stock price has been nuked so far, valuation is reasonably low.

As for financials, Jefferies so far so good, however the mentioned Bulge bracket challenging for deals in Middle market, JPMorgan is one that I would like to buy as well, launching their American dream initiation with a 1.5 trillion investment platform, focused on current problems such as small business funding and housing affordability, etc, will be competing for these deals under 1 Billion.

Intel also back on the watchlist, moved out of the range to the upside, very reasonably, they bought back an Irish based chip factory for 14.2 Billion, a 27% premium to when they sold it to Apollo management for 11.2 Billion, finances has to have improved.

Amazon, perfect, around +8% since coverage, got really good premarket price last Tuesday, now riding this momentum. They are also to acquire a satellite group, a $9 billion Globalstar deal, to compete with Starlink. Similar to Nvidia and SpaceX and the “group that is catching up”, they will eventually catch up to the technology, maybe its Bezos vs Musk as Blue origin, also founded by Bezos, is also catching up to SpaceX technology.