Capital markets news summary for Tue 21 Mar 2023

Capital markets news summary for Tue 21 Mar 2023

AHAM Capital suspends 2 funds invested in Credit Suisse

The Single Bond Series 2 and the Single Bond Series 4 represent less than 0.1% of the company’s RM77b assets under management. The Series 2 fund has the Credit Suisse 6.376% Additional Tier (AT) 1 – also known as contingent convertible or CoCo bonds – as its underlying bonds while the Series 4 has the Credit Suisse 5.25% AT 1 as its underlying bonds. The funds invested 85% in the bonds while the balance is held in cash. The company’s other bond funds have zero or negligible exposure to Credit Suisse. In the weekend, the Swiss Financial Market Supervisory Authority (Finma) announced its approval for the takeover of Credit Suisse by UBS. However, the government support will trigger the complete write-down of Credit Suisse’ 16b Swiss franc bonds. The Single Bond Series 2 fell from 84.87 sen per unit on 7 Feb to 31.56 sen on 17 Mar leaving a value of RM30.59m. The Single Bond Series 4 fell from 80.42 sen per unit on 7 Feb to 30.6 sen on 17 Mar ending up with RM40.79m.

Jewellery stocks benefit from banking crisis

Investors’ flight to safe haven assets has pushed gold up by 11% or USD200 per ounce to USD2,009.59 in just 10 days. Jewellery stocks are bucking the trend while equities come under pressure. Poh Kong went from 81 sen on 10 Mar to 98 sen, a 21% jump. Tomei climbed 18% from RM1.05 to RM1.24 in the same period. Tomei’s wholly-owned subsidiary and gold jewellery wholesaler YX Precious Metals – which listed on the ACE Market in Jun 2022 – increased 12% from 25 sen to 28 sen. Gold ETF, on the other hand, rose 8% from RM2.605 to RM2.82 also between 10 and 20 Mar. An analyst said that gold could touch USD2,200 per ounce as a medium-term benchmark and USD2,500 in the long-term.

Theta Edge contract terminated by IJN

The company’s wholly-owned subsidiary Theta Technologies was awarded the contract on 25 Feb 2021. The contract covers supply, conducting requirement study, design, developing, customising, configuring, integration, data migration, installation, testing, training, support and maintenance of the hospital information system and electronic medical record for Institut Jantung Negara (IJN). The contract termination notice was issued by IJN on 17 Mar. Theta Edge is assessing the financial impact. The counter closed at 67 sen. The government is clearly reviewing non-performing contracts and arrangements. Another example is the RM1.2b National Integrated Immigration System (NIISe) project. Following market talks of the government cancelling the project, the Home Minister Saifuddin Nasution Ismail said on 12 Mar that his ministry has been given a month by the cabinet to submit a memo. Iris Corp was awarded the project in Mar 2021 with a deadline of Aug 2024. As at Mar 2023, progress was inadequate. Also, on 20 Mar, the Transport Minster said that credit and debit cards can soon be used at Prasarana’s transport services, breaking Touch ‘n Go’s long-standing monopoly.

Japan’s storage tank maker benefits from chip industry

Valqua Ltd – founded in Tokyo in 1927 – is the world’s largest supplier of specialised super-clean containers for storing essential chip-making chemicals. Half of its sales are from the semiconductor industry and one of its biggest customers is Taiwan Semiconductor Manufacturing Co. Japanese firms with niche technologies dominate parts of the supply chain. For example, Disco Corp provides silicon wafer cutters while JSR Corp supplies high-purity chemicals. Even a molecular-level impurity would degrade the production yields of chip-making, turning the entire contents in Valqua’s tanks useless. The company is bucking the trend of a global semiconductor slowdown. Following a 41% jump in operating profit in 2022, the company’s share price rose 27% this year. It is also confident of 30% growth in the next 4 years. The extreme specifications for Valqua’s clean tanks erect high barriers to entry for small businesses and make it unattractive for bigger players. Despite the high production cost in Japan, top chipmakers still favour it because of the quality and the country being protected from geopolitical risks.

China’s graft busters march on

This time, the Central Commission for Discipline Inspection’s target is former Tsinghua Unigroup chairman Zhao Weiguo. His case has been given to the prosecutors who will file charges. China’s top leadership has become increasingly frustrated with the country’s failure to develop semiconductor technology that can replace Western microchips. President Xi Jinping has allocated more than USD100b to build up a domestic chip sector so that the country can break its dependence on the West. In Jul 2022, officials began investigating Zhao. Tsinghua Unigroup was once regarded as one of China’s national champions in semiconductors, but collapsed under a mountain of debt. Zhao had publicly fought off a USD9b bailout before he was ousted. Apart from the company, the anti-graft agency is also investigating several executives of the National Integrated Circuit Industry Investment Fund – known as the Big Fund – which gives out funds to the semiconductor industry. Senior government officials are feeling squeezed by the success of the US’ technology embargo, while at the same time realising that the local industry has not produced any breakthroughs.