Fourth Week of January 2021

2021.01.18.

□ Alongside the spread of avian influenza (AI), the recent surge in global grain prices—which have continued to hit new highs over the past several months—has sent the prices of various vegetables, fruits, and eggs soaring.
▶ Wheat futures have risen 74.2% over five years, from $387.5 on 2016.1.8. to $675.0 per bushel.
▶ Starting 2021.3.1., Russia, the world’s largest wheat exporter, will double its wheat export tariff.
▶ Corn futures have likewise jumped 70% in one year, from $311.50 on 2020.1.4. to $530.90/bushel.
▶ Korea’s food self-sufficiency rate is very low. This is why I have repeatedly recommended majoring in agriculture on the blog.
▶ I recommend reading Sisa Onuel’s series, “Food Is Money."
▶ Which stocks or sectors show a high correlation with the price trends of wheat, corn, and soybean futures? (e.g. snacks, ramen, dairy products, etc.)
▶ Which sectors consume large amounts of vegetables, fruits, and eggs? (e.g. livestock, etc.)
▶ How elastic is pricing in those stocks/sectors? (e.g. strong/weak resistance to price hikes, supplier advantage vs. consumer advantage, etc.)

□ The Galaxy S21 has been unveiled … with a 108-megapixel camera capable of shooting subjects 1-2 km away.
▶ Combined with unmanned drones, this seems likely to make privacy concerns far more serious.
▶ Camera-parts stocks supplying Samsung Electronics? Drone stocks?

□ Social-distancing regulations were eased as of 2021.1.18. … though the restriction on business operations after 9 p.m. remains in place.
▶ What effect will this have on stay-at-home, remote-work, and digital-consumption themes? (e.g. education, etc.)

□ The eco-friendly theme is gaining traction … POSCO (hydrogen steelmaking), CJ Logistics (electric cargo trucks), Coupang and Hyundai Glovis (hydrogen-electric trucks), etc.
▶ These were projects that had not been feasible until now because unit costs were too high, but Biden’s election added momentum. That said, actually implementing hydrogen-based steelmaking would likely take roughly twenty years and would not be sustainable without government support. When reviewing a deal in the related field, I consulted an environmental-engineering expert, and he explained that renewable-energy projects remain structurally loss-making worldwide without government support.
▶ Among New Deal funds, which stocks or sectors are related to hydrogen or ESS?

□ Chinese real-estate companies have about KRW 59 trillion of debt maturing this year, roughly double last year’s amount.
▶ Put that way it sounds enormous, but the total wealth of the 400 richest Chinese on the 2020 Forbes list was KRW 2,324.7 trillion. Out of China’s population of 1.44 billion, just 400 individuals held KRW 2,324.7 trillion in personal wealth.

□ The number of newly opened overdraft accounts more than doubled over two weeks, reaching 2,204 per day (as of the 14th) … while regulations on personal credit loans were strengthened in order to block “debt-financed investing."
▶ Which stocks or sectors would benefit if loans from top-tier financial institutions are cut off or if credit defaults rise? (e.g. medium-rate lending, P2P, credit-rating agencies, etc.)

□ A KRW 400 billion loan program called “Future Environmental Industry Development Financing” has been launched, offering eco-friendly companies 1%-interest loans … with KRW 300 billion earmarked for environmental industries and KRW 100 billion for green transition.
▶ It supports installation costs for greenhouse-gas-reduction equipment and sulfur-emission-reduction equipment (cf. designated emission-control areas: Busan, Incheon, Ulsan, Yeosu-Gwangyang, Pyeongtaek-Dangjin).
▶ Which manufacturers make such equipment, or which companies operate factories in those emission-control areas?

□ China’s low-carbon policy stance is reducing iron-ore output … and steel prices are surging worldwide.
▶ Earnings estimates are being revised upward for related companies such as POSCO and Hyundai Steel.
▶ See the commodities section of the weekly newsletter.

□ Yulchon, one of the “top six law firms” and particularly known for corporate-finance deals—Kim & Chang is excluded here because it is an all-rounder—has established a dedicated ESG team.
▶ ESG theme strength is likely to persist for the next one to two years, which corresponds to the early part of Biden’s term.


2021.01.19.

□ Korean companies are mobilizing all of their capabilities in the Fourth Industrial Revolution and ESG … AI (Samsung), autonomous driving (Hyundai), automotive electronics parts (LG), hydrogen (SK, POSCO), solar power (Hanwha), optical cable (Kolon, LS), and environment (KEPCO).
□ KEPCO subsidiary Korea Southern Power has announced plans to issue KRW 500 billion in green bonds.
□ Even the United Arab Emirates (UAE), one of the major oil-producing states, is investing in hydrogen energy … three state-owned entities in Abu Dhabi—holding company ADQ, oil company ADNOC, and sovereign wealth fund Mubadala—have signed an MOU for the “Abu Dhabi Hydrogen Alliance."
□ Japanese Prime Minister Suga says, “We will achieve a coal-free society by 2050, and 100% eco-friendly vehicles by 2035."
□ Automotive semiconductors are in short supply worldwide … Audi, Ford, Chrysler, Toyota, Honda, and Nissan have all temporarily suspended plant operations.
▶ In the EV-battery market, LG (22.6%), Samsung (5.8%), and SK (5.5%) together account for 33.9% of the global market. The industry leader is China’s CATL (24.2%).
▶ As noted in the 2021.1.18. clipping, the renewable-energy sector is currently not viable anywhere in the world without state aid.
▶ How do the relevant business areas of SK, POSCO, and KEPCO intersect with the New Deal funds (Green New Deal segment)? \

Green bond: a bond whose proceeds can be invested only in environmentally related sectors.

□ Janet Yellen, incoming U.S. Treasury Secretary (former Fed Chair), says, “We oppose an artificially weak dollar … we leave it to the market."
▶ “The United States will not pursue a weaker dollar in order to gain a competitive advantage, and should also oppose it when other countries do so."
▶ During Janet Yellen’s tenure as Fed Chair—February 2014 to February 2018—the United States designated China a “currency manipulator” and placed Korea on the “currency monitoring list," issuing a warning. Biden is a China hand—widely regarded in Washington as one of its foremost China specialists after Henry Kissinger—not a pro-China politician.

□ Moon Jae-in admits failure in real-estate policy … saying, “We will increase supply while maintaining the stance of suppressing speculation," and “We will ease public anxiety by supplying far more than the market expects."
▶ Are we talking about supply on the scale of building a “fourth-generation new town”? One year remains in the term.
▶ More importantly, Moon’s camp still seems unable to read the market properly. The continued emphasis on “speculation” makes that especially clear. As a result, policy is likely to lag the market again.
▶ In effect, the president’s message was that residential real estate still has further upside. But most listings have already risen, so one now has to be very selective in choosing one “truly prime” home.

□ China’s 2020 GDP rose 2.3% YoY, and equipment investment rose 2.8% YoY … the Brookings Institution says, “China will overtake U.S. GDP in 2028."
▶ China’s population is 1.44 billion; the U.S. population is 330 million.

□ Real-estate taxes will be strengthened from June 1 … capital-gains-tax surcharges will be raised from the current 10-20% to 20-30%, and comprehensive real-estate-tax surcharges will be raised from 10-20% to 20-30%.
▶ That suggests fiscal pressure and should also be read in the broader context of profit-sharing rhetoric. Politically, the marginal electoral cost is limited because multi-home owners and property investors are already against the Moon administration.

□ Monthly withholding tax for workers with children under age seven will rise by between KRW 10,000 and KRW 90,000.
▶ That likewise suggests fiscal pressure, while the political cost is limited because many voters in their 20s and 30s have already turned away from the Moon administration.

□ New lending under financial products targeted at low-income and low-credit borrowers who have difficulty accessing bank loans rose 31% from the previous year, from KRW 3.7643 trillion to KRW 4.9293 trillion.
▶ See the 2021.1.18. news clipping.

□ Commercial banks are slimming down … while more rank-and-file employees in their 30s and 40s are moving into fintech.
▶ An entirely foreseeable development. See the post “Me, a liberal-arts major, supposed to transform into an ICT expert?…" (2019.11.21.).

□ The Ministry of Science and ICT designates six firms subject to the “Netflix Law," which imposes a duty on content providers to maintain telecom-service quality: Google, Facebook, Netflix, Naver, Kakao, and Contents Wave.
□ With NCSoft entering the field, the K-pop content-platform market has become a three-way race … Naver’s “V Live," Big Hit’s “Weverse," and NCSoft’s “Universe."
▶ The Netflix Law applies to platforms averaging at least 1 million daily users over three months and generating at least 1% of total domestic traffic through that platform. Naver is the only Korean company caught by the law.
▶ Does that count as a positive, since it confirms Naver as a leading player? Or does it create an opening for Big Hit and NCSoft to benefit by comparison?

□ The Fair Trade Commission is strengthening its dedicated ICT team … with major targets being platform companies such as Google, Naver, and Baemin.
▶ That suggests they need more tax revenue. Naver is included here too.

□ The Ministry of Food and Drug Safety recommends conditional product approval for Celltrion’s COVID-19 antibody treatment “Regkirona Inj." … on the condition that Phase 3 clinical trials be completed.
▶ Celltrion yet again.

□ The Ministry of Food and Drug Safety grants conditional marketing approval for Yuhan Corporation’s non-small-cell lung-cancer treatment “Lazertinib tablets” … the first domestically developed new drug in three years since HK inno.N’s GERD treatment “K-CAB tablets."
▶ Ahn Myung-joo, professor of hematology-oncology at Samsung Medical Center, says, “Lazertinib is a treatment whose efficacy and safety have been recognized, including publication in the world-renowned The Lancet Oncology."
▶ The non-small-cell lung-cancer treatment market is estimated to grow from USD 19.2 billion in 2019 to USD 32.9 billion in 2029—running it through Excel gives a CAGR of 5.53%.
▶ Yuhan has already completed five outbound licensing deals for new drugs totaling KRW 4 trillion, and with Lazertinib it is now targeting annual sales of more than KRW 1 trillion.
▶ Yuhan continues to strengthen its position as one of Korea’s standout drug developers.

□ Goldman Sachs says, “A commodity supercycle is coming over the next ten years” … watch quality mining and steel stocks.
□ Funds in the Korean market are likewise shifting from untact and ontact into reopening and asset plays.
▶ In a recovery phase, cyclicals (i.e. economy-sensitive stocks) move first.

□ ARK Invest—which recently hit the jackpot on Tesla—says, “We are creating a space-industry ETF."
□ Korea Aerospace Industries (KAI) announces research cooperation with KAIST in the small-satellite field.
▶ Kenko Aerospace (aircraft assembly and precision processing), Satrec Initiative (satellite systems and cameras), Hanwha Aerospace, LIG Nex1, and AP Satellite (aerospace and defense names) all rise in unison.
▶ They rose because of ARK, not because of KAI. Space- and aerospace-related stocks all over the world rose together.

□ With the KOSPI catching its breath, Korean retail investors are moving into the U.S. market … buying an average of USD 1.2 billion (KRW 1.3224 trillion) per day last week.
▶ ETFs rather than individual names … five of the top ten net-purchase items were ETFs. Perhaps this also reflects the influence of figures like John Lee.


2021.01.20.

□ Pinelopi Goldberg, professor at Yale (former World Bank Chief Economist), says, “By late this summer, COVID will likely be brought under some degree of control … given the demand that has been suppressed in the meantime, the pace of recovery is likely to be very fast … but a sharp recovery outlook does not mean that the unemployment rate, which rose because of COVID, will return to its previous level."
▶ Vaccines are a matter for physicians, not economists. Even former President Trump was loudly saying in March last year that “the COVID problem will be solved by Easter (April) this year," but failed to solve it and lost reelection.
▶ Job polarization in the U.S. is severe. Finance and strategy consulting still hired entry-level staff this year at normal scale, but conditions on the ground are still very weak. The distressed M&A industry is currently in a massive boom. Contacts in related fields say workloads have become extreme.

□ The Korea Development Institute (KDI) says, “Biden will continue putting pressure on China through fair trade, just as the previous administration did."
▶ To emphasize again: Biden is a China hand, not a pro-China figure. This should be read in the context of Treasury nominee Yellen’s “we leave it to the market." In other words, “The United States will not be the only one playing fair." See the 2021.1.19. news clipping.

□ The International Accounting Standards Board (IASB) is moving to standardize ESG indicators in financial statements.
▶ If you are considering the CPA or CFA, it may be best to get them quickly before the exam scope expands.

□ The Financial Services Commission is reviewing a plan to apply principal amortization to personal credit loans above KRW 80 million in order to block “debt-financed investing” … while planning to pilot 40-year long-term mortgage loans in the second half as a “targeted support measure” for young people, newlyweds, and first-time buyers.
□ The Financial Services Commission has also decided to extend loan-maturity rollovers and interest-payment deferrals for small merchants and SMEs … with the amount of loans subject to maturity extension at about KRW 126 trillion.
□ Naver is considering the acquisition of Jeju Bank, 75% owned by Shinhan Financial Group … Shinhan has also been sounding out strategic investors including domestic financial companies for the sale of Jeju Bank since last year.
□ Naver Financial (service launched in December 2020) and Kakao Pay (planning to launch the service within the year) are also entering the medium-rate unsecured-loan market.
▶ Naver is making a major push to acquire a banking license. The separation-of-banking-and-commerce rules are the main obstacle. See the 2021.1.18. news clipping.

□ From the second half of this year, the statutory maximum interest rate will be lowered from 24% to 20% … the Sunshine Loan rate will be reduced to 17.9%, and financial companies that expand the scale of their medium-rate lending products will receive lending benefits.
▶ See the 2021.1.18. news clipping.

□ The National Assembly’s Strategy and Finance Committee plans to prepare guidelines prohibiting discretionary investment of surplus funds by public institutions … after some public institutions, including the Korea Racing Authority and KEPCO, were found to have invested employee-welfare funds in Optimus funds.

□ The Financial Supervisory Service orders six P2P firms to suspend operations over “annual rates exceeding 24%" … with the issue being whether platform fees should be treated as interest.
▶ Why suspend P2P firms when policy is simultaneously pushing the expansion of medium-rate lending products?
▶ Reason 1. Because they are not “voluntary."
▶ Reason 2. Because the medium-rate lending market itself is too small. Yet it still has to be shared among existing commercial banks, KakaoBank, K Bank, and even Naver. There is limited room left for smaller players.

□ Housing transactions surge again because of “panic buying” … monthly housing transactions exceed 140,000 for the first time in five months since July 2020.
▶ The president’s New Year address practically told the market that real estate still had further upside, so of course people would buy. See the 2021.1.19. news clipping.

□ Hyundai Steel’s green bond, planned at KRW 250 billion as part of ESG management, draws KRW 2.7 trillion in demand … and the company is considering doubling the issue size to KRW 500 billion.
▶ See the 2021.1.19. news clipping.

□ KDB, Eximbank, and NongHyup—having formed a “joint consultative body for overseas M&A and investment support”—have decided to lend KRW 3.3 trillion to SK Hynix.
▶ See page 199 of my book.
“For example, in an abrupt crisis on the scale of the foreign-exchange crisis or the global financial crisis, most companies suffer financial distress. Large conglomerates, however, can instead use such moments to widen the gap with latecomers through large-scale capital expenditure, raise barriers to entry so high that potential new competitors are shut out entirely, or even pursue a quantum leap through major M&A."

□ Netflix’s 2020 revenue in Korea is estimated at KRW 517.3 billion.
□ Companies providing content to over-the-top (OTT) platforms are drawing attention.
▶ Dramas (AStory, NEW, Studio Dragon), webtoons (Kidari Studio, D&C Media, Daewon Media), etc.
▶ Kidari Studio in particular now seems to be realizing the synergies from its acquisition of Lezhin Entertainment. Lezhin was the first company to create—and successfully establish—the market for paid webtoon platforms at a time when Naver and Daum, which dominated the domestic webtoon market, offered most content for free. In other words, that implies real content competitiveness.
▶ What is the annual growth rate of the OTT market? Which Korean beneficiaries are tied to Netflix?
▶ How does this relate to streaming-platform markets such as Twitch or Afreeca?

□ Owing to the stock-market boom, sales of economics and management books rose YoY 74.7%, while sales of personal-finance and investment books rose YoY 156.6%.
▶ Demand for introductory stock-investing books continues to grow. It may be worth looking for material on the Korean market during the tech-bubble period.

□ Meritz Securities says, “Judging by the PMR ratio of stock prices to liquidity, this is still not a top."
▶ Ten months ago, people were saying “stocks are headed to 1100” and “this is a second IMF crisis." See the blog posts written in March-April 2020.

□ On expectations of expanded housing supply, cement stocks as well as construction stocks are soaring.
▶ Construction and cement are obvious beneficiaries, but they are not the only ones. Housing turnover can also support interior finishing and furnishings.
▶ That matters even more now, when indoor activity is increasing because of COVID. What about home appliances?


2021.01.21.

□ The Baltic Dry Index (BDI) rose 27% over one month … while daily charter rates for LNG carriers are approaching KRW 200 million.
▶ Watch traditional cyclicals such as manufacturing and consumer discretionary, as well as shipping and trading-company sectors.
▶ However, one must also consider the increased freight costs facing import and export companies—a direct blow to steel and chemical producers.
▶ Baltic Dry Index (BDI): +80.9% YoY
▶ China Containerized Freight Index (CCFI): +107.7% YoY
▶ Howe Robinson Container Index (HRCI): +59.5% YoY \

Sources for each index: Korea Customs Logistics Association. Freight indices indicate changes in ocean-transport costs, while charter indices indicate changes in ship-rental costs.

□ Treasury Secretary Yellen says, “A corporate-tax increase will come only after the recession caused by COVID has been overcome … China is a country committing horrific human-rights abuses. China is weakening American companies through unfair and illegal practices."
▶ Yellen, who was classified as a dove even during her Fed tenure, has now made it clear through the phrase “act big” that she intends to maintain that basic stance. With larger fiscal stimulus and a signal that corporate-tax hikes will not be front-loaded into the recovery, the equity uptrend is likely to continue. Since the United States has repeatedly declared a hard line on China, investment in China-related companies should be approached with caution.
▶ But the stock market “prices in” both positives and negatives in advance, so the key question is what momentum remains. If liquidity and positive expectations have driven the market so far, the real economy now has to start providing actual support. The “sorting of wheat from chaff” and the “season of sowing” mentioned on the blog in January last year are now set to become visible in earnest.

□ President Moon Jae-in visits SK Bioscience’s Andong plant in North Gyeongsang, a contract manufacturer of the AstraZeneca vaccine. This is his second visit following his trip to its Pangyo research center in October 2020.
▶ SK is simultaneously pursuing technology transfer from Novavax and developing its own vaccine. If clinical trials are completed, planned Novavax production volume would be enough for 76 million people.
▶ Prime Minister Chung Sye-kyun is also trying to claim a role here… then where does that leave Celltrion?

□ The Democratic Party is reviewing a plan to create a KRW 500 billion social-solidarity fund under the banner of a “COVID profit-sharing system." … Democratic Party lawmaker Hong Ik-pyo says, “It would be good if the financial sector joined the fund-raising effort."
▶ In other words, they are asking private financial institutions for “voluntary” contributions. See the 2021.1.19. and 2021.1.20. news clippings.

□ Democratic Party lawmaker Kim Jin-pyo (five-term lawmaker for Suwon-mu, Gyeonggi; born in 1947 in Suwon, Gyeonggi; Seoul National University College of Law, class of ‘67; 13th class of the higher civil-service exam; former Finance Minister (Deputy Prime Minister for the economy); former Education Minister (Deputy Prime Minister for social affairs); former floor leader of the Democratic United Party; current chair of the Korea-Japan Parliamentarians’ League) says, “Create asset-management guidelines telling pension funds and mutual-aid associations to recover their real-estate investments and invest in the ‘Korean New Deal’ instead."
▶ Pension funds respond, “There is no need to realize losses and sell real estate immediately when it remains in a long-term uptrend."

□ Naver, Korea’s No. 1 webtoon company, acquires Wattpad, the world’s No. 1 web-novel distributor, for KRW 653.2 billion … the combined monthly active users of Wattpad and Naver Webtoon total 160 million.
▶ Last year Naver also invested KRW 100 billion in SM Entertainment and carried out a KRW 600 billion share swap with CJ Group. It is becoming the world’s largest web-novel and webtoon platform.

□ In 2020, the sectors with the highest numbers of companies entering the “KRW 1 trillion revenue club” were IT (18), chemicals (12), and pharma-bio (10).
▶ Sectors that had been filled only with dreams and hope are now acquiring substance.

□ Jung Won-o, mayor of Seoul’s Seongdong District, says, “We will introduce crime-prevention technology using AI-enabled CCTV." … unlisted company N3N says, “We will enter the SOC market with AI-based CCTV video-analysis technology."
▶ N3N currently supplies Samsung Electronics, Hyundai Motor Group, POSCO, and others. IPO planned for the second half of the year.

□ Kakao TV original content “Myeoneuragi” surpasses 10 million cumulative views … while Netflix’s paid subscribers rise from 100 million to 200 million in just three years.
□ With the number of households eating at home surging because of COVID, sales of “hybrid electric ranges” combining induction and highlight technology are rising sharply.
▶ Not only OTT but also home appliances deserve attention. See the 2021.1.20. news clipping.

□ North Chungcheong Province has reached a record USD 24.9 billion in exports, surpassing its 2018 figure of USD 23.2 billion after just two years.
▶ Exports of machinery, electrical and electronic goods, chemicals, and steel products rose 23.5% from the previous year, driving overall exports. This marks diversification away from a semiconductor-centered export structure. Solar products, secondary-battery materials, SSDs, and polarizing film (an OLED display-module material) account for 22% of total exports.
▶ If there are any listed small- or mid-cap companies with operations or factories in North Chungcheong, they may be worth considering for small-cap investment.


2021.01.22.

□ The United States is moving in earnest to launch Bidenomics—mobility, carbon neutrality, and economic normalization—through a roughly KRW 2,100 trillion stimulus package, while China too is strengthening its low-carbon and eco-friendly policy line.
▶ Biden’s campaign pledges include KRW 1,430 trillion in spending on the infrastructure sector and KRW 2,200 trillion on eco-friendly sectors such as renewable energy. That is separate from the roughly KRW 2,100 trillion American Rescue Plan stimulus package.
▶ Watch EVs, renewable energy (solar, hydrogen, etc.), shipping, consumer discretionary, and retail sectors.

□ ARK Invest CEO Cathie Wood says, “We estimate 2021 EPS for S&P 500 companies at $200 … corporate earnings will be double 2020 levels."
□ As expectations for Chinese economic recovery rise, interest is increasing in China-export stocks such as cosmetics and apparel … companies with sharply higher provisional 1Q21 operating profit YoY estimates include Osstem Implant +356.1%, Webzen +349.5%, Amorepacific +109.5%, and Hugel +85.8%.
▶ ① 10 → 5: -50%. ② 5 → 10: +100%.

□ Eximbank says, “We will invest KRW 80 trillion in K-New Deal industries over the next ten years."

□ SK Innovation acquires a 13.3% stake in Blue Park Smart Energy, a subsidiary of Beijing Automotive in China.
▶ SK (the holding company) had also previously invested about KRW 2 trillion to acquire a 9.9% stake in Plug Power, one of the leading U.S.-listed carbon-neutrality plays. That is why the share price has surged recently.
▶ Recently, virtually every SK affiliate has been filling the business pages with news of equity acquisitions and investment expansion—e.g. the KRW 3.3 trillion loan to SK Hynix, and SK Bioscience’s selection as a domestic distributor for a COVID vaccine; see the 20th and 21st news clippings. There is a need to analyze the past five years of business reports for the affiliates in the sectors of interest.

□ Automotive semiconductors are in short supply worldwide … GM Korea becomes the first domestic automaker to cut vehicle production because of semiconductor shortages.
▶ Because of COVID, demand for smartphones and home appliances has increased. As a result, foundries were flooded with orders for chips for consumer electronics, delaying automotive-chip production because margins there are relatively low.
▶ Domestic semiconductor companies, including Samsung Electronics, specialize primarily in chips for consumer electronics. In automotive semiconductors, the top five global firms account for 45% of the global market: Infineon (Germany; U.S. OTC) 12%, NXP (Netherlands; NYSE) 11%, Renesas (Japan; JPX) 8%, TI (United States; yes, the calculator company) 7%, and STM (Switzerland; NYSE) 7%.
▶ Research firm IHS Markit estimates the automotive-semiconductor market will grow from USD 38 billion in 2020 to USD 67.6 billion in 2026—CAGR +7%. See the 2021.1.19. news clipping.
▶ In the market for ultra-high-purity hydrogen fluoride, a key semiconductor material, Japanese firms still dominate. Korea went through major turmoil in August 2019 over GSOMIA and the whole “No No Japan” campaign—Cho Kuk’s appointment as Minister of Justice came in September—and was removed from Japan’s whitelist. Vice Chairman Lee Jae-yong of Samsung, who had been in prison until February 2018, even went to Japan personally to secure hydrogen fluoride—Samsung’s founder Lee Byung-chul and Chairman Lee Kun-hee were both Waseda alumni—and was then sent back to prison three days ago. Since then, there has been no news of successful localization of ultra-high-purity hydrogen fluoride.
▶ For a detailed overview of the automotive-semiconductor situation, see Hana Financial Investment’s report (2021.1.20.).

□ As COVID increases the number of “stay-at-home households," the indoor-ventilation market is expanding … the strengthened rule requiring ventilation facilities (April 2020)—which now applies to apartment complexes of 30 or more units instead of 100 or more—is also a factor.
▶ I had already argued that attention should extend beyond high-profile IT names such as Netflix, Naver, and Kakao to the broader indoor-activity and interior-related space. See the 2021.1.20. news clipping.
▶ LG Hausys, Kiturami, KyungDong Navien, Haatz, etc.

□ Sales of Lunar New Year gift sets priced above KRW 200,000 have more than tripled … Are expressions of sincerity now being priced more explicitly in money?
▶ The industry explains this as a consequence of the difficulty of making in-person visits (especially since older people are more vulnerable to COVID-19).

□ Subsidies of KRW 22.5 million will be provided for hydrogen vehicles—the Nexo, Korea’s only hydrogen vehicle—while EVs priced below KRW 60 million will receive KRW 8-13 million in subsidies … but high-priced EVs such as Teslas will receive zero subsidy.
▶ If one buys a hydrogen vehicle, the subsidy cuts the price to the mid-KRW 30 million range, effectively making it half price. But there are only 45 hydrogen charging stations nationwide. The government says it will build 54 more next year, but in early 2020 it also said it would build 100 by year-end and failed to deliver even half because of the cost.

□ Pension funds have been selling continuously since 2020.12.23., totaling about KRW 6.5 trillion, in line with asset-allocation principles … “It is natural for the world’s third-largest pension fund to diversify risk” vs. “At a time when Korea is becoming a developed-country-style financial market with a high share of financial assets, this is an anachronistic splash of cold water."
▶ Choi Seok-won, head of research at SK Securities—the same firm whose analyst Han Dae-hoon published a report on 2020.3.13. saying “the KOSPI could go to 1100” (six days before the 2020.3.19. market bottom)—points out that “when the attractiveness of the domestic equity market is rising, it is necessary to adjust weightings flexibly."
▶ Looking up analyst Han Dae-hoon, I found that he also wrote in a June 2017 report that “Paul Krugman, the Nobel laureate in economics, analyzed Bitcoin as having more of the characteristics of a commodity than a currency, but Bitcoin is recognized as a legal means of payment." Gold and silver are also “legal means of payment," but they are commodities, not money.
▶ If they fail to do proper asset allocation and losses result, whose responsibility is that? See the 2021.1.20. news clipping.
▶ For reference: an online outlet called Victor News ranked twenty-two securities firms using reports published in June 2020, based on closing prices as of 2020.12.28. It gave first place to whichever report came closest to the actual share price, and ranked brokerages by the number of such “No. 1 reports” they produced.
▶ In parentheses are the total numbers of reports issued by each brokerage. Yuanta Securities (70), Hana Financial Investment (63), Samsung Securities (42), Shinhan Financial Investment (39), and SK Securities (31): zero “No. 1 reports."

□ Pension funds voted against both LG Chem’s “battery spin-off” and Korean Air’s “Asiana acquisition," and both stocks then surged … “Individual stock trading is handled by outsourced managers, so we cannot intervene."
▶ Yet they still retrieve voting rights whenever necessary.
□ On news of a full-scale restructuring of LG Electronics’ smartphone business, the share price surged … with Google, Facebook, and Vingroup being mentioned as potential buyers.
▶ Smartphone technology is central to IoT, and given that LG Electronics appears to be increasing the share of automotive electronics in its business, a split sale rather than a full withdrawal looks more likely.

□ The Korea Consumer Finance Association says, “The average annual interest rate charged by illegal loan sharks rose threefold, from 145% in 2019 to 401% in 2020” … because ordinary people who were hit directly by COVID and could not borrow through the formal financial system have increasingly turned to illegal private lending.
▶ This is a problem for Lee Nak-yon and Prime Minister Chung Sye-kyun to solve after publicly pressuring banks, amid tighter household-credit regulation, to narrow loan-deposit spreads and surrender part of their operating profit. President Moon Jae-in’s approval rating this week rose 5.7 percentage points to 43.6%.