[Morning Market Memo] 9/29 (Tue) US Semiconductor Decline and Stock Splits

Good morning.

Yesterday’s Nikkei Stock Average turned from a morning rise to close at its low. US stocks also fell last night, and the weakness in the semiconductor index is particularly concerning.

Today is also the ex-rights date for stock splits for many issues. Since the apparent stock prices of some companies will change significantly, I will organize the morning’s materials, including that point.

*This article does not recommend or solicit the buying or selling of specific stocks or financial products.

Key points for this morning

• The three major US indices all fell. The semiconductor index (SOX) was down 1.61%.

• Uncertainty continues regarding negotiations between the US and Iran, and the movements of crude oil and long-term US interest rates are of concern.

• Today, the 29th, is the ex-rights date for stock splits for many companies, including Kioxia and Tokyo Electron.

• NVIDIA has added to its share buyback authorization. On the other hand, US semiconductor stocks as a whole were weak, and reactions to the news were mixed.

• After the close yesterday, Asahi Yukizai, Accel, and others raised their earnings and dividend forecasts.

Last night’s US market and this morning’s futures and exchange rates

• Dow Jones Industrial Average: 51,481.51 | -347.11 | ↓0.67%

• S&P 500: 7,683.69 | -59.72 | ↓0.77%

• Nasdaq Composite Index: 26,820.38 | -248.34 | ↓0.92%

• Semiconductor Index (SOX): 12,465.24 | -203.69 | ↓1.61%

• Nikkei 225 Futures (Large): 65,650 yen | +80 yen | ↑0.12%

• US Dollar/Yen: 157.410 yen | +0.01%

• WTI Crude Oil Futures (28th settlement price): $92.60 per barrel | +$0.19 | ↑approx. 0.2%

• US 10-Year Treasury Yield: 5.236% | +0.69%

US stocks were generally soft. Even with individual positive news like NVIDIA’s announcement, the SOX index fell. I want to watch how Japanese semiconductor-related stocks react at today’s opening.

The figures are based on the screen as of approximately 7:00 AM on September 29. Futures, currencies, and interest rates will continue to move after this.

Yesterday’s Japanese stock market and sector-specific movements

The Nikkei 225 on the 28th was 65,877.62 yen (down 486.58 yen, or 0.73%, from the previous day). Although it rose in the morning, it ended the day at its lowest point.

Among the 33 Tokyo Stock Exchange sectors, 4 sectors rose and 29 sectors fell.

Top 3 sectors by gain

• 1st: Insurance (+0.95%): Dai-ichi Life Holdings, Lifenet Insurance, FP Partner

• 2nd: Banking (+0.83%): Aichi Financial Group, CCIG, Sanju San Financial Group

• 3rd: Electric & Gas (+0.23%): Shikoku Electric Power, Hokkaido Electric Power, Hokuriku Electric Power

Top 3 sectors by decline

• 1st: Pharmaceuticals (-1.59%): Chugai Pharmaceutical, Daiichi Sankyo, Kissei Pharmaceutical

• 2nd: Pulp & Paper (-1.58%): Daio Paper, Hokuetsu Corporation, Rengo

• 3rd: Mining (-1.07%): K&O Energy Group, Japan Petroleum Exploration, INPEX

The stocks listed here are examples of those that saw significant movement within their respective sectors yesterday. It shows the breadth of the declining sectors better than just looking at the Nikkei 225.

News that may affect today’s Japanese stock market

Crude oil rose temporarily, then narrowed its gains

Following reports that the US did not accept the Iranian side’s proposal, crude oil prices rose sharply at one point on the 28th. Later, expectations for negotiations mediated by Qatar caused the gains to narrow, and WTI crude oil futures settled at $92.60.

It is not yet clear how the negotiations will proceed. If crude oil prices rise again, it could lead to concerns about inflation and interest rates, so I intend to watch crude oil and the US 10-year Treasury yield together.

Reference: Reuters Crude Oil Market Report

Nvidia expands its share buyback program

Nvidia announced on the 28th that it would add $150 billion to its existing share buyback plan, bringing the remaining authorized limit to $235 billion. This does not mean that all purchases have been completed, but rather refers to the upper limit for future purchases.

Individually, this is considered a supportive factor, but the SOX index fell last night. For Japanese stocks, I would like to view the announcement itself and the overall sentiment of the semiconductor sector separately.

Reference: NVIDIA Announcement

Stocks trading at post-split price levels starting today

Today, the 29th, is the ‘ex-rights date’ for stock splits. Major stocks affected include the following:

• Kioxia HD (285A): 1 share split into 3

• Tokyo Electron (8035): 1 share split into 5

• Tokio Marine HD (8766): 1 share split into 15

• Mitsui Kinzoku (5706): 1 share split into 10

• Sumitomo Mitsui FG (8316): 1 share split into 2

The effective date for the split determined by the company is October 1st, but for trading purposes, the price level reflecting the split will apply starting today. For example, when splitting 1 share into 3, the theoretical stock price benchmark becomes approximately one-third, and the number of shares held triples. The asset value does not become one-third just because of that price adjustment.

Also, the final purchase date to receive dividends or shareholder benefits with rights determined at the end of September was, in principle, yesterday, the 28th. Even if you buy today, you will not receive these rights. When comparing stock prices before and after the split, please be aware that adjustments due to dividend ex-dates may also overlap.

Today, I intend to check the charts and trading volume after the split adjustment, rather than interpreting it as a ‘sharp drop’ or ‘undervalued’ based solely on the simple day-over-day change.

Reference: SBI Securities Stock Split List / Kioxia Announcement / Tokyo Electron Announcement / Tokio Marine Announcement / Mitsui Kinzoku Public Notice / Sumitomo Mitsui FG Information

Earnings revisions after the close yesterday

Asahi Yukizai has raised its consolidated ordinary profit forecast for the current fiscal year from 8.7 billion yen to 12.3 billion yen, and its annual dividend forecast from 130 yen to 180 yen. They explain that pipe material projects for semiconductor-related applications are performing well.

Axell has also raised its consolidated ordinary profit forecast for the current fiscal year from 1.27 billion yen to 2.35 billion yen, and its year-end dividend forecast from 41 yen to 79 yen. This is due to factors such as sales of memory-related products. Since price movements can be volatile at the opening after news is released, I will check the numbers and the stock price reaction separately.

Reference: Asahi Yukizai Earnings Revision / Kabutan 28th Earnings/Revision Summary

Today’s important events and major earnings schedule

September 29 (Tue)

• 9:30 Japan: August Trade Balance (Final)

• 13:30 Australia: Reserve Bank of Australia Policy Interest Rate Announcement

• 14:00 Japan: July Business Conditions Index (Revised)

• Time TBD Major Earnings Schedule: DCM HD, Honeys HD, Okwa, etc.

• 23:00 USA: September Consumer Confidence Index

Announcement times are in Japan Standard Time and are subject to change. Earnings announcement times for the stocks listed here have not been confirmed.

Reference: Major Schedule for the 29th / Earnings Announcement Schedule for the 29th

Summary

This morning, we first want to check the decline in US semiconductor stocks and the movements in crude oil and US interest rates. In addition, for stocks where stock splits and end-of-September ex-rights dates overlap, it becomes difficult to judge based solely on the apparent stock price or the change from the previous day.

While watching the reaction at the opening, we should look at the split-adjusted price and the actual price movement separately.

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