Stocks Rise Again on Hopes for Opening Economies

Published April 20, 2020

Stocks rallied for the 2nd straight week as investors and policy makers focus on re-opening global economies and possible vaccines. On the other hand, economists focused on the weak economic data and continued uncertainty about when world growth will recover. As shown below, our indexes were up from 1.5% to 7% led by the concentrated semiconductor index (SMH) and our display equipment index (ESSI). On a YTD basis, large cap tech (XLK) is down the least at -3% followed by SMH with emerging markets (EEM) down the most at -19% followed by panel makers at -18% (PSSI)

Last Week’s Index Performance

Weekly/YTD Index Performance

We started to see more economic data which revealed the extent of the damage to the world economy as indicated below:

  • The International Monetary Fund (IMF) said the global economy is expected to shrink by 3% this year and grow 5.8% next year. By the end of 2021, the level of economic activity will be below what was projected before the virus. The 2021 outlook was described as a partial recovery. They indicated that the response has been much faster and at a larger scale than the response to the 2008 financial crisis with fiscal stimulus of $8 trillion with $7 trillion coming from developed markets and only $1 trillion from developing and emerging countries. By country for 2020, they expect the USA to decline 5.9%, the 4 largest economies in the Euro area to drop 7.5%, Japan to fall 5.2% and the UK to fall 6.5%. In the developing world, China and India are expected to rise 1.0% and 1.2% respectively.
  • In China, their Q1’20 GDP results were published which were at an annual decline of 6.8%, down from 6% in Q4’19. It was their first decline since this data began in 1992. The consensus was for a 6.5% decline. The industrial sector fell 9.6% while services fell 5.2%. Car production dropped 45%.

China’s Quarterly GDP Results

  • US economic data remained problematic.
    • Weekly initial jobless claims remained at elevated levels at 5.245M, above the consensus for 5.0M. 22M people have joined the unemployment ranks over the past 4 weeks.
    • US retail sales for March were down 8.7% vs. February with 8 categories down double-digits with clothing and accessories down the most at over -50%.
    • US industrial production fell 5.4% in March with manufacturing down 6.3%. These are the largest monthly declines since 1946. Auto production was down 28% with non-auto manufacturing down 4.5%, the largest drop on record. The price of crude oil is down 68% since January.
    • US housing starts fell 22.3% in March.
    • First Trust offered some interesting weekly data which shows dramatic reductions in:
      • Movie tickets
      • Hotel occupancy
      • Hotel revenues per room
      • TSA checkpoint data
      • Gas supply
      • Etc.

Weekly Initial Jobless Claims

Source: US Department of Labor
Source: First Trust

In terms of the status of COVID-19:

  • The number of cases worldwide appears to have plateaued.
  • The number of deaths was up last week with April 10th the peak at over 10K deaths.
  • The number of cases rose 31% last week with deaths up 39% and recovered up 51%.
  • The US overtook Italy to lead in deaths last week and the US suffered an alarming 92% increase in total deaths, only behind Canada in terms of a weekly change.
  • The US still has one of the lowest recovery rates at just 8% with 5% of the cases now resulting in deaths and 86% active. This compares with a global average of 26% recovered, 6% deaths and 68% active.
  • A number of other countries saw faster growth than the US in cases such as Singapore up 140%, Brazil up 69%, Turkey up 67%, Japan up 54%, the UK up 47% and Canada up 43%. China saw a 39% increase in deaths last week which adds to the concerns with China’s data.
  • Speaking to my team in Japan, I am very concerned about their situation. It is very difficult to get a test there. They have the lowest testing rate of the countries shown. I was told you have to show symptoms for 4 days before you can get a test. In addition, social distancing is a problem there with plenty of people still riding the subways.
  • I tried to correlate testing per 1M people with # of cases. In general, there was correlation but there are some oddities such as:
    • Portugal which has a lot of testing, but low recovery rates so far;
  • South Korea which has a high recovery rate and relatively modest testing and Taiwan which had even lower testing and high recovery rates.

Daily COVID-19 Related Cases and Deaths

Source: Worldometers

COVID-19 Cases, Deaths and Recovery Rates for Select Countries

Source: Worldometers, compiled by DSCC

COVID-19 Testing vs. Recovery Rates

Source: Worldometers, compiled by DSCC

In more positive news about COVID-19, President Trump presented a 3-phase plan to open up the US economy which would be implemented by each governor. You can see the plan at Of course, to implement such a plan, we still need more widespread testing which apparently Congress will provide money for.

In addition, there was positive news about the Gilead drug Remdesivir, which was created to fight Ebola, and its ability to fight Covid-19 with most patients in a University of Chicago study leaving the hospital in less than a week. Experts say it is still very early to draw conclusions that this could be a widespread cure as there was no a control group. However, it sounds promising and there are trials all over the world with 4000 patients currently receiving trials.

In terms of the $US, it was mixed last week rising:

  • 0.5% against the Chinese Yuan to 7.07 and is now up 2% YTD;
  • 0.4% against the Korean Won to 1216 and is now up 5% YTD;
  • 0.2% against the Dollar Index to 99.8 and is now up 3% YTD;

It was flat against the Taiwan Dollar at 30.06 and is flat YTD and was down against the Japanese Yen to 107.6 and is down 1% YTD.

Panel maker stocks had a wide range of outcomes in the week, with some big winners and big losers. Unlike some prior week’s where there were clear divisions between the Chinese and non-Chinese stocks, this week there were winners and losers in both camps. Our PSSI was up by 1.5% for the week, pulled by gains from the two biggest players, BOE and CSOT, and is now down 18% for the year.

Among individual panel stocks:

  • For the third week in a row, HannStar was the best performer, up 4.7% for the week without any specific news. HannStar is now down 24% for the year.
  • CSOT (traded as TCL Technologies) was up by 3.9% week, and pulled into the positive column for year-to-date performance, now up 2% since the beginning of the year. CSOT was rumored to be bidding for CEC Panda assets (see separate story).
  • Innolux increased 2.6% for the week after reporting that its production and shipment would be unaffected by a computer hacking attack on April 9th. Innolux reported that it managed to remove the viruses immediately, and the integrity of its data and confidential business information were not damaged due to timely protection measures, according to Digitimes. Innolux is now down 25% for the year.
  • Visionox increased 2.1% for the week and is now down 30% year to date.
  • BOE was up 1.8% for the week, and BOE is down 16% since the beginning of the year. BOE has not yet released its Q4 and full year 2019 financial statements, but along with CSOT was rumored to be bidding for CEC Panda assets (see separate story).
  • LG Display recovered 1.1% for the week and is now down 33% for the year, despite reporting that its operating loss guidance for the first quarter of 2020 was increased from KRW 357.6 billion ($290.9 million) to KRW 457.5 billion, as reported by DB Financial Investment, which forecast LGD’s loss this year will double to 1.06 trillion won from its early estimate of 575.8 billion won.
  • Tianma, also rumored to bid for CEC Panda, was down 0.9% for the week and Tianma is now down 18% for the year.
  • AUO dropped 1.0% for the week, and AUO is now down 27% since the beginning of the year. AUO was reported by Digitimes to be setting up two new production lines for automotive panel modules in Taiwan, with production to start in Q2 2020, but demand for automotive panels is falling with the reduced automotive production as factories in the US and Europe are shut down from COVID-19. DSCC is showing a 17% decline in 2020 automotive displays and a 13% decline in automotive revenues as revealed in its BASID webinar whose highlights can be found at It was reported that AUO’s module expansion is part of a 3-year $1.35B capex plan to build smart manufacturing lines and high-margin, large size panels in Taiwan. 2020 spending will also cover upgrading the module production lines in Longtan and accelerating the moving of its front-end manufacturing toward smart manufacturing. To combat the short term decline in demand from Chinese customers, the company is moving module production back from China to Taiwan.
  • Japan Display was down 5.6 % for the week and remains the worst performer year-to-date, down 43%. JDI released its Q4 financial statements, including a restatement of earnings from 2013-2018 resulting from investigation into accounting fraud (see separate story). JDI also reported its financial restructuring which restored the company to positive shareholder equity, but indicated that because of the industry slowdown resulting from the COVID-19 pandemic, they may need to secure additional funding.
  • CEC Huadong was worst performer of the week, down 10.7%, and is now down 30% for the year. Huadong released its Q4 2019 financial statements, reporting a massive loss of CNY 3.8 billion (US$546 million), nearly half of the shareholder equity of the company, and was rumored to be up for sale (see separate story).

Weekly Stock Price Performance by Display Supplier and Index

W/W Stock Price Performance by Display Supplier and Index

Looking at large-cap display equipment stocks, every company enjoyed W/W growth except for Nikon. Wuhan Jingce earned 16% growth followed by SCREEN at 10% and AMAT at 7%. Wuhan Jingce has yet to release its Q4’19 financials, but it hasn’t slowed down its stock which is now up 15% YTD and is the only large cap stock showing YTD growth. TEL is nearly even down 1% YTD followed by AMAT down 13%. The remaining large cap equipment stocks are down between 13% and 41%.

Large Cap Equipment Company W/W Results

Large Cap Equipment Company YTD Results

Looking at the small cap equipment companies last week, 12 of the 16 companies enjoyed W/W growth led by Japanese equipment suppliers YAC and V Tech. Top and Toptec were the only suppliers to experience declines. On a YTD basis, Toptec has a wide advantage up 66% and is the only supplier up YTD. The other top performers are SNU down 3% and Top Eng. down 7%. The rest of the small cap eqpt stocks are down between 14% and 45%.

Small Cap Equipment Company W/W Results

Small Cap Equipment Company YTD Results

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Written by

Ross Young