Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Credit

CHINAGOV CDS USD SR 5Y D14 (CCHIN1U5 CORP)

<ul>
<li>Asian USD high-yield bonds have outperformed on an improving sentiment toward emerging market credits.</li>
<li>China 5-year CDS has declined 14 bps since June and we expect non-property Chinese credits to have more capital inflow on  the hunt for a better yield.</li>
<li>We are in favor of Chinese high-yield credits with recurring revenue and operate in more defensive industries such as consumer non-discretionary, utilities, and pharmaceuticals.</li>
</ul>


Asian USD high-yield bonds have outperformed on an improving sentiment toward emerging market credits.
China 5-year CDS has declined 14 bps since June and we expect non-property Chinese credits to have more capital inflow on  the hunt for a better yield.
We are in favor of Chinese high-yield credits with recurring revenue and operate in more defensive industries such as consumer non-discretionary, utilities, and pharmaceuticals.


Asian Bond Monitor: Chinese Bonds Are Back

Thematic (Sector/Industry)

<ul>
<li>Indian USD high-yield bonds in our sample have outperformed on an improving operating environment in India.</li>
<li>Our base case scenario calls for a stabilized rate environment in 2026 which makes fixed rate bonds fully-valued, in our view.</li>
<li>We argue for a reduction in Asian bond exposure, and not a total abandonment.</li>
</ul>


Indian USD high-yield bonds in our sample have outperformed on an improving operating environment in India.
Our base case scenario calls for a stabilized rate environment in 2026 which makes fixed rate bonds fully-valued, in our view.
We argue for a reduction in Asian bond exposure, and not a total abandonment.


Macroeconomics

<ul>
<li>Here we are checking our thesis on the bond markets we reconfirmed as bullish back in September.</li>
<li>Declining inflation, as indicated by the November US Personal Consumption Expenditure (PCE) deflator, could lead to the 2% inflation target in 2024</li>
<li>A rate cut and a peak of a rate hike cycle plots a scenario where  fixed rate bonds will be the asset class of choice in 2024.</li>
</ul>


Here we are checking our thesis on the bond markets we reconfirmed as bullish back in September.
Declining inflation, as indicated by the November US Personal Consumption Expenditure (PCE) deflator, could lead to the 2% inflation target in 2024
A rate cut and a peak of a rate hike cycle plots a scenario where  fixed rate bonds will be the asset class of choice in 2024.


Bond Market Monitor: Time to Invest in EM Bonds

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

China's economy was virtually stagnant in September, and real GDP grew just 0.2% QoQ in 3Q 2021 as YoY growth slowed to 4.9% (from 7.9% in the previous quarter). Industrial output grew just 3.1% YoY and 0.1% MoM in September, while fixed asset investment (FAI), long the key driver of China's economic activity, declined 5.5% YoY in September 2021 (and fell 3.3% YoY in 3Q 2021). With rising political uncertainty, and heightened risk of expropriation of foreign bond-holders and successful local billionaires, real GDP is likely to contract QoQ in 4Q 2021, and grow just 3% YoY, as China's FAI finally declines after two decades of over-investment. 
With global trade volume slated to grow 10.8% in 2021 (twice the pace of global real GDP growth), China has one key remaining economic strength: like the rest of Asia, China's export sector remains robust. While imports too are growing (to feed import-intensive exports), slumping FAI will cause trade surpluses to widen in 4Q 2021. However, foreign reserves are likely to continue edging lower as capital flight accelerates. 
China's foreign reserves are down this year despite consistently large monthly trade surpluses -- and foreign reserves have been largely unchanged since 1Q 2016 despite large annual trade surpluses. In September 2021, net capital and services/income outflows were US$98 billion (the largest monthly outflow since capital controls were tightened in November 2016). In Jan-Sep 2021, net outflows have swelled to US$455 billion (much larger than the US$290 billion of net outflows in Jan-Sep 2020). If <a href="https://www.smartkarma.com/entities/evergrande-property-services" target="_blank" data-smartkarma-citation="entities:30921:1" rel="noopener">Evergrande Property Services (6666 HK)</a> or its affiliate defaults on its foreign bonds (while local bond holders were paid last month), the discriminatory treatment is likely to spur larger capital outflows, and a flight from Chinese foreign-currency paper. We recommend staying Underweight China.

China's economy was virtually stagnant in September, and real GDP grew just 0.2% QoQ in 3Q 2021 as YoY growth slowed to 4.9% (from 7.9% in the previous quarter). Industrial output grew just 3.1% YoY and 0.1% MoM in September, while fixed asset investment (FAI), long the key driver of China's economic activity, declined 5.5% YoY in September 2021 (and fell 3.3% YoY in 3Q 2021). With rising political uncertainty, and heightened risk of expropriation of foreign bond-holders and successful local billionaires, real GDP is likely to contract QoQ in 4Q 2021, and grow just 3% YoY, as China's FAI finally declines after two decades of over-investment. 
With global trade volume slated to grow 10.8% in 2021 (twice the pace of global real GDP growth), China has one key remaining economic strength: like the rest of Asia, China's export sector remains robust. While imports too are growing (to feed import-intensive exports), slumping FAI will cause trade surpluses to widen in 4Q 2021. However, foreign reserves are likely to continue edging lower as capital flight accelerates. 
China's foreign reserves are down this year despite consistently large monthly trade surpluses -- and foreign reserves have been largely unchanged since 1Q 2016 despite large annual trade surpluses. In September 2021, net capital and services/income outflows were US$98 billion (the largest monthly outflow since capital controls were tightened in November 2016). In Jan-Sep 2021, net outflows have swelled to US$455 billion (much larger than the US$290 billion of net outflows in Jan-Sep 2020). If Evergrande Property Services (6666 HK) or its affiliate defaults on its foreign bonds (while local bond holders were paid last month), the discriminatory treatment is likely to spur larger capital outflows, and a flight from Chinese foreign-currency paper. We recommend staying Underweight China.  

China: Succumbing to Excess Capacity in Industry and Real-Estate, & Capital Flight

China and US Equity Analyst

Roger Xie

Cross Asset Strategy

<ul>
<li>China domestic activity indicators are weakening and missed expectations in August. Retail sales growth decelerated sharply to 2.5% year-over-year, vs 8.5% in July. Industrial production also slowed to 5.3% year-over-year, vs 6.4% in July. The most concerning development is in the property market. After housing activity turned significantly more negative from June to July, August registered another sequential declines in housing starts and property sales . <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a> has retreated around 23% from its peak in February 2021. China market performance has been subdued given the resurge of COVID-19 cases, some property developers' credit risk and the uncertainty on policies.</li>
<li>We expect there will be some monetary stimulus policies to stabilize the economy.  Beijing has released a series of rules aiming to remake private education and tech sectors. to curb cost pressure and better serve ordinary people. The magnitude of policy change on these sectors is unprecedent. And the visibility of these changes remains clouded. But for short-term efforts, monetary tools, such as MLF (medium-term lending facility), could be utilized to inject liquidity into the market. </li>
<li>On financial innovation front, we have observed some breakthrough activities. 1) The long-awaited China A-share Index future finally received approval from regulators. The to-be-launched MSCI China A50 Connect Index will be a game changer for <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> derivative business as investors' increasing exposure in China A-share cash equity market and index future. 2) China also announced that a new stock exchange will soon be launched in Beijing. The new exchange will initially be formed by a subset of National Equity Exchange and Quotations (China OTC market) which has been in place since 2013. But Beijing Stock Exchange has ambition to grow into a venue for high-tech and high-growth companies.  </li>
</ul>


China domestic activity indicators are weakening and missed expectations in August. Retail sales growth decelerated sharply to 2.5% year-over-year, vs 8.5% in July. Industrial production also slowed to 5.3% year-over-year, vs 6.4% in July. The most concerning development is in the property market. After housing activity turned significantly more negative from June to July, August registered another sequential declines in housing starts and property sales . Hong Kong Hang Seng Index (HSI INDEX) has retreated around 23% from its peak in February 2021. China market performance has been subdued given the resurge of COVID-19 cases, some property developers' credit risk and the uncertainty on policies.
We expect there will be some monetary stimulus policies to stabilize the economy.  Beijing has released a series of rules aiming to remake private education and tech sectors. to curb cost pressure and better serve ordinary people. The magnitude of policy change on these sectors is unprecedent. And the visibility of these changes remains clouded. But for short-term efforts, monetary tools, such as MLF (medium-term lending facility), could be utilized to inject liquidity into the market. 
On financial innovation front, we have observed some breakthrough activities. 1) The long-awaited China A-share Index future finally received approval from regulators. The to-be-launched MSCI China A50 Connect Index will be a game changer for HKEX (388 HK) derivative business as investors' increasing exposure in China A-share cash equity market and index future. 2) China also announced that a new stock exchange will soon be launched in Beijing. The new exchange will initially be formed by a subset of National Equity Exchange and Quotations (China OTC market) which has been in place since 2013. But Beijing Stock Exchange has ambition to grow into a venue for high-tech and high-growth companies.  


China Equity Strategy: Growth Slowdown Risk, Potential Monetary Stimulus

Price Gauge
52-week Range	0.00 - 0.00
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CHINAGOV CDS USD SR 5Y D14 (CCHIN1U5 CORP)

Asian Bond Monitor: Chinese Bonds Are Back

Asian high-yield bonds, particularly Chinese credits, are performing well due to improving sentiment towards emerging markets, with a focus on non...

Bondcritic

Asian Bond Monitor: Take Profits

Indian high-yield bonds outperforming due to improving operating environment, fixed rate bonds seen as fully-valued in stable rate scenario,...

Bondcritic

Bond Market Monitor: Time to Invest in EM Bonds

Here is the time to review what we said last December. We are due to the launch thew revision by the end of the month. Stay tuned!

Bondcritic

China: Succumbing to Excess Capacity in Industry and Real-Estate, & Capital Flight

China's economy was stagnant in Sep21 as FAI contracted 5.5%YoY (-3.3% in 3Q). Real GDP will decelerate to 3%YoY in 4Q21. Capital flight will...

Prasenjit K. Basu

China Equity Strategy: Growth Slowdown Risk, Potential Monetary Stimulus

China activity indicators are weakening and missed expectations in August. We expect there will be some monetary stimulus to stabilize the economic...

Roger Xie

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Asian Bond Monitor: Chinese Bonds Are Back

​Asian high-yield bonds, particularly Chinese credits, are performing well due to improving sentiment towards emerging markets, with a focus on non...

Bondcritic

Asian Bond Monitor: Take Profits

​Indian high-yield bonds outperforming due to improving operating environment, fixed rate bonds seen as fully-valued in stable rate scenario,...

Bondcritic

Bond Market Monitor: Time to Invest in EM Bonds

Here is the time to review what we said last December. We are due to the launch thew revision by the end of the month. Stay tuned!

Bondcritic

China: Succumbing to Excess Capacity in Industry and Real-Estate, & Capital Flight

China's economy was stagnant in Sep21 as FAI contracted 5.5%YoY (-3.3% in 3Q). Real GDP will decelerate to 3%YoY in 4Q21. Capital flight will...

Prasenjit K. Basu

China Equity Strategy: Growth Slowdown Risk, Potential Monetary Stimulus

China activity indicators are weakening and missed expectations in August. We expect there will be some monetary stimulus to stabilize the economic...

Roger Xie

Asian high-yield bonds, particularly Chinese credits, are performing well due to improving sentiment towards emerging markets, with a focus on non...

Indian high-yield bonds outperforming due to improving operating environment, fixed rate bonds seen as fully-valued in stable rate scenario,...