Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

Thematic (Sector/Industry)

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 
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This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 
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In this report, we identify that <a href="https://www.smartkarma.com/entities/sheng-siong-group-ltd" target="_blank" data-smartkarma-citation="entities:6824:1" rel="noopener">Sheng Siong (SSG SP)</a> , <a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> and <a href="https://www.smartkarma.com/entities/singapore-post-ltd" target="_blank" data-smartkarma-citation="entities:150:1" rel="noopener">Singapore Post (SPOST SP)</a>as winners while <a href="https://www.smartkarma.com/entities/comfortdelgro-corp-ltd" target="_blank" data-smartkarma-citation="entities:497:1" rel="noopener">Comfortdelgro Corp (CD SP)</a> and <a href="https://www.smartkarma.com/entities/genting-singapore-ltd" target="_blank" data-smartkarma-citation="entities:439:1" rel="noopener">Genting Singapore (GENS SP)</a>as losers.

For investors who are not based in Singapore, the mini lockdown in Singapore has started again due to the sudden increase in the number of community cases which previously was relatively under control. Before one thinks that it is a too-harsh of a policy, the rate of the increase of unlinked community cases in Singapore is high. This matters a lot because every Singapore residents need to check in every establishment using either an Identification card, Trace Together app, or token which has proved to be very effective as for months, most of the COVID-19 cases can be traced and therefore allows the government to take the necessary actions. 

This time is different. Alongside the third wave that has hit India and Thailand, Singapore, too, is hit. The Singapore government's response to this is very much like the first lock-down (Circuit Breaker), that they minimize public interactions so that the number of community cases does not increase and provide them with the time to perform contact tracing thoroughly. 

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP) and Genting Singapore (GENS SP)as losers. 

Singapore Mini Lockdown: Winners and Losers

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

Cross Asset Strategy

Dividend yields for the S&amp;P 500 are 1.5%; the only time they were lower in the past 150 years was in 2000 (1% before the "dot-com crash" of 2000). We expect the S&amp;P 500 earnings yield to rebound from its low of 2.5% through a combination of stronger EPS growth and falling stock prices. The 14% of GDP fiscal stimulus will strengthen the recovery; already the end of the SLR-relaxation amounts to a slight tightening of monetary conditions from April 2021. The pledge of US$120 billion of monthly bond purchases will need to be relaxed after May 2021, and further tightening is likely at the FOMC meeting at the end of June, via either a 12.5bp rise in Fed Funds rate or an increase in the 0.1% interest rate paid on banks' reserves. The US$ will strengthen.Over the past 3 months (starting 27 December 2020), the US has legislated an aggregate fiscal stimulus of US$2.8 trillion (14% of GDP), of which the first part (US$0.9 trillion) has been almost entirely disbursed in the current quarter. Unsurprisingly, FOMC members expect US real GDP to rebound to a spectacular 6.5% growth in 2021. The unemployment rate has already declined to 6.2% in February 2021 (from 6.7% in Nov-Dec 2020, and 10.2% in July 2020); although much higher than February 2020 (3.5%), the current unemployment rate is not far above the traditional 5-6% rate considered the non-accelerating-inflation rate of unemployment (NAIRU), which is estimated to have fallen to 4-5% for the 2005-30 period. Given that jobs in the pandemic-hit hospitality sector are unlikely to come back for awhile, we estimate that NAIRU this year is close to 5%, a level of unemployment that is likely to be reached before 4Q 2021. Manufacturing is leading the US recovery: the ISM's manufacturing PMI was equal to a 3-year high (last exceeded 17 years ago) in February 2021 despite inclement weather. The Philadelphia Fed's manufacturing outlook reached a 48-year high this month. Inflation is likely to edge up as unemployment declines toward the NAIRU, making it untenable for the Fed to keep to its pledge of buying US$120 billion of bonds monthly without countervailing actions to reduce the money-multiplier. The first such step removes the SLR relaxations from the beginning of next month. The second is likely to be an increase in the interest rate paid on banks' reserves (from their 0.1% current level) or an outright increase in the Fed Funds rate (to 0.25%) at the June FOMC meeting. We are bearish on risk assets (equities and EMs) over the next half year, and would recommend continuing to rotate away from technology stocks to cyclicals, consumer cyclicals and banks.

Dividend yields for the S&amp;P 500 are 1.5%; the only time they were lower in the past 150 years was in 2000 (1% before the "dot-com crash" of 2000). We expect the S&amp;P 500 earnings yield to rebound from its low of 2.5% through a combination of stronger EPS growth and falling stock prices. The 14% of GDP fiscal stimulus will strengthen the recovery; already the end of the SLR-relaxation amounts to a slight tightening of monetary conditions from April 2021. The pledge of US$120 billion of monthly bond purchases will need to be relaxed after May 2021, and further tightening is likely at the FOMC meeting at the end of June, via either a 12.5bp rise in Fed Funds rate or an increase in the 0.1% interest rate paid on banks' reserves. The US$ will strengthen.Over the past 3 months (starting 27 December 2020), the US has legislated an aggregate fiscal stimulus of US$2.8 trillion (14% of GDP), of which the first part (US$0.9 trillion) has been almost entirely disbursed in the current quarter. Unsurprisingly, FOMC members expect US real GDP to rebound to a spectacular 6.5% growth in 2021. The unemployment rate has already declined to 6.2% in February 2021 (from 6.7% in Nov-Dec 2020, and 10.2% in July 2020); although much higher than February 2020 (3.5%), the current unemployment rate is not far above the traditional 5-6% rate considered the non-accelerating-inflation rate of unemployment (NAIRU), which is estimated to have fallen to 4-5% for the 2005-30 period. Given that jobs in the pandemic-hit hospitality sector are unlikely to come back for awhile, we estimate that NAIRU this year is close to 5%, a level of unemployment that is likely to be reached before 4Q 2021. Manufacturing is leading the US recovery: the ISM's manufacturing PMI was equal to a 3-year high (last exceeded 17 years ago) in February 2021 despite inclement weather. The Philadelphia Fed's manufacturing outlook reached a 48-year high this month. Inflation is likely to edge up as unemployment declines toward the NAIRU, making it untenable for the Fed to keep to its pledge of buying US$120 billion of bonds monthly without countervailing actions to reduce the money-multiplier. The first such step removes the SLR relaxations from the beginning of next month. The second is likely to be an increase in the interest rate paid on banks' reserves (from their 0.1% current level) or an outright increase in the Fed Funds rate (to 0.25%) at the June FOMC meeting. We are bearish on risk assets (equities and EMs) over the next half year, and would recommend continuing to rotate away from technology stocks to cyclicals, consumer cyclicals and banks. 

Biden's Huge Stimulus Is Obliging the Fed to Edge Away from Unlimited QE

Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Japan may be one of the top three luxury markets in the world but luxury e-commerce is poorly evolved, with much of the focus still on flagships, boutiques and department stores.While Rakuten opened its own luxury section last month, a new dedicated luxury platform, Milleporte, which is backed by Goldman Sachs and Itochu Corp, has just launched with the promise to offer both merchants and customers a true luxury experience.In marked contrast to the busier online fashion pages of <a href="https://www.smartkarma.com/entities/zozo-inc" target="_blank" data-smartkarma-citation="entities:18379:1" rel="noopener">ZOZO Inc (3092 JP)</a> and <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten Inc (4755 JP)</a>’s new luxury store, where the focus remains on the platform-as-brand at the expense of the merchant, Milleporte strips away the store front to allow customers to focus on the luxury brands themselves.The site is a direct challenge to both Zozo and Rakuten.

Japan may be one of the top three luxury markets in the world but luxury e-commerce is poorly evolved, with much of the focus still on flagships, boutiques and department stores.While Rakuten opened its own luxury section last month, a new dedicated luxury platform, Milleporte, which is backed by Goldman Sachs and Itochu Corp, has just launched with the promise to offer both merchants and customers a true luxury experience.In marked contrast to the busier online fashion pages of ZOZO Inc (3092 JP) and Rakuten Inc (4755 JP)’s new luxury store, where the focus remains on the platform-as-brand at the expense of the merchant, Milleporte strips away the store front to allow customers to focus on the luxury brands themselves.The site is a direct challenge to both Zozo and Rakuten.

Milleporte Counters Rakuten and Zozo on Luxury Platform

Alpha-Centric ESG Research

Kyle Rudden

The intersection of ESG and initial public offerings is a treacherous corner in the ESG landscape. ESG is highly material and uniquely relevant to IPOs, affecting deal interest and valuations, and in some cases killing the IPO altogether. For IPO investors, pre-IPO ESG research is critical, but almost non-existent. ESG information is out there if you know where to look and are willing to dig. This is Part I: Probem. <hr>ESG and IPOs is an important subject for ESG investing, and in my opinion doesn't receive enough attention. Although I have published a few IPO-specific ESG reports in which I broach the subject, I have been wanting to write about it in more depth – a proper thematic treatment versus passing mention as background in some other report – but I debated about how to best present it to you.Let me explain the dilemma.The purely-pedantic version of the ESG and IPO story goes like this: ESG really, really matters for IPOs, therefore pre-IPO ESG research really matters for IPO investors, but the fact of the matter is pre-IPO ESG research doesn't really exist, ergo IPO investors are really screw... up that proverbial creek, sorry, thanks for reading, cheers. I really, really didn't want to write that report.I did anyway. Here it is. Sort of.My instinct is that for this subject, there is as much if not more value in a more practical hands-on approach. Saying, "Here is the problem, and here is how to solve it" is far better than just "Here is the problem." However, the theoretical part of the story is still important, on its own and as context for the practical report. What else is there to do, then, but to publish both. A problem-solution pair.<ol>
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ESG and IPOs: ESG Affects IPO Investing but Pre-IPO Research is Scarce: This report about how and why ESG matters to IPO investors, and the shortcomings of pre-IPO ESG research.</li>
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ESG and IPOs: Pre-IPO ESG Research with Central Retail as a Case Study: Solutions to the problem of non-existent pre-IPO ESG research, with <a href="https://www.smartkarma.com/entities/central-retail-corp-ltd" target="_blank" data-smartkarma-citation="entities:28240:1" rel="noopener">Central Retail (CRC TB)</a> as a "case study."</li>
</ol>

The intersection of ESG and initial public offerings is a treacherous corner in the ESG landscape. ESG is highly material and uniquely relevant to IPOs, affecting deal interest and valuations, and in some cases killing the IPO altogether. For IPO investors, pre-IPO ESG research is critical, but almost non-existent. ESG information is out there if you know where to look and are willing to dig. This is Part I: Probem. ESG and IPOs is an important subject for ESG investing, and in my opinion doesn't receive enough attention. Although I have published a few IPO-specific ESG reports in which I broach the subject, I have been wanting to write about it in more depth – a proper thematic treatment versus passing mention as background in some other report – but I debated about how to best present it to you.Let me explain the dilemma.The purely-pedantic version of the ESG and IPO story goes like this: ESG really, really matters for IPOs, therefore pre-IPO ESG research really matters for IPO investors, but the fact of the matter is pre-IPO ESG research doesn't really exist, ergo IPO investors are really screw... up that proverbial creek, sorry, thanks for reading, cheers. I really, really didn't want to write that report.I did anyway. Here it is. Sort of.My instinct is that for this subject, there is as much if not more value in a more practical hands-on approach. Saying, "Here is the problem, and here is how to solve it" is far better than just "Here is the problem." However, the theoretical part of the story is still important, on its own and as context for the practical report. What else is there to do, then, but to publish both. A problem-solution pair.

ESG and IPOs: ESG Affects IPO Investing but Pre-IPO Research is Scarce: This report about how and why ESG matters to IPO investors, and the shortcomings of pre-IPO ESG research.

ESG and IPOs: Pre-IPO ESG Research with Central Retail as a Case Study: Solutions to the problem of non-existent pre-IPO ESG research, with Central Retail (CRC TB) as a "case study."


ESG and IPOs: ESG Affects IPO Investing but Pre-IPO Research Is Scarce

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

* All That Glitters Isn’t Gold: Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on capital markets businesses. However, as a sector, these subsidiaries are NIM-challenged, wholesale funded, and have bloated cost structures (like their parent companies) - all of which challenge operating returns; * COVID-19 Challenges At US Franchises: Our “burn down” results for MUFGA were a surprise. We calculate that MUFG Americas’ (8306.JP) [MUFGA] 4Q19 CET1/Tier 1 capital ratios would decline from 14.1% to 3.9% - implying a regulatory capital shortfall, while the same analysis suggests COVID-19 will be a multi-year earnings event for both SMBC Americas (8316.JP) [SMBCA] and Mizuho Americas (8411.JP); and* Exhaustive Megbank Challenges: Japanese Megabanks were struggling to meet their FY (March) 2020 and 2021 business plans. Chronic weak returns, weak/negative growth in Japan, increased reliance of volatile capital markets revenues, impairments charges on previous acquisitions, EPS deal dilution, Softbank Group (9984.JP) exposures, and growth in Asia (Ex-Japan) risk just as the USD significantly strengthened all continue to hamper Megabank returns – even before the impact of COVID-19.

* All That Glitters Isn’t Gold: Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on capital markets businesses. However, as a sector, these subsidiaries are NIM-challenged, wholesale funded, and have bloated cost structures (like their parent companies) - all of which challenge operating returns; * COVID-19 Challenges At US Franchises: Our “burn down” results for MUFGA were a surprise. We calculate that MUFG Americas’ (8306.JP) [MUFGA] 4Q19 CET1/Tier 1 capital ratios would decline from 14.1% to 3.9% - implying a regulatory capital shortfall, while the same analysis suggests COVID-19 will be a multi-year earnings event for both SMBC Americas (8316.JP) [SMBCA] and Mizuho Americas (8411.JP); and* Exhaustive Megbank Challenges: Japanese Megabanks were struggling to meet their FY (March) 2020 and 2021 business plans. Chronic weak returns, weak/negative growth in Japan, increased reliance of volatile capital markets revenues, impairments charges on previous acquisitions, EPS deal dilution, Softbank Group (9984.JP) exposures, and growth in Asia (Ex-Japan) risk just as the USD significantly strengthened all continue to hamper Megabank returns – even before the impact of COVID-19.  

Japan Mega Banks – Avenue of the Americas

United States

The Goldman Sachs Group, Inc., a bank holding company, is a global investment banking and securities firm specializing in investment banking, trading and principal investments, asset management and securities services.  The Company provides services to corporations, financial institutions, governments, and high-net worth individuals.

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Goldman Sachs Group (GS US)

Singapore Mini Lockdown: Winners and Losers

In this report, we identify that Sheng Siong (SSG SP) , Sea Ltd (SE US) and Singapore Post (SPOST SP)as winners while Comfortdelgro Corp (CD SP)...

Henry Soediarko

Biden's Huge Stimulus Is Obliging the Fed to Edge Away from Unlimited QE

The 14% of GDP stimulus will oblige the Fed to tighten policy by mid-year, strengthening the US$.S&P500 dividend yield (1.5%) has been lower only...

Prasenjit K. Basu

Milleporte Counters Rakuten and Zozo on Luxury Platform

Japan is the 3rd biggest luxury market but has no dedicated luxury online platform. Until now. Rakuten launched last month a new mall just launched...

Michael Causton

ESG and IPOs: ESG Affects IPO Investing but Pre-IPO Research Is Scarce

The intersection of ESG and initial public offerings is a treacherous corner in the ESG landscape. ESG is highly material and uniquely relevant to...

Kyle Rudden

Japan Mega Banks – Avenue of the Americas

* All That Glitters Isn’t Gold: Structurally, the Megabank American franchises are well-capitalized, have strong credit metrics, and are reliant on...

Thomas J. Monaco

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