Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-227'>Guangzhou R&F Properties</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Guangzhou R&F Properties

Morning Views Asia: Guangzhou R&F Properties

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

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

13 months after its introduction, China's "Three Red Lines" (TRL) policy initiative (to reduce leverage, improve debt coverage and increase liquidity) for property companies is beginning to have a serious impact. A key contributory factor is that TSF (total social financing) has increased by a more moderate RMB21.68 trillion in Jan-Aug 2021 than last year (RMB25.97 trillion in Jan-Aug 2020), which still implies 10.3% YoY growth in the stock of TSF (to RMB306.83 trillion, or US$47.5 trillion), which is near the slowest-ever pace since TSF began to be published. The stock of M2, bank credit and TSF in China are at historic highs never reached by any other country, and the growth of all these aggregates continues, albeit at a marginally slower pace.Despite the abundance of liquidity (and the cut in RRR in mid-July), real GDP is growing barely over 5% YoY in 3Q 2021, with retail sales decelerating to 2.5% YoY growth and industrial production to 5.3% YoY growth in August 2021. The latter was largely export-driven (helped by a surge in global trade), as FAI (fixed asset investment) declined 2.1% YoY in May-August 2021. Such an economic deceleration in the year before an important leadership transition (i.e., rubber-stamping of continuity for Xi, change for others around him) will be met by further monetary easing in October 2021. That half of the 10 largest residential-property developers are Guangdong-based (a province traditionally known for both entrepreneurship and rebellion) makes them particularly vulnerable to the political crackdown on capitalists. The focus increasingly will be on cutting the costs of property, healthcare and education, not just tech titans.  However, moral hazard will be tightly managed. Onshore (local currency) bond holders will bear relatively few losses on high-profile names like Evergrande (although there will be credit events for bank loans), while offshore foreign-currency bond holders are likely to feel considerable pain (i.e., the partial end of the "moral hazard play"). The political crackdown on sundry capitalists -- tech titans, others seeking overseas listings, property developers, gaming companies -- will persist, adding more to the China Premium. We would recommend staying Underweight China equities amid the uncertainty generated by this political instability, which will result in a new equilibrium discount on Chinese valuations emerging by early 2022.

13 months after its introduction, China's "Three Red Lines" (TRL) policy initiative (to reduce leverage, improve debt coverage and increase liquidity) for property companies is beginning to have a serious impact. A key contributory factor is that TSF (total social financing) has increased by a more moderate RMB21.68 trillion in Jan-Aug 2021 than last year (RMB25.97 trillion in Jan-Aug 2020), which still implies 10.3% YoY growth in the stock of TSF (to RMB306.83 trillion, or US$47.5 trillion), which is near the slowest-ever pace since TSF began to be published. The stock of M2, bank credit and TSF in China are at historic highs never reached by any other country, and the growth of all these aggregates continues, albeit at a marginally slower pace.Despite the abundance of liquidity (and the cut in RRR in mid-July), real GDP is growing barely over 5% YoY in 3Q 2021, with retail sales decelerating to 2.5% YoY growth and industrial production to 5.3% YoY growth in August 2021. The latter was largely export-driven (helped by a surge in global trade), as FAI (fixed asset investment) declined 2.1% YoY in May-August 2021. Such an economic deceleration in the year before an important leadership transition (i.e., rubber-stamping of continuity for Xi, change for others around him) will be met by further monetary easing in October 2021. That half of the 10 largest residential-property developers are Guangdong-based (a province traditionally known for both entrepreneurship and rebellion) makes them particularly vulnerable to the political crackdown on capitalists. The focus increasingly will be on cutting the costs of property, healthcare and education, not just tech titans.  However, moral hazard will be tightly managed. Onshore (local currency) bond holders will bear relatively few losses on high-profile names like Evergrande (although there will be credit events for bank loans), while offshore foreign-currency bond holders are likely to feel considerable pain (i.e., the partial end of the "moral hazard play"). The political crackdown on sundry capitalists -- tech titans, others seeking overseas listings, property developers, gaming companies -- will persist, adding more to the China Premium. We would recommend staying Underweight China equities amid the uncertainty generated by this political instability, which will result in a new equilibrium discount on Chinese valuations emerging by early 2022.  

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-8039'>Bayan Resources</a></li><li><a href='#lucror-entity-6159'>China SCE</a></li><li><a href='#lucror-entity-227'>Guangzhou R&F Properties</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Bayan ResourcesChina SCEGuangzhou R&F Properties

Morning Views Asia: Bayan Resources, China SCE, Guangzhou R&F Properties

China

Guangzhou R&F Properties Co., Ltd. operates real estate businesses. The Company provides housing renovation, housing loans, real estate brokerage, property management, and other services. Guangzhou R&F Properties also operates hotel management.

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Guangzhou R&F Properties (2777 HK)

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related...

Lucror Analytics

Morning Views Asia: Guangzhou R&F Properties

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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

China: The End of the Moral Hazard Play?

Moral hazard will be managed, not ended. Offshore bonds, local loans will bear pain. Property, health, education costs must fall. We recommend...

Prasenjit K. Basu

Morning Views Asia: Bayan Resources, China SCE, Guangzhou R&F Properties

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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