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

Macroeconomics

<ul>
<li>Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. </li>
<li>More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   </li>
<li>With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. </li>
</ul>


Although the fiscal deficit declined to 1.6% of GDP in 2023, markets are pricing in risks arising from President-elect Prabowo's possible resort to fiscal profligacy in pursuit of 8% growth. 
More tangibly, with exports declining 7.5%YoY and imports up 1.1%YoY in Q1CY24, the trade surplus shrank to US$7.3bn (from Q1CY23's US$12.11bn), likely widening the CAD (from Q4CY23's 0.4% of GDP).   
With IDR depreciating 9.3%YoY, BI hiked its policy rate by 25bp last week to pre-empt imported inflation. Another rate hike is likely before Oct'24, so we would Underweight Indonesia. 


Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

Cross Asset Strategy

<div class="content-highlight">
<p>The week that was in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a> is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.</p>
<p>We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets. </p>
</div><h3>Corporate Webinar with <a href="https://www.smartkarma.com/entities/pt-aneka-gas-industri" target="_blank" data-smartkarma-citation="entities:23564:1" rel="noopener">Aneka Gas (AGII IJ)</a> </h3><p>In<a href="https://www.smartkarma.com/insights/smartkarma-corporate-webinar-aneka-gas-indonesia-gas-industry-leader" target="_blank" rel="noopener"> Smartkarma Corporate Webinar | Aneka Gas: Indonesia Gas Industry Leader</a>, CrossASEAN insight provider<a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener"> Angus Mackintosh</a> will host a webinar with<a href="https://www.smartkarma.com/entities/pt-aneka-gas-industri" target="_blank" rel="noopener"> Aneka Gas (AGII IJ)</a> with the company's management to introduce the company and discuss its future prospects.</p><h3>Equity Bottom Up</h3><p>In <a href="https://www.smartkarma.com/insights/bank-mandiri-bmri-ij-digital-and-syariah-fuelled-recovery" target="_blank" data-smartkarma-citation="insights:51103" rel="noopener">Bank Mandiri (BMRI IJ) - Digital and Syariah Fuelled Recovery</a>, CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> circles back to this leading Indonesian bank post a call with management.</p><p><a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener"></a>In<a href="https://www.smartkarma.com/insights/monde-nissin-pre-ipo-not-cheap-but-sensible" target="_blank" rel="noopener"> Monde Nissin Pre-IPO - Not Cheap but Sensible</a>,<a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" rel="noopener"> Sumeet Singh</a> returns to look at<a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" rel="noopener"> Monde Nissin Corp (0191881D PM)</a> after the company fixed the offer price for its IPO at PHP13.5/share. </p><p>In<a href="https://www.smartkarma.com/insights/monde-nissin-ipo-valuation-insights" target="_blank" rel="noopener"> Monde Nissin IPO: Valuation Insights</a>,<a href="https://www.smartkarma.com/profiles/arun-george" target="_blank" rel="noopener"> Arun George</a> reports back on<a href="https://www.smartkarma.com/entities/monde-nissin-corp" target="_blank" rel="noopener"> Monde Nissin Corp (0191881D PM)</a> after it announced its IPO price of PHP13.50 to raise gross proceeds of USD1bn. </p><p>In<a href="https://www.smartkarma.com/insights/ngern-tid-lor-ipo-trading-should-be-a-steady-listing" target="_blank" rel="noopener"> Ngern Tid Lor IPO Trading - Should Be a Steady Listing</a>,<a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" rel="noopener"> Sumeet Singh</a> returns to look at<a href="https://www.smartkarma.com/entities/ngern-tid-lor" target="_blank" rel="noopener"> Ngern Tid Lor (NTL TB)</a>'s deal dynamics and valuations. Ngern Tid Lor (NTL), a financial service provider based in Thailand, already raised around US$1bn in its Thailand IPO. </p><p>In<a href="https://www.smartkarma.com/insights/singapore-press-own-time-own-target-restructuring-lor-come-i-clap-for-you" target="_blank" rel="noopener"> Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You)</a>,<a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" rel="noopener"> Travis Lundy</a> provides his view on<a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" rel="noopener"> Singapore Press Holdings (SPH SP)</a> after it announced that it would undergo a proposed restructuring, spinning off the Media Business into a Media Holdco, which would be run as a not-for-profit in the form of a Company Limited by Guarantee (CLG). </p><p>In<a href="https://www.smartkarma.com/insights/hmpro-expect-2q21-earnings-recover-yoy-from-low-base" target="_blank" rel="noopener"> HMPRO: Expect 2Q21 Earnings Recover YoY from Low Base</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> circles back to<a href="https://www.smartkarma.com/entities/home-product-center-pcl" target="_blank" rel="noopener"> Home Product Center (HMPRO TB)</a> after its analyst meeting, which came out with a positive tone, and maintains a BUY rating to the company. </p><p>In<a href="https://www.smartkarma.com/insights/osp-king-of-energy-drinks-in-thailand" target="_blank" rel="noopener"> OSP: King of Energy Drinks in Thailand</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> initiate coverage of <a href="https://www.smartkarma.com/entities/osotspa-public-company-limited" target="_blank" data-smartkarma-citation="entities:27004:1" rel="noopener">Osotspa Public Company Limited (OSP TB)</a> with a BUY rating, based on a target price of THB43.0,  derived from 35x FY21E PER, close to the average of the Thailand Energy Drinks sector but at a 40% discount to the Asia ex-Japan Consumer Staples sector.</p><p><a href="https://www.smartkarma.com/insights/advanc-1q21-normalized-earnings-slightly-recovered-qoq" target="_blank" rel="noopener">ADVANC: 1Q21 Normalized Earnings Slightly Recovered QoQ</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> maintains a BUY rating on<a href="https://www.smartkarma.com/entities/advanced-info-service-pcl" target="_blank" rel="noopener"> Advanced Info Service (ADVANC TB)</a> post its recent1Q2021 results. </p><p>In<a href="https://www.smartkarma.com/insights/ivl-solid-outlook-in-2q21-from-seasonality" target="_blank" rel="noopener"> IVL: Solid Outlook in 2Q21 from Seasonality</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> circles back to<a href="https://www.smartkarma.com/entities/indorama-ventures-pcl" target="_blank" rel="noopener"> Indorama Ventures (IVL TB)</a> after it released its 1Q2021 results and recorded a net profit of THB6bn,  the highest level since 3Q18.</p><h3>Sector and Thematic </h3><p>In<a href="https://www.smartkarma.com/insights/set50-june-index-rebalance-preview-no-change-to-index-methodology-3-potential-constituent-changes" target="_blank" rel="noopener"> SET50 June Index Rebalance Preview: No Change to Index Methodology; 3 Potential Constituent Changes</a>,<a href="https://www.smartkarma.com/profiles/brian-freitas" target="_blank" rel="noopener"> Brian Freitas</a> takes a look at the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-index" target="_blank" rel="noopener">Thailand SET Index (SET INDEX)</a> rebalancing, where there is a high probability of <a href="https://www.smartkarma.com/entities/sri-trang-gloves-thailand-public-company-limited" target="_blank" rel="noopener">Sri Trang Gloves (Thailand) Public Company Limited (STGT TB)</a> and <a href="https://www.smartkarma.com/entities/irpc-pcl" target="_blank" rel="noopener">IRPC PCL (IRPC TB)</a> being included in the index. </p>


The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets. 
Corporate Webinar with Aneka Gas (AGII IJ) In Smartkarma Corporate Webinar | Aneka Gas: Indonesia Gas Industry Leader, CrossASEAN insight provider Angus Mackintosh will host a webinar with Aneka Gas (AGII IJ) with the company's management to introduce the company and discuss its future prospects.Equity Bottom UpIn Bank Mandiri (BMRI IJ) - Digital and Syariah Fuelled Recovery, CrossASEAN Insight Provider Angus Mackintosh circles back to this leading Indonesian bank post a call with management.In Monde Nissin Pre-IPO - Not Cheap but Sensible, Sumeet Singh returns to look at Monde Nissin Corp (0191881D PM) after the company fixed the offer price for its IPO at PHP13.5/share. In Monde Nissin IPO: Valuation Insights, Arun George reports back on Monde Nissin Corp (0191881D PM) after it announced its IPO price of PHP13.50 to raise gross proceeds of USD1bn. In Ngern Tid Lor IPO Trading - Should Be a Steady Listing, Sumeet Singh returns to look at Ngern Tid Lor (NTL TB)'s deal dynamics and valuations. Ngern Tid Lor (NTL), a financial service provider based in Thailand, already raised around US$1bn in its Thailand IPO. In Singapore Press Own Time Own Target Restructuring Lor... (Come I Clap For You), Travis Lundy provides his view on Singapore Press Holdings (SPH SP) after it announced that it would undergo a proposed restructuring, spinning off the Media Business into a Media Holdco, which would be run as a not-for-profit in the form of a Company Limited by Guarantee (CLG). In HMPRO: Expect 2Q21 Earnings Recover YoY from Low Base, Country Group circles back to Home Product Center (HMPRO TB) after its analyst meeting, which came out with a positive tone, and maintains a BUY rating to the company. In OSP: King of Energy Drinks in Thailand, Country Group initiate coverage of Osotspa Public Company Limited (OSP TB) with a BUY rating, based on a target price of THB43.0,  derived from 35x FY21E PER, close to the average of the Thailand Energy Drinks sector but at a 40% discount to the Asia ex-Japan Consumer Staples sector.ADVANC: 1Q21 Normalized Earnings Slightly Recovered QoQ, Country Group maintains a BUY rating on Advanced Info Service (ADVANC TB) post its recent1Q2021 results. In IVL: Solid Outlook in 2Q21 from Seasonality, Country Group circles back to Indorama Ventures (IVL TB) after it released its 1Q2021 results and recorded a net profit of THB6bn,  the highest level since 3Q18.Sector and Thematic In SET50 June Index Rebalance Preview: No Change to Index Methodology; 3 Potential Constituent Changes, Brian Freitas takes a look at the Thailand SET Index (SET INDEX) rebalancing, where there is a high probability of Sri Trang Gloves (Thailand) Public Company Limited (STGT TB) and IRPC PCL (IRPC TB) being included in the index. 

The Week That Was in ASEAN@Smartkarma - Bank Mandiri, Monde Nissin IPO, and Singapore's Free Press

<p><em><strong>With the current account in surplus in 2H 2020, and inflation below BI's 2-4% target for 9 months, we expect the policy rate to decline by 50bp over the next half year, spurring a strong above-consensus rebound to 6.7% real GDP growth. Structural reforms that have made the labour-market more flexible and created an equity-funded vehicle to expedite infrastructure investment, will contribute to the economic acceleration, as will the spill-over from 2020's unspent fiscal stimulus, and this year's continued fiscal accommodation. </strong></em></p><p>With inflation well below BI's agreed target range of 2-4% for 9 consecutive months (and the real policy rate above +2% for the past 10 months), we expect BI to cut its policy rate by 25bp each in the next two quarters, to an all-time low of 3% by September 2021. This will spur a strong economic rebound. Aided by the low-base effect (especially in 2Q), we expect Indonesia's real GDP to accelerate to 6.7% growth in 2021. In 1Q 2021, real GDP is likely to have grown 4.5% YoY, led by a strong export rebound, but a sharp acceleration is likely in the rest of 2021, with the past year's structural reforms also helping.  </p><p>Those reforms have substantially reduced the severance compensation employers are required to pay laid-off employees, thereby making the labour-market much more flexible, and aiding Pres. Jokowi's job creation agenda, which depends crucially on spurring FDI inflows. With the current account in surplus during 2H 2020, and FDI inflows up 5.5% YoY, foreign reserves have rebounded in the past 3 months (to US$138.8 billion, or 10 months import cover). While there will still be some downward pressure on the IDR when interest rates decline (given the large proportion of foreign ownership of local bonds), mild depreciation in the early stages of an economic recovery is unlikely to deter BI. </p><p>The 7-day moving average of new Covid cases peaked at a 7-day moving average of 12,476 on 2nd February and has since moderated to 5174 by 27 March 2021, allowing the economy to resume functioning more normally. Large fiscal packages worth an additional 4.4% of GDP were announced last year, after the constitutional ceiling on annual fiscal deficits was temporarily raised (from 3% of GDP). But past experience suggests that actual spending will spill-over into 1H 2021 (even with the deficit for this year programmed to decline to 5.9% of GDP, and the extra spending cut to 2.1% of GDP). The Nusantara Investment Authority (NIA), created as part of the structural reforms and funded mainly by foreign, private and government equity (rather than debt) will contribute to accelerating the pace of infrastructure investment.  With the economy likely to grow much faster than consensus expectations, we are bullish on Indonesian equities, particularly large banks like <a href="https://www.smartkarma.com/entities/bank-central-asia-tbk-pt" target="_blank" data-smartkarma-citation="entities:440:1" rel="noopener">Bank Central Asia (BBCA IJ)</a>. </p>

With the current account in surplus in 2H 2020, and inflation below BI's 2-4% target for 9 months, we expect the policy rate to decline by 50bp over the next half year, spurring a strong above-consensus rebound to 6.7% real GDP growth. Structural reforms that have made the labour-market more flexible and created an equity-funded vehicle to expedite infrastructure investment, will contribute to the economic acceleration, as will the spill-over from 2020's unspent fiscal stimulus, and this year's continued fiscal accommodation. With inflation well below BI's agreed target range of 2-4% for 9 consecutive months (and the real policy rate above +2% for the past 10 months), we expect BI to cut its policy rate by 25bp each in the next two quarters, to an all-time low of 3% by September 2021. This will spur a strong economic rebound. Aided by the low-base effect (especially in 2Q), we expect Indonesia's real GDP to accelerate to 6.7% growth in 2021. In 1Q 2021, real GDP is likely to have grown 4.5% YoY, led by a strong export rebound, but a sharp acceleration is likely in the rest of 2021, with the past year's structural reforms also helping.  Those reforms have substantially reduced the severance compensation employers are required to pay laid-off employees, thereby making the labour-market much more flexible, and aiding Pres. Jokowi's job creation agenda, which depends crucially on spurring FDI inflows. With the current account in surplus during 2H 2020, and FDI inflows up 5.5% YoY, foreign reserves have rebounded in the past 3 months (to US$138.8 billion, or 10 months import cover). While there will still be some downward pressure on the IDR when interest rates decline (given the large proportion of foreign ownership of local bonds), mild depreciation in the early stages of an economic recovery is unlikely to deter BI. The 7-day moving average of new Covid cases peaked at a 7-day moving average of 12,476 on 2nd February and has since moderated to 5174 by 27 March 2021, allowing the economy to resume functioning more normally. Large fiscal packages worth an additional 4.4% of GDP were announced last year, after the constitutional ceiling on annual fiscal deficits was temporarily raised (from 3% of GDP). But past experience suggests that actual spending will spill-over into 1H 2021 (even with the deficit for this year programmed to decline to 5.9% of GDP, and the extra spending cut to 2.1% of GDP). The Nusantara Investment Authority (NIA), created as part of the structural reforms and funded mainly by foreign, private and government equity (rather than debt) will contribute to accelerating the pace of infrastructure investment.  With the economy likely to grow much faster than consensus expectations, we are bullish on Indonesian equities, particularly large banks like Bank Central Asia (BBCA IJ). 

Indonesia: More Rate Cuts to Spur Recovery After Recent Structural Reform

Indonesia 10Y (GIDR10YR INDEX)

Indonesia: Prabowo Risk Beginning to Hurt IDR, Requiring Tighter Money

Despite a smaller fiscal deficit (1.6% of GDP) in 2023, markets are pricing in "Prabowo risk". The switch to a current account deficit will...

Prasenjit K. Basu

The Week That Was in ASEAN@Smartkarma - Bank Mandiri, Monde Nissin IPO, and Singapore's Free Press

The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South...

Angus Mackintosh

Indonesia: More Rate Cuts to Spur Recovery After Recent Structural Reform

With inflation below BI's 2-4% target for 9 months, we expect 50bp of further rate cuts. That, coupled with fiscal stimulus & structural reform,...

Prasenjit K. Basu