Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>A review of recent events/data impacting our investment themes or outlook</li>
<li>China listed HK shares continue to lead the pack in Asia</li>
<li>India's rate cuts, tax cuts and election wins are not supporting the market</li>
</ul>


A review of recent events/data impacting our investment themes or outlook
China listed HK shares continue to lead the pack in Asia
India's rate cuts, tax cuts and election wins are not supporting the market


Overview #15 – Who's Afraid of the USD?

Chief Executive Officer, Emmer Capital Partners Limited

Manishi Raychaudhuri

Chief Executive Officer

Emmer Capital Partners Limited

Emmer Capital Partners is an Asia Pacific focused financial advisory firm engaging in strategic financial asset allocation advice, bespoke thematic research and advising early-stage companies and connecting them to investors. Emmer Capital provides macro-economic and multi-asset investment strategy inputs to institutions, family offices, private wealth managers, private equity, and corporate boards directly and through independent research platforms. Emmer Capital also advises a wide range of startup companies on fund raising and business strategy. Emmer Capital's active engagement with the print and electronic media reaches a broad spectrum of investors across the globe.

<ul>
<li>Asia is cheap relative to the US - trading at less than 40% of US's P/BV - but that's because Asia's ROE has consistently declined relative to US's.</li>
<li>Over the next couple of years Asian ROEs are forecast to revive relative to the US's but all Asian markets are not forecast to participate in this recovery.</li>
<li>The "ROE Winners" (rising forecast ROEs) are Korea, Taiwan, India, Malaysia. Indonesia to stay flat but solidly higher than Asian average. We are skeptical of HK/China and Thailand's ROE recovery.</li>
</ul>


Asia is cheap relative to the US - trading at less than 40% of US's P/BV - but that's because Asia's ROE has consistently declined relative to US's.
Over the next couple of years Asian ROEs are forecast to revive relative to the US's but all Asian markets are not forecast to participate in this recovery.
The "ROE Winners" (rising forecast ROEs) are Korea, Taiwan, India, Malaysia. Indonesia to stay flat but solidly higher than Asian average. We are skeptical of HK/China and Thailand's ROE recovery.


Asian Equities: Be Selective - Focus on The "ROE Winners"

<ul>
<li>A key medium-term driver of share price is earnings estimate trajectory - in particular, "earnings inflections" - i.e. the trajectory of earnings estimates changing directions. </li>
<li>Different Asian markets have had different estimate trajectories. But most suffered estimate cuts since August/September 2024, coinciding with the US Dollar appreciation and the spike in US yields.</li>
<li>We argue that investors need to watch out for Taiwan, Indonesia, Malaysia and India for earnings estimate increases. India's could decline in the near term and commence an uptrend later. </li>
</ul>


A key medium-term driver of share price is earnings estimate trajectory - in particular, "earnings inflections" - i.e. the trajectory of earnings estimates changing directions. 
Different Asian markets have had different estimate trajectories. But most suffered estimate cuts since August/September 2024, coinciding with the US Dollar appreciation and the spike in US yields.
We argue that investors need to watch out for Taiwan, Indonesia, Malaysia and India for earnings estimate increases. India's could decline in the near term and commence an uptrend later. 


Asian Equities: In Search of Earnings Estimate Uptrends

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>
<strong><a href="https://www.smartkarma.com/entities/jardine-cycle-carriage-ltd" target="_blank" data-smartkarma-citation="entities:347:1" rel="noopener">Jardine Cycle &amp; Carriage (JCNC SP)</a></strong> is currently trading at a ~9% discount to NAV, around the narrowest since the post-Covid nadir in April 2020.</li>
<li>JCNC's recent results highlighted a marked improvement in its unlisted Vietnamese automotive ops. </li>
<li>Weakness in the Indonesian rupiah has taken some of the shine off <strong><a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a></strong>'s strong sales growth. </li>
</ul>



Jardine Cycle &amp; Carriage (JCNC SP) is currently trading at a ~9% discount to NAV, around the narrowest since the post-Covid nadir in April 2020.
JCNC's recent results highlighted a marked improvement in its unlisted Vietnamese automotive ops. 
Weakness in the Indonesian rupiah has taken some of the shine off Astra International (ASII IJ)'s strong sales growth. 


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>Riding the boom in energy prices, Indonesia had twin surpluses in 1H2022: a fiscal surplus of 0.9% of GDP and a BoP current account surplus of 0.6% of GDP.</li>
<li>After last week's policy rate hike, real interest rates are close to positive. Fiscal strength allows the government to boost spending to counter the OECD recession over the next year.</li>
<li>We expect real GDP growth of 6%YoY in 2H2022, and 6.3% in 2023. With nominal GDP surging nearly 15%, EPS will be resurgent and valuations attractive. Overweight Indonesia.  </li>
</ul>


Riding the boom in energy prices, Indonesia had twin surpluses in 1H2022: a fiscal surplus of 0.9% of GDP and a BoP current account surplus of 0.6% of GDP.
After last week's policy rate hike, real interest rates are close to positive. Fiscal strength allows the government to boost spending to counter the OECD recession over the next year.
We expect real GDP growth of 6%YoY in 2H2022, and 6.3% in 2023. With nominal GDP surging nearly 15%, EPS will be resurgent and valuations attractive. Overweight Indonesia.  


Indonesia: Set to Accelerate Amid the OECD Recession, Helped by Twin Surpluses

Indonesia

The Jakarta Stock Price Index is a modified capitalization-weighted index of all stocks listed on the regular board of the Indonesia Stock Exchange. The index was developed with a base index value of 100 as of August 10, 1982. Please look at CDR JA<GO> for exchange trading days.

Jakarta Stock Exchange Composite Index (JCI INDEX)

Jakarta Stock Exchange Composite Index (JCI INDEX)

Overview #15 – Who's Afraid of the USD?

A review of recent events/data impacting our investment themes and outlook. We takea quick tour around China, India and Japan

Rikki Malik

Asian Equities: Be Selective - Focus on The "ROE Winners"

Asia's cheap P/BV compared to the US is due to low ROE. Over the next couple of years Asian ROE is forecast to revive relative to US, driven by...

Manishi Raychaudhuri

Asian Equities: In Search of Earnings Estimate Uptrends

Earnings estimate trajectory, especially "earnings inflection," are key drivers of share price in Asian markets. We see potential uptrends in...

Manishi Raychaudhuri

JCNC Is Overstretched Vs. Astra

If you had set up the stub, I would be unwinding here. I'd look to reverse the stub as and when the current momentum reverses.

David Blennerhassett

Indonesia: Set to Accelerate Amid the OECD Recession, Helped by Twin Surpluses

With a BoPCA surplus of 0.6% & fiscal surplus of 0.9% of GDP in 1H2022, Indonesia is able to provide a big fiscal stimulus over the next year. EPS...

Prasenjit K. Basu

Overview #15 – Who's Afraid of the USD?

A review of recent events/data impacting our investment themes and outlook. We takea quick tour around China, India and Japan

Rikki Malik

Asian Equities: Be Selective - Focus on The "ROE Winners"

​Asia's cheap P/BV compared to the US is due to low ROE. Over the next couple of years Asian ROE is forecast to revive relative to US, driven by...

Manishi Raychaudhuri

Asian Equities: In Search of Earnings Estimate Uptrends

​Earnings estimate trajectory, especially "earnings inflection," are key drivers of share price in Asian markets. We see potential uptrends in...

Manishi Raychaudhuri

JCNC Is Overstretched Vs. Astra

If you had set up the stub, I would be unwinding here. I'd look to reverse the stub as and when the current momentum reverses.

David Blennerhassett

Indonesia: Set to Accelerate Amid the OECD Recession, Helped by Twin Surpluses

With a BoPCA surplus of 0.6% & fiscal surplus of 0.9% of GDP in 1H2022, Indonesia is able to provide a big fiscal stimulus over the next year. EPS...

Prasenjit K. Basu

Asia's cheap P/BV compared to the US is due to low ROE. Over the next couple of years Asian ROE is forecast to revive relative to US, driven by...

Earnings estimate trajectory, especially "earnings inflection," are key drivers of share price in Asian markets. We see potential uptrends in...