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

Ismail Sabri Yaakob, the third-ranking member of Malaysia's second-largest party in parliament (UMNO, the long-ruling party that was defeated at the 2018 general election) became Malaysia's 9th Prime Minister on Saturday (21 August 2021). Having never been the minister of Education, Trade &amp; Industry or Finance (the 3 traditional stepping-stones to the top job), the new PM is a relative lightweight in Malaysian politics: all previous prime ministers from UMNO have also simultaneously been Presidents of the party (while UMNO Deputy Presidents were Deputy PM).
Continuity in policy is assured, with the line-up of parties exactly the same as the previous government -- except that the Prime Minister is different, from UMNO rather than Bersatu (PPBM). This year's fiscal deficit (projected at 6% of GDP) is still expected to keep real GDP growth at just 2.5% YoY in 2H 2021; given high public debt, the deficit will need to be reined in next year, limiting the government's options. PM Ismail Sabri will also face persistent pressure from the UMNO leadership to drop (or ease up on) corruption cases against UMNO leaders like ex-PM Najib and party president Zahid Hamidi, while Muhyiddin's Bersatu  counters with pressure to keep prosecuting those cases. The Sarawak state election (originally due in June 2021, now likely only in March 2022) could be a crucial destabilizing factor, as the 18 Sarawak MPs (from the GPS group) are crucial to this government's parliamentary majority. 
Opposition leader Anwar Ibrahim has chosen not to make sordid deals with tainted politicians, and instead bide his time until the next (15th) General Election, officially due in May 2023, but likely to be held sooner (mid-2022) if the Covid pandemic eases. On present indications, that will become a straight fight between a purely Malay-Islamist grouping (UMNO, Bersatu and the openly Islamist PAS) and a multi-racial coalition -- comprising two genuinely multi-racial parties (PKR and DAP) with a more ethnically-harmonious vision for Malaysia, supported by two smaller Malay parties (Amanah and Pejuang).  For the past 3 decades, UMNO has never formally aligned with PAS (which nonetheless gained ground in Kelantan and Terengganu, the two states with the largest proportion of Malays). The emergence of an UMNO-Bersatu-PAS alliance at the centre of the current government is shifting Malay politics increasingly in a pro-Shariah direction (including the imposition of hudud-based punishments), which will likely polarize the electorate by 2023. Competence (especially in dealing with Covid) will be a key determinant of the political outcome (and on that, both Muhyiddin and Ismail Sabri will be on the defensive), but the broader debate about Malaysia's future direction will be the key underlying question. That the Anwar-led alliance won the 2013 election (in terms of popular vote) and in 2018 (despite Anwar being in prison) suggests that the electorate will hand PH a clearer victory at the 15th General Election. But until that election is held, slow growth and a more polarized society will make the Malaysian market unattractive.

Ismail Sabri Yaakob, the third-ranking member of Malaysia's second-largest party in parliament (UMNO, the long-ruling party that was defeated at the 2018 general election) became Malaysia's 9th Prime Minister on Saturday (21 August 2021). Having never been the minister of Education, Trade &amp; Industry or Finance (the 3 traditional stepping-stones to the top job), the new PM is a relative lightweight in Malaysian politics: all previous prime ministers from UMNO have also simultaneously been Presidents of the party (while UMNO Deputy Presidents were Deputy PM).
Continuity in policy is assured, with the line-up of parties exactly the same as the previous government -- except that the Prime Minister is different, from UMNO rather than Bersatu (PPBM). This year's fiscal deficit (projected at 6% of GDP) is still expected to keep real GDP growth at just 2.5% YoY in 2H 2021; given high public debt, the deficit will need to be reined in next year, limiting the government's options. PM Ismail Sabri will also face persistent pressure from the UMNO leadership to drop (or ease up on) corruption cases against UMNO leaders like ex-PM Najib and party president Zahid Hamidi, while Muhyiddin's Bersatu  counters with pressure to keep prosecuting those cases. The Sarawak state election (originally due in June 2021, now likely only in March 2022) could be a crucial destabilizing factor, as the 18 Sarawak MPs (from the GPS group) are crucial to this government's parliamentary majority. 
Opposition leader Anwar Ibrahim has chosen not to make sordid deals with tainted politicians, and instead bide his time until the next (15th) General Election, officially due in May 2023, but likely to be held sooner (mid-2022) if the Covid pandemic eases. On present indications, that will become a straight fight between a purely Malay-Islamist grouping (UMNO, Bersatu and the openly Islamist PAS) and a multi-racial coalition -- comprising two genuinely multi-racial parties (PKR and DAP) with a more ethnically-harmonious vision for Malaysia, supported by two smaller Malay parties (Amanah and Pejuang).  For the past 3 decades, UMNO has never formally aligned with PAS (which nonetheless gained ground in Kelantan and Terengganu, the two states with the largest proportion of Malays). The emergence of an UMNO-Bersatu-PAS alliance at the centre of the current government is shifting Malay politics increasingly in a pro-Shariah direction (including the imposition of hudud-based punishments), which will likely polarize the electorate by 2023. Competence (especially in dealing with Covid) will be a key determinant of the political outcome (and on that, both Muhyiddin and Ismail Sabri will be on the defensive), but the broader debate about Malaysia's future direction will be the key underlying question. That the Anwar-led alliance won the 2013 election (in terms of popular vote) and in 2018 (despite Anwar being in prison) suggests that the electorate will hand PH a clearer victory at the 15th General Election. But until that election is held, slow growth and a more polarized society will make the Malaysian market unattractive. 

Malaysia: A Lightweight Takes Over, Setting up a Future Election over the Nation's Soul

Cross Asset Strategy

With the Supreme Council of UMNO (Malaysia's former ruling party, which is now down to just 38 out of 220 MPs in the current parliament) withdrawing support from PM Muhyiddin's Perikatan Nasional (PN), the latter is theoretically down to 77 MPs. However, 26 UMNO MPs (including recently-appointed DPM Ismail Sabry Yaakob, Senior Minister Hishamuddin Hussein and Coordinating minister for Covid vaccination Khairy Jamaluddin) have not yet signed statutory declarations (SDs) withdrawing support from PM Muhyiddin Yassin's PN government. Even if he is able to hold onto all 26 MPs, however, Muhyiddin will have only 103 MPs, 8 short of a majority. Pakatan Harapan (PH), the main Opposition alliance led by Anwar Ibrahim, has 90 MPs, 21 short of a majority. If the 38 UMNO MPs swing their support to PH, it will be able to comfortably form a government, but that is unlikely immediately. Beginning with 12 UMNO MPs, Anwar will need another 9. If the Sarawak-based GPS goes along with the UMNO (hence BN) leadership and switches to PH (a big leap that the GPS has never made electorally in the past), that will suffice to enable Anwar to form a government. Alternatively, Anwar could form a government with the help of Shafie Apdal's Warisan (8 MPs) plus a couple of independents, or more easily with Warisan plus the 4 MPs from Mahathir's Pejuang. The King has thus far been reluctant to allow Anwar to form a government. The implicit fear among Malays (as perhaps also felt by many of the rulers) is that a PH government will be dominated by DAP, which will be its largest party. Given the political impasse, and the fact that PH (then including Muhyiddin's Bersatu) did win the last general election, a PH government would be morally legitimate. UMNO, however, will look primarily at the next general election, now unlikely to be held for at least another 9-12 months (until Covid recedes). With Muhyiddin losing credibility after the shambolic response to Covid in the past half-year, UMNO is now expressing outrage over the PN government's perceived insults to the King. Since it cannot form a government on its own, the UMNO leadership will likely go along with an Anwar-led government, as long as UMNO is prominently represented in it. The UMNO calculation will be that, when the party is ready for a post-Covid general election, UMNO will pull the plug on Anwar's government and take the country back to a general election. For now, uncertainty prevails (a big negative); but if Anwar Ibrahim is finally able to become Prime Minister (heading a genuinely multi-ethnic government and cabinet), it will be good for Malaysia in the longer-term.

With the Supreme Council of UMNO (Malaysia's former ruling party, which is now down to just 38 out of 220 MPs in the current parliament) withdrawing support from PM Muhyiddin's Perikatan Nasional (PN), the latter is theoretically down to 77 MPs. However, 26 UMNO MPs (including recently-appointed DPM Ismail Sabry Yaakob, Senior Minister Hishamuddin Hussein and Coordinating minister for Covid vaccination Khairy Jamaluddin) have not yet signed statutory declarations (SDs) withdrawing support from PM Muhyiddin Yassin's PN government. Even if he is able to hold onto all 26 MPs, however, Muhyiddin will have only 103 MPs, 8 short of a majority. Pakatan Harapan (PH), the main Opposition alliance led by Anwar Ibrahim, has 90 MPs, 21 short of a majority. If the 38 UMNO MPs swing their support to PH, it will be able to comfortably form a government, but that is unlikely immediately. Beginning with 12 UMNO MPs, Anwar will need another 9. If the Sarawak-based GPS goes along with the UMNO (hence BN) leadership and switches to PH (a big leap that the GPS has never made electorally in the past), that will suffice to enable Anwar to form a government. Alternatively, Anwar could form a government with the help of Shafie Apdal's Warisan (8 MPs) plus a couple of independents, or more easily with Warisan plus the 4 MPs from Mahathir's Pejuang. The King has thus far been reluctant to allow Anwar to form a government. The implicit fear among Malays (as perhaps also felt by many of the rulers) is that a PH government will be dominated by DAP, which will be its largest party. Given the political impasse, and the fact that PH (then including Muhyiddin's Bersatu) did win the last general election, a PH government would be morally legitimate. UMNO, however, will look primarily at the next general election, now unlikely to be held for at least another 9-12 months (until Covid recedes). With Muhyiddin losing credibility after the shambolic response to Covid in the past half-year, UMNO is now expressing outrage over the PN government's perceived insults to the King. Since it cannot form a government on its own, the UMNO leadership will likely go along with an Anwar-led government, as long as UMNO is prominently represented in it. The UMNO calculation will be that, when the party is ready for a post-Covid general election, UMNO will pull the plug on Anwar's government and take the country back to a general election. For now, uncertainty prevails (a big negative); but if Anwar Ibrahim is finally able to become Prime Minister (heading a genuinely multi-ethnic government and cabinet), it will be good for Malaysia in the longer-term. 

Malaysia in Political Flux: Muhyiddin Likely to Go, but Can Anwar Gain a Majority?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

Sri Trang Gloves Thailand  / Event-Driven

Today is the last day of the review period for the June rebalance of the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a>. The Stock Exchange of Thailand (SET) should announce the list of changes in the next few weeks and the changes will be effective after the close of trading on 30 June.With no changes made to the index methodology post the market consultation, we see three potential inclusions and exclusions for the <a href="https://www.smartkarma.com/entities/stock-exchange-of-thailand-set-50-index" target="_blank" data-smartkarma-citation="entities:31493:1" rel="noopener">Stock Exchange of Thailand SET 50 Index (SET50 INDEX)</a>.<a href="https://www.smartkarma.com/entities/sri-trang-gloves-thailand-public-company-limited" target="_blank" data-smartkarma-citation="entities:29141:1" rel="noopener">Sri Trang Gloves (Thailand) Public Company Limited (STGT TB)</a> and <a href="https://www.smartkarma.com/entities/irpc-pcl" target="_blank" data-smartkarma-citation="entities:19051:1" rel="noopener">IRPC PCL (IRPC TB)</a> are high probability inclusions while <a href="https://www.smartkarma.com/entities/vgi-pcl" target="_blank" data-smartkarma-citation="entities:12409:1" rel="noopener">VGI PCL (VGI TB)</a> and <a href="https://www.smartkarma.com/entities/bangkok-commercial-asset-management-public-company-limited" target="_blank" data-smartkarma-citation="entities:28442:1" rel="noopener">Bangkok Commercial Asset Management (BAM TB)</a> are high probability deletions from the index.<a href="https://www.smartkarma.com/entities/sri-trang-agro-industry-pcl" target="_blank" data-smartkarma-citation="entities:2759:1" rel="noopener">Sri Trang Agro Industry (STA TB)</a> is a lower probability inclusion and <a href="https://www.smartkarma.com/entities/toa-paint-thailand-pcl" target="_blank" data-smartkarma-citation="entities:24235:1" rel="noopener">TOA Paint (Thailand) (TOA TB)</a> is the corresponding deletion.<a href="https://www.smartkarma.com/entities/kce-electronics-pcl" target="_blank" data-smartkarma-citation="entities:1892:1" rel="noopener">KCE Electronics PCL (KCE TB)</a> at rank 51 will just miss out on index inclusion at the June review despite the surge in the stock price due to the averaging process.

Today is the last day of the review period for the June rebalance of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX). The Stock Exchange of Thailand (SET) should announce the list of changes in the next few weeks and the changes will be effective after the close of trading on 30 June.With no changes made to the index methodology post the market consultation, we see three potential inclusions and exclusions for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX).Sri Trang Gloves (Thailand) Public Company Limited (STGT TB) and IRPC PCL (IRPC TB) are high probability inclusions while VGI PCL (VGI TB) and Bangkok Commercial Asset Management (BAM TB) are high probability deletions from the index.Sri Trang Agro Industry (STA TB) is a lower probability inclusion and TOA Paint (Thailand) (TOA TB) is the corresponding deletion.KCE Electronics PCL (KCE TB) at rank 51 will just miss out on index inclusion at the June review despite the surge in the stock price due to the averaging process.

SET50 June Index Rebalance Preview: Review Period Ends Today

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Korea, Taiwan, Japan and Australia all met our rally objectives and our long focus on weakness after key breakouts. Asia’s rally is extended amid lofty RSI readings for a pullback sequence to add to long exposure. Risk shift if SPX breaks 3,580 support.We touted a cycle turn date in late November (today) for a quick and sharp correction into early December with odds of a harder pullback if the SPX breaks 3,580 pivot support.Bear group to use on pullback sequences: Singapore, Malaysia and HSI. Using as our short vehicles on pullback cycles.

Korea, Taiwan, Japan and Australia all met our rally objectives and our long focus on weakness after key breakouts. Asia’s rally is extended amid lofty RSI readings for a pullback sequence to add to long exposure. Risk shift if SPX breaks 3,580 support.We touted a cycle turn date in late November (today) for a quick and sharp correction into early December with odds of a harder pullback if the SPX breaks 3,580 pivot support.Bear group to use on pullback sequences: Singapore, Malaysia and HSI. Using as our short vehicles on pullback cycles.

The <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (Klci) (FBMKLCI INDEX)</a> is the flagship index of the Bursa Malaysia. The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be announced on 3 December and will be effective after the close of trading on 18 December.The review uses today's closing price to determine the stocks to be included into and excluded from the index. We see <a href="https://www.smartkarma.com/entities/supermax-corp-bhd" target="_blank" data-smartkarma-citation="entities:12883:1" rel="noopener">Supermax Corp (SUCB MK)</a> being included in the index, replacing <a href="https://www.smartkarma.com/entities/klccp-stapled-group" target="_blank" data-smartkarma-citation="entities:7148:1" rel="noopener">KLCCP Stapled (KLCCSS MK)</a>. Glove makers should have a weighting of 14.23% in the <a href="https://www.smartkarma.com/entities/kuala-lumpur-composite-index" target="_blank" data-smartkarma-citation="entities:22913:1" rel="noopener">Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)</a> post the change.<a href="https://www.smartkarma.com/entities/kossan-rubber-industries" target="_blank" data-smartkarma-citation="entities:20482:1" rel="noopener">Kossan Rubber Industries (KRI MK)</a> has dropped out of the list of potential inclusions following the momentum unwind, while <a href="https://www.smartkarma.com/entities/genting-bhd" target="_blank" data-smartkarma-citation="entities:14210:1" rel="noopener">Genting Bhd (GENT MK)</a> and <a href="https://www.smartkarma.com/entities/genting-malaysia-bhd" target="_blank" data-smartkarma-citation="entities:3141:1" rel="noopener">Genting Malaysia (GENM MK)</a> have rallied to avoid index deletion.We estimate passive funds will need to buy 0.35 days of ADV on <a href="https://www.smartkarma.com/entities/supermax-corp-bhd" target="_blank" data-smartkarma-citation="entities:12883:1" rel="noopener">Supermax Corp (SUCB MK)</a>, while passive selling on <a href="https://www.smartkarma.com/entities/klccp-stapled-group" target="_blank" data-smartkarma-citation="entities:7148:1" rel="noopener">KLCCP Stapled (KLCCSS MK)</a> will be around 13 days of ADV.<a href="https://www.smartkarma.com/entities/klccp-stapled-group" target="_blank" data-smartkarma-citation="entities:7148:1" rel="noopener">KLCCP Stapled (KLCCSS MK)</a> was an inclusion at the previous review in June, and its short stay in the index looks like coming to an end.

The Kuala Lumpur Composite Index (Klci) (FBMKLCI INDEX) is the flagship index of the Bursa Malaysia. The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be announced on 3 December and will be effective after the close of trading on 18 December.The review uses today's closing price to determine the stocks to be included into and excluded from the index. We see Supermax Corp (SUCB MK) being included in the index, replacing KLCCP Stapled (KLCCSS MK). Glove makers should have a weighting of 14.23% in the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) post the change.Kossan Rubber Industries (KRI MK) has dropped out of the list of potential inclusions following the momentum unwind, while Genting Bhd (GENT MK) and Genting Malaysia (GENM MK) have rallied to avoid index deletion.We estimate passive funds will need to buy 0.35 days of ADV on Supermax Corp (SUCB MK), while passive selling on KLCCP Stapled (KLCCSS MK) will be around 13 days of ADV.KLCCP Stapled (KLCCSS MK) was an inclusion at the previous review in June, and its short stay in the index looks like coming to an end.

KLCI Index Rebalance Preview: Glovemaker to Take a Real Estate Spot

Malaysia

The FTSE Bursa Malaysia KLCI Index comprises of the largest 30 companies by full market capitalization on Bursa Malaysia's Main Board. When launched, on July 6, 2009 it replaced the Bursa Malaysia KLCI Index starting at the closing value of the KLCI Index on July 3 2009, also inheriting the full history of the KLCI Index.

Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)

Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX)

Malaysia: A Lightweight Takes Over, Setting up a Future Election over the Nation's Soul

PM Ismail Sabri is a lightweight who will struggle with Covid. The economy will decelerate, and society will be more polarized under a coalition...

Prasenjit K. Basu

Malaysia in Political Flux: Muhyiddin Likely to Go, but Can Anwar Gain a Majority?

UMNO's withdrawal of support reduces PN to minority, albeit with 2/3 of UMNO MPs not backing its leaders. Anwar needs 21 more MPs: he can get them...

Prasenjit K. Basu

SET50 June Index Rebalance Preview: Review Period Ends Today

Today is the last day of the review period for the June rebal. We see STGT, IRPC and STA as adds and VGI, BAM and TOA as deletes. KCE could be...

Brian Freitas

Best Short Hedges in Asia

Korea, Taiwan, Japan and Australia all met primary rally objectives. Asia’s rally is extended with a cycle turn date today for a quick and sharp...

Thomas Schroeder

KLCI Index Rebalance Preview: Glovemaker to Take a Real Estate Spot

Supermax is expected to join the KLCI after its eye-popping rally this year, taking the place of KLCC. Glove makers will have a weight of over 14%...

Brian Freitas