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

While the FOMC formally maintains an accommodative stance (including the promised purchase of US$120 billion worth of bonds monthly), the US monetary base has declined by US$15 billion between April and June 2021. Despite this stealth taper of the monetary base, M2 was still up 11.1% YoY in June 2021 -- faster than the fastest pace of M2 growth reached during QE1 and QE2 (10.4% YoY in January 2009 and January 2012) -- despite the high base of 20.6-27% YoY growth in M2 during April 2020-March 2021.  The excessively rapid pace of monetary growth inevitably is contributing to inflation: the broadest measure, the GDP deflator, was up 6%QoQsaar in 2Q 2021, core PCE inflation was 6.1% and PCE inflation was 6.4% annualized in 2Q 2021. The YoY pace of core-PCE inflation (3.5% in June) and core CPI inflation (4.5%) are at 29-year highs, but do not yet reflect the impact of soaring house prices on OERs and rental rates: the Case-Shiller 20-city house price index was up 17% YoY in May 2021 (the fastest in its 30 year history), which will inevitably seep into the consumer inflation gauges during the course of 2H 2021. To pretend housing inflation is transitory is fatuous.  In the second half of July, the US overtook Indonesia for the dubious distinction of the country with the highest number of new Covid cases globally (569K in the last week of July, 400K in the previous week). But the 7-day moving average (80K) is still less than a third the new daily cases the US was reporting at the peak (11 January 2021), and nearly half the US population has been fully vaccinated. ISM manufacturing for July (with the PMI at 59.5 and new orders at 64.9, both still suggesting spectacular growth but 1.1 points lower than June) suggests a very mild impact from this second Covid wave: real GDP will decelerate in 2H 2021, but (having already surpassed pre-Covid levels) will continue to grow faster than the US economy's potential growth, keeping the pressure on inflation. We note that taper has already begun, but will have to be formally acknowledged by the November FOMC meeting, as inflation continues to print well above the 3% YoY mark for the rest of 2021. A premature rise in the Fed Funds is inevitable before the end of 2021, completely against the market's expectations. We would stay underweight equities.

While the FOMC formally maintains an accommodative stance (including the promised purchase of US$120 billion worth of bonds monthly), the US monetary base has declined by US$15 billion between April and June 2021. Despite this stealth taper of the monetary base, M2 was still up 11.1% YoY in June 2021 -- faster than the fastest pace of M2 growth reached during QE1 and QE2 (10.4% YoY in January 2009 and January 2012) -- despite the high base of 20.6-27% YoY growth in M2 during April 2020-March 2021.  The excessively rapid pace of monetary growth inevitably is contributing to inflation: the broadest measure, the GDP deflator, was up 6%QoQsaar in 2Q 2021, core PCE inflation was 6.1% and PCE inflation was 6.4% annualized in 2Q 2021. The YoY pace of core-PCE inflation (3.5% in June) and core CPI inflation (4.5%) are at 29-year highs, but do not yet reflect the impact of soaring house prices on OERs and rental rates: the Case-Shiller 20-city house price index was up 17% YoY in May 2021 (the fastest in its 30 year history), which will inevitably seep into the consumer inflation gauges during the course of 2H 2021. To pretend housing inflation is transitory is fatuous.  In the second half of July, the US overtook Indonesia for the dubious distinction of the country with the highest number of new Covid cases globally (569K in the last week of July, 400K in the previous week). But the 7-day moving average (80K) is still less than a third the new daily cases the US was reporting at the peak (11 January 2021), and nearly half the US population has been fully vaccinated. ISM manufacturing for July (with the PMI at 59.5 and new orders at 64.9, both still suggesting spectacular growth but 1.1 points lower than June) suggests a very mild impact from this second Covid wave: real GDP will decelerate in 2H 2021, but (having already surpassed pre-Covid levels) will continue to grow faster than the US economy's potential growth, keeping the pressure on inflation. We note that taper has already begun, but will have to be formally acknowledged by the November FOMC meeting, as inflation continues to print well above the 3% YoY mark for the rest of 2021. A premature rise in the Fed Funds is inevitable before the end of 2021, completely against the market's expectations. We would stay underweight equities. 

2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

Alpha-Centric ESG Research

Kyle Rudden

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (JDL HK)</a> – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

The collective carbon footprint of global freight transportation and logistics is utterly massive, and growing. Freight and logistics accounts for 10-15% of the world's greenhouse gas (GHG) emissions, or 3.4-5.1 billion tonnes of carbon dioxide (CO2) per year of the world's 34 billion-tonne total. Current GHG mitigation and decarbonisation policies will be enough to fully offset GHG emissions from expected growth in freight transportation and logistics. Projections suggest a 60-80% increase in emissions by 2050, when a decrease of 55-80% is needed to meet the Paris Agreement goals.Climate impacts of trade growth are compounded by how it will shift freight movement from North Atlantic to Indian Ocean corridors, increasing average distances 12%. More critical is the local leg; 10% by tonne-kilometres but 30% of GHGs (inland modes like trucking are more GHG-intensive).On a company level, carbon footprint – present and future – depends on several things. Aside from macro issues like regional fuel mix and climate policies, two big factors are: 1) a company's specific function (e.g., freight trains vs. logistics software), and 2) its decarbonisation initiatives.The collective carbon footprint is a major ESG issue but we should not apply a broad-brush. Freight and logistics companies are vital to the economy and deliver life-critical goods like medication and food. Moreover, companies like JD Logistics (JDL HK) – are leading a "greening" of supply chains.This is an important ESG issue to watch, but not an "exclusionary screen" by any means.

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

Last week's announcement by Singapore Exchange – regarding its launching four FTSE ESG Index futures – is a really big deal for SGX. Not that it will not solve all of SGX's problems overnight; the liquidity-building takes time, and four ESG contracts won't make up for all those lost MSCI trades.Nonetheless, these ESG futures contracts are "worth" more than one might think, in two ways. For SGX FIRST, the launch proves its ability to execute. For SGX in general, it's a much-needed boost – financial and psychological – after last year's MSCI losses.I will be publishing a series of on various ESG investment products, starting with derivatives (very soon). That will provide additional detail.

Last week's announcement by Singapore Exchange – regarding its launching four FTSE ESG Index futures – is a really big deal for SGX. Not that it will not solve all of SGX's problems overnight; the liquidity-building takes time, and four ESG contracts won't make up for all those lost MSCI trades.Nonetheless, these ESG futures contracts are "worth" more than one might think, in two ways. For SGX FIRST, the launch proves its ability to execute. For SGX in general, it's a much-needed boost – financial and psychological – after last year's MSCI losses.I will be publishing a series of on various ESG investment products, starting with derivatives (very soon). That will provide additional detail.

SGX FIRST Launches ESG Futures Putting It in the Company of ESG Derivatives Leaders ICE and Eurex

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Equity Bottom-Up

<ul>
<li>Rather than going back to profit on Q2 this year, we think it is more likely that <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> will be profitable in Q3 this year. </li>
<li>It will involve around a 70% utilization rate in the EV battery plant, maximizing US AMPC, and a higher contribution from higher-margin batteries for data centers. </li>
<li>The current share price weakness is a buying opportunity but investors do not need to rush, build your positions slowly and carefully. </li>
</ul>


Rather than going back to profit on Q2 this year, we think it is more likely that Samsung SDI (006400 KS) will be profitable in Q3 this year. 
It will involve around a 70% utilization rate in the EV battery plant, maximizing US AMPC, and a higher contribution from higher-margin batteries for data centers. 
The current share price weakness is a buying opportunity but investors do not need to rush, build your positions slowly and carefully. 


Last week, <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">Singapore Exchange (SGX SP)</a> made a momentous <a href="https://www.sgx.com/media-centre/20201215-sgx-strengthens-commitment-sustainability-s20-million-plan" target="_blank" rel="noopener">announcement</a> in the sphere of Asian sustainable/ESG finance and investing. <a href="https://first.sgx.com" target="_blank" rel="noopener">SGX FIRST</a> is its new multi-partner sustainability initiative. The acronym, FIRST, is for "Future in Reshaping Sustainability Together," but it says so much more.SGX FIRST, puts SGX first, in the ranks of Asia's most sustainable stock exchanges.This is different. SGX FIRST is a well-conceived, high-level, strategic sustainability initiative on an entirely different plane than the many "platform" launches of late. It is indeed part platform, but to view it as only that misses its essence entirely. SGX FIRST stands out in three interrelated ways:<ol>
<li>
Intelligent: Unlike "me-too" ESG portals, SGX FIRST is an integrated strategic plan leveraging existing strengths, products, and relationships. It's making progress, not even a week out.</li>
<li>
Impactful: Intelligent design and synergies-galore should translate into real impact; the ability for SGX FIRST to foster and shape sustainable capital markets in Singapore, and APAC.</li>
<li>
Profitable: Yet to be seen, but likely. This is the stuff of virtuous cycles, from establishing ESG domain authority to licensing fees and other incomes. Altruistic capitalism, but capitalism.</li>
</ol>In this game of ESG "platforms," SGX is playing chess, whilst others chew on checkers.In light of pandemic-induced hard times for SGX, this may be what the doctor ordered.

Last week, Singapore Exchange (SGX SP) made a momentous announcement in the sphere of Asian sustainable/ESG finance and investing. SGX FIRST is its new multi-partner sustainability initiative. The acronym, FIRST, is for "Future in Reshaping Sustainability Together," but it says so much more.SGX FIRST, puts SGX first, in the ranks of Asia's most sustainable stock exchanges.This is different. SGX FIRST is a well-conceived, high-level, strategic sustainability initiative on an entirely different plane than the many "platform" launches of late. It is indeed part platform, but to view it as only that misses its essence entirely. SGX FIRST stands out in three interrelated ways:

Intelligent: Unlike "me-too" ESG portals, SGX FIRST is an integrated strategic plan leveraging existing strengths, products, and relationships. It's making progress, not even a week out.

Impactful: Intelligent design and synergies-galore should translate into real impact; the ability for SGX FIRST to foster and shape sustainable capital markets in Singapore, and APAC.

Profitable: Yet to be seen, but likely. This is the stuff of virtuous cycles, from establishing ESG domain authority to licensing fees and other incomes. Altruistic capitalism, but capitalism.
In this game of ESG "platforms," SGX is playing chess, whilst others chew on checkers.In light of pandemic-induced hard times for SGX, this may be what the doctor ordered.

SGX FIRST Puts SGX First in the Ranks of Asia's Most Sustainable Stock Exchanges

United States

MSCI Inc. provides investment decision support tools to investment institutions worldwide. The Company produces indices and risk and return portfolio analytics for use in managing investment portfolios.

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MSCI Inc (MSCI US)

2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

US base money declined by $15bn between April and June 2021, a stealth taper. House prices up 17%YoY will push up PCE inflation via OERs, & growth...

Prasenjit K. Basu

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

The carbon footprint of global freight and logistics is large, growing, and a source of ESG risk for investors. Fortunately, firms like JD...

Kyle Rudden

SGX FIRST Launches ESG Futures Putting It in the Company of ESG Derivatives Leaders ICE and Eurex

SGX's lauch of ESG futures is a big deal. It proves SGX FIRST's ability to execute, and softens the pain of MSCI losses.

Kyle Rudden

Samsung SDI (006400): Q3 Rather than Q2

Samsung SDI (006400 KS) is expected to turn profitable in Q3 this year, driven by increased utilization in EV battery plant and higher-margin...

Henry Soediarko

SGX FIRST Puts SGX First in the Ranks of Asia's Most Sustainable Stock Exchanges

"What's in a name? "asked Shakespeare. Quite a lot, when the name "SGX FIRST." FIRST is an acronym, but it also makes a bold statement; that SGX is...

Kyle Rudden

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52-week Range

Market Cap (USDm)

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2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

US base money declined by $15bn between April and June 2021, a stealth taper. House prices up 17%YoY will push up PCE inflation via OERs, & growth...

Prasenjit K. Basu

Carbon Footprint of Freight Transportation and Logistics and Other ESG Issues

The carbon footprint of global freight and logistics is large, growing, and a source of ESG risk for investors. Fortunately, firms like JD...

Kyle Rudden

SGX FIRST Launches ESG Futures Putting It in the Company of ESG Derivatives Leaders ICE and Eurex

SGX's lauch of ESG futures is a big deal. It proves SGX FIRST's ability to execute, and softens the pain of MSCI losses.

Kyle Rudden

Samsung SDI (006400): Q3 Rather than Q2

​Samsung SDI (006400 KS) is expected to turn profitable in Q3 this year, driven by increased utilization in EV battery plant and higher-margin...

Henry Soediarko

SGX FIRST Puts SGX First in the Ranks of Asia's Most Sustainable Stock Exchanges

"What's in a name? "asked Shakespeare. Quite a lot, when the name "SGX FIRST." FIRST is an acronym, but it also makes a bold statement; that SGX is...

Kyle Rudden

Samsung SDI (006400 KS) is expected to turn profitable in Q3 this year, driven by increased utilization in EV battery plant and higher-margin...