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

India's exports grew 86% YoY in Apr-Jun 2021, and were 18.3% higher than in Apr-Jun 2019 (the pre-Covid times). The return to pre-Covid levels was clearest in June (+48.3% YoY, and 30% up from June 2019) and July (+47.9% YoY, and 34% above July 2019). The height of the second Covid wave did hurt industrial growth in May 2021 (up 29.3% YoY, but down 12.6% from May 2019), although industrial output surpassed 2019 levels in April; for April-May 2021, manufacturing output grew 88.8% YoY. And in 1H 2021, India's steel output (+31.3% YoY) was the fastest-growing among the world's top-10 steel producers. A real recovery is set to gather momentum in 2H 2021. The clearest evidence of a powerful economic rebound comes from the revival in net tax revenues, which were up 97% YoY in 1Q-FY2021/22, and were 26.7% of the full-year target in 1Q of this fiscal year, compared with reaching just 14.4% of the full year target in Apr-Jun 2019. However, while total government spending in Apr-Jun 2021 was 23.6% of the full-year target, it was 25.9% of full-year target in Apr-Jun 2019 -- the consequence being that the fiscal deficit in Apr-Jun 2021 was just 18.2% of the full-year target, while in Apr-Jun 2019 it had been a whopping 61.4% of the target. Fiscal prudence is helped by a surge in corporate tax revenue (+128% YoY, but also 75% higher than in Apr-Jun 2019) and soaring union excise duties (mainly on petrol and diesel, which are encouraging a shift to renewables across the energy spectrum). Remarkable fiscal prudence should ensure that deficits this year will be below target. With exports, industrial output and tax revenue soaring, the economy is set to accelerate, and comfortably achieved 11% real GDP growth this year, especially as the accelerated vaccination drive helps contain any third Covid wave.  That corporate tax revenues in Apr-Jun 2021 were 75% higher than in Apr-Jun 2019 suggests a powerful acceleration in corporate profitability. That pace of corporate profit acceleration will ensure that valuations will remain reasonable despite the steadily rising equity prices. We would recommend staying Overweight India.

India's exports grew 86% YoY in Apr-Jun 2021, and were 18.3% higher than in Apr-Jun 2019 (the pre-Covid times). The return to pre-Covid levels was clearest in June (+48.3% YoY, and 30% up from June 2019) and July (+47.9% YoY, and 34% above July 2019). The height of the second Covid wave did hurt industrial growth in May 2021 (up 29.3% YoY, but down 12.6% from May 2019), although industrial output surpassed 2019 levels in April; for April-May 2021, manufacturing output grew 88.8% YoY. And in 1H 2021, India's steel output (+31.3% YoY) was the fastest-growing among the world's top-10 steel producers. A real recovery is set to gather momentum in 2H 2021. The clearest evidence of a powerful economic rebound comes from the revival in net tax revenues, which were up 97% YoY in 1Q-FY2021/22, and were 26.7% of the full-year target in 1Q of this fiscal year, compared with reaching just 14.4% of the full year target in Apr-Jun 2019. However, while total government spending in Apr-Jun 2021 was 23.6% of the full-year target, it was 25.9% of full-year target in Apr-Jun 2019 -- the consequence being that the fiscal deficit in Apr-Jun 2021 was just 18.2% of the full-year target, while in Apr-Jun 2019 it had been a whopping 61.4% of the target. Fiscal prudence is helped by a surge in corporate tax revenue (+128% YoY, but also 75% higher than in Apr-Jun 2019) and soaring union excise duties (mainly on petrol and diesel, which are encouraging a shift to renewables across the energy spectrum). Remarkable fiscal prudence should ensure that deficits this year will be below target. With exports, industrial output and tax revenue soaring, the economy is set to accelerate, and comfortably achieved 11% real GDP growth this year, especially as the accelerated vaccination drive helps contain any third Covid wave.  That corporate tax revenues in Apr-Jun 2021 were 75% higher than in Apr-Jun 2019 suggests a powerful acceleration in corporate profitability. That pace of corporate profit acceleration will ensure that valuations will remain reasonable despite the steadily rising equity prices. We would recommend staying Overweight India.   

India: Exports Lead Industrial Rebound, While Fiscal Policy Remains Prudent

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

Asia Index Private Limited has announced the changes to the <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> for the upcoming review in June. The rebalance will be effective from the open on 21 June and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on 18 June.<a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> will be included in the index replacing <a href="https://www.smartkarma.com/entities/oil-natural-gas-corp-ltd" target="_blank" data-smartkarma-citation="entities:3456:1" rel="noopener">Oil &amp; Natural Gas Corp (ONGC IN)</a>.<a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> was the highest ranking non-constituent but the Index Committee went with <a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> to reduce the underweight of the Materials sector in the <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> vs the BSE All Cap index.<a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> was deleted from the <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> in December and makes its way back into the index after a big rally while out of the index.Passive funds will need to buy 0.33 days of ADV on <a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> and sell 1.63 days of ADV on <a href="https://www.smartkarma.com/entities/oil-natural-gas-corp-ltd" target="_blank" data-smartkarma-citation="entities:3456:1" rel="noopener">Oil &amp; Natural Gas Corp (ONGC IN)</a>. The actual impact will be higher since the delivery volumes on both stocks are much lower, especially on <a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a>.

Asia Index Private Limited has announced the changes to the S&amp;P BSE SENSEX Index (SENSEX INDEX) for the upcoming review in June. The rebalance will be effective from the open on 21 June and passive funds will need to trade at the close (VWAP over the last 30 minutes of trading) on 18 June.Tata Steel Ltd (TATA IN) will be included in the index replacing Oil &amp; Natural Gas Corp (ONGC IN).Wipro Ltd (WPRO IN) was the highest ranking non-constituent but the Index Committee went with Tata Steel Ltd (TATA IN) to reduce the underweight of the Materials sector in the S&amp;P BSE SENSEX Index (SENSEX INDEX) vs the BSE All Cap index.Tata Steel Ltd (TATA IN) was deleted from the S&amp;P BSE SENSEX Index (SENSEX INDEX) in December and makes its way back into the index after a big rally while out of the index.Passive funds will need to buy 0.33 days of ADV on Tata Steel Ltd (TATA IN) and sell 1.63 days of ADV on Oil &amp; Natural Gas Corp (ONGC IN). The actual impact will be higher since the delivery volumes on both stocks are much lower, especially on Tata Steel Ltd (TATA IN). 

Sensex Index Rebalance: Tata Steel IN, ONGC OUT

<div>The <a href="https://www.smartkarma.com/entities/s-p-bse-sensex-index" target="_blank" data-smartkarma-citation="entities:31494:1" rel="noopener">S&amp;P BSE SENSEX Index (SENSEX INDEX)</a> is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 18 June.</div><div>
The June review uses the market cap and turnover data from 1 November to 30 April to determine the stocks to be included and excluded from the index, and the announcement of the changes is made 4 weeks before the rebalance effective date.
We see <a href="https://www.smartkarma.com/entities/oil-natural-gas-corp-ltd" target="_blank" data-smartkarma-citation="entities:3456:1" rel="noopener">Oil &amp; Natural Gas Corp (ONGC IN)</a> as a high probability deletion, while <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> holds the edge over <a href="https://www.smartkarma.com/entities/tata-steel-ltd" target="_blank" data-smartkarma-citation="entities:20934:1" rel="noopener">Tata Steel Ltd (TATA IN)</a> as an index inclusion.
There will be between 3-6 days of average delivery volume to trade from passive funds on the stocks that are included into and deleted from the index.
</div>

The S&amp;P BSE SENSEX Index (SENSEX INDEX) is the flagship index of the Bombay Stock Exchange (BSE). The index has 30 stocks and is a free float weighted market cap index. The next rebalance will be effective after the close of trading on 18 June.
The June review uses the market cap and turnover data from 1 November to 30 April to determine the stocks to be included and excluded from the index, and the announcement of the changes is made 4 weeks before the rebalance effective date.
We see Oil &amp; Natural Gas Corp (ONGC IN) as a high probability deletion, while Wipro Ltd (WPRO IN) holds the edge over Tata Steel Ltd (TATA IN) as an index inclusion.
There will be between 3-6 days of average delivery volume to trade from passive funds on the stocks that are included into and deleted from the index.


Sensex June21 Index Rebalance Preview: Index Committee Has a Decision to Make

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

The choppy Indian stock indices are looking more vulnerable by the day. Nifty is now trading below key levels which, if it sustains, is likely to lead to another 7%-8% decline. The Sensex already seems to be leading the way.

The choppy Indian stock indices are looking more vulnerable by the day. Nifty is now trading below key levels which, if it sustains, is likely to lead to another 7%-8% decline. The Sensex already seems to be leading the way.

Event-Driven

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing 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>, SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

The Stock Exchange of Thailand (SET) has commenced a market consultation on changing the Stock Exchange of Thailand SET 50 Index (SET50 INDEX), SET100 and SETHD indices to free float market cap weighted indices from the upcoming rebalance in June.The market consultation document is short on detail, but the main points are the change in index calculation from full market cap weighted to free float market cap weighted, implementation of the changes in two tranches at the June and December reviews, and implementation of quarterly changes in free float for moves of +/-5%.The biggest uncertainty for us is whether the selection of the stocks for inclusion/exclusion will use the full market cap or the free float market cap.Using the full market cap for stock selection could see 3 changes at the upcoming June review, while using free float market cap for stock selection could result in up to 6 changes at the review. The two step implementation of the free float changes will dampen the index turnover but it will still be relatively high, ranging from a one-way turnover of 7.8% for changes in free float only to 9.52% if the stock selection methodology uses free float market cap.In this Insight, we look at the proposed changes and enumerate three scenarios, the changes they will entail, the impact on the stocks and the turnover for each scenario.

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

India

The S&P BSE Sensex Index is a cap-weighted index. The index members have been selected on the basis of liquidity, depth, and floating-stock-adjustment depth and industry representation. Sensex has a base date and value of 100 in 1978-1979. The Index shifted to free-float methodology since 09/01/03. Please see {SNSXOLD Index <GO>} for mid-month options.

S&P BSE SENSEX Index (SENSEX INDEX EQUITY)

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S&P BSE SENSEX Index (SENSEX INDEX EQUITY)

India: Exports Lead Industrial Rebound, While Fiscal Policy Remains Prudent

Jan-Jul21 exports up 47% YoY, with Jun-Jul 32% higher than 2019. Corp tax revenue is up 128%YoY & 75% above 2019, so fiscal deficit in Apr-Jun21...

Prasenjit K. Basu

Sensex Index Rebalance: Tata Steel IN, ONGC OUT

Tata Steel will replace ONGC in the Sensex after the close of trading on 18 June. Tata Steel is back in the index after a 6 month break. Rebalance...

Brian Freitas

Sensex June21 Index Rebalance Preview: Index Committee Has a Decision to Make

ONGC is a high probability deletion from the Sensex at the June review. The index committee needs to decide whether to include Wipro or Tata Steel....

Brian Freitas

Mum'bye' Nifty?

India's Nifty and Sensex Indices continue to make lower lows. It is time to look at where the downside targets could be. These charts suggest they...

Shyam Devani

SET50 Index - Proposed Methodology Changes: Scenarios, Names Affected & Impact

The SET has commenced a market consultation on the proposed changes to make its indices free float market cap weighted. We look at the impact on...

Brian Freitas

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