Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

The global economic impact of COVID-19 deepened in April, with many countries now expected to see GDP contract in 2020. That said, credit and equity markets were buoyed by central bank stimulus and more positive headlines on the pandemic. This month, we consider the effect of this unprecedented event on the investor psyche, which could heighten risk aversion for some time and weigh heavily on Asian HY corporate credit. We also present a trade idea for Chinese property bonds, where we see promise amid the current uncertainty. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  The global economic impact of COVID-19 deepened in April, with many countries now expected to see GDP contract in 2020. That said, credit and equity markets were buoyed by central bank stimulus and more positive headlines on the pandemic. This month, we consider the effect of this unprecedented event on the investor psyche, which could heighten risk aversion for some time and weigh heavily on Asian HY corporate credit. We also present a trade idea for Chinese property bonds, where we see promise amid the current uncertainty.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Impact Of COVID-19 On Investment Strategy - Lucror Analytics

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

Mitsubishi UFJ Financial (MUFG) / Equity Bottom-Up

*MUFG Pre-Announcement: According to Mitsubishi UFJ Financial Group (8306.JP) [MUFG], FY 2019 preliminary profit declined to its lowest level in a decade after MUFG added JPY 100 bn to JPY 520 bn (results due out on May 15th) due to  COVID-19-related charges and stock holdings hurt by volatile markets. This is the second earnings revision in less than a year, as guidance is now down 40% in aggregate.*Still Overstating Earnings Despite Downgrade: All else equal, MUFG – based on its lax discretionary provisioning methodology - is overstating preliminary results between JPY 916-1,042 bn, by our calculation.*Pig Piling Continues: The lack of provisioning is far from the only problem MUFG must manage. ACOM is a chronically understates kaburai risk; post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; continued impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

*MUFG Pre-Announcement: According to Mitsubishi UFJ Financial Group (8306.JP) [MUFG], FY 2019 preliminary profit declined to its lowest level in a decade after MUFG added JPY 100 bn to JPY 520 bn (results due out on May 15th) due to  COVID-19-related charges and stock holdings hurt by volatile markets. This is the second earnings revision in less than a year, as guidance is now down 40% in aggregate.*Still Overstating Earnings Despite Downgrade: All else equal, MUFG – based on its lax discretionary provisioning methodology - is overstating preliminary results between JPY 916-1,042 bn, by our calculation.*Pig Piling Continues: The lack of provisioning is far from the only problem MUFG must manage. ACOM is a chronically understates kaburai risk; post-COVID-19, we calculate that MUFG America’s will have a regulatory capital shortfall of up to USD 6.5 bn or 40% of MUFG America’s stated equity; continued impairments on subsidiaries; significant Softbank (9984.JP) exposure; and Morgan Stanley’s (MS.US) MUFG dilutive E*Trade (ETFC.US) transaction.

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Quantitative Analysis

Three days ago I wrote <a href="https://www.smartkarma.com/insights/boj-etf-buying-update" target="_blank" data-smartkarma-citation="insights:38783" rel="noopener">BOJ ETF Buying Update</a> which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the BOJ made a small clarification, or possibly amendment, to their purchasing plan. This changes the daily purchasing constituent basket slightly, favouring the Nikkei 225 vs what the market probably thought it was doing since mid-March. A quick refresher course on BOJ ETF buying constituency is below.

Three days ago I wrote BOJ ETF Buying Update which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the BOJ made a small clarification, or possibly amendment, to their purchasing plan. This changes the daily purchasing constituent basket slightly, favouring the Nikkei 225 vs what the market probably thought it was doing since mid-March. A quick refresher course on BOJ ETF buying constituency is below.

Telco/Internet specialist

Kirk Boodry

Redex Research

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork. The downgrade is not particularly surprising as we think that asset is worthless, so the closer Softbank gets to that level, the more realistic we think they are being.  It does appear that the latest write-down takes the carrying value negative which Softbank attributes to higher losses for loan commitments and guarantees. Markets appears unconcerned as we expect most investors wrote WeWork off already whilst impairments are thick on the ground for all companies so an incremental change from Softbank probably does not move the needle.

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork. The downgrade is not particularly surprising as we think that asset is worthless, so the closer Softbank gets to that level, the more realistic we think they are being.  It does appear that the latest write-down takes the carrying value negative which Softbank attributes to higher losses for loan commitments and guarantees. Markets appears unconcerned as we expect most investors wrote WeWork off already whilst impairments are thick on the ground for all companies so an incremental change from Softbank probably does not move the needle. 

Softbank Group Revises Forecasts Down Again on Higher Valuation Losses for WeWork

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-433'>Fosun International</a></li><li><a href='#lucror-entity-26799'>Future Retail</a></li><li><a href='#lucror-entity-19717'>Gcl New Energy Holdings</a></li><li><a href='#lucror-entity-810'>Melco Resorts & Entertainment</a></li><li><a href='#lucror-entity-315'>Softbank Group</a></li><li><a href='#lucror-entity-6100'>Sunshine 100 China</a></li><li><a href='#lucror-entity-10646'>Tahps Group Bhd</a></li><li><a href='#lucror-entity-19341'>Television Broadcasts</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Fosun InternationalFuture RetailGcl New Energy HoldingsMelco Resorts & EntertainmentSoftbank GroupSunshine 100 ChinaTahps Group BhdTelevision Broadcasts

Morning Views Asia: Fosun International, Future Retail, Gcl New Energy Holdings

Japan

SoftBank Group Corp provides telecommunication services.  The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (ADR) (SFTBY US)

Asia HY Monthly - Impact Of COVID-19 On Investment Strategy - Lucror Analytics

The global economic impact of COVID-19 deepened in April, with many countries now expected to see GDP contract in 2020. That said, credit and...

Lucror Analytics

MUFG – Painful to Watch

*MUFG Pre-Announcement: According to Mitsubishi UFJ Financial Group (8306.JP) [MUFG], FY 2019 preliminary profit declined to its lowest level in a...

Thomas J. Monaco

BOJ ETF Buying Composition Clarified

Three days ago I wrote BOJ ETF Buying Update which described the impact of the BOJ buying ETFs on the underlying constituents. This morning, the...

Travis Lundy

Softbank Group Revises Forecasts Down Again on Higher Valuation Losses for WeWork

Softbank Group has revised its guidance for FY19 net losses higher by ¥150bn ($1.4bn) on additional provisions for the parent’s stake in WeWork....

Kirk Boodry

Morning Views Asia: Fosun International, Future Retail, Gcl New Energy Holdings

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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