Chief Economist, Heteronomics

Phil Rush

Chief Economist

Heteronomics

Heteronomics represents a different kind of economics. We believe analysis should delve into the details of what is really going on, rather than using overly simplistic assumptions to quick-sell stories. Independence from myopic institutional pressures allows us to focus on the realities underlying your asset allocation decisions, without the conflicts of the old market structures. Heteronomics targets the themes driving UK asset prices, offering the benefits of depth, independence and ultimately price.

UK-centric macro research

Macroeconomics

<ul>
<li>UK monthly GDP stayed surprisingly strong in Feb-19, growing 0.2% m-o-m after 0.5% in Jan-19. Services matched my bullish forecast and show no signs of matching the collapse in the PMI, but finance’s downward trend looks to be re-establishing.</li>
<li>Manufacturing and construction caused the upside surprise and are set to be highly supportive of GDP growth. With the economy firing on all cylinders, despite the prophecies of doom, I raise my bullish 1Q19 GDP growth forecast by 0.1pp to 0.5%.</li>
</ul>


UK monthly GDP stayed surprisingly strong in Feb-19, growing 0.2% m-o-m after 0.5% in Jan-19. Services matched my bullish forecast and show no signs of matching the collapse in the PMI, but finance’s downward trend looks to be re-establishing.
Manufacturing and construction caused the upside surprise and are set to be highly supportive of GDP growth. With the economy firing on all cylinders, despite the prophecies of doom, I raise my bullish 1Q19 GDP growth forecast by 0.1pp to 0.5%.


<ul>
<li>The European Council will consider the UK’s latest request for an extension at its 10 April meeting. It is not a soft touch seeking to reward failure, so I expect an extension to be longer and conditional on passing a substantive vote soon.</li>
<li>Fundamental market-relevant factors have changed little over the past fortnight, in my view, despite all the domestic political noise. I still subjectively see the routes and relative probabilities of a deal, no deal, and no Brexit at 45:35:20.</li>
</ul>


The European Council will consider the UK’s latest request for an extension at its 10 April meeting. It is not a soft touch seeking to reward failure, so I expect an extension to be longer and conditional on passing a substantive vote soon.
Fundamental market-relevant factors have changed little over the past fortnight, in my view, despite all the domestic political noise. I still subjectively see the routes and relative probabilities of a deal, no deal, and no Brexit at 45:35:20.


Equity analyst UK & Europe, UK Long Short

Peter Toeman

Equity analyst UK & Europe

Accelerating Tomorrow’s Independent Research

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Equity Bottom-Up

A ‘perfect storm’ is enveloping UK retailers. Brexit uncertainty is reducing footfall and sales and the structural shift to e-commerce continues unabated. But if things are tough for retailers they are equally bad for UK property companies with a significant proportion of retail in their portfolios. Declining rents and rising yields are not positive for valuations. Landlords also have to deal with an increasing incidence of tenant insolvencies. 
British Land: what does it do ?
British Land is the third largest property company in the FTSE100 with a market capitalisation of £5.6bn and property portfolio of £12.8bn split almost equally between Retail and Central London offices. 
Why is it in the Short portfolio ?
Trading pressure in the retail sector is translating into rent reductions for landlords, or worse, vacant space. Yields are rising due to decreased investment demand. Property consultancies anticipate a double digit decline in retail capital values over the next two years. The consensus expectation is for British Land's EPRA NAV to decline 8% over the next two years.

A ‘perfect storm’ is enveloping UK retailers. Brexit uncertainty is reducing footfall and sales and the structural shift to e-commerce continues unabated. But if things are tough for retailers they are equally bad for UK property companies with a significant proportion of retail in their portfolios. Declining rents and rising yields are not positive for valuations. Landlords also have to deal with an increasing incidence of tenant insolvencies. 
British Land: what does it do ?
British Land is the third largest property company in the FTSE100 with a market capitalisation of £5.6bn and property portfolio of £12.8bn split almost equally between Retail and Central London offices. 
Why is it in the Short portfolio ?
Trading pressure in the retail sector is translating into rent reductions for landlords, or worse, vacant space. Yields are rising due to decreased investment demand. Property consultancies anticipate a double digit decline in retail capital values over the next two years. The consensus expectation is for British Land's EPRA NAV to decline 8% over the next two years.    

British Land (BLND:LN): Retail in Reverse

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. 

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Thematic (Sector/Industry)

After numerous false starts -- including a narrow defeat of "permanent Customs Union" last Wednesday (8 votes) and this Monday (3 votes) -- the advocates of "soft Brexit" pulled off a parliamentary coup close to midnight on Wednesday (3rd March). Yvette Cooper's bill requiring the government to seek a long extension for Brexit if Theresa May's Withdrawal Agreement (or any amended version of it) fails to obtain parliamentary approval before 12 April 2019 was passed by a 1-vote majority (313-312) in the House of Commons. If it is passed by the House of Lords (likely, albeit after some filibustering delays), it becomes the law -- and a no-deal Brexit becomes impossible. PM May and the Tories opposed the bill, but it was passed. (An earlier motion, seeking another round of indicative votes, ended in a tie in the Commons, but the Speaker followed precedent to vote with the government, and kill the idea of more indicative votes). Meanwhile, PM May on Tuesday (2nd April), ended a long Cabinet meeting by announcing that she would seek a meeting with Opposition leader Jeremy Corbyn, to try and work out a compromise solution on the Brexit conundrum. This is a remarkable step in Britain's confrontational political system. All that separates May's Withdrawal Agreement from Kenneth Clarke's idea of a permanent Customs Union (which Labour supports) is that the Customs Union would not last just for another two years, but would become permanent (thereby precluding the need for a border between Northern Ireland and Eire, the Republic of Ireland).While this is seemingly a small gap to bridge, the first day of talks between May and Corbyn was "inconclusive" but "constructive". May is cognizant of the fact that becoming part of the Customs Union ends Britain's ability to negotiate trade deals with third countries. But her options have narrowed, and she will probably have to cave in eventually. If she doesn't, Yvette Cooper's bill will likely become the law, enshrining an even softer Brexit than is envisaged currently by the Labour leader (and Tory Europhiles like Kenneth Clarke) -- and ruling out a no-deal Brexit. These developments make a softer Brexit a near-certainty, and are finally a genuine source of strength for Sterling.

After numerous false starts -- including a narrow defeat of "permanent Customs Union" last Wednesday (8 votes) and this Monday (3 votes) -- the advocates of "soft Brexit" pulled off a parliamentary coup close to midnight on Wednesday (3rd March). Yvette Cooper's bill requiring the government to seek a long extension for Brexit if Theresa May's Withdrawal Agreement (or any amended version of it) fails to obtain parliamentary approval before 12 April 2019 was passed by a 1-vote majority (313-312) in the House of Commons. If it is passed by the House of Lords (likely, albeit after some filibustering delays), it becomes the law -- and a no-deal Brexit becomes impossible. PM May and the Tories opposed the bill, but it was passed. (An earlier motion, seeking another round of indicative votes, ended in a tie in the Commons, but the Speaker followed precedent to vote with the government, and kill the idea of more indicative votes). Meanwhile, PM May on Tuesday (2nd April), ended a long Cabinet meeting by announcing that she would seek a meeting with Opposition leader Jeremy Corbyn, to try and work out a compromise solution on the Brexit conundrum. This is a remarkable step in Britain's confrontational political system. All that separates May's Withdrawal Agreement from Kenneth Clarke's idea of a permanent Customs Union (which Labour supports) is that the Customs Union would not last just for another two years, but would become permanent (thereby precluding the need for a border between Northern Ireland and Eire, the Republic of Ireland).While this is seemingly a small gap to bridge, the first day of talks between May and Corbyn was "inconclusive" but "constructive". May is cognizant of the fact that becoming part of the Customs Union ends Britain's ability to negotiate trade deals with third countries. But her options have narrowed, and she will probably have to cave in eventually. If she doesn't, Yvette Cooper's bill will likely become the law, enshrining an even softer Brexit than is envisaged currently by the Labour leader (and Tory Europhiles like Kenneth Clarke) -- and ruling out a no-deal Brexit. These developments make a softer Brexit a near-certainty, and are finally a genuine source of strength for Sterling.  

The Probability Of "Softer Brexit" Rises Markedly; No-Deal Brexit Virtually Ruled Out

<ul>
<li>The pace of activity growth implied by the UK services PMI collapsed again in Mar-19 as the index fell by 2.4 points to 48.9. It is biased to overstate the effect of uncertainty, which has intensified recently amid political gridlock.</li>
<li>A slight slowing in comparable sectors remains likely, but I maintain my relatively bullish forecast for 1Q19 GDP growth of 0.4% q-o-q, with 0.0% m-o-m in Feb-19.</li>
</ul>


The pace of activity growth implied by the UK services PMI collapsed again in Mar-19 as the index fell by 2.4 points to 48.9. It is biased to overstate the effect of uncertainty, which has intensified recently amid political gridlock.
A slight slowing in comparable sectors remains likely, but I maintain my relatively bullish forecast for 1Q19 GDP growth of 0.4% q-o-q, with 0.0% m-o-m in Feb-19.


UK: PMIs Diverge as Bias Intensifies in Mar-19

United Kingdom

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SPDR FTSE UK All Share (FTAL LN)

UK: 1Q19 GDP Growth Tracking up to 0.5%

UK monthly GDP stayed surprisingly strong in Feb-19, growing 0.2% m-o-m after 0.5% in Jan-19. Services matched my bullish forecast and show no...

Phil Rush

Brexit: No Soft-Touch Extension

The European Council will consider the UK’s latest request for an extension at its 10 April meeting. It is not a soft touch seeking to reward...

Phil Rush

British Land (BLND:LN): Retail in Reverse

A ‘perfect storm’ is enveloping UK retailers. Brexit uncertainty is reducing footfall and sales and the structural shift to e-commerce continues...

Boost Research

The Probability Of "Softer Brexit" Rises Markedly; No-Deal Brexit Virtually Ruled Out

After numerous false starts -- including a narrow defeat of "permanent Customs Union" last Wednesday (8 votes) and this Monday (3 votes) -- the...

Prasenjit K. Basu

UK: PMIs Diverge as Bias Intensifies in Mar-19

The pace of activity growth implied by the UK services PMI collapsed again in Mar-19 as the index fell by 2.4 points to 48.9. It is biased to...

Phil Rush