Category

Indonesia

Brief Indonesia: EV Battery Players in Korea – Chicken Egg in Supply Chain and Flow and more

By | Daily Briefs, Indonesia

In this briefing:

  1. EV Battery Players in Korea – Chicken Egg in Supply Chain and Flow
  2. Sido Muncul (SIDO): Immunity Booster
  3. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

1. EV Battery Players in Korea – Chicken Egg in Supply Chain and Flow

The longer term battle in large sized battery in both ESS and EV use seems to be very difficult field where the right combination of scale and technology is needed and few will survive.  While the Koreans represent 3 of the top 5 large battery makers, there is a lot of pressure coming from the Chinese. 

2. Sido Muncul (SIDO): Immunity Booster

Image 64238184021592292739724

The management has confirmed that the wholesale price for ginger (a key ingredient and natural immunity booster is well known in Indonesia) is much more manageable compared to the retail price that has gone through the roof as demand surges. 

With a lasting COVID-19 pandemic in the country,  Sido Muncul (SIDO IJ) is the beneficiary of the increased demand for an immunity booster therefore if there will be an increase in the raw material cost, the revenue growth could negate that and translate into some earnings growth. 

SIDO has outperformed Jakarta Stock Exchange Composite Index (JCI INDEX) post initial COVID-19 event, and while it may seem that the Index is cheaper relative to SIDO, the index constituents have to deal with the economic reality post-COVID-19 while SIDO is a beneficiary

3. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

You are currently reading Executive Summaries of Smartkarma Insights.

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Brief Indonesia: The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk and more

By | Daily Briefs, Indonesia

In this briefing:

  1. The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk
  2. Morning Views Asia: Alam Sutera Realty, Glenmark Pharmaceuticals
  3. Double Bubble, Double Trouble?
  4. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment
  5. Core Correlations Weekly – July 6th, 2020

1. The Week that Was in [email protected] – PAP Retains Power, Rising Sea Ltd, and Cratering Credit Risk

Image?1594620051

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In PAP Retains Power, but Faces the Largest Opposition Contingent Since Independence, Cross ASEAN Cheif Economist Prasenjit K. Basu comments on last week’s election in Singapore. 

In Singapore’s Twin Surpluses: How Much Is Too Much?, CrossASEAN’s Cheif Economist Prasenjit K. Basu comments on Singapore’s standout current account and fiscal surpluses. 

Equity Bottom-Up Insights

In Sea Ltd (SE US) – Gaming Its Way to the Top, Crossasean insight Provider Angus Mackintosh zeros in on South East Asia’s leading e-commerce and gaming player as the company continues to hit new highs. 

In BCA – Most ROA to Claw Back, banking specialist Daniel Tabbush revisits Indonesia’s leading private bank and assesses the impact of COVID-19 so far with a focus on Bank Central Asia (BBCA IJ) versus its local and regional peers. 

In Company Visits: KTC, Taokaenoi (Treading Water),Athaporn Arayasantiparb, CFA provides feedback from recent company visits to Krungthai Card (KTC TB) and Taokaenoi Food & Marketing (TKN TB).

In EPG: One of the Most Solid Polymer Convertor in the Downstream Sector, our friends at Country Group zero in on Eastern Polymer Group (EPG TB).

In DOHOME: Fastest Growing Home-Improvement Player in Thailand,Country Group initiate coverage on Dohome PCL (DOHOME TB) with a HOLD rating based on a target price of Bt12.5. 

In RBF: Recent Jump in Share Price Leads to OvervaluationDr Andrew Stotz, CFA initiates coverage on RBF with a SELL recommendation based on a target price of Bt8.70, implying a downside of 13% from the current price. 

In Valuation Is Approaching an Expensive Zone our friends at Country Group downgrade Com7 PCL (COM7 TB) to a HOLD rating after rolling over 2021E target price to Bt29.30.

In TFG: Weak 2Q20E but Strong Outlook in Medium to Long Term,Country Group maintain a BUY rating on Thai Foods Group Public Company (TFG TB) with a new 2021E target price at Bt5.95.

Sector and Thematic Insights

In this thematic insight, Banks – Credit Risk, Cratering, banking specialist Daniel Tabbush zeros in on credit risk for banks across the region. 

2. Morning Views Asia: Alam Sutera Realty, Glenmark Pharmaceuticals

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.

3. Double Bubble, Double Trouble?

Image 28694035391594500095935

A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

4. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Image 71063129331594361508270

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

5. Core Correlations Weekly – July 6th, 2020

Image 838743361594274027652

Demand

  1. China Manufacturing PMI: Manufacturing PMI data from China continues to be healthy after posting a dip in February due to COVID. June data came in at 50.9 and showed sequential improvement over May’s 50.6.
  2. Fundamental data points from China continue to show strength. Auto demand is likely to be up 4-5% YoY in June, and CRIC (China Real Estate Information Corporation) data shows property sales are up 14% YoY in June for the top 200 developers. Data for Jan-June FY20 has inflected into positive territory at 1% YTD.

Supply

  1. Supply issues from Brazil in June were not as bad as initially feared. Brazil shipped out 30 million tons in June, recording a 1% YoY growth.

  2. Inventory at the ports in China rose for the first time in three months.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: Sido Muncul (SIDO): Immunity Booster and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Sido Muncul (SIDO): Immunity Booster
  2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

1. Sido Muncul (SIDO): Immunity Booster

Image 64238184021592292739724

The management has confirmed that the wholesale price for ginger (a key ingredient and natural immunity booster is well known in Indonesia) is much more manageable compared to the retail price that has gone through the roof as demand surges. 

With a lasting COVID-19 pandemic in the country,  Sido Muncul (SIDO IJ) is the beneficiary of the increased demand for an immunity booster therefore if there will be an increase in the raw material cost, the revenue growth could negate that and translate into some earnings growth. 

SIDO has outperformed Jakarta Stock Exchange Composite Index (JCI INDEX) post initial COVID-19 event, and while it may seem that the Index is cheaper relative to SIDO, the index constituents have to deal with the economic reality post-COVID-19 while SIDO is a beneficiary

2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: Sido Muncul (SIDO): Immunity Booster and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Sido Muncul (SIDO): Immunity Booster
  2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp
  3. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. Sido Muncul (SIDO): Immunity Booster

Image 64238184021592292739724

The management has confirmed that the wholesale price for ginger (a key ingredient and natural immunity booster is well known in Indonesia) is much more manageable compared to the retail price that has gone through the roof as demand surges. 

With a lasting COVID-19 pandemic in the country,  Sido Muncul (SIDO IJ) is the beneficiary of the increased demand for an immunity booster therefore if there will be an increase in the raw material cost, the revenue growth could negate that and translate into some earnings growth. 

SIDO has outperformed Jakarta Stock Exchange Composite Index (JCI INDEX) post initial COVID-19 event, and while it may seem that the Index is cheaper relative to SIDO, the index constituents have to deal with the economic reality post-COVID-19 while SIDO is a beneficiary

2. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

3. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

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The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: Morning Views Asia: Alam Sutera Realty, Glenmark Pharmaceuticals and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Morning Views Asia: Alam Sutera Realty, Glenmark Pharmaceuticals
  2. Double Bubble, Double Trouble?
  3. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment
  4. Core Correlations Weekly – July 6th, 2020
  5. Smartkarma Webinar

1. Morning Views Asia: Alam Sutera Realty, Glenmark Pharmaceuticals

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.

2. Double Bubble, Double Trouble?

Image 141113133121594500095937

A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

3. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Image 71063129331594361508270

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

4. Core Correlations Weekly – July 6th, 2020

Image 838743361594274027652

Demand

  1. China Manufacturing PMI: Manufacturing PMI data from China continues to be healthy after posting a dip in February due to COVID. June data came in at 50.9 and showed sequential improvement over May’s 50.6.
  2. Fundamental data points from China continue to show strength. Auto demand is likely to be up 4-5% YoY in June, and CRIC (China Real Estate Information Corporation) data shows property sales are up 14% YoY in June for the top 200 developers. Data for Jan-June FY20 has inflected into positive territory at 1% YTD.

Supply

  1. Supply issues from Brazil in June were not as bad as initially feared. Brazil shipped out 30 million tons in June, recording a 1% YoY growth.

  2. Inventory at the ports in China rose for the first time in three months.

5. Smartkarma Webinar

In this Smartkarma Webinar, Dr Y. Shirley Meng, an energy technology expert, will talk through the advances in battery technology, which can change the future of energy consumption and have a profound impact on everything from cars to pacemakers.

The webinar will be hosted on Friday, 17/July/2020, 11.00am SGT/HKT.



Shirley holds the Zable Endowed Chair Professor in Energy Technologies and is Professor of NanoEngineering and Materials Science at the University of California San Diego (UCSD). She is the founding Director of Sustainable Power and Energy Center, and her research group – Laboratory for Energy Storage and Conversion (LESC) – focuses on functional nano and micro-scale materials for energy storage and conversion.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp and more

By | Daily Briefs, Indonesia

In this briefing:

  1. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp
  2. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. The Week that Was in [email protected] – Consumer Transformation, Indonesian Banks, and Semcorp

This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.

Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]

Macro Insights

In Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021, CrossASEAN Cheif Economist Prasenjit K. Basu revisits the US Economy, where he sees inflationary risks ahead. 

In Post-COVID 19 – Economic Reality Bites,Sharmila Whelan suggests that we may be about to see a change in market sentiment as the realisation of the true impact of COVID-19 dawns on liquidity-driven markets. 

Equity Bottom-Up Insights

In Bank Mandiri Persero (BMRI IJ) – Biting the Bullet on Restructuring, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian lender as it lays out its COVID-19 restructuring plans.

In SATS: Traffic -99.5% in April and May; How Much Worse Can It Get?, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore’s leading aircraft maintenance player and asks whether we have hit the bottom.

In Malaysia – Carlsberg or Heineken?, CrossASEAN Insight Provider Henry Soediarko zeros in on the Malaysian brewery space. 

In BTPS – Exceptional Core, banking specialist Daniel Tabbush revisits Indonesia’s most interesting Sharia lender and finds an encouraging picture. 

In Keppel Corp – Stretched Vs Proxy Baskets And Now With New Risk, Travis Lundy revisits this long-in-the-tooth partial offer. 

In Sembcorp Marine Rights Offer – Cast Away,Travis Lundy comments on the recently announced Sembcorp Marine (SMM SP) S$2.1bn rights issue. 

In Sembcorp Industries/Sembcorp Marine Rights Issue and Demerger,Arun George also comments on this ongoing transaction.

In SMM Rights Issue & Demerger Is One Step Closer to Keppel O&M+SMM Merger,Ke Yan, CFA, FRM looks at this ongoing situation but sees a longer-term endgame ahead. 

In BTS: Solid Core Operation with Huge Potential Upside, our friends at Country Group revisit BTS Group Holdings (BTS TB) and expect some softening in the outlook. 

In SPA: Major Beneficiary of Return Chinese Tourist Arrivals in Thailand,Country Group upgrade Siam Wellness Group (SPA TB) to BUY as it will be a beneficiary of Chinese tourists returning to Thailand. 

Sector and Thematic Insights

In Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare, CrossASEAN Insight Provider Angus Mackintosh zeros in on the changing behaviour of the Indonesian consumer over COVID-19. 

In Indonesian Media – A Tale of Two Cities – BUY MNCN, CrossASEAN Insight Provider Angus Mackintosh revisits the sector in light of the ongoing COVID-19 impact.

In Indonesia Banks – Loan Forbearance, banking specialist Daniel Tabbush zooms in on the Indonesian banking sector, where he sees a relatively promising outlook.

In Sathorn Series O: Thai Banks Expand Abroad, our Thai guru Athaporn Arayasantiparb, CFA zeroes in on Thai Banks as they look overseas for future growth. 

In WhatsApp, PayPal Funding To Fortify Go-Jek’s Go-Pay Business,Aqila Ali takes a look at the reasoning behind Facebook Inc A (FB US) and Paypal Holdings (PYPL US)‘s recent investment into Gojek (1379371D IJ).

Credit Insights

In Chandra Asri – Earnings Flash – Q1 FY 2020 Results,Trung Nguyen zeros in on recent results from Chandra Asri Petrochemical (TPIA IJ),  which were weaker than expected. 

2. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

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Brief Indonesia: Double Bubble, Double Trouble? and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Double Bubble, Double Trouble?
  2. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment
  3. Core Correlations Weekly – July 6th, 2020
  4. Smartkarma Webinar
  5. BCA – Most ROA to Claw Back

1. Double Bubble, Double Trouble?

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A review of U.S. and global markets reveals that market leadership has narrowed to NASDAQ and Chinese stocks. If this is the start of a new bull, or a continuation of the old bull, can it rest on the narrow leadership of a handful of NASDAQ stocks and the Chinese market?

Is this just a double bubble, and does that imply double trouble ahead?

We are not sure. We are torn between Bob Farrell’s Rule No. 4:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

And Rule No. 7.

Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.

Investors need to be aware of the tension between Rule No. 4, which raises the possibility of a stock bubble, and the risks posed by the narrow leadership warned by Rule No. 7. Tail-risk is high in both directions. In this environment, it is worthwhile to return to basics and re-visit investment objectives and risk tolerances in order to balance risk and reward. There are no perfect answers and each will be different.

Regardless of what direction the market takes, investors can count on a climate of high volatility in the near future.

2. 6G: Still a Remote Concept; Capable of Overcoming 5G Disappointment

Image 71063129331594361508270

In our previous insight, we spoke about 5G being a disappointment, a possible delay in 5G adoption, and how WiFi-6 could take its place. In this insight, we look at 6G, which is still a developing technology. 6G is the sixth generation of wireless technologies, with extreme coverage and capacity. 6G network systems are expected to support data rates at a speed of 1 terabit per second (Tbps), 8000 times faster than 5G, with an end-to-end latency of one microsecond. The increase in IoT applications triggered the expansion of 5G, and it is now stimulating the demand for the 6G networks as well. Our key points based on the first look at 6G, are:

  • 6G is still a remote concept and will take another 15 years to be fully deployed (i.e. by 2035) since there are many necessary technological and technical advancements to be made before a 6G product is introduced to the market.
  • Most developments and the initiation of projects come from the South Korean and Chinese players. In our opinion, South Korea could take the lead, as China is currently focusing on developing its 5G networks, and China’s Huawei is also having issues with the expansion of its 5G networks.
  • South Korean mobile manufacturers like Samsung and LG are likely to benefit due to their increased initial commitments focusing on 6G, and this might give them an edge over Chinese and U.S. manufacturers like Apple or Huawei.
  • The U.S. manufacturers have a head start in 6G semiconductor technology. However, given the reduced size requirement for base stations and, eventually, for mobile phones, we believe that Japanese MLCC players could closely compete with the U.S. chip manufacturers.

Previous related insights:

5G for the Next Big Turn of a New Decade 

Will 2020 See Successful Deployment of 5G? 

Lockdown To Accelerate WiFi 6: A Threat to Anticipated 5G Deployment? 

5G Delay and Disappointment – Will Murata Suffer? 

3. Core Correlations Weekly – July 6th, 2020

Image 838743361594274027652

Demand

  1. China Manufacturing PMI: Manufacturing PMI data from China continues to be healthy after posting a dip in February due to COVID. June data came in at 50.9 and showed sequential improvement over May’s 50.6.
  2. Fundamental data points from China continue to show strength. Auto demand is likely to be up 4-5% YoY in June, and CRIC (China Real Estate Information Corporation) data shows property sales are up 14% YoY in June for the top 200 developers. Data for Jan-June FY20 has inflected into positive territory at 1% YTD.

Supply

  1. Supply issues from Brazil in June were not as bad as initially feared. Brazil shipped out 30 million tons in June, recording a 1% YoY growth.

  2. Inventory at the ports in China rose for the first time in three months.

4. Smartkarma Webinar

In this Smartkarma Webinar, Dr Y. Shirley Meng, an energy technology expert, will talk through the advances in battery technology, which can change the future of energy consumption and have a profound impact on everything from cars to pacemakers.

The webinar will be hosted on Friday, 17/July/2020, 11.00am SGT/HKT.



Shirley holds the Zable Endowed Chair Professor in Energy Technologies and is Professor of NanoEngineering and Materials Science at the University of California San Diego (UCSD). She is the founding Director of Sustainable Power and Energy Center, and her research group – Laboratory for Energy Storage and Conversion (LESC) – focuses on functional nano and micro-scale materials for energy storage and conversion.

5. BCA – Most ROA to Claw Back

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We all know that banks in Indonesia have the best margins and best ROAs of all banks in the region. This is largely due to the limited level of competition, specialized nature of these banks, an under-penetrated system and excellent demographics. Where recovery metrics are strong across most all regions, banks should seem a meaningful delta in profit, perhaps in 2Q20 or later during 2H20.  One way of considering where the most marginal gains can be made is by looking at where the greatest loss was, where the greatest decline in ROA was.

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Brief Indonesia: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare
  2. Post-Covid 19 – Economic Reality Bites

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

2. Post-Covid 19 – Economic Reality Bites

Capture

A severe global recession is baked in the cake is the realisation steadily dawning on market commentators and institutions. Corporate profits have collapsed. Debt levels are rising rapidly. Both are ingredients for investment led economic downturn. So far markets buoyed by cheap liquidity markets have chosen to ignore economic reality but that might be changing.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.

Brief Indonesia: Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare and more

By | Daily Briefs, Indonesia

In this briefing:

  1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare
  2. Post-Covid 19 – Economic Reality Bites
  3. Morning Views Asia: Garuda Indonesia (Persero), Mnc Investama, Wynn Macau Ltd

1. Indonesian Consumers – This Transformation Is Forever – BUY Staples and Healthcare

Screenshot%202020 06 12%20at%2011.55.38%20am

The latest report from AC Niesen Indonesia is entitled “Meet the new consumer” and looks into the changing behaviour of Indonesia’s consumers in the face of the COVID-19 pandemic. 

These changes will have a pronounced impact on the retail landscape in Indonesia and the way that the population consumes, with a lot more already going online and much more focus on health with more financial restraint. 

A number of consumer behaviours developed during the pandemic will stick as we enter the new normal period, with 16% of those surveyed by AC Nielsen suggesting they will not visit the mall even under the new normal. 

We remain positive on consumer staples and healthcare stocks including Unilever Indonesia (UNVR IJ),Indofood CBP Sukses (ICBP IJ), Kalbe Farma (KLBF IJ),Mitra Keluarga Karyasehat Tbk (MIKA IJ) and consumer discretionary name Mitra Adiperkasa (MAPI IJ) for the recovery. 

2. Post-Covid 19 – Economic Reality Bites

Capture

A severe global recession is baked in the cake is the realisation steadily dawning on market commentators and institutions. Corporate profits have collapsed. Debt levels are rising rapidly. Both are ingredients for investment led economic downturn. So far markets buoyed by cheap liquidity markets have chosen to ignore economic reality but that might be changing.

3. Morning Views Asia: Garuda Indonesia (Persero), Mnc Investama, Wynn Macau Ltd

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.

You are currently reading Executive Summaries of Smartkarma Insights.

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