Brief Multi-Strategy: Big Bang Reforms, Support for Consumers & Flexible Labour to Boost India and more

In this briefing:

  1. Big Bang Reforms, Support for Consumers & Flexible Labour to Boost India
  2. Ocumension Therapeutics IPO: Valuation Insights
  3. Sustainability/ESG Frameworks: SASB (Sustainability Accounting Standards Board)
  4. Sustainability/ESG Frameworks: GRI (Global Reporting Initiative)
  5. Yamato Struggling with Rising Demand

1. Big Bang Reforms, Support for Consumers & Flexible Labour to Boost India

India current%20account percentgdp

Unlike most of the world, India has not undertaken a fiscal spending binge to counter its Covid-induced downturn. Instead, while keeping its fiscal and monetary powder relatively dry (with modest, calibrated stimulus), India has focused on undertaking major structural economic reforms. There is, instead, a massive pipeline of privatisations — with the vast majority of public-sector companies likely to be put up for a strategic sale (to a new controlling private shareholder), or privatized in other ways (while 1-3 champion performers in key sectors remain in government hands). Privatisation will provide the key source of financing for vital social spending on those most adversely affected by the Covid-induced crisis. 

The most dramatic reform was the abolition of the Essential Commodities Act (ECA), which had hitherto strangled farmers’ ability to sell their produce freely. This vital reform (followed by the dismantling of the farm-produce monopsonist in most states) will be a big medium-term boost to the agriculture sector, which is the one segment of India’s economy that functioned at near-full-throttle even when the rest of the country was in Lockdown. In addition, a slew of sectors were thrown open to new private investment: coal and all other minerals, nuclear power, defence production, aircraft MRO, social infrastructure and power distribution in union territories. These, coupled with electronics (where a slew of attractive incentives have been rolled out over the past half year) are likely to attract substantially larger investments in the period ahead. 

We expect a strong investment-led economic recovery to gather momentum from July onwards, and gain substantial speed by  September. India’s current account swung to a small surplus in January-March 2020, and will likely show a surplus of 1.5% of GDP in the quarter just ending. Foreign reserves are consequently at a record high. The external balances are thus in particularly fine fettle to spur a strong investment-led rebound. We continue to expect real GDP to grow 2% in FY2020/21, after likely contracting about 15% YoY in the quarter that is just ending. 

2. Ocumension Therapeutics IPO: Valuation Insights

Ocumension Therapeutics (1477 HK) is a China-based ophthalmic pharmaceutical company dedicated to identifying, developing and commercializing first- or best-in-class ophthalmic therapies. Ocumension has launched a Hong Kong IPO to raise net proceeds of $164-184 million.

In our initiation note, we stated that Ocumension belief that its key four drug candidates have the potential to be first- or best-in-class addressing unmet medical needs in China and have significant near-term revenue potential from as early as 2022 is justified. Overall, a strong cornerstone investor lineup and our valuation analysis suggest that the IPO price range is attractive. 

3. Sustainability/ESG Frameworks: SASB (Sustainability Accounting Standards Board)

Smartkarma rudden esg frameworks sasb materiality map

This Insight is a very brief look at the Sustainability Accounting Standards Board (SASB) reporting framework. It is mostly intended as background for an upcoming report mapping SASB’s standards to the UN’s Sustainable Development Goals (SDGs) – and vice versa – then applying that to specific investing strategies. SDG integration is interesting for a number of reasons, mainly these three:

  • Data: Unlike for other areas of sustainable/ESG investing, there is a wealth of data available on country-level SDGs performance. That is because the SDGs are designed to be quantifiable and based on non-commercial data from global (e.g., World Bank, OECD) and local organisations.
  • Alpha: With nearly five years of history (the SDGs were launched in 2015 and effective in 2016) for that data, we have learned that the SDGs are good indicators of macro risks (e.g., economic, political) and opportunities, particularly for larger, diversified global portfolios.
  • Impact: How SDGs affect portfolios is relevant to all investors. How portfolios might affect SDG outcomes is of more (but not exclusive) interest to investors who value “ESG Impact” as well as “ESG Alpha.” Mapping investments (using SASB) to the SDGs enhances both, especially impact.

See Sustainability/ESG Frameworks: SDGs (UN Sustainable Development Goals) for a detailed into to the SDGs, and Sustainability/ESG Frameworks: Overview for a bird’s-eye view of all major ESG and sustainability frameworks (as well as other categories in the overall ecosystem).

I am doing the same thing with the Global Reporting Initiative (GRI) framework; I will be mapping the SDGs to GRI and publishing an Insight about it relatively soon. In preparation for that, I wrote an overview of GRI – Sustainability/ESG Frameworks: GRI (Global Reporting Initiative).

4. Sustainability/ESG Frameworks: GRI (Global Reporting Initiative)

Smartkarma rudden esg frameworks gri triple bottom line

Herein is a very brief synopsis of the Global Reporting Initiative (GRI) sustainability/ESG reporting framework. This should be of interest to anyone new to sustainable/ESG investing, but the primary purpose is as background for more practical Insights on particular sustainable investing strategies.

Specifically, mapping issuer-level reporting frameworks (in this case, GRI) to the UN’s Sustainable Development Goals (SDGs) – and vice versa – then applying it to securities selection and portfolio management. SDG integration is undergoing a proliferation for a number of reasons, including:

  • Data: Unlike for other areas of sustainable/ESG investing, there is a wealth of data available on country-level SDGs performance. That is because the SDGs are designed to be quantifiable and based on non-commercial data from global (e.g., World Bank, OECD) and local organisations.
  • Alpha: With nearly five years of history (the SDGs were launched in 2015 and effective in 2016) for that data, we have learned that the SDGs are good indicators of macro risks (e.g., economic, political) and opportunities, particularly for larger, diversified global portfolios.
  • Impact: How SDGs affect portfolios is relevant to all investors. How portfolios might affect SDG outcomes is of more (but not exclusive) interest to investors who value “ESG Impact” as well as “ESG Alpha.” Mapping investments (using GRI) to the SDGs enhances both, especially impact.

See Sustainability/ESG Frameworks: SDGs (UN Sustainable Development Goals) for a fairly detailed introduction to the SDGs, and Sustainability/ESG Frameworks: Overview for a brief overview of all major sustainability/ESG frameworks (as well as other categories in the overall ecosystem).

Soon, I will publish an Insight like this but pertaining to the Sustainability Accounting Standards Board (SASB) framework, also as context for an Insight mapping the SDGs to SASB.

5. Yamato Struggling with Rising Demand

E-commerce package deliveries at Yamato Holdings (9064 JP) grew 13% in April as people stayed at home, but the leading couriers continue to struggle with this growth in demand. New models, new ideas and a rebalancing of the load are needed to help move the service forward in the short-term.

You are currently reading Executive Summaries of Smartkarma Insights.

Want to read on? Explore our tailored Smartkarma Solutions.