Brief Multi-Strategy: Indonesia: The Rent Seeker and more

In this briefing:

  1. Indonesia: The Rent Seeker
  2. Trade War/Huawei/Financial Risks/Mr Science & Mr Democracy
  3. Green Shoots, Rotten Roots?
  4. Nexon Sale: Latest Development & Likely Outcomes
  5. Haitong UniTrust Intl Leasing IPO Preview: Fourth Time Lucky?

1. Indonesia: The Rent Seeker

Indonesia’s election results will be confirmed by 22 May, with Joko Widodo leading the official vote count. Although President Widodo is considered slightly less of an economic nationalist than his challenger, Prabowo Subianto, both candidates have made it a pillar in their economic platforms. With five years of economic nationalism during Mr. Widodo’s last term, we expect more of the same during his second. 

2. Trade War/Huawei/Financial Risks/Mr Science & Mr Democracy

China News That Matters

  • Concessions all round in US-China trade talks
  • Huawei “stealing its way” to global dominance?
  • Consumers flip credit cards and listed firms lie
  • Laud this student protest. Ignore the one next month

In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

3. Green Shoots, Rotten Roots?

Just when you think the global economy is starting to spring green shoots, the skies have darkened and some of those shoots may be turning brown. In the U.S., ISM Manufacturing fell and missed expectations.

In China, both the official PMI, which is tilted toward larger SOEs, and the Cain PMI, which measures SMEs, fell and missed expectations. These readings have cast doubt on the longevity of Beijing’s stimulus-driven rebound.

On the other hand, the Non-Farm Payroll report came in ahead of expectations. In Europe, the PMIs for peripheral countries like Italy and Greece are outperforming Germany. In addition, exports from Korea and Taiwan, which are highly globally sensitive, have rebounded, indicating recovery.

How do investors interpret these cross-currents?

We concur with Rob Hanna of Quantifiable Edges, who made an insightful comment that “Tops Wobble Before Falling Over”. Our review of the market’s technical conditions reveals the market is not wobbling yet.

Any market wobble would be seen in NASDAQ and semiconductor stocks. Until Technology and NASDAQ leadership starts to falter, and if their leadership is not replaced by the reflation-sensitive cyclical groups, we remain bullish on equities.

4. Nexon Sale: Latest Development & Likely Outcomes

Local news outlet Invest Chosun reports the latest development on the Nexon deal. This report says that MBK and Netmarble are now going separate ways. I summarize the key points of this latest development in this post. I include possible reasons why MBK is leaving out Netmarble and likely outcomes of this development.

5. Haitong UniTrust Intl Leasing IPO Preview: Fourth Time Lucky?

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Haitong UniTrust International Leasing Co Ltd (HUIL HK) is a foreign-funded financial leasing company in China and is the leasing unit of Haitong Securities Co Ltd (H) (6837 HK). Haitong UniTrust will start pre-marketing for a long overdue Hong Kong IPO to raise $500 million, according to press reports.

Overall, our analysis suggests that Haitong UniTrust’s fundamentals are mixed which would need to be reflected in IPO valuation.

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