ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

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. 

Insights across South East Asia

Cross Asset Strategy

<div class="content-highlight">
The week that was in ASEAN@Smartkarma 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 over the past week.
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 <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a>
</div><h3>Macro Insights</h3>In <a href="https://www.smartkarma.com/insights/thai-macro-watch-august-the-new-tech-wars-chinese-flood" target="_blank" data-smartkarma-citation="insights:42012" rel="noopener">Thai Macro Watch (August): The New Tech Wars, Chinese Flood</a>, our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> five global events and their impact on Thai equities.<h3>Equity Bottom-Up Insights</h3>In <a href="https://www.smartkarma.com/insights/ace-hardware-indonesia-aces-ij-building-a-road-to-recovery" target="_blank" data-smartkarma-citation="insights:42520" rel="noopener">Ace Hardware Indonesia (ACES IJ) - Building A Road to Recovery,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits one of Indonesia's leading retailers after a call with management.In <a href="https://www.smartkarma.com/insights/akr-corporindo-akra-ij-the-landed-logistics-player" target="_blank" data-smartkarma-citation="insights:42569" rel="noopener">AKR Corporindo (AKRA IJ) - The Landed Logistics Player,</a><a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits this Indonesian chemical and fuel distributor with an increasing contribution coming from its JIIPE industrial estate. In <a href="https://www.smartkarma.com/insights/sats-from-serving-22-5m-pax-in-1q20-to-serving-200k-pax-in-1q21-houston-we-have-a-problem" target="_blank" data-smartkarma-citation="insights:42488" rel="noopener">SATS: From Serving 22.5M Pax in 1Q20 -&gt; To Serving 200K Pax in 1Q21. Houston We Have a Problem.</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits Singapore airport maintenance leader post its recent numbers. In <a href="https://www.smartkarma.com/insights/permata-bank-mandatory-takeover-launched-finally" target="_blank" data-smartkarma-citation="insights:42577" rel="noopener">Permata Bank Mandatory Takeover Launched. Finally.</a><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> revisits the <a href="https://www.smartkarma.com/entities/bank-permata-tbk-pt" target="_blank" data-smartkarma-citation="entities:728:1" rel="noopener">Bank Permata (BNLI IJ)</a> deal as it enters its final stage.In <a href="https://www.smartkarma.com/insights/sprime-good-point-of-entry-singha-connection-could-add-further-upside" target="_blank" data-smartkarma-citation="insights:42589" rel="noopener">SPRIME: Good Point of Entry, Singha Connection Could Add Further Upside,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> initiates coverage on SPRIME with a BUY recommendation based on a target price of Bt11.20, implying an upside of 21% from the current share price. In <a href="https://www.smartkarma.com/insights/aimirt-good-growth-outlook-but-already-priced-in" target="_blank" data-smartkarma-citation="insights:42639" rel="noopener">AIMIRT: Good Growth Outlook, but Already Priced In</a> initiates coverage on <a href="https://www.smartkarma.com/entities/aim-industrial-growth-freehold-and-leasehold-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:29180:1" rel="noopener">AIM Industrial Growth Freehold and Leasehold Real Estate Investment Trust (AIMIRT TB)</a> with a HOLD recommendation based on a target price of Bt14.30, implying an upside of 6% from the current share price. In <a href="https://www.smartkarma.com/insights/teamg-cost-savings-and-government-stimulus-to-drive-profit" target="_blank" data-smartkarma-citation="insights:42628" rel="noopener">TEAMG: Cost-Savings and Government Stimulus to Drive Profit,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> revisits <a href="https://www.smartkarma.com/entities/team-consulting-engineering-and-management-public-company-limited" target="_blank" data-smartkarma-citation="entities:29175:1" rel="noopener">TEAM Consulting Engineering and Management (TEAMG TB)</a> and maintains a BUY recommendation on the company as he increases the target price to Bt2.81 from Bt2.42, implying an upside of 17% from the current share price. In <a href="https://www.smartkarma.com/insights/sisb-good-entry-point-for-investment-in-private-schools" target="_blank" data-smartkarma-citation="insights:42632" rel="noopener">SISB: Good Entry Point for Investment in Private Schools,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> initiates coverage on SPRIME with a BUY recommendation based on a target price of Bt11.20, implying an upside of 21% from the current share price.In <a href="https://www.smartkarma.com/insights/sflex-staying-behind-key-players-in-the-market" target="_blank" data-smartkarma-citation="insights:42679" rel="noopener">SFLEX: Staying Behind Key Players in the Market,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> initiates coverage on <a href="https://www.smartkarma.com/entities/starflex-pcl" target="_blank" data-smartkarma-citation="entities:29172:1" rel="noopener">Starflex PCL (SFLEX TB)</a> with a SELL recommendation based on a target price of Bt8.90, implying a downside of 28% from the current price. In <a href="https://www.smartkarma.com/insights/boffice-asset-expansion-motivates-the-upside" target="_blank" data-smartkarma-citation="insights:42678" rel="noopener">BOFFICE: Asset Expansion Motivates the Upside,</a><a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> initiates coverage on <a href="https://www.smartkarma.com/entities/bhiraj-office-leasehold-reit" target="_blank" data-smartkarma-citation="entities:29173:1" rel="noopener">Bhiraj Office Leasehold REIT (BOFFICE TB)</a> with a BUY recommendation based on a target price of Bt14.10, implying an upside of 18% from the current share price. In <a href="https://www.smartkarma.com/insights/all-valuation-remains-undemanding-expect-further-upside" target="_blank" data-smartkarma-citation="insights:42635" rel="noopener">ALL: Valuation Remains Undemanding, Expect Further Upside</a>, <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr Andrew Stotz, CFA</a> revisits <a href="https://www.smartkarma.com/entities/all-inspire-development-pcl" target="_blank" data-smartkarma-citation="entities:29177:1" rel="noopener">All Inspire Development PCL (ALL TB),</a> where he has a Buy recommendation based on a target price of Bt4.39, implying an upside of 31% from the current price. In <a href="https://www.smartkarma.com/insights/m-rapid-sssg-recovery-with-potential-growth-from-seafood-restaurant" target="_blank" data-smartkarma-citation="insights:42578" rel="noopener">M: Rapid SSSG Recovery with Potential Growth from Seafood Restaurant,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> circle back to <a href="https://www.smartkarma.com/entities/mk-restaurants-group-pcl" target="_blank" data-smartkarma-citation="entities:17689:1" rel="noopener">MK Restaurants Group (M TB)</a> after attending the recent analyst briefing, where they came away more positive with signs of an SSSG recovery post lockdown easing.In <a href="https://www.smartkarma.com/insights/egco-positive-2h20-earnings-outlook-from-better-overseas-performance" target="_blank" data-smartkarma-citation="insights:42634" rel="noopener">EGCO: Positive 2H20 Earnings Outlook from Better Overseas Performance,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> revisit <a href="https://www.smartkarma.com/entities/electricity-generating-pcl" target="_blank" data-smartkarma-citation="entities:6149:1" rel="noopener">Electricity Generating (EGCO TB)</a> after the company's positive analyst briefing. In <a href="https://www.smartkarma.com/insights/wice-expect-earnings-to-continue-growing-yoy-in-2h20" target="_blank" data-smartkarma-citation="insights:42537" rel="noopener">WICE: Expect Earnings to Continue Growing YoY in 2H20,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> circle back to <a href="https://www.smartkarma.com/entities/wice-logistics-pcl" target="_blank" data-smartkarma-citation="entities:26172:1" rel="noopener">Wice Logistics (WICE TB)</a> after going to the company's analyst briefing. In <a href="https://www.smartkarma.com/insights/hana-covid-19-impact-has-passed" target="_blank" data-smartkarma-citation="insights:42575" rel="noopener">HANA: Covid-19 Impact Has Passed,</a><a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> revisits one of Thailand's leading electronics manufacturing services companies. <h3>Sector and Thematic Insights</h3>In <a href="https://www.smartkarma.com/insights/indonesia-banks-most-to-recover" target="_blank" data-smartkarma-citation="insights:42493" rel="noopener">Indonesia Banks – Most To Recover?,</a> banking specialist <a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> zooms in on the potential recovery to come for Indonesian Banks. <div><div><div id="ember9100"><div><section><div id="ember9112"><div>In <a href="https://www.smartkarma.com/insights/asia-banks-oversized-dividends" target="_blank" data-smartkarma-citation="insights:42535" rel="noopener">Asia Banks – Oversized Dividends,</a><a href="https://www.smartkarma.com/profiles/daniel-tabbush" target="_blank" data-smartkarma-citation="accounts:12" rel="noopener">Daniel Tabbush</a> zeros in on dividend payments for Asian banks during the pandemic period. </div></div></section></div></div></div></div><h3>Credit Insights</h3>In <a href="https://www.smartkarma.com/insights/bank-rakyat-indonesia-pondering-pricing-on-a-promised-new-issue" target="_blank" data-smartkarma-citation="insights:42524" rel="noopener">Bank Rakyat Indonesia: Pondering Pricing on a Promised New Issue</a><a href="https://www.smartkarma.com/profiles/hank-calenti-cfa" target="_blank" data-smartkarma-citation="accounts:5194" rel="noopener">Hank Calenti, CFA</a> takes a look at the proposed US$1bn bond issue from <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> and finds it appealing. <a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> could price a potential five-year senior unsecured


The week that was in ASEAN@Smartkarma 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 over the past week.
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 ASEAN@Smartkarma
Macro InsightsIn Thai Macro Watch (August): The New Tech Wars, Chinese Flood, our Thai guru Athaporn Arayasantiparb, CFA five global events and their impact on Thai equities.Equity Bottom-Up InsightsIn Ace Hardware Indonesia (ACES IJ) - Building A Road to Recovery, CrossASEAN Insight Provider Angus Mackintosh revisits one of Indonesia's leading retailers after a call with management.In AKR Corporindo (AKRA IJ) - The Landed Logistics Player,Angus Mackintosh revisits this Indonesian chemical and fuel distributor with an increasing contribution coming from its JIIPE industrial estate. In SATS: From Serving 22.5M Pax in 1Q20 -&gt; To Serving 200K Pax in 1Q21. Houston We Have a Problem. CrossASEAN Insight Provider Nicolas Van Broekhoven revisits Singapore airport maintenance leader post its recent numbers. In Permata Bank Mandatory Takeover Launched. Finally.Travis Lundy revisits the Bank Permata (BNLI IJ) deal as it enters its final stage.In SPRIME: Good Point of Entry, Singha Connection Could Add Further Upside,Dr Andrew Stotz, CFA initiates coverage on SPRIME with a BUY recommendation based on a target price of Bt11.20, implying an upside of 21% from the current share price. In AIMIRT: Good Growth Outlook, but Already Priced In initiates coverage on AIM Industrial Growth Freehold and Leasehold Real Estate Investment Trust (AIMIRT TB) with a HOLD recommendation based on a target price of Bt14.30, implying an upside of 6% from the current share price. In TEAMG: Cost-Savings and Government Stimulus to Drive Profit,Dr Andrew Stotz, CFA revisits TEAM Consulting Engineering and Management (TEAMG TB) and maintains a BUY recommendation on the company as he increases the target price to Bt2.81 from Bt2.42, implying an upside of 17% from the current share price. In SISB: Good Entry Point for Investment in Private Schools,Dr Andrew Stotz, CFA initiates coverage on SPRIME with a BUY recommendation based on a target price of Bt11.20, implying an upside of 21% from the current share price.In SFLEX: Staying Behind Key Players in the Market,Dr Andrew Stotz, CFA initiates coverage on Starflex PCL (SFLEX TB) with a SELL recommendation based on a target price of Bt8.90, implying a downside of 28% from the current price. In BOFFICE: Asset Expansion Motivates the Upside,Dr Andrew Stotz, CFA initiates coverage on Bhiraj Office Leasehold REIT (BOFFICE TB) with a BUY recommendation based on a target price of Bt14.10, implying an upside of 18% from the current share price. In ALL: Valuation Remains Undemanding, Expect Further Upside, Dr Andrew Stotz, CFA revisits All Inspire Development PCL (ALL TB), where he has a Buy recommendation based on a target price of Bt4.39, implying an upside of 31% from the current price. In M: Rapid SSSG Recovery with Potential Growth from Seafood Restaurant, our friends at Country Group circle back to MK Restaurants Group (M TB) after attending the recent analyst briefing, where they came away more positive with signs of an SSSG recovery post lockdown easing.In EGCO: Positive 2H20 Earnings Outlook from Better Overseas Performance,Country Group revisit Electricity Generating (EGCO TB) after the company's positive analyst briefing. In WICE: Expect Earnings to Continue Growing YoY in 2H20,Country Group circle back to Wice Logistics (WICE TB) after going to the company's analyst briefing. In HANA: Covid-19 Impact Has Passed,Country Group revisits one of Thailand's leading electronics manufacturing services companies. Sector and Thematic InsightsIn Indonesia Banks – Most To Recover?, banking specialist Daniel Tabbush zooms in on the potential recovery to come for Indonesian Banks. In Asia Banks – Oversized Dividends,Daniel Tabbush zeros in on dividend payments for Asian banks during the pandemic period. Credit InsightsIn Bank Rakyat Indonesia: Pondering Pricing on a Promised New IssueHank Calenti, CFA takes a look at the proposed US$1bn bond issue from Bank Rakyat Indonesia Persero (BBRI IJ) and finds it appealing. Bank Rakyat Indonesia Persero (BBRI IJ) could price a potential five-year senior unsecured 

The Week that Was in ASEAN@Smartkarma - Ace Hardwear, Thai Macro, and Indonesian Banks

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Asia’s high yield market kept pace with the US as risk sentiment rose following the Fed Chairman’s speech this week. The Powell put is alive and well in US high yield markets. However, how the Fed affects its policy change will make a difference to Asia and broader EM US$-denominated risk assets. If the Fed’s change in policy framework is actioned via yield curve control to cap real yields and push the dollar lower, then emerging market bonds will continue to benefit.Concurrently, in rate markets, the change in Fed policy stance and high supply expectations for September drove the US Treasury curve significantly higher as long-end bonds sold-off while shorter-end securities rose in price. The curve also steepened despite three record sized auctions during the week.  Curve steepening is generally associated with increased bank net interest income from maturity transformation and as sure as night follows day, a steepening yield curve resulted in higher bank share prices. However, if longer-end Treasury yields continue to rise, then marginal flows into risk-assets may reduce, particularly in EM as rising Treasury yields pressure dollar FX levels. This is a real risk for EM markets. All eyes are now on to the Sept 16 FOMC meeting for greater details on how the Fed policy change is implemented. In-line with increased risk tolerance in Asia, nine bond spreads tightened for every one that widened during the week as cross-over Senior Unsecured bonds outperformed other securities. <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank of India's (SBIN IN)</a> Additional Tier 1 (AT1) bond outperformed despite being downgraded one-notch by Moody’s Investors Service to B2. Investors may have expected a larger downgrade. <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia's (23 HK)</a> AT1 also outperformed, please see: <a href="https://www.smartkarma.com/insights/bank-of-east-asia-strategic-review-to-set-at1-value-forewarned-is-forearmed" target="_blank" data-smartkarma-citation="insights:42705" rel="noopener">Bank of East Asia: Strategic Review to Set AT1 Value; Forewarned Is Forearmed</a>. Concurrently, Turkish banks continued to lag financials globally as Fitch placed a negative outlook on its BB- sovereign rating. Tactically, cross-over senior unsecured may be best for defensive positioning as volatility may be heightened until we have better visibility on the Fed’s plans. In bank debt capital markets, over US$17 billion was issued in USD and Euros across the credit continuum. In Asia, the <a href="https://www.smartkarma.com/entities/agricultural-bank-of-china-limited" target="_blank" data-smartkarma-citation="entities:1120:1" rel="noopener">Agricultural Bank of China (1288 HK)</a> brought a Senior Unsecured bond which looks attractive relative to where similarly rated UBS and Bank of America brought 5.5-year and 10-year senior holding company bonds last month. Close to Asia, Qatar-based Masraf Al Rayan also issued a five-year Sukuk at attractive price levels. Within the Additional Tier 1 (AT1) space, Bank of Ireland’s (BKIR) Euro-AT1 was issued +40 basis points wider than <a href="https://www.smartkarma.com/entities/rizal-commercial-banking-corp" target="_blank" data-smartkarma-citation="entities:23143:1" rel="noopener">Rizal Commercial Bank's (RCB PM)</a> of last week, after adjusting for the currency and coupon basis. BKIR has a long-established debt issuance programme and is much better at financial disclosure, in our view. We believe that Rizal’s bond was priced too tight; however, we think that this issuance may benefit spreads on Rizal’s 2024 Senior Unsecured debt. The pricing on higher rated BKIR’s bond further cements this view. For more on this, please see <a href="https://www.smartkarma.com/insights/rizal-commercial-bank-s-inaugural-at1-bond-caveat-emptor" target="_blank" data-smartkarma-citation="insights:42437" rel="noopener">Rizal Commercial Bank’s Inaugural AT1 Bond: Caveat Emptor</a>.Market Outlook Risks may now be materially higher for EM credit. Until now, perceptions were that lower-for-longer interest rates would cause US$-investors to reach for yield, in turn raising demand for longer maturities and non-US assets. Following Powell’s speech, if the Fed permits long bond yields to rise, then marginal flows into emerging market credit may slow on increasing dollar strength. We expect some market volatility until more visibility is available.Inside: In this weekly, we elaborate on these themes as we review global credit index levels, interest rates, Eurodollar futures and fund flows as well as bank bond spread moves and recent debt issuance to identify possible investment opportunities and potential pitfalls in Asia-headquartered bank bonds.

Asia’s high yield market kept pace with the US as risk sentiment rose following the Fed Chairman’s speech this week. The Powell put is alive and well in US high yield markets. However, how the Fed affects its policy change will make a difference to Asia and broader EM US$-denominated risk assets. If the Fed’s change in policy framework is actioned via yield curve control to cap real yields and push the dollar lower, then emerging market bonds will continue to benefit.Concurrently, in rate markets, the change in Fed policy stance and high supply expectations for September drove the US Treasury curve significantly higher as long-end bonds sold-off while shorter-end securities rose in price. The curve also steepened despite three record sized auctions during the week.  Curve steepening is generally associated with increased bank net interest income from maturity transformation and as sure as night follows day, a steepening yield curve resulted in higher bank share prices. However, if longer-end Treasury yields continue to rise, then marginal flows into risk-assets may reduce, particularly in EM as rising Treasury yields pressure dollar FX levels. This is a real risk for EM markets. All eyes are now on to the Sept 16 FOMC meeting for greater details on how the Fed policy change is implemented. In-line with increased risk tolerance in Asia, nine bond spreads tightened for every one that widened during the week as cross-over Senior Unsecured bonds outperformed other securities. State Bank of India's (SBIN IN) Additional Tier 1 (AT1) bond outperformed despite being downgraded one-notch by Moody’s Investors Service to B2. Investors may have expected a larger downgrade. Bank of East Asia's (23 HK) AT1 also outperformed, please see: Bank of East Asia: Strategic Review to Set AT1 Value; Forewarned Is Forearmed. Concurrently, Turkish banks continued to lag financials globally as Fitch placed a negative outlook on its BB- sovereign rating. Tactically, cross-over senior unsecured may be best for defensive positioning as volatility may be heightened until we have better visibility on the Fed’s plans. In bank debt capital markets, over US$17 billion was issued in USD and Euros across the credit continuum. In Asia, the Agricultural Bank of China (1288 HK) brought a Senior Unsecured bond which looks attractive relative to where similarly rated UBS and Bank of America brought 5.5-year and 10-year senior holding company bonds last month. Close to Asia, Qatar-based Masraf Al Rayan also issued a five-year Sukuk at attractive price levels. Within the Additional Tier 1 (AT1) space, Bank of Ireland’s (BKIR) Euro-AT1 was issued +40 basis points wider than Rizal Commercial Bank's (RCB PM) of last week, after adjusting for the currency and coupon basis. BKIR has a long-established debt issuance programme and is much better at financial disclosure, in our view. We believe that Rizal’s bond was priced too tight; however, we think that this issuance may benefit spreads on Rizal’s 2024 Senior Unsecured debt. The pricing on higher rated BKIR’s bond further cements this view. For more on this, please see Rizal Commercial Bank’s Inaugural AT1 Bond: Caveat Emptor.Market Outlook Risks may now be materially higher for EM credit. Until now, perceptions were that lower-for-longer interest rates would cause US$-investors to reach for yield, in turn raising demand for longer maturities and non-US assets. Following Powell’s speech, if the Fed permits long bond yields to rise, then marginal flows into emerging market credit may slow on increasing dollar strength. We expect some market volatility until more visibility is available.Inside: In this weekly, we elaborate on these themes as we review global credit index levels, interest rates, Eurodollar futures and fund flows as well as bank bond spread moves and recent debt issuance to identify possible investment opportunities and potential pitfalls in Asia-headquartered bank bonds.

Bank Credit Weekly: Powell Put Pushes Asia and US HY Risk Sentiment Higher – Risks Now Changed

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Asian Governance: Diversity & Incentives Through the Cultural Lens

<a href="https://www.smartkarma.com/entities/bank-rakyat-indonesia-persero" target="_blank" data-smartkarma-citation="entities:484:1" rel="noopener">Bank Rakyat Indonesia Persero (BBRI IJ)</a> could price a potential five-year senior unsecured US$-bond at 200 basis points over similar maturity US Treasuries (T+200), based on current spread levels at which peer banks trade and relative to where Republic of Indonesia US$-bonds trade.  In early August, Indonesia’s Deputy Minister for State-Owned Enterprise stated that Bank Rakyat could issue up to US$1 billion in a global bond offering during the third quarter, according to a Bloomberg report. The Deputy Minister suggested that the company secure dollar liquidity now as pricing seems reasonable. We could not agree more.Despite considerable margin compression in recent results from Covid-19 impacts and a restructuring portfolio at over 21% of total loans, Bank Rakyat’s US$ bonds continue to be well bid in the market. Furthermore, in May, <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a> issued a five year note at T+455bps. Bank Mandiri’s bond now trades at T+215bps. Investors have enjoyed 10 price points of performance in the Mandiri bond over the last 3+ months. We are not optimistic on obtaining the same level of performance from a Bank Rakyat bond in the current market. As such, with slightly more than one month to the end of Q3, we ponder the potential pricing on Rakyat’s promised new issue and consider if there could be any upside left for investors. The final price may prove attractive considering that the bank is 58% owned by the Republic of Indonesia. Even if the bond is priced at T+200bps, there may be as much as 50bps of upside overtime. We detail our fair value expectations within

Bank Rakyat Indonesia Persero (BBRI IJ) could price a potential five-year senior unsecured US$-bond at 200 basis points over similar maturity US Treasuries (T+200), based on current spread levels at which peer banks trade and relative to where Republic of Indonesia US$-bonds trade.  In early August, Indonesia’s Deputy Minister for State-Owned Enterprise stated that Bank Rakyat could issue up to US$1 billion in a global bond offering during the third quarter, according to a Bloomberg report. The Deputy Minister suggested that the company secure dollar liquidity now as pricing seems reasonable. We could not agree more.Despite considerable margin compression in recent results from Covid-19 impacts and a restructuring portfolio at over 21% of total loans, Bank Rakyat’s US$ bonds continue to be well bid in the market. Furthermore, in May, Bank Mandiri Persero (BMRI IJ) issued a five year note at T+455bps. Bank Mandiri’s bond now trades at T+215bps. Investors have enjoyed 10 price points of performance in the Mandiri bond over the last 3+ months. We are not optimistic on obtaining the same level of performance from a Bank Rakyat bond in the current market. As such, with slightly more than one month to the end of Q3, we ponder the potential pricing on Rakyat’s promised new issue and consider if there could be any upside left for investors. The final price may prove attractive considering that the bank is 58% owned by the Republic of Indonesia. Even if the bond is priced at T+200bps, there may be as much as 50bps of upside overtime. We detail our fair value expectations within

Bank Rakyat Indonesia: Pondering Pricing on a Promised New Issue

Asia’s high yield market underperformed as risk sentiment in both Asia and the US retreated. US spreads came under pressure following a deluge of deals over the last few weeks and as U.S. jobless claims unexpectedly jumped during the week. Asia’s performance erased wider losses earlier in the week on US-China trade concerns following news that the US cancelled higher level trade talks. Regional actions such as systemic liquidity injections by the People’s Bank of China as well as unchanged policy interest rates in Indonesia and the Philippines limited spread widening.Concurrently, in rate markets, despite treasury bond market disappointment on what was not said in the Fed’s recent meeting minutes, namely expectations regarding the Fed’s bond buying programme, the US Treasury curve flattened slightly over the week as yields fell faster in the longer-end. Curve steepening is generally associated with increased bank net interest income from maturity transformation. Curve flattening suggests the opposite. Over the next week, the market will be looking for more direction on the path of US monetary policy when Chairman Jerome Powell speaks at the Kansas City Fed’s annual symposium on Aug. 27.In-line with reduced risk tolerance in Asia, only four bond spreads tightened for every one that widened during the week as Senior Unsecured bonds outperformed more Subordinated securities. Among those bonds that underperformed,  India’s non-bank finance companies (NBFCs) widened despite the extension and expansion of a partial state guarantee on NBFC-issued bonds and commercial paper that are purchased by India's public-sector banks.Amongst those bonds that outperformed, in addition to increased risk-aversion, debt issuance positively affected spreads on several bonds. <a href="https://www.smartkarma.com/entities/rizal-commercial-banking-corp" target="_blank" data-smartkarma-citation="entities:23143:1" rel="noopener">Rizal Commercial Bank's (RCB PM)</a> inaugural Additional Tier 1 (AT1) bond and <a href="https://www.smartkarma.com/entities/state-bank-of-india" target="_blank" data-smartkarma-citation="entities:160:1" rel="noopener">State Bank Of India's (SBIIN)</a> Tier II local currency issuance may have positively impacted the spreads of several bonds. SBIIN’s issuance of a Basel III compliant Tier II bond in the local market likely had a positive impact on the issuers’ US$-denominated credit curve. In Rizal’s case, the Ba3 rated bond priced at a level which may have pushed spreads tighter on <a href="https://www.smartkarma.com/entities/tmb-bank-pcl" target="_blank" data-smartkarma-citation="entities:8090:1" rel="noopener">TMB Bank's (TMB TB)</a> similarly rated AT1 bond. We believe the Rizal bond was priced too tight; however, we think this issuance may benefit spreads on Rizal’s 2024 Senior Unsecured debt. For more on this, please see <a href="https://www.smartkarma.com/insights/rizal-commercial-bank-s-inaugural-at1-bond-caveat-emptor" target="_blank" data-smartkarma-citation="insights:42437" rel="noopener">Rizal Commercial Bank’s Inaugural AT1 Bond: Caveat Emptor</a>. Market Outlook Risks remain for this market. These include rising U.S.-China geo-political tensions, resurgent Coronavirus activity, the global growth outlook, and the outcome of the US election. In this background, concerns are being voiced on the potentially unsettling bond market impact from a successful coronavirus vaccine. We expect the Fed’s moves to have a more lasing affect. In addition, as we move through the US election, downward moves in US Treasury rates may occur, given potential investor uncertainty on policy direction, post-election. One cannot rule out a return to negative short-term US$ interest rates, as occurred in mid-March. Fortunately for credit investors, the Fed’s powder remains very dry with respect to utilizing its Secondary Corporate Credit Facility and this programme was recently extended to year-end.Inside: In this weekly, we review global credit index levels, interest rates and fund flows as well as bank bond spread moves and recent debt issuance to identify possible investment opportunities and potential pitfalls in Asia-headquartered bank bonds.

Asia’s high yield market underperformed as risk sentiment in both Asia and the US retreated. US spreads came under pressure following a deluge of deals over the last few weeks and as U.S. jobless claims unexpectedly jumped during the week. Asia’s performance erased wider losses earlier in the week on US-China trade concerns following news that the US cancelled higher level trade talks. Regional actions such as systemic liquidity injections by the People’s Bank of China as well as unchanged policy interest rates in Indonesia and the Philippines limited spread widening.Concurrently, in rate markets, despite treasury bond market disappointment on what was not said in the Fed’s recent meeting minutes, namely expectations regarding the Fed’s bond buying programme, the US Treasury curve flattened slightly over the week as yields fell faster in the longer-end. Curve steepening is generally associated with increased bank net interest income from maturity transformation. Curve flattening suggests the opposite. Over the next week, the market will be looking for more direction on the path of US monetary policy when Chairman Jerome Powell speaks at the Kansas City Fed’s annual symposium on Aug. 27.In-line with reduced risk tolerance in Asia, only four bond spreads tightened for every one that widened during the week as Senior Unsecured bonds outperformed more Subordinated securities. Among those bonds that underperformed,  India’s non-bank finance companies (NBFCs) widened despite the extension and expansion of a partial state guarantee on NBFC-issued bonds and commercial paper that are purchased by India's public-sector banks.Amongst those bonds that outperformed, in addition to increased risk-aversion, debt issuance positively affected spreads on several bonds. Rizal Commercial Bank's (RCB PM) inaugural Additional Tier 1 (AT1) bond and State Bank Of India's (SBIIN) Tier II local currency issuance may have positively impacted the spreads of several bonds. SBIIN’s issuance of a Basel III compliant Tier II bond in the local market likely had a positive impact on the issuers’ US$-denominated credit curve. In Rizal’s case, the Ba3 rated bond priced at a level which may have pushed spreads tighter on TMB Bank's (TMB TB) similarly rated AT1 bond. We believe the Rizal bond was priced too tight; however, we think this issuance may benefit spreads on Rizal’s 2024 Senior Unsecured debt. For more on this, please see Rizal Commercial Bank’s Inaugural AT1 Bond: Caveat Emptor. Market Outlook Risks remain for this market. These include rising U.S.-China geo-political tensions, resurgent Coronavirus activity, the global growth outlook, and the outcome of the US election. In this background, concerns are being voiced on the potentially unsettling bond market impact from a successful coronavirus vaccine. We expect the Fed’s moves to have a more lasing affect. In addition, as we move through the US election, downward moves in US Treasury rates may occur, given potential investor uncertainty on policy direction, post-election. One cannot rule out a return to negative short-term US$ interest rates, as occurred in mid-March. Fortunately for credit investors, the Fed’s powder remains very dry with respect to utilizing its Secondary Corporate Credit Facility and this programme was recently extended to year-end.Inside: In this weekly, we review global credit index levels, interest rates and fund flows as well as bank bond spread moves and recent debt issuance to identify possible investment opportunities and potential pitfalls in Asia-headquartered bank bonds.

Bank Credit Weekly: Risk Sentiment Retreats in Asia and US HY Markets

Indonesia

PT Bank Rakyat Indonesia (Persero) Tbk provides commercial banking activities and its related services. The Bank also provides banking activities based on shariah principles.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Bank Rakyat Indonesia (BBRI IJ)

The Week that Was in ASEAN@Smartkarma - Ace Hardwear, Thai Macro, and Indonesian Banks

This past week's offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable...

Angus Mackintosh

Bank Credit Weekly: Powell Put Pushes Asia and US HY Risk Sentiment Higher – Risks Now Changed

Asia’s high yield market kept pace with the US as risk sentiment rose following the Fed Chairman’s speech this week. The Powell put is alive and...

Hank Calenti, CFA

Asian Governance: Diversity & Incentives Through the Cultural Lens

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and...

Bondcritic

Bank Rakyat Indonesia: Pondering Pricing on a Promised New Issue

Bank Rakyat Indonesia Persero (BBRI IJ) could price a potential five-year senior unsecured US$-bond at 200 basis points over similar maturity US...

Hank Calenti, CFA

Bank Credit Weekly: Risk Sentiment Retreats in Asia and US HY Markets

Asia’s high yield market underperformed as risk sentiment in both Asia and the US retreated. US spreads came under pressure following a deluge of...

Hank Calenti, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)