Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

<p><em><strong>&lsquo;Pay no attention to that man behind the curtain&rsquo;</strong>&nbsp;</em><em>- Wizard of Oz</em></p><p>The nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.</p><p>The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to <strong>illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.</strong></p>

&lsquo;Pay no attention to that man behind the curtain&rsquo;&nbsp;- Wizard of OzThe nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.

CHINA: Reform & Omnipotence Myths Dispelled

<div><div><div>Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche Bank towards the end of 2010 and the start of 2011, at a time when the consensus outlook for EM economies and equities was almost unanimously bullish.</div><div>&nbsp;</div><div>I made a number of tentative predictions and recommendations, which were generally greeted with a combination of indifference and skepticism and on occasion outright hostility among most, though not quite all of the bank&rsquo;s clients.</div><div>&nbsp;</div></div></div><div><div><strong>It seems that we may now be entering the final stage of EM relative underperformance, in line with our expectations in our initiation last year where we posited the relative trade was 2/3rds through.</strong></div></div>

Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche Bank towards the end of 2010 and the start of 2011, at a time when the consensus outlook for EM economies and equities was almost unanimously bullish.&nbsp;I made a number of tentative predictions and recommendations, which were generally greeted with a combination of indifference and skepticism and on occasion outright hostility among most, though not quite all of the bank&rsquo;s clients.&nbsp;It seems that we may now be entering the final stage of EM relative underperformance, in line with our expectations in our initiation last year where we posited the relative trade was 2/3rds through.

A Roadmap of the EM Bear Market and Three Myths about the China Bull Market

Chairman, sgtradex

Tan Chin-Hwee

Chairman

Thematic (Sector/Industry)

<p>The discourse on Asia&rsquo;s &ldquo;rise&rdquo; is dominated by China and India, countries whose vast populations and buoyant economies have captured the imagination of international investors, journalists and policy analysts.</p><p>&ldquo;Chindia&rdquo;-scented rhetoric abounds with catchphrases that state the obvious, but whose import is less so. China has the hardware, India the software; India needs China&rsquo;s roads, China could do with India&rsquo;s political inclusiveness. <em>Given how fundamentally different India and China are, though, such &ldquo;lessons learnt&rdquo; are of limited value.</em></p><p><em><strong>The more relevant comparison in Asia &ndash; and one with enormous implications for the global economy &ndash; is between India and its civilisational sibling, Indonesia.</strong></em> These two eclectic democracies share more in common than India and China, yet they are rarely hyphenated.</p><p>Last year&rsquo;s elections saw the elevation of a new breed of popular leader in both countries. Narendra Modi, whose family ran a tea stall, has risen from near the bottom of India&rsquo;s caste and class hierarchies. Joko Widodo is from a similarly underprivileged background.</p>

The discourse on Asia&rsquo;s &ldquo;rise&rdquo; is dominated by China and India, countries whose vast populations and buoyant economies have captured the imagination of international investors, journalists and policy analysts.&ldquo;Chindia&rdquo;-scented rhetoric abounds with catchphrases that state the obvious, but whose import is less so. China has the hardware, India the software; India needs China&rsquo;s roads, China could do with India&rsquo;s political inclusiveness. Given how fundamentally different India and China are, though, such &ldquo;lessons learnt&rdquo; are of limited value.The more relevant comparison in Asia &ndash; and one with enormous implications for the global economy &ndash; is between India and its civilisational sibling, Indonesia. These two eclectic democracies share more in common than India and China, yet they are rarely hyphenated.Last year&rsquo;s elections saw the elevation of a new breed of popular leader in both countries. Narendra Modi, whose family ran a tea stall, has risen from near the bottom of India&rsquo;s caste and class hierarchies. Joko Widodo is from a similarly underprivileged background.

The Rise of Asia: India and Indonesia's Shared Challenges and Opportunities.

Ex-Buyside Principal, now doing Independent Secondary Research on Indian Equities

Pawan Sachdeva

<p></p><span style="font-size: 0.95em; line-height: 2;">In preparing this insight, I have tried to compare ACC (as an Indian Cement Sector Proxy) to Holcim and Anhui Conch. &nbsp;</span><div><ul><li><span style="font-size: 0.95em; line-height: 2;">I discuss Long Term trends of cement pricing in India, environmental issues and relative cost structures.&nbsp;</span><br></li><li><span style="font-size: 0.95em; line-height: 2;">I believe that this work might aid fund managers / analysts in deriving a better view on the cement sector.&nbsp;</span><br></li><li><span style="font-size: 0.95em; line-height: 2;">Cement Company Managements can also use this as an analysis framework to benchmark their own performance.&nbsp;</span><br></li><li><span style="font-size: 0.95em; line-height: 2;">Lastly, I also try to raise thoughts on whether 2015-2020 is like 2003-2008 for the Indian stock market.&nbsp;</span></li></ul><blockquote><span style="font-size: 0.95em; line-height: 2;">My work examines publicly available data spanning 15 years, going back to 1999.&nbsp;</span></blockquote><p></p></div>

In preparing this insight, I have tried to compare ACC (as an Indian Cement Sector Proxy) to Holcim and Anhui Conch. &nbsp;I discuss Long Term trends of cement pricing in India, environmental issues and relative cost structures.&nbsp; I believe that this work might aid fund managers / analysts in deriving a better view on the cement sector.&nbsp; Cement Company Managements can also use this as an analysis framework to benchmark their own performance.&nbsp; Lastly, I also try to raise thoughts on whether 2015-2020 is like 2003-2008 for the Indian stock market.&nbsp;My work examines publicly available data spanning 15 years, going back to 1999.&nbsp;

ACC, Holcim & Anhui Conch: A Cross-Country Benchmarking Study of Cement Sector Leaders

India

LafargeHolcim Ltd provides building materials. The Company produces and markets ready-mixed concrete, cement, clinker, and ad-mixtures, as well as provides consulting and engineering services in all areas of the cement manufacturing process. LafargeHolcim operates cement manufacturing facilities worldwide.

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LafargeHolcim Ltd (LHN VX)

CHINA: Reform & Omnipotence Myths Dispelled

‘Pay no attention to that man behind the curtain’ - Wizard of OzThe nature and scale of Beijing’s reaction to the bursting of the China equity...

John-Paul Smith

A Roadmap of the EM Bear Market and Three Myths about the China Bull Market

Let me begin by revisiting the road map for the bear market in EM equities which I first outlined in my role as EM equity strategist for Deutsche...

John-Paul Smith

The Rise of Asia: India and Indonesia's Shared Challenges and Opportunities.

The discourse on Asia’s “rise” is dominated by China and India, countries whose vast populations and buoyant economies have captured the...

Tan Chin-Hwee

ACC, Holcim & Anhui Conch: A Cross-Country Benchmarking Study of Cement Sector Leaders

In preparing this insight, I have tried to compare ACC (as an Indian Cement Sector Proxy) to Holcim and Anhui Conch. I discuss Long Term trends...

Pawan Sachdeva

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