Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

We offer the best research for institutional investors by:

-Only publishing research from veteran analysts
-Eliminate the inherent conflicts of the traditional sell and buy side relationship
-Ensure our team is always accessible; collaboration with clients nurtures our collective success

Cross-Asset & Quantitative Research

Cross Asset Strategy

<ul>
<li>While we are intermediate term cautious, our working hypothesis for the near-term outlook is a choppy market, but the S&amp;P 500 is unlikely to breach its 2022 lows.  </li>
<li>It is with this chaotic environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.</li>
<li>We will update all of the pairs periodically. Feedback and expressions of interest are appreciated so we know how much resources to devote to the regular update to this strategy.</li>
</ul>


While we are intermediate term cautious, our working hypothesis for the near-term outlook is a choppy market, but the S&amp;P 500 is unlikely to breach its 2022 lows.  
It is with this chaotic environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.
We will update all of the pairs periodically. Feedback and expressions of interest are appreciated so we know how much resources to devote to the regular update to this strategy.


Achieving Stable Alpha in a Chaotic Bear Market

Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

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

Macroeconomics

Sri Lanka's external debt was 440% of its goods exports and 270% of its goods &amp; services exports at end-2019 (unsustainable based on the IMF-WB framework). The acceleration in real GDP growth (averaging nearly 6.4%) during Mahinda Rajapaksa's presidency (2005 to early-2015) was akin to India's acceleration in the 1980s (similarly funded by an external borrowing binge). Sri Lanka hasn't made structural changes, remaining dependent on tea and tourism as foreign-exchange earners, and must now either agree a program of structural reform (akin to India 1991) or face a restructuring of its external debt later this year. Either way, near-term growth prospects are dismal. We recommend staying well clear of Sri Lanka exposure.  Sri Lanka's economy -- driven mainly by earnings from tourism, tea and (modest) textile exports -- is in dire straits. Foreign visitor arrivals declined 18% YoY in 2019 (falling to a 4-year low of 1.91 million), causing real GDP to decelerate to 2.3% growth in 2019 (the lowest since 2001). During Mahinda Rajapaksa's 10 years as President (2005-early 2015), Sri Lanka experienced rapid real GDP growth -- infrastructure-driven 6% annual growth in 2005-09, and a "peace dividend" of 6.7% annual growth in 2010-14 driven by a surge in foreign visitor arrivals. But growth was accompanied by high inflation (8% annual average over the 10 years) and a massive rise in external debt, which rose from US$11.4bn at the start of Rajapaksa's term to US$42.9bn at its end (16.6% CAGR).  Sri Lanka took its 16th loan from the IMF in 2016 -- a 3-year Extended Fund Facility (EFF) worth US$1.5bn, extended by a year to 2 June 2020 -- and has been a ward of the IMF for 70% of the time in the past 40 years. (Among South Asian economies, only Pakistan has been in IMF programs longer). But its external debt reached 63.9% of GDP in 2019 -- or a humongous 440% of goods exports, and 270% of exports of goods &amp; services, numbers that are well above the upper limit for the IMF's framework for external-debt sustainability. Last year's fiscal and primary deficits were 6.2% and 0.3% of GDP (vs. an IMF requirement of a primary surplus of 0.2%).In February (before the Covid-induced slump in tourism), the IMF projected 3.7% real GDP growth for 2020, a fiscal deficit of 7.9% of GDP and a primary deficit of 1.9% of GDP. Those estimates were based on the dramatic tax cuts by the new administration of President Gotabaya Rajapaksa (with Mahinda Rajapaksa as Prime Minister). The IMF's latest projection is for real GDP to contract 0.5% in 2020; we estimate a contraction of at least 2% in 2020. The external debt dynamics will consequently deteriorate dramatically, making it near-impossible for Sri Lanka to meet its external debt service payments of US$4-4.5bn  in each of the next 5 years. By October, Sri Lanka will need a large structural adjustment loan from the IMF -- or will need to restructure its external debt. Until the Rajapaksa administration decides which path to take (one entailing a near-term hit to growth but with the prospect of structural improvement in the medium-term, the other an Argentina-like future), we would advise staying away from Sri Lankan assets.

Sri Lanka's external debt was 440% of its goods exports and 270% of its goods &amp; services exports at end-2019 (unsustainable based on the IMF-WB framework). The acceleration in real GDP growth (averaging nearly 6.4%) during Mahinda Rajapaksa's presidency (2005 to early-2015) was akin to India's acceleration in the 1980s (similarly funded by an external borrowing binge). Sri Lanka hasn't made structural changes, remaining dependent on tea and tourism as foreign-exchange earners, and must now either agree a program of structural reform (akin to India 1991) or face a restructuring of its external debt later this year. Either way, near-term growth prospects are dismal. We recommend staying well clear of Sri Lanka exposure.  Sri Lanka's economy -- driven mainly by earnings from tourism, tea and (modest) textile exports -- is in dire straits. Foreign visitor arrivals declined 18% YoY in 2019 (falling to a 4-year low of 1.91 million), causing real GDP to decelerate to 2.3% growth in 2019 (the lowest since 2001). During Mahinda Rajapaksa's 10 years as President (2005-early 2015), Sri Lanka experienced rapid real GDP growth -- infrastructure-driven 6% annual growth in 2005-09, and a "peace dividend" of 6.7% annual growth in 2010-14 driven by a surge in foreign visitor arrivals. But growth was accompanied by high inflation (8% annual average over the 10 years) and a massive rise in external debt, which rose from US$11.4bn at the start of Rajapaksa's term to US$42.9bn at its end (16.6% CAGR).  Sri Lanka took its 16th loan from the IMF in 2016 -- a 3-year Extended Fund Facility (EFF) worth US$1.5bn, extended by a year to 2 June 2020 -- and has been a ward of the IMF for 70% of the time in the past 40 years. (Among South Asian economies, only Pakistan has been in IMF programs longer). But its external debt reached 63.9% of GDP in 2019 -- or a humongous 440% of goods exports, and 270% of exports of goods &amp; services, numbers that are well above the upper limit for the IMF's framework for external-debt sustainability. Last year's fiscal and primary deficits were 6.2% and 0.3% of GDP (vs. an IMF requirement of a primary surplus of 0.2%).In February (before the Covid-induced slump in tourism), the IMF projected 3.7% real GDP growth for 2020, a fiscal deficit of 7.9% of GDP and a primary deficit of 1.9% of GDP. Those estimates were based on the dramatic tax cuts by the new administration of President Gotabaya Rajapaksa (with Mahinda Rajapaksa as Prime Minister). The IMF's latest projection is for real GDP to contract 0.5% in 2020; we estimate a contraction of at least 2% in 2020. The external debt dynamics will consequently deteriorate dramatically, making it near-impossible for Sri Lanka to meet its external debt service payments of US$4-4.5bn  in each of the next 5 years. By October, Sri Lanka will need a large structural adjustment loan from the IMF -- or will need to restructure its external debt. Until the Rajapaksa administration decides which path to take (one entailing a near-term hit to growth but with the prospect of structural improvement in the medium-term, the other an Argentina-like future), we would advise staying away from Sri Lankan assets.  

Sri Lanka: Struggling to Avert Being The "Next Argentina" Amid Unsustainable Debt

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Counter trend rally call in the global cycle is now coming through after some heart wrenching support tests Thursday. We are targeting S&amp;P 1,918 with scope of reaching for 1,950 thus the most probable target comes in at 1,938.We touted putting on some risk and reducing shorts last week in anticipation of a risk on bounce sequence to re cycle shorts into.WTI called for rise from 28 was off the mark with a low at 26.19; rally target is pattern resistance at 34 but will have immediate trouble above 32. Upside from here will be harder. MT bear target in the 25 region.USD was due for profit taking versus the CAD in particular (slipping below our 1.42 dip target) but also versus some EM FX but our strategic bullish USD view remains firm against EM FX and commodity currencies. Euro is losing ground on stimulus jawboning while the GBP is oversold with sell resistance now at 1.45; our macro 1.35 target is in sight. USD/JPY to see rally to 119.40 if not 120 for a key turn lower again.EEM kissed our 27.50 major target to cover some shorts and the break above resistance on Friday triggered another reduce point for shorts with a 31-32 target to re cycle shorts for test on 26. Asian FX - Lock in gains in THB and MYR shorts. KRW and SGD shorts re cycle/add on chart dips. INR hit 68 in line with a Nifty low.Cycles – The current snap back rally cycle will see price swings moderate and expected to last into early February when a turn is very probable around the 5th.

Counter trend rally call in the global cycle is now coming through after some heart wrenching support tests Thursday. We are targeting S&amp;P 1,918 with scope of reaching for 1,950 thus the most probable target comes in at 1,938.We touted putting on some risk and reducing shorts last week in anticipation of a risk on bounce sequence to re cycle shorts into.WTI called for rise from 28 was off the mark with a low at 26.19; rally target is pattern resistance at 34 but will have immediate trouble above 32. Upside from here will be harder. MT bear target in the 25 region.USD was due for profit taking versus the CAD in particular (slipping below our 1.42 dip target) but also versus some EM FX but our strategic bullish USD view remains firm against EM FX and commodity currencies. Euro is losing ground on stimulus jawboning while the GBP is oversold with sell resistance now at 1.45; our macro 1.35 target is in sight. USD/JPY to see rally to 119.40 if not 120 for a key turn lower again.EEM kissed our 27.50 major target to cover some shorts and the break above resistance on Friday triggered another reduce point for shorts with a 31-32 target to re cycle shorts for test on 26. Asian FX - Lock in gains in THB and MYR shorts. KRW and SGD shorts re cycle/add on chart dips. INR hit 68 in line with a Nifty low.Cycles – The current snap back rally cycle will see price swings moderate and expected to last into early February when a turn is very probable around the 5th.

United States

iShares MSCI Frontier 100 ETF is an exchange traded fund incorporated in the USA. The ETF tracks the MSCI Frontier Markets 100 Index.

ishares msci frontier 100 (FM US)

Achieving Stable Alpha in a Chaotic Bear Market

It is with a chaotic bearish environment in mind that we suggest pairs trading as a more risk-controlled way of finding better returns.

Cam Hui

Sri Lanka: Struggling to Avert Being The "Next Argentina" Amid Unsustainable Debt

Sri Lanka's external debt was 440% of its goods exports and 270% of its goods & services exports at end-2019 (unsustainable based on the IMF-WB...

Prasenjit K. Basu

Measuring Rally Caps

Counter trend rally call in the global cycle is now coming through after some heart wrenching support tests Thursday. We are targeting S&P...

Thomas Schroeder