Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*A50 Challenges From HKEx: On October 18, 2021, the Hong Kong Exchange &amp; Clearing (388.HK) [HKEx] is set to launch a derivative product (China A50 contract), which is predicated on the new MSCI A50 Index. Unfortunately, this new product will be in direct competition with Singapore Exchange’s (SGX.SP) [SGX]  FTSE A50 contract, which represents approximately 10% of company revenue or close to 20% of PBT - not to mention 53% of its equity derivatives volume. HKEx has a very broad range of liquid Hong Kong-China linked products, with the new A50 contract being linked to the northbound Stock Connect – on top of a better fee offering; and*Time For Massive Strategic Move: As SGX needs to contend with a greater than expected impact from the earlier-than-expected launch of HKEX's MSCI China A50 index futures – on top of weaker equity volumes and fees, it continues to do numerous tiny bolt-on deals which appear to be more of a distraction than their worth. SGX must consider significant strategic alternatives if it is to avoid being hollowed out over the longer-term.

*A50 Challenges From HKEx: On October 18, 2021, the Hong Kong Exchange &amp; Clearing (388.HK) [HKEx] is set to launch a derivative product (China A50 contract), which is predicated on the new MSCI A50 Index. Unfortunately, this new product will be in direct competition with Singapore Exchange’s (SGX.SP) [SGX]  FTSE A50 contract, which represents approximately 10% of company revenue or close to 20% of PBT - not to mention 53% of its equity derivatives volume. HKEx has a very broad range of liquid Hong Kong-China linked products, with the new A50 contract being linked to the northbound Stock Connect – on top of a better fee offering; and*Time For Massive Strategic Move: As SGX needs to contend with a greater than expected impact from the earlier-than-expected launch of HKEX's MSCI China A50 index futures – on top of weaker equity volumes and fees, it continues to do numerous tiny bolt-on deals which appear to be more of a distraction than their worth. SGX must consider significant strategic alternatives if it is to avoid being hollowed out over the longer-term.

Singapore Exchange – 50 Hits To Bottom-Line

Alpha-Centric ESG Research

Kyle Rudden

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:<ul>
<li>Affects firms doing business with U.K. asset managers/owners not just the managers/owners.</li>
<li>Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.</li>
<li>Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).</li>
</ul>This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:
Affects firms doing business with U.K. asset managers/owners not just the managers/owners.
Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.
Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).
This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Smartkarma Research Team, Smartkarma

Smartkarma Research

Smartkarma Research Team

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

For our next Smartkarma Webinar, we are thrilled to welcome back Insight Provider <a href="https://www.smartkarma.com/profiles/kyle-rudden" target="_blank" data-smartkarma-citation="accounts:4495" rel="noopener">Kyle Rudden</a>, who continues his series on ESG investing.On this session, Kyle will give an overview of the “Metrics and Materiality” issue and debate, explore its implications for Corporate ESG Reporting and ESG Investing, and examine Metrics and Materiality in practice through examples and case studies.This webinar is organised jointly by Smartkarma and SGX.<h3>The webinar will be hosted on Wednesday, 25 August 2021, 17:00 SGT/HKT.</h3><div class="content-highlight"><h2><a href="https://share.hsforms.com/1H9pFZOB-RF2J00kbvMmxcw2c5gj?zoom_webinar_id=88191048159" target="_blank" rel="noopener">Register for the Webinar here</a></h2></div>Kyle Rudden is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.

For our next Smartkarma Webinar, we are thrilled to welcome back Insight Provider Kyle Rudden, who continues his series on ESG investing.On this session, Kyle will give an overview of the “Metrics and Materiality” issue and debate, explore its implications for Corporate ESG Reporting and ESG Investing, and examine Metrics and Materiality in practice through examples and case studies.This webinar is organised jointly by Smartkarma and SGX.The webinar will be hosted on Wednesday, 25 August 2021, 17:00 SGT/HKT.Register for the Webinar hereKyle Rudden is an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. Kyle believes global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.

Smartkarma Webinar | ESG Metrics and Materiality - What Matters to Whom and Why

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

While the FOMC formally maintains an accommodative stance (including the promised purchase of US$120 billion worth of bonds monthly), the US monetary base has declined by US$15 billion between April and June 2021. Despite this stealth taper of the monetary base, M2 was still up 11.1% YoY in June 2021 -- faster than the fastest pace of M2 growth reached during QE1 and QE2 (10.4% YoY in January 2009 and January 2012) -- despite the high base of 20.6-27% YoY growth in M2 during April 2020-March 2021.  The excessively rapid pace of monetary growth inevitably is contributing to inflation: the broadest measure, the GDP deflator, was up 6%QoQsaar in 2Q 2021, core PCE inflation was 6.1% and PCE inflation was 6.4% annualized in 2Q 2021. The YoY pace of core-PCE inflation (3.5% in June) and core CPI inflation (4.5%) are at 29-year highs, but do not yet reflect the impact of soaring house prices on OERs and rental rates: the Case-Shiller 20-city house price index was up 17% YoY in May 2021 (the fastest in its 30 year history), which will inevitably seep into the consumer inflation gauges during the course of 2H 2021. To pretend housing inflation is transitory is fatuous.  In the second half of July, the US overtook Indonesia for the dubious distinction of the country with the highest number of new Covid cases globally (569K in the last week of July, 400K in the previous week). But the 7-day moving average (80K) is still less than a third the new daily cases the US was reporting at the peak (11 January 2021), and nearly half the US population has been fully vaccinated. ISM manufacturing for July (with the PMI at 59.5 and new orders at 64.9, both still suggesting spectacular growth but 1.1 points lower than June) suggests a very mild impact from this second Covid wave: real GDP will decelerate in 2H 2021, but (having already surpassed pre-Covid levels) will continue to grow faster than the US economy's potential growth, keeping the pressure on inflation. We note that taper has already begun, but will have to be formally acknowledged by the November FOMC meeting, as inflation continues to print well above the 3% YoY mark for the rest of 2021. A premature rise in the Fed Funds is inevitable before the end of 2021, completely against the market's expectations. We would stay underweight equities.

While the FOMC formally maintains an accommodative stance (including the promised purchase of US$120 billion worth of bonds monthly), the US monetary base has declined by US$15 billion between April and June 2021. Despite this stealth taper of the monetary base, M2 was still up 11.1% YoY in June 2021 -- faster than the fastest pace of M2 growth reached during QE1 and QE2 (10.4% YoY in January 2009 and January 2012) -- despite the high base of 20.6-27% YoY growth in M2 during April 2020-March 2021.  The excessively rapid pace of monetary growth inevitably is contributing to inflation: the broadest measure, the GDP deflator, was up 6%QoQsaar in 2Q 2021, core PCE inflation was 6.1% and PCE inflation was 6.4% annualized in 2Q 2021. The YoY pace of core-PCE inflation (3.5% in June) and core CPI inflation (4.5%) are at 29-year highs, but do not yet reflect the impact of soaring house prices on OERs and rental rates: the Case-Shiller 20-city house price index was up 17% YoY in May 2021 (the fastest in its 30 year history), which will inevitably seep into the consumer inflation gauges during the course of 2H 2021. To pretend housing inflation is transitory is fatuous.  In the second half of July, the US overtook Indonesia for the dubious distinction of the country with the highest number of new Covid cases globally (569K in the last week of July, 400K in the previous week). But the 7-day moving average (80K) is still less than a third the new daily cases the US was reporting at the peak (11 January 2021), and nearly half the US population has been fully vaccinated. ISM manufacturing for July (with the PMI at 59.5 and new orders at 64.9, both still suggesting spectacular growth but 1.1 points lower than June) suggests a very mild impact from this second Covid wave: real GDP will decelerate in 2H 2021, but (having already surpassed pre-Covid levels) will continue to grow faster than the US economy's potential growth, keeping the pressure on inflation. We note that taper has already begun, but will have to be formally acknowledged by the November FOMC meeting, as inflation continues to print well above the 3% YoY mark for the rest of 2021. A premature rise in the Fed Funds is inevitable before the end of 2021, completely against the market's expectations. We would stay underweight equities. 

2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

I recently published <a href="https://www.smartkarma.com/insights/u-s-esg-legislation-h-r-1187-unlikely-to-survive-the-republican-senate-but-there-is-more-to-come" target="_blank" data-smartkarma-citation="insights:55304" rel="noopener">U.S. ESG Legislation (H.R.1187) Unlikely to Survive the Republican Senate But There Is More to Come</a>, a brief update on ESG legislative activity in the U.S. Congress, specifically House bill (<a href="https://www.congress.gov/117/bills/hr1187/BILLS-117hr1187rfs.pdf" target="_blank" rel="noopener">H.R.1187</a>), commonly known by its short title, the "ESG Disclosure Simplification Act."That Insight told a bitter-sweet tale. On one hand, H.R.1187 is the first substantive ESG legislation in U.S. history and its passage by the House to the Senate represents a watershed moment for U.S. ESG policy. On the other hand, the bill is likely already dead on arrival in the Republican Senate.A key point made in that Insight is that whilst H.R.1187 seems destined to die on the Senate floor, it would not be in vain. H.R.1187 and its precursors set the wheels of U.S. ESG policy in motion to such a degree that Congressional legislation is merely one locus of current ESG policy activity.Aside from ESG legislation in Congress, ESG regulation at the Securities and Exchange Commission is a second epicentre of U.S. ESG policy – and in many respects, the SEC is the more promising of the two. In the first Insight, I promised a summary of the SEC's ESG-related activity.So here we are; a quick catch-up on recentg SEC activity, an overview of its ESG agenda, and a few thoughts on where things are headed vis-à-vis climate and ESG disclosure regulations.

I recently published U.S. ESG Legislation (H.R.1187) Unlikely to Survive the Republican Senate But There Is More to Come, a brief update on ESG legislative activity in the U.S. Congress, specifically House bill (H.R.1187), commonly known by its short title, the "ESG Disclosure Simplification Act."That Insight told a bitter-sweet tale. On one hand, H.R.1187 is the first substantive ESG legislation in U.S. history and its passage by the House to the Senate represents a watershed moment for U.S. ESG policy. On the other hand, the bill is likely already dead on arrival in the Republican Senate.A key point made in that Insight is that whilst H.R.1187 seems destined to die on the Senate floor, it would not be in vain. H.R.1187 and its precursors set the wheels of U.S. ESG policy in motion to such a degree that Congressional legislation is merely one locus of current ESG policy activity.Aside from ESG legislation in Congress, ESG regulation at the Securities and Exchange Commission is a second epicentre of U.S. ESG policy – and in many respects, the SEC is the more promising of the two. In the first Insight, I promised a summary of the SEC's ESG-related activity.So here we are; a quick catch-up on recentg SEC activity, an overview of its ESG agenda, and a few thoughts on where things are headed vis-à-vis climate and ESG disclosure regulations.

U.S. ESG Regulation Expected By Year-End; SEC to Mandate Climate/ESG Disclosure By Listed Companies

United States

MSCI Inc. provides investment decision support tools to investment institutions worldwide. The Company produces indices and risk and return portfolio analytics for use in managing investment portfolios.

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MSCI Inc (MSCI US)

Singapore Exchange – 50 Hits To Bottom-Line

SGX: On October 18th HKEx is set to launch its own China A50 contract, which will be in direct competition with SGX FTSE A50 contract. SGX's A50...

Thomas J. Monaco

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Telegraph from European front in global war on greenwashing. U.K. names stewardship victors ("not greenwashers"). Many notable casualties. Anti...

Kyle Rudden

Smartkarma Webinar | ESG Metrics and Materiality - What Matters to Whom and Why

On 25 August, 5pm SGT, join us and Kyle Rudden for an overview of the “Metrics and Materiality” issue and debate in ESG investing. This webinar is...

Smartkarma Research

2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

US base money declined by $15bn between April and June 2021, a stealth taper. House prices up 17%YoY will push up PCE inflation via OERs, & growth...

Prasenjit K. Basu

U.S. ESG Regulation Expected By Year-End; SEC to Mandate Climate/ESG Disclosure By Listed Companies

While ESG reporting legislation is tied up in Congress, ESG reporting regulation is moving swiftly at the SEC unencumbered by the bipartisanship of...

Kyle Rudden

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