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 US was the epicentre of the world's first Covid wave (peaking in January 2021), and India the second (peaking in early-May 2021), the epicentre of the current third global Covid wave is ASEAN. While Indonesia was initially the worst hit, this wave has spread to Malaysia, Thailand and Vietnam (the latter two among the most successful in combatting Covid in 2020), with some scares in Singapore and the Philippines as well. ASEAN's real GDP is estimated to have grown over 10% YoY in 2Q 2021 (helped by a very depressed base from 2Q 2020) but the renewed Covid surge is set to weaken the economic recovery in 2H 2021. In July 2021, Indonesia has had more new Covid cases than any other nation globally. But the worst of Indonesia's Covid wave was reached on 18 July 2021 (at a 7-day moving average of 50,039 new daily infections), and these have since receded by nearly a fifth. The biggest hit will occur in 3Q 2021 growth, but Indonesia's real GDP should exceed 6% YoY in 4Q 2021, bringing full-year growth to about 5%. The worst-hit ASEAN economy (and polity) is Malaysia, where there have been 3 successive Covid waves in 2021, the last of which has not yet reached its peak. Consequently, the greatest economic and political uncertainty in 2H 2021 will be in Malaysia, which has the highest per capita Covid case load in South or South-east Asia (at 31,334 cases per million population). We expect real GDP to grow no more than 3% YoY in 2H 2021 despite a low base. Thailand and Vietnam, both extremely successful in containing Covid in 2020 (although Thailand's tourism-dependent economy nonetheless suffered a severe hit from the drying-up of tourist arrivals) are now seeing their first wave of Covid infections, in July 2021. The peak of the current Covid wave is not yet detectable in either country. Vietnam's Covid wave is concentrated in the south (Ho Chi Minh City and surrounding provinces), but Thailand's is concentrated around the main economic centre, Bangkok, and its surrounding provinces. However, the base effect is more helpful in Thialand than Vietnam (the latter having continued to grow in all four quarters of 2020), so we expect Vietnam's real GDP to grow 5% YoY and Thailand's 5-6% YoY in 2H 2021. Despite a major alarm being raised in Singapore as well, the latest Covid wave is very mild in the island-republic, and real GDP in Singapore is consequently likely to grow 7.2% in 2021.

While the US was the epicentre of the world's first Covid wave (peaking in January 2021), and India the second (peaking in early-May 2021), the epicentre of the current third global Covid wave is ASEAN. While Indonesia was initially the worst hit, this wave has spread to Malaysia, Thailand and Vietnam (the latter two among the most successful in combatting Covid in 2020), with some scares in Singapore and the Philippines as well. ASEAN's real GDP is estimated to have grown over 10% YoY in 2Q 2021 (helped by a very depressed base from 2Q 2020) but the renewed Covid surge is set to weaken the economic recovery in 2H 2021. In July 2021, Indonesia has had more new Covid cases than any other nation globally. But the worst of Indonesia's Covid wave was reached on 18 July 2021 (at a 7-day moving average of 50,039 new daily infections), and these have since receded by nearly a fifth. The biggest hit will occur in 3Q 2021 growth, but Indonesia's real GDP should exceed 6% YoY in 4Q 2021, bringing full-year growth to about 5%. The worst-hit ASEAN economy (and polity) is Malaysia, where there have been 3 successive Covid waves in 2021, the last of which has not yet reached its peak. Consequently, the greatest economic and political uncertainty in 2H 2021 will be in Malaysia, which has the highest per capita Covid case load in South or South-east Asia (at 31,334 cases per million population). We expect real GDP to grow no more than 3% YoY in 2H 2021 despite a low base. Thailand and Vietnam, both extremely successful in containing Covid in 2020 (although Thailand's tourism-dependent economy nonetheless suffered a severe hit from the drying-up of tourist arrivals) are now seeing their first wave of Covid infections, in July 2021. The peak of the current Covid wave is not yet detectable in either country. Vietnam's Covid wave is concentrated in the south (Ho Chi Minh City and surrounding provinces), but Thailand's is concentrated around the main economic centre, Bangkok, and its surrounding provinces. However, the base effect is more helpful in Thialand than Vietnam (the latter having continued to grow in all four quarters of 2020), so we expect Vietnam's real GDP to grow 5% YoY and Thailand's 5-6% YoY in 2H 2021. Despite a major alarm being raised in Singapore as well, the latest Covid wave is very mild in the island-republic, and real GDP in Singapore is consequently likely to grow 7.2% in 2021.  

ASEAN as Epicentre of the Covid Crisis: Malaysia Worst Off, Indonesia Improving

Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Technical Analysis

Having made fresh all time highs earlier this month, The Ho Chi Minh Stock Index -    <a href="https://www.smartkarma.com/entities/vietnam-ho-chi-minh-stock-index-vn-index" target="_blank" data-smartkarma-citation="entities:26055:1" rel="noopener">Vietnam VNIndex (VNINDEX INDEX)</a> - has seen a decent short term pullback to the levels just above 1,200.Is this a buying opportunity or something more serious to worry about?

Having made fresh all time highs earlier this month, The Ho Chi Minh Stock Index -    Vietnam VNIndex (VNINDEX INDEX) - has seen a decent short term pullback to the levels just above 1,200.Is this a buying opportunity or something more serious to worry about?

Vietnam – Buying Opportunity or Something Worse?

Trade data for February 2021 (due next week), the first for the Biden era, will be scrutinized for bilateral deficits. In 2020, the US' bilateral deficits with only 3 of its top-10 trade partners declined -- Canada, Japan and Germany -- suggesting that Trump tariffs on steel and aluminium had worked partially. The US deficit with China declined sharply in 2019 and in Jan-Oct 2020, but mysteriously widened in the next 3 months. The US suspects that big deficits with Vietnam, Taiwan, South Korea and Malaysia reflect transshipment of mainland-China products via those countries, and they are consequently already coming under some pressure. The trade war may not heat up further under Biden, but it will not cool down anytime soon. The US had a trade deficit of US$916 billion in 2020, 6% larger than in 2019, with exports down 14.1% YoY and imports down 6.6% YoY. But with net tourist and student inflows to the US down sharply, the current account deficit widened by as much as 35% to US$647 billion or 3.1% of GDP in 2020 (the largest in a decade, but much lower than the 2006 peak of 6% of GDP). US bilateral trade deficits with Canada, Japan and Germany (which are among top-5 trade partners) declined in 2020, suggesting that the impact of the steel and aluminium tariffs imposed early in the Trump term were beginning to finally pay off at least partly. Importantly, for the second consecutive year, the bilateral trade deficit with China declined (by a modest 3.6% YoY) to US$311 billion, the lowest since 2011. That bilateral deficit had widened in 2017 and 2018 (while Trump was only threatening but not actually imposing any tariffs). The imposition of tariffs on China's imports in 2019 (extended in 2020 to nearly half of goods imports from China) did contribute to reducing the US bilateral trade deficit with China. However, US imports from China increased 23.8% YoY in November-December 2020 (immediately after the US election), having declined in 9 of the first 10 months of 2020, and rose 17.5% YoY in Jan 2021.  The beneficiaries of export diversion from China were Vietnam, Switzerland, Taiwan, South Korea and Malaysia, who saw US imports from them rise significantly in 2020 -- thereby also widening the US' bilateral trade deficits with them in 2020. The US believes that at least some of these countries' widening trade surpluses with the US reflect Chinese exports being transshipped to the US via those countries. So the Biden administration is likely to pay increased attention not only to the bilateral trade deficit with China (which has mysteriously risen sharply again since the election), but also bilateral deficits with Vietnam, Taiwan, Malaysia, South Korea, etc., which may reflect the impact of transshipment of mainland-Chinese products into the US.

Trade data for February 2021 (due next week), the first for the Biden era, will be scrutinized for bilateral deficits. In 2020, the US' bilateral deficits with only 3 of its top-10 trade partners declined -- Canada, Japan and Germany -- suggesting that Trump tariffs on steel and aluminium had worked partially. The US deficit with China declined sharply in 2019 and in Jan-Oct 2020, but mysteriously widened in the next 3 months. The US suspects that big deficits with Vietnam, Taiwan, South Korea and Malaysia reflect transshipment of mainland-China products via those countries, and they are consequently already coming under some pressure. The trade war may not heat up further under Biden, but it will not cool down anytime soon. The US had a trade deficit of US$916 billion in 2020, 6% larger than in 2019, with exports down 14.1% YoY and imports down 6.6% YoY. But with net tourist and student inflows to the US down sharply, the current account deficit widened by as much as 35% to US$647 billion or 3.1% of GDP in 2020 (the largest in a decade, but much lower than the 2006 peak of 6% of GDP). US bilateral trade deficits with Canada, Japan and Germany (which are among top-5 trade partners) declined in 2020, suggesting that the impact of the steel and aluminium tariffs imposed early in the Trump term were beginning to finally pay off at least partly. Importantly, for the second consecutive year, the bilateral trade deficit with China declined (by a modest 3.6% YoY) to US$311 billion, the lowest since 2011. That bilateral deficit had widened in 2017 and 2018 (while Trump was only threatening but not actually imposing any tariffs). The imposition of tariffs on China's imports in 2019 (extended in 2020 to nearly half of goods imports from China) did contribute to reducing the US bilateral trade deficit with China. However, US imports from China increased 23.8% YoY in November-December 2020 (immediately after the US election), having declined in 9 of the first 10 months of 2020, and rose 17.5% YoY in Jan 2021.  The beneficiaries of export diversion from China were Vietnam, Switzerland, Taiwan, South Korea and Malaysia, who saw US imports from them rise significantly in 2020 -- thereby also widening the US' bilateral trade deficits with them in 2020. The US believes that at least some of these countries' widening trade surpluses with the US reflect Chinese exports being transshipped to the US via those countries. So the Biden administration is likely to pay increased attention not only to the bilateral trade deficit with China (which has mysteriously risen sharply again since the election), but also bilateral deficits with Vietnam, Taiwan, Malaysia, South Korea, etc., which may reflect the impact of transshipment of mainland-Chinese products into the US. 

US: Trump's Record Card on Trade Mixed; China Trade Already Challenging Biden

Cross-Asset Liquidity Strategist, CrossBorder Capital

Michael J. Howell

Cross-Asset Liquidity Strategist

Implementing Research Using Alt Data & AI

CrossBorder Capital

CrossBorder Capital is a London-based independent investment advisory firm. Founded in 1996, it exploits a gap in the investment arena by focusing on Central bank liquidity. 

It specialises in the monitoring and analysis of global liquidity flows - an important determinant of asset prices, from currencies through to bonds, equities and real estate.

CrossBorder Capital implements its investment strategy and currently manages over US$ 350m.


Cross Asset Strategy

<ul>
<li>
Vietnam stocks should benefit from recent strong liquidity gains led by foreign inflows and Central Bank easing</li>
<li>On top, investors’ equity positioning is relatively low according to our newly released Risk Appetite Indexes for Vietnam</li>
<li>
Risk Appetite is a statistic derived from aggregate securities’ holdings data, new issues and liquidity</li>
<li>
Risk Appetite Indexes have proven track records in other World markets by signalling the best times to invest</li>
</ul>



Vietnam stocks should benefit from recent strong liquidity gains led by foreign inflows and Central Bank easing
On top, investors’ equity positioning is relatively low according to our newly released Risk Appetite Indexes for Vietnam

Risk Appetite is a statistic derived from aggregate securities’ holdings data, new issues and liquidity

Risk Appetite Indexes have proven track records in other World markets by signalling the best times to invest


Could Vietnamese Equities Be Set For Take-Off?

Alongside democratic Taiwan, communist Vietnam remains a beacon of remarkable success in combating the novel Coronavirus. As of 23 April, Vietnam has just 268 cases and no deaths from Covid-19 -- despite having tested 206,253 individuals. A limited lockdown was imposed at the start of April, but will not need to be extended, since the situation has been well contained (and no new cases of Covid-19 have occurred since 15 April). Transparency in communications about the disease has enabled the government to retain the public's confidence, improving compliance.   Real GDP nonetheless decelerated to 3.8% YoY growth in 1Q 2020, and will likely decelerate slightly further in the current quarter (especially given this month's partial lockdown). However, exports grew 8.8% YoY even in January-February 2020 (despite the delayed return of workers in February from Lunar New Year holidays) and +5.9% YoY in March 2020. With exports outpacing imports, the trade surplus was US$4 billion in 1Q 2020 (and at a record US$12.75 billion over the latest 12 months). Foreign reserves reached record levels of US$81.15 billion in January 2020 (and likely rose further by March), allowing the State Bank of Vietnam (SBV) to cut its policy rate to a 15-year low of 5% on 17th March 2020. The Vietnamese Dong (VND) has been more stable than most EM and frontier-market currencies both this year and in the past 5 years. Given the strong external balances, record-low interest rates, and exceptional success in containing the negative impact of Covid-19, we expect Vietnam's real GDP to rebound strongly to 5.5-6% YoY growth in 2H 2020, making Vietnam one of the world's fastest-growing economies in 2020 (with real GDP growth of 4.8% for the full year). Next year, growth should comfortably return to the 7-7.5% YoY pace. We recommend staying Overweight Vietnam.

Alongside democratic Taiwan, communist Vietnam remains a beacon of remarkable success in combating the novel Coronavirus. As of 23 April, Vietnam has just 268 cases and no deaths from Covid-19 -- despite having tested 206,253 individuals. A limited lockdown was imposed at the start of April, but will not need to be extended, since the situation has been well contained (and no new cases of Covid-19 have occurred since 15 April). Transparency in communications about the disease has enabled the government to retain the public's confidence, improving compliance.   Real GDP nonetheless decelerated to 3.8% YoY growth in 1Q 2020, and will likely decelerate slightly further in the current quarter (especially given this month's partial lockdown). However, exports grew 8.8% YoY even in January-February 2020 (despite the delayed return of workers in February from Lunar New Year holidays) and +5.9% YoY in March 2020. With exports outpacing imports, the trade surplus was US$4 billion in 1Q 2020 (and at a record US$12.75 billion over the latest 12 months). Foreign reserves reached record levels of US$81.15 billion in January 2020 (and likely rose further by March), allowing the State Bank of Vietnam (SBV) to cut its policy rate to a 15-year low of 5% on 17th March 2020. The Vietnamese Dong (VND) has been more stable than most EM and frontier-market currencies both this year and in the past 5 years. Given the strong external balances, record-low interest rates, and exceptional success in containing the negative impact of Covid-19, we expect Vietnam's real GDP to rebound strongly to 5.5-6% YoY growth in 2H 2020, making Vietnam one of the world's fastest-growing economies in 2020 (with real GDP growth of 4.8% for the full year). Next year, growth should comfortably return to the 7-7.5% YoY pace. We recommend staying Overweight Vietnam. 

Remarkable Success in Combating Covid-19 Ensures Relative Economic Resilience

Vietnam

The Vietnam Stock Index or VN-Index is a capitalization-weighted index of all the companies listed on the Ho Chi Minh City Stock Exchange. The index was created with a base index value of 100 as of July 28, 2000. Prior to March 1, 2002, the market only traded on alternate days.

Vietnam VNIndex (VNINDEX INDEX)

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Could Vietnamese Equities Be Set For Take-Off?

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Remarkable Success in Combating Covid-19 Ensures Relative Economic Resilience

Alongside democratic Taiwan, communist Vietnam remains a beacon of remarkable success in combating the novel Coronavirus. As of 23 April, Vietnam...

Prasenjit K. Basu