Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.
62% of small cap funds, 38% of mid cap funds have negative 3-year SIP returns
33% of large cap funds have 3-year SIP returns lower than FD rate
AMFI data shows 50% of SIP accounts were registered since April-17
Discontinued SIP accounts in 9MFY19 are 24% higher than those over entire FY18. Net SIP additions are down 70% in last 6 months.
Even though gross SIP inflows are holding up, industry experts indicate net inflows have fallen from 70% of the gross in mid-2018 to 40% currently.
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Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.
Another week of US-China negotiations and another big boost to market sentiment. Stock markets as well as crude rallied last week on the back of news from Washington that the US and China were preparing to sign a framework deal in the form of several MoUs covering trade and structural issues.
But there are other economic concerns around the globe, and a preliminary deal between the US and China is not going to curb all the headwinds. Further upside to crude may also be limited because much of the anticipated rapprochement between the two countries has already been factored in. WTI prices stabilising well above the $50/barrel threshold are also likely to support strong growth in US production, which hit the 12 million b/d mark last week.
Nonetheless, there are factors on the supply front that could trigger a spike beyond $70/barrel for Brent, especially if combined with a turnaround in economic and oil demand growth expectations.
If that happens, we believe the Saudis will ease up on over-compliance with their own production cuts, either voluntarily or under renewed pressure from US President Donald Trump.
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Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.
Another week of US-China negotiations and another big boost to market sentiment. Stock markets as well as crude rallied last week on the back of news from Washington that the US and China were preparing to sign a framework deal in the form of several MoUs covering trade and structural issues.
But there are other economic concerns around the globe, and a preliminary deal between the US and China is not going to curb all the headwinds. Further upside to crude may also be limited because much of the anticipated rapprochement between the two countries has already been factored in. WTI prices stabilising well above the $50/barrel threshold are also likely to support strong growth in US production, which hit the 12 million b/d mark last week.
Nonetheless, there are factors on the supply front that could trigger a spike beyond $70/barrel for Brent, especially if combined with a turnaround in economic and oil demand growth expectations.
If that happens, we believe the Saudis will ease up on over-compliance with their own production cuts, either voluntarily or under renewed pressure from US President Donald Trump.
Asian currencies are, in general, well supported by economic fundamentals in the form of external surpluses and interest rate differentials. Indeed, most Asian currencies display an appreciating bias, contrary to perceptions in 2018 when all of them lost ground to the US dollar. Over the last year the underlying external strength has been reflected in Asian currency appreciation against the US dollar.
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Vedanta Resources (VED LN) (Vedanta)’s net debt of USD6.4bn for six months ended 30 September 2018 results in a net debt/EBITDA ratio of 3.2x compared to 2.4x a year earlier. We are worried about the company’s rising debt amidst new court orders in India barring it from reopening its subsidiary’s controversial copper plant in the southern state of Tamil Nadu. Vedanta’s subsidiary Vedanta Ltd (VEDL IN) (VL) has also witnessed a sharp decline in its stock price over the past three months due to uncertainty over the plant. Vedanta’s 1HFY19 revenues of USD7.1bn saw a 4% increase compared to the same period last year as a result of higher aluminium sales as well as rising commodity prices. Vedanta’s EBITDA for 1HFY19 stood at USD1.7bn, a 1% increase compared to the same period the year before, driven by the higher oil prices as well as better operating efficiencies. Average production metrics increased across the board, including higher production of oil, aluminium, and steel.
We reiterate our OVERWEIGHT recommendation for the VEDLN complex (21s, 23s and 24s) on its attractive yields versus Indian quasi-sovereign peers and the company’s consistent operating performance.
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Market activity, both bonds and stocks, has been all about realigning expectations. Wednesday’s Fed announcement was more dovish than expected, and the market is now pricing in roughly 25bps of cuts by the end of 2019. Stocks reacted positively on Thursday, but then reversed (and then some) on Friday as global growth concerns became a little more serious. We continue to maintain our positive outlook. In today’s report we recap our bullish investment thesis and highlight attractive Groups and stocks within Consumer Staples, Materials, and Services.
Energy Transfer LP (ET US) and Royal Dutch Shell (RDSA LN) have signed a Project Framework Agreement to further develop a large-scale LNG export facility in Lake Charles, Louisiana and move toward a potential final investment decision (FID). They have started actively engaging with LNG Engineering, Procurement and Contracting (EPC) companies with a plan to issue an Invitation to Tender (ITT) in the weeks ahead. We look at the potential contract size and winners and also the other US LNG projects that could be negatively impacted. More detail on the LNG project queue for this year in: A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies.
The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of negative 1.65% and negative 0.81% in domestic terms respectively. In Dollar terms, they fell by 0.81% and 0.09% respectively. Indian Rupee witnessed an appreciation of 0.85% during the period and has risen from 71.44 USD/ INR to 70.84 USD/ INR. Among the select indices, Dow Jones was the best performer with dollar returns of 3.4%.
Performance of Select Indices during Feb’19
Index
Returns in Domestic Currency
Returns in USD
S&P BSE SENSEX
-1.65%
-0.81%
NIFTY 50
-0.93%
-0.09%
Nikkei 225
2.87%
1.17%
Dow Jones Industrial Average
3.40%
3.40%
HANG SENG
2.51%
2.49%
FTSE 100
0.78%
2.22%
Among the sectoral indices, Nifty Media was the highest gainer with a 17.56% return in domestic terms and 18.56% in USD terms. The worst performer has been Nifty PSU Banks with a decrease of 5.82% in domestic terms and 5.02% in USD terms.
Performance of Indian Sectoral Indices in USD
INR Returns
USD Returns
NIFTY MEDIA
17.56%
18.56%
NIFTY METAL
1.99%
2.85%
NIFTY IT
0.05%
0.90%
NIFTY REALTY
-0.50%
0.35%
NIFTY PVT BANK
-0.59%
0.26%
NIFTY PHARMA
-0.94%
-0.10%
NIFTY AUTO
-1.02%
-0.18%
NIFTY BANK
-1.09%
-0.25%
NIFTY FIN SERVICE
-2.04%
-1.20%
NIFTY FMCG
-3.10%
-2.28%
NIFTY PSU BANK
-5.82%
-5.02%
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Vedanta Resources (VED LN) (Vedanta)’s net debt of USD6.4bn for six months ended 30 September 2018 results in a net debt/EBITDA ratio of 3.2x compared to 2.4x a year earlier. We are worried about the company’s rising debt amidst new court orders in India barring it from reopening its subsidiary’s controversial copper plant in the southern state of Tamil Nadu. Vedanta’s subsidiary Vedanta Ltd (VEDL IN) (VL) has also witnessed a sharp decline in its stock price over the past three months due to uncertainty over the plant. Vedanta’s 1HFY19 revenues of USD7.1bn saw a 4% increase compared to the same period last year as a result of higher aluminium sales as well as rising commodity prices. Vedanta’s EBITDA for 1HFY19 stood at USD1.7bn, a 1% increase compared to the same period the year before, driven by the higher oil prices as well as better operating efficiencies. Average production metrics increased across the board, including higher production of oil, aluminium, and steel.
We reiterate our OVERWEIGHT recommendation for the VEDLN complex (21s, 23s and 24s) on its attractive yields versus Indian quasi-sovereign peers and the company’s consistent operating performance.
US private LNG company Venture Global is starting construction on its 10 million ton per annum (mtpa) US LNG export facility in Louisiana after gaining approval from the US Federal Energy Regulatory Commission (FERC). This is positive for the LNG contractor market and we discuss the companies involved in the project.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
US private LNG company Venture Global is starting construction on its 10 million ton per annum (mtpa) US LNG export facility in Louisiana after gaining approval from the US Federal Energy Regulatory Commission (FERC). This is positive for the LNG contractor market and we discuss the companies involved in the project.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Energy Transfer LP (ET US) and Royal Dutch Shell (RDSA LN) have signed a Project Framework Agreement to further develop a large-scale LNG export facility in Lake Charles, Louisiana and move toward a potential final investment decision (FID). They have started actively engaging with LNG Engineering, Procurement and Contracting (EPC) companies with a plan to issue an Invitation to Tender (ITT) in the weeks ahead. We look at the potential contract size and winners and also the other US LNG projects that could be negatively impacted. More detail on the LNG project queue for this year in: A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies.
The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of negative 1.65% and negative 0.81% in domestic terms respectively. In Dollar terms, they fell by 0.81% and 0.09% respectively. Indian Rupee witnessed an appreciation of 0.85% during the period and has risen from 71.44 USD/ INR to 70.84 USD/ INR. Among the select indices, Dow Jones was the best performer with dollar returns of 3.4%.
Performance of Select Indices during Feb’19
Index
Returns in Domestic Currency
Returns in USD
S&P BSE SENSEX
-1.65%
-0.81%
NIFTY 50
-0.93%
-0.09%
Nikkei 225
2.87%
1.17%
Dow Jones Industrial Average
3.40%
3.40%
HANG SENG
2.51%
2.49%
FTSE 100
0.78%
2.22%
Among the sectoral indices, Nifty Media was the highest gainer with a 17.56% return in domestic terms and 18.56% in USD terms. The worst performer has been Nifty PSU Banks with a decrease of 5.82% in domestic terms and 5.02% in USD terms.
In continuation of the Housing Finance Series (pleas click here and here for the earlier articles), this article provides a detail on HDFC, the largest Housing Finance Company (HFC) in the country. The company has a market share of 38% in the private sector. It is a AAA rated with one of the best asset quality among its peers.
The key strength of HDFC is its ability to generate low cost funds from multiple sources that helps in maintaining its spread irrespective of the interest rate cycles.
Given a long term secular trend of the housing industry in India, we expect HDFC to remain a key beneficiary. A strong corporate governance standard, high management quality and a robust risk management may help in sustaining the return ratios as well as the asset quality that are among the best in class.
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NextDecade Corp (NEXT US) recently announced that it started offering long-term contracts indexed to the crude Brent in order to attract more LNG buyers. This follows the agreement reached by Tellurian Inc (TELL US) with Vitol back in December to index a long term contract with the Asian LNG price benchmark JKM. While typically US LNG projects are indexed to the Henry Hub, declining crude oil and LNG prices seem to have diminished the appeal of the Henry Hub pricing compared to the oil indexation. This insight takes a look at the latest trends in the LNG markets to assess which companies are taking the lead in the race to bring to FID in 2019 their proposed LNG projects.
Exhibit 1: NextDecade adds Brent indexation to its commercial offering
Source: NextDecade Corporate Presentation February 2019
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NextDecade Corp (NEXT US) recently announced that it started offering long-term contracts indexed to the crude Brent in order to attract more LNG buyers. This follows the agreement reached by Tellurian Inc (TELL US) with Vitol back in December to index a long term contract with the Asian LNG price benchmark JKM. While typically US LNG projects are indexed to the Henry Hub, declining crude oil and LNG prices seem to have diminished the appeal of the Henry Hub pricing compared to the oil indexation. This insight takes a look at the latest trends in the LNG markets to assess which companies are taking the lead in the race to bring to FID in 2019 their proposed LNG projects.
Exhibit 1: NextDecade adds Brent indexation to its commercial offering
Source: NextDecade Corporate Presentation February 2019
London-based investors are turning cautiously optimistic on China’s growth outlook amid the latest easing measures in January
There is still little awareness about the rising deflation risk
Interest in the trade war has subsided
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