In this briefing:
- Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
- India Monthly Report: Jan’19 – Feb’19
- Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
- Indian Housing Finance Companies-Series 2- LIC Housing Finance
- India: Outlook on Capex Recovery Continues to Brighten
1. Confluence of Politics – China Bans Australian Coal Imports (Flash Note)
- China implements coal import caps specifically targeting Australian producers
- Unclear as to how widespread these restrictions will eventually be
- Thermal and metallurgical coal exports affected
- Impacting ~A$8.4Bn of metallurgical coal exports; or 4.4% of national income
- Thermal coal exports affected worth ~A$3.8Bn; or an additional 2% of national income
- Collectively, thermal and metallurgical exports equate to ~0.9% of Australian annual GDP
- Actions appear to be a response to blocking Huawei bidding for the 5G network
- Recent Chinese cyber-attacks harden Australian Government’s resolve
- Expect similar Chinese measures (in time) to be applied to other commodities and industries
2. India Monthly Report: Jan’19 – Feb’19
Indian indices were the least performing among the select global indices with S&P BSE Sensex and Nifty 50 generating returns of 0.01% and negative 0.73% in domestic terms respectively. In Dollar terms they fell by 2.18% and 2.89% respectively. Indian Rupee witnessed deprecation of 2.18% during the period and fell from 69.40 USD/ INR to 70.95 USD/ INR. Among the select indices, Hang Seng was the best performer with dollar returns of 10.89% and among the select currencies, South African Rand was the best performing with an appreciation of 7.88%.
Performance of Select Indices during Jan’19 | ||
Index | Returns in Domestic Currency | Returns in USD |
S&P BSE SENSEX | 0.01% | -2.18% |
NIFTY 50 | -0.73% | -2.89% |
Nikkei 225 | 6.19% | 6.84% |
Dow Jones Industrial Average | 7.08% | 7.08% |
HANG SENG | 11.19% | 10.89% |
FTSE 100 | 3.49% | 7.06% |
Among the Sectoral indices, Nifty Pharma was the best performing with returns of 4.91% in dollar terms and Nifty Realty was the worst performing with falling by 17.41%
Performance of Indian Sectoral Indices during Jan’19 | INR Returns | USD Returns |
NIFTY PHARMA | 7.25% | 4.91% |
NIFTY IT | 0.67% | -1.52% |
NIFTY FMCG | -0.35% | -2.53% |
NIFTY FIN SERVICE | -0.64% | -2.81% |
NIFTY PVT BANK | -1.97% | -4.11% |
NIFTY BANK | -2.10% | -4.24% |
NIFTY AUTO | -3.55% | -5.66% |
NIFTY METAL | -3.77% | -5.87% |
NIFTY MEDIA | -7.00% | -9.03% |
NIFTY PSU BANK | -10.50% | -12.45% |
NIFTY REALTY | -15.57% | -17.41% |
3. Foldable Smartphones to Debut in 2019; Will It Aid an Industry Turnaround?
Plans regarding Samsung and Huawei’s foldable smartphones are out. The companies, which happen to be two of the largest contenders in the smartphone landscape are expected to unveil their foldable smartphone prototypes this month. In 4Q2018, Samsung, coming in first place, held a market share of 18.7% while Huawei, in third place, held a market share of 16.1%. Both companies are following different strategies when it comes to their foldable phone models.
The concept of foldable phones revolves around devices that can be folded into the size of a smartphone or opened up in to the size of a tablet. Huawei is said to be planning to introduce their foldable smartphone with 5G compatibility while Samsung is planning to release their foldable model with 4G compatibility. The market leader aims to leverage the expertise it has gained on its display technologies in its foldable smartphones.
4. Indian Housing Finance Companies-Series 2- LIC Housing Finance
We have recently written a report on Housing Finance Industry (please click here) where we delved on the outlook of the industry that has witnessed significant support from the government as it opened up the funding stream for the NBFC sector including HFCs who in the past relied heavily on banks. In addition, the government has also focussed on improving the housing demand through reforms like RERA, Housing For All etc. that has helped revive sales in the recent quarters.
We concluded the report by saying that the forthcoming articles in the form of a series will elaborate on some HFCs that are likely to be the key beneficiaries of an expected revival of the residential real estate. These HFCs have shown high corporate governance standard and their asset quality has not been compromised for growth. And this could be ascertained by the highest credit rating of AAA awarded to these HFCs by the noted credit rating agencies in India.
In continuation of the series, this article provides detail on Lic Housing Finance (LICHF IN) , the second largest HFC in the country. The company has witnessed robust growth in the past with an asset quality that is among the best in class. We initiate coverage on the company through this report that would delve on the outlook of the company along with some glaring risks that have lately emerged and may likely have an impact on the asset quality going forward.
5. India: Outlook on Capex Recovery Continues to Brighten
As per the CSO, gross fixed capital formation (GFCF) has grown above nominal GDP for 4 consecutive quarters now (latest data for September quarter). This, after GFCF grew slower than nominal GDP in 20 of the preceding 21 quarters. Capex cycle is thus picking up. And there are good reasons to expect this continue in the foreseeable future. Capacity utilisation is increasing in a broad-based manner. Liquidity conditions have improved, and cost of capital is likely to fall. Corporate profit cycle is no longer a headwind, although it is not yet a strong tailwind. The nascent signs of a recovery in the capex cycle are thus likely to get stronger in the months ahead.
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