In this briefing:
- India – Overweight
- A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies
1. India – Overweight
We reiterate our overweight call on Indian equities. Our December Austrian Stress Indicator update suggested that the business cycle was still stuck but the economy is gathering momentum. Fiscal policy has turned expansionary and will support consumption, particularly rural spending. Monetary conditions are easing and we expect the next move in policy rates to be down. The private investment cycle should be turning up by the end of the year. Strengthening economic activity together with an improvement in the current account balance should also underpin a recovery in the rupee.
2. A Huge Wave of New LNG Projects Coming in the Next 18 Months: Positive for The E&C Companies
Our analysis shows that there are an unbelievable 25+ LNG developers that have stated (within the last year) they will take a final investment decision (FID) on their LNG liquefaction plants in 2019. Unless demand surprises to the upside, the expected LNG supply deficit in the mid-2020s could easily turn into a glut. In total there is almost 250 million tonnes per annum (mtpa) of capacity that plans to take FID this year – the equivalent of 80% of current global supply. In total there are ~US$180bn of contracts up for grabs – it should be a bumper year for the oil service (E&C) companies. This should be positive for the LNG contractors such as Mcdermott Intl (MDR US), TechnipFMC PLC (FTI FP), Chiyoda Corp (6366 JP) and Jgc Corp (1963 JP) .
Exxon Q4’18 conference call, “While we see a lot of high growth opportunities in LNG, capacity will come on in big chunks. It won’t be necessarily coordinated, so we’ll see, I suspect, periods of oversupply.”
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