Brief India: This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks and more

In this briefing:

1. This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks
2. RRG Global Macro Weekly – Political Turmoil in London, Caracas and DC Shakes Markets
3. Don’t Write off Further Aussie LNG Supply Growth: Positive for WPL AU; Negative for US LNG Players
4. Signs of High Level Political Interference in ICICI Bank Case?
5. Yes Bank’s New CEO Should Not Be a Yes Man

1. This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks

• If you are a follower of the Asian stock markets, one of the “rules of thumb” is to carefully follow the investments trails of the “superman” Li Ka-Shing, who has recently publicly declared that he supports Bakkt. On December 31st, 2018, Bakkt raised $182.5 million from high profile investors including Li Ka-Shing backed Horizon Ventures, M12 (Microsoft’s venture capital arm), Intercontinental Exchange (owner of the New York Stock Exchange), Alan Howard, and the Boston Consulting Group. 

• Starbucks and Bakkt have yet to mention exactly when Starbucks will allow consumers to use Bitcoin to purchase coffee at their stores. In terms of timing, we believe that the probable time frame is likely to be sometime in 4Q 2019 to 2020 when Starbucks will start allowing their consumers to start using Bitcoin at some of their stores. This will represent a crucial positive tipping point for Bitcoin in the next two years.
• Rakuten & Bitcoin – It has been reported that Rakuten may start to allow Bitcoin as a means of payment as early as April 2019. 

2. RRG Global Macro Weekly – Political Turmoil in London, Caracas and DC Shakes Markets

China: US-China trade negotiations are focusing on the easy parts to avoid truly difficult discussions on thornier structural issues.
Brazil: Early economic numbers have been positive for new president Bolsonaro. Data this week and next will show the way forward.
Thailand: Elections set for March 24th. Constitutional changes may avoid the repeat of the populist/protest /coup cycle that has dominated Thai politics since 2000.

3. Don’t Write off Further Aussie LNG Supply Growth: Positive for WPL AU; Negative for US LNG Players

We think the market is underestimating global LNG supply in the early to mid-2020s from current facilities: initially we look at Australia, which became the world’s largest LNG exporter on a monthly basis in November (~80mtpa or 25% of global supply). Our analysis of Australian LNG supply suggests that production in the early to mid-2020s will be much higher than market expectations of falling production, as fields move into decline. Overall we think this is negative longer-term for the LNG market as supply could supply to the upside but it is a relative positive for the Australian LNG companies. 

We think production could grow to around 95mtpa by the mid-2020s due to substantial upside to the nameplate capacity on existing facilities, tie-backs and new developments keeping existing facilities full and utilizing new brownfield LNG trains. Australia’s key advantages versus LNG projects elsewhere are the low offshore upstream operating costs, cheap shipping costs to Asia, an investor friendly environment and having a huge installed base of LNG infrastructure and associated cashflows.

Relative to its size Woodside Petroleum (WPL AU) should be the biggest beneficiary and it is also positive for Inpex Corp (1605 JP) and Santos Ltd (STO AU) . It is also good news for the larger integrated players such as Chevron Corp (CVX US), Total Sa Spon Adr (TOT US) and Royal Dutch Shell (RDSA LN). We think that the US LNG players are disadvantaged relative to Australian expansions so this is relatively negative for the likes of Cheniere Energy (LNG US) and NextDecade Corp (NEXT US).

4. Signs of High Level Political Interference in ICICI Bank Case?

The Central Bureau of Investigation (CBI), India’s premier federal police investigation agency, finally filed a First Information Report (FIR) and charged Chanda Kochhar, former CEO, ICICI Bank, her husband, Deepak Kochhar and V. N. Dhoot, managing director, Videocon Group, with cheating ICICI Bank in the Rs 32.5 bn Videocon loan case. The long delay in filing the FIR, the unusual nature of the FIR itself, the unprecedented reaction of the erstwhile Finance Minister on his personal blog, and the sudden transfer of the supervisory officer investigating the case — all arouse suspicion that political interference has played a large role in this case, and will continue to do so. Even if such political interference winds up rescuing prominent accused persons, it will hardly provide reassurance about the state of governance at the bank itself.

5. Yes Bank’s New CEO Should Not Be a Yes Man

Yes Bank has appointed Ravneet Gill as the bank’s CEO, effective latest from March 1, 2019, for a 3-year term. The announcement led to a spurt in the bank’s share price, as the leadership issue was finally resolved.  While investors rejoiced, it remains to be seen whether the new CEO will be influenced by Rana Kapoor, who will step down as founder-CEO on January 31, 2019. Normally, in India, founders are reluctant to cede managerial control, and in banks, their influence often disrupts operational management even when the regulator has compelled founders to step down from the board. It is therefore imperative that once Rana Kapoor steps down as CEO his role should only be restricted to a founder shareholder without any operational involvement even as an advisor.  Gill’s actions as Yes Bank CEO will need to be closely monitored as some board appointees have already been made prior to his taking charge. In particular, we need to closely watch how he manages the close associates of Rana Kapoor, one of whom has been elevated to the board, subject to the regulator’s approval. If Gill starts inducting experienced bankers from outside in senior positions in Yes Bank, it will demonstrate to the public that he is not under the yoke of the founder, but if he continues with the existing team of senior executive management or permits an advisory role for the departed founder-CEO it will indicate the continued strong influence of Rana Kapoor on the bank he co-founded.