In this briefing:
- India: How “Free Electricity” Schemes May Be Linked to Excellent Industrial Growth Numbers?
- Overview of My Winners and Losers in 2018…and 5 High Conviction Ideas Going into 2019
- RRG Global Macro – US Fed Positive Outlook – Stocks Fall. Politics Take Over from Fundamentals
- Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- India Politics: Long Before 2019 Results, Fight Begins for PM Candidate in Opposition = Good for BJP
1. India: How “Free Electricity” Schemes May Be Linked to Excellent Industrial Growth Numbers?
If we look more closely at the latest Industrial Production (IIP) increase data which reported a strong overall growth of 8.1% yoy, we find a mixed picture emerging on the component wise contribution and growth across categories. The industry group ‘Manufacture of furniture’ has shown highest positive growth of 41.0% followed by 39.0% in ‘Manufacture of wood and products of wood and cork’, which is not as such the indicators of robust capacity creation for an economy. There are other interesting data points as well. Among top five item groups with positive percentage increase in production, some are purely consumption items which will have rather limited impact in terms of long term positive implications for the country.
But, what is that we are most worried about? For several previous months, IIP growth data is getting massive support from huge growth in electricity consumption. Electricity has contributed the most in growth even in October data (almost 20% more than mining, the second most important contributor and the one which has double the weight as compared to electricity). But, this could also be primarily driven by Government schemes such as SAUBHAGYA and other initiatives for rural electrification which are in overdrive. If this is not managed well, massive growth in electricity could lead to more stress for DISCOMs (power distribution companies) and that could be harmful for the entire power sector.
2. Overview of My Winners and Losers in 2018…and 5 High Conviction Ideas Going into 2019
In a follow up to my note from last year Overview of My Winners and Losers in 2017…and 5 High Conviction Ideas Going into 2018 I again look at my stock ideas that have worked out in 2018, those that have not and those where the verdict is still pending.
Last year I provided 5 high conviction ideas and here is their performance in a brutal year for Asian Stock Markets:
Company | Share Price 27 Dec 2017 | Share Price 20 December 2018 | Dividends | % Total Return |
0.70 HKD | 0.88 HKD | 0.01 HKD | +27% | |
0.20 SGD | 0.27 SGD | 0.0 SGD | +35% | |
2.39 HKD | 2.82 HKD | 0.147 HKD | +24% | |
0.84 SGD | 0.85 SGD | 0.02 SGD | +3.5% | |
1.44 MYR | 0.32 MYR | 0.0 MYR | -79% |
4 out of 5 had a positive performance.
Below I will make a new attempt to provide five high conviction ideas going into 2019.
3. RRG Global Macro – US Fed Positive Outlook – Stocks Fall. Politics Take Over from Fundamentals
- US: Stocks fall on political turmoil despite positive noises from the Fed with a dovish rate hike, a reduction in expected 2019 hikes and positive trends on employment and inflation.
- Russia: Unexpected 25 bps rate hike in the face of higher inflation in Nov. Watch for impact of lower oil prices in coming quarters.
- Turkey: Economic developments remain negative. The outlook for retail sales is poor as the economy in general is faltering.
- Indonesia: Trade deficit in November. Exports down 3.3%; imports up 11.68%. This disappointing performance could be the beginning of a trend.
4. Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- We’ve reviewed 10 companies in the sector. Of those, three are the consensus favorites of our Tokyo based panel of industry, financial and economics observers of the IR initiative over many years.
- Based on pachinko alone, the stocks of these companies are fully valued. Based on potential tailwind from a license award within 6 months, they could be vastly undervalued.
- Each of the three noted here brings strength to a bid less based on financials than corporate focus, outlook and experience in the field.
5. India Politics: Long Before 2019 Results, Fight Begins for PM Candidate in Opposition = Good for BJP
The Opposition parties discussing who will be their Prime Minister after 2019 elections is not just premature, it is also a distraction from their main objective which is to defeat the BJP first in the next Lok Sabha elections. Notwithstanding some recent reversals and visible signs of nervousness in the BJP, Prime Minister Narendra Modi is still miles ahead of any other candidate and even BJP is still the dominant force, both in absolute terms and as compared to any other political party in India today. Without any significant threat to his popular appeal and personal charisma, Mr. Modi remains the best bet for leading the NDA (National Democratic Alliance) in the next Lok Sabha elections.
However, this discussion that who should be the PM candidate for Opposition in next elections began when M K Stalin who is a prominent leader from Tamil Nadu and chief of DMK (the party not in power in the state today but clearly one of the two most powerful political forces in this Southern state) proposed Rahul Gandhi (leader of Congress, the other national party apart from BJP) for PM’s job next year. Almost immediately, several other Opposition parties opposed the proposal and said it is best decided after the elections.
There are several reasons why it will work better for BJP if Opposition has a joint candidate for Prime Minister’s post next year, a) It will harm the fragile Opposition unity because there are several contenders but there is no one who will be acceptable to all the Opposition parties, b) If Rahul Gandhi is the PM candidate and his party takes this decision unilaterally, Congress will become less acceptable to other parties. As things stand today, Congress is far away from becoming a strong force in the next Lok Sabha, c) The voters will get more polarized and it will help BJP in winning over even neutral voters who may not have been really happy with BJP.
