In this briefing:
- China’s New Semiconductor Thrust – Part 1: Why and How?
- The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles
- Bull Or Bear? Latest Global Liquidity Readings
- Risk of Future LNG Supply Glut as Bubble of New Projects Grows
- The Dollar IS the Story; Gold Confounds, A Brexit Rabbit Hole; EUR Punished
1. China’s New Semiconductor Thrust – Part 1: Why and How?
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
In the first part of this series we will see what motivated China to enter the market and how it plans to do so.
2. The Week that Was in ASEAN@Smartkarma – Elections, Trade War Beneficiaries, and Indonesian Textiles
This week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The highlights of this week are comments on the Thai elections with differing perspectives from CrossASEAN Economist Prasenjit K. Basu, Thailand based Athaporn Arayasantiparb, CFA, and Dr Jim Walker. Dr Jim Walker also gives us his views on the key beneficiaries and the ongoing US-China trade dispute and singles out Indonesia and Vietnam. On this theme, Kevin O’Rourke highlights a potentially significant announcement of a US$400m investment in Kendal, Central Java by a Chinese Textile company of its intention to relocate a shirt manufacturing facility there from China. Kawasan Industri Jababeka (KIJA IJ) and Sembcorp Industries (SCI SP) have a JV industrial estate there, which stands potentially to benefit should this move should it transpire. More importantly, it could signal the start of a more promising future for Indonesia’s manufacturing sector.
Macro Insights
In Prayuth Accomplishes a Clear-Cut Victory, Assuring Stability (If Not Rapid Growth), CrossASEAN Insight Provider Prasenjit K. Basu comments on the result of the recent election in Thailand.
In Thai Election 2019: Defeat in Parliament, Victory in Senate, Thai Guru Athaporn Arayasantiparb, CFA comments on the results on the Thai elections and the consequences for decision making in that country.
In a follow-up Insight on the recent election in Thailand, Political Pit Stop (April): An Election Gridlock, Athaporn Arayasantiparb, CFA deals with some unfinished business post the election.
In Elections, Coups and Constitutions: Thailand’s Reckoning, Dr. Jim Walker looks at Thailand’s political history with the recent election in mind and concludes that Thai politics looks set to become fractious and interesting once again.
In his insight, 18pt Lead Mitigates Prabowo-Related Risk / Islamic Parties Declining / PRC Textile Plan / 4th Debate, Kevin O’Rourke looks and the most important political and economic developments over the past week and provides his value-added comment.
In Vietnam Picks up the China Baton, Dr. Jim Walker lays out his thoughts on which countries are set to benefit the most from the ongoing trade dispute between the US and China. Indonesia and Vietnam would seem to be the most obvious beneficiaries.
Equity Bottom-Up Insights
In his most recent on-the-ground insight, Shaky Situations at DEMCO and Pranda, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to two companies with very different trajectories, namely renewable power specialist Demco Pcl (DEMCO TB), which is struggling, despite doing really well in the past and jeweller Pranda Jewelry Pub (PRANDA TB), once struggling but now on a recovery path.
In Golden Agri Bull Pivots to Get Involved, technical specialist Thomas Schroeder works his magic on this leading Singapore listed plantation company.
For a fundamental view on the above situations please refer to last week’s insight, Golden Agri: El Nino Back on the Front Burner; Bullish Catalyst for GAR, from commodities specialist Charles Spencer who zeros on the potential positive impact from an impending El Nino event on Golden Agri Resources (GGR SP).
Sector and Thematic Insights
In Small Cap Diary: Rajthanee Hospital, CAZ, Athaporn Arayasantiparb, CFA lays out his thoughts post visits to these two small-cap companies from totally different industries Rajthanee Hospital (RJH TB) and CAZ Thailand PCL (CAZ TB).
3. Bull Or Bear? Latest Global Liquidity Readings
- Global Liquidity bottoming out, but Central Banks not yet easing
- US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
- PBoC still tightening through OMOs
- ECB on ‘pause’
- QE4 is coming in 2019, but no evidence it has started yet
4. Risk of Future LNG Supply Glut as Bubble of New Projects Grows
The rapidly improving outlook in the LNG industry over the last few years, reinforced towards the end of 2017 by the unexpected growth of demand from China, has set off a proliferation of new LNG projects especially from the US (Exhibit 1).
In its latest LNG Outlook report, Royal Dutch Shell (RDSA LN) is projecting from 2023 onwards a significant gap between the future LNG demand and the existing supply including the capacity under construction that could require up to 100mtpa of new LNG project sanctions by 2023.
The race to gain market share in the projected LNG demand-supply gap has produced an aggregated capacity of proposed new projects of up to 475mtpa, a number larger than the total LNG traded volume in 2018 of 319mtpa and way above the capacity required to meet the future growth in LNG demand.
Exhibit 1: Funnel of proposed LNG projects getting bigger
5. The Dollar IS the Story; Gold Confounds, A Brexit Rabbit Hole; EUR Punished
- The dollar IS the story
- EUR punished for negative yields
- Chasing Brexit down a rabbit hole
- Gold confounds
- Bitcoin at an interesting juncture
The fact that the dollar has strengthened despite the dovish turn at the Fed this year and the significant fall in US rates and bond yields has confounded many analysts.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
