Daily Thailand: EM Active Fund Performance:  Difficult 2018, but Long-Term Outperformance Remains and more

In this briefing:

1. EM Active Fund Performance:  Difficult 2018, but Long-Term Outperformance Remains
2. ATP30: 100% Secured Client Base Prompt 2019 Growth
3. Inventory Clearance and the Semiconductor Cycle
4. RRG Global Macro Weekly – Dramatic Brexit Defeat A Positive for Markets? We Are Not So Sanguine
5. Wanted: A 21st Century Monetary Theory

1. EM Active Fund Performance:  Difficult 2018, but Long-Term Outperformance Remains

2018 was a year to forget for many active GEM managers. Absolute returns were the worst since 2011 and, relative to the I-Shares MSCI Emerging Markets ETF, active funds registered their first average underperformance since 2008.  Here we share some of the key data points on active fund performance for 2018 and over the longer term.

2. ATP30: 100% Secured Client Base Prompt 2019 Growth

We maintain a BUY rating for ATP30, based on a target price of Bt2.46 (previous TP: 2.48) and derived from a 30xPE’18E, which is its average trading range in the past one year and 10% discount to Thailand’s transportation sector

The story:

• Active fleet expansion still go on in 2019-20E
• Lower interest expense burden support margin expansion

Risks: Higher than expected in volatility in fuel price and probability that clients will terminate service contracts

3. Inventory Clearance and the Semiconductor Cycle

A very normal part of the semiconductor cycle is inventory clearance.  DRAM makers are starting to discuss this in their earnings calls.  What they are NOT telling their investors is how significant this is to the onset of a price collapse, perhaps because they don’t understand it themselves.  This Insight will help readers to learn how and why an inventory clearance helps ratchet a budding oversupply into a full-blown glut.

4. RRG Global Macro Weekly – Dramatic Brexit Defeat A Positive for Markets? We Are Not So Sanguine

The dramatic defeat of PM May’s Brexit arrangement with the EU was seen by the markets as a positive development. Apparently the markets believe that this could result in Britain remaining in the EU.

While we agree this would be good news we consider it unlikely without many more months or years of uncertainty as another referendum is organized and implemented.

Romania: GDP in Q3 grew 4.4% y/y, up from 4.1% in Q2. The country’s economy is doing better than most EU countries.
Brazil: The CPI in Dec rose 3.7%, down from 4.05% in Nov. Lowest rate since May, as prices slowed for food and fuel.
India: The trade deficit in Dec narrowed to $13.1 bn. Exports rose a meager 0.3% and imports fell 2.44%. GDP growth of 7% is expected for this year and next..

5. Wanted: A 21st Century Monetary Theory

The globe is facing more than an ordinary business cycle.

Joseph C. Sternberg, editorial-page editor and European political-economy columnist for the Wall Street Journal’s European edition, recently interviewed Claudio Borio, head of the Monetaryand Economic Department of the BIS. Mr. Borio said that politicians have relied far too much on central banks, which are constrained by economic theories that offer little meaningful guidance on how to sustain growth and financial stability. The only tool they have is an interest rate that can affect output in the short run but ends up affecting only inflation in the end.