Daily Thailand: Inventory Clearance and the Semiconductor Cycle and more

In this briefing:

1. Inventory Clearance and the Semiconductor Cycle
2. RRG Global Macro Weekly – Dramatic Brexit Defeat A Positive for Markets? We Are Not So Sanguine
3. Wanted: A 21st Century Monetary Theory
4. The Week that Was in ASEAN@Smartkarma – Asia’s Time, Indo Mini-Marts, and Singapore Property Woes
5. Catalyst Calendar for Thailand 2019

1. 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.

2. 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..

3. 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.

4. The Week that Was in ASEAN@Smartkarma – Asia’s Time, Indo Mini-Marts, and Singapore Property Woes

Macro Insights

In Ten Years On – Asia’s Time Is Coming, Don’t Miss The Boat, Sharmila Whelan suggests that the time has come for Asia to outperform developed markets.

In The Black Elephant Has Trumpeted, Dr. Jim Walker argues that we are on the cusp of a period of pronounced outperformance for Asian economies. 

In Catalyst Calendar for Thailand 2019, our Thai Guru attempts upcoming catalysts for selective stocks in Thailand including TMB Bank PCL (TMB TB), Airports Of Thailand (AOT TB), Indorama Ventures (IVL TB), Sino Thai Engr & Constr (STEC TB), and Major Cineplex Group (MAJOR TB).

Equity Bottom-Up Insights

In his on the ground insight, Sumber Alfaria Trijaya (AMRT IJ) – Flying off the Shelves, former Jakartan Angus Mackintosh revisits this leading Indonesian mini-market operator. After a meeting with management, he finds the company on an altogether more favourable tack.

In Ayala Corp Placement – Selldown by Mitsubishi Likely to Reignite Overhang Worries, Zhen Zhou, Toh takes a look at this significant transaction in the Philippines. 

in Capitaland (CAPL SP): Transformational Acquisition at a Premium, Arun George comments on Capitaland Ltd (CAPL SP)‘s latest acquisition and though he sees it as significant would take a wait and see stance on the stock. 

Sector and Thematic Insights

In Singapore Real Deals (Jan 2019 Issue 1, Anni Kum launches a new regular product commenting on significant developments in the Singapore property sector. Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In the first issue of Singapore Real Deals, she will dive into the first property launch in Prime District 9 in 2019, RV Altitude, to get a sense of the product mix and pricing strategies that developers are adopting in a price-sensitive market. 

In Singapore Property – A Perfect Storm for the High-End Residential Market in 2019?, Royston Foo investigates some worrying developments on the supply side in Singapore property, which he suggests could negatively affect the market, especially the high-end.

5. Catalyst Calendar for Thailand 2019

While it may not be possible to get 100% visibility on upcoming analysts, the team at MCorp Review figured that it would be useful to start a calendar for those we see in the pipeline for this year and cite no more than three stocks that could come into focus during those months because of these catalysts. Some examples include:

• The TMB-Thanachart deal (late January) possibly the biggest bank deal since Mitsubishi-UFJ bought BAY for US$4.4bn in 2013, we see the government’s fingerprints in this and the likelihood that the share swap ratio will favor TMB.
• Chinese New Year (Feb 5), an important test for Thai tourism and AOT following the death of mainland tourists in Phuket last year. An underwhelming show would also hit Indorama.
• General elections (late May?) If this goes through, Sino Thai Engr & Constr (STEC TB) , whose tycoon Anutin Charnvirakul leads the swing vote party Bhumjaithai, could benefit hugely.
• Blockbuster season (August) So far, X-Men sequel The New Mutants, which timeline is confirmed, looks like the big boost for cinema titan Major Cineplex Group (MAJOR TB) , though we suspect Avengers Endgame, the sequel to Infinity Wars, would be an even bigger deal.