Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Covid-19/Economic Impact/Consumption/Global Fight

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Thematic (Sector/Industry)

Cayman islands Financials / Thematic (Sector/Industry)

Market was consolidating as the local outbreaks continue. We expect the worst (while hoping for the best). There are two uncertainties, in our view.
First, we are no medical experts but believe only effective vaccines will stop this pandemic. There has been sporadic news on vaccine projects in addition to drug cocktails which were proven to work somehow. We understand it would take from 11-17 months minimum to produce vaccines for the masses. Without a vaccine for the masses, any market recovery is short-lived and susceptible to successive waves of infections, in our view.
Second, we have no confidence on how much this COVID19 will damage the global economy. The mistake in forecasting US initial jobless claims in the past three weeks tells us economists may have no idea what will happen. We heard many compared this crisis to the Great Depression. What we can agree is that not many of us have experienced the Great Depression, but we believe this crisis could be the crisis most of us have not experienced before in our lifetime. This uncertainty, in our view, led to our view that this bear market rally will be short-lived.
In our last <a href="https://www.smartkarma.com/insights/market-monitor-friday-13th-pandemic" target="_blank" data-smartkarma-citation="insights:37459" rel="noopener">Market Monitor: Friday 13th Pandemic </a>(dated 13-March), we expected a global recession this year and expect volatility to persist for another month as a result of pandemic conditions in the US and Europe. We still believe risky assets should not be accumulated at the time of this report on the remaining uncertainties above.
Back to credit, we expect further spread widening for emerging markets bonds as defaults are expected to rise significantly toward 10% this year with defaults ranging from household loans (i.e. SME loans, mortgages, and credit card receivables), and high-yield bonds to sovereign bonds. We expect rising redemption on hedge funds to lead to even more bond sell-offs beyond the fundamentals. On an issuer point of view, now is the time to issue on the so-called bear market rally.  But from an investor point of view, we advise against running toward the light at the end of the tunnel as that light could be an incoming train, to say the least.

Market was consolidating as the local outbreaks continue. We expect the worst (while hoping for the best). There are two uncertainties, in our view.
First, we are no medical experts but believe only effective vaccines will stop this pandemic. There has been sporadic news on vaccine projects in addition to drug cocktails which were proven to work somehow. We understand it would take from 11-17 months minimum to produce vaccines for the masses. Without a vaccine for the masses, any market recovery is short-lived and susceptible to successive waves of infections, in our view.
Second, we have no confidence on how much this COVID19 will damage the global economy. The mistake in forecasting US initial jobless claims in the past three weeks tells us economists may have no idea what will happen. We heard many compared this crisis to the Great Depression. What we can agree is that not many of us have experienced the Great Depression, but we believe this crisis could be the crisis most of us have not experienced before in our lifetime. This uncertainty, in our view, led to our view that this bear market rally will be short-lived.
In our last Market Monitor: Friday 13th Pandemic (dated 13-March), we expected a global recession this year and expect volatility to persist for another month as a result of pandemic conditions in the US and Europe. We still believe risky assets should not be accumulated at the time of this report on the remaining uncertainties above.
Back to credit, we expect further spread widening for emerging markets bonds as defaults are expected to rise significantly toward 10% this year with defaults ranging from household loans (i.e. SME loans, mortgages, and credit card receivables), and high-yield bonds to sovereign bonds. We expect rising redemption on hedge funds to lead to even more bond sell-offs beyond the fundamentals. On an issuer point of view, now is the time to issue on the so-called bear market rally.  But from an investor point of view, we advise against running toward the light at the end of the tunnel as that light could be an incoming train, to say the least.

iShares 20+ Year Treasury Bond ETF (TLT US)

Market Monitor: The Corona Carnage