Research

Ten Predictions for 2023

This year has been particularly difficult for most investors as there are few places to hide from inflation and rising cost of capital. Both equity and long-term bonds are down over 20% YTD, and even the value of cash is being eaten out by inflation, which rose as high as 9.1% y/y back in June.Continue reading “Ten Predictions for 2023“

Lessons from Japan: Automation and Reshoring of Supply Chain

Download PDF: There are two main drivers of global deflationary trend in the past 30 years: rising global trade allowed by the shift towards greater openness in China and former Soviet countries and the explosion of productive-age population facilitated by the baby boomer generation (Chart 1). In 1989, the wage gap between the developed worldContinue reading “Lessons from Japan: Automation and Reshoring of Supply Chain”

U.S. Equity Strategy: Sector Selection Amid Slowing Global Growth

Download PDF: The 2021 post-pandemic recovery has been impressive, with record amount of fiscal stimulus propping up household spending and the corporate sector turning into a capex hyperdrive. Meanwhile, the Fed maintained an ultra-loose monetary policy and tilted toward the dovish side in the first half of the year, which fuel the froth and equitiesContinue reading “U.S. Equity Strategy: Sector Selection Amid Slowing Global Growth”

Positive on Russia, Neutral on Mexico

Download PDF: Remains Overweight Russia Russia and other oil-exporting countries historically perform poorly during a global slowdown, but tighter discipline among OPEC+ and shale producers since last year has bolstered oil prices to above $80/bbl, which creates a positive spin for energy producers. We have been constructive on Russian and energy sector since last quarter,Continue reading “Positive on Russia, Neutral on Mexico”

Negative Outlook: Chile, Peru and Brazil

Download PDF: Downgrade Chile and Peru to Underweight Our recommendation to trim exposure to Chile and Peru is driven by three things: downside risk in copper price, rising political risk, and aggressive tightening by both countries’ central bank. Slowdown in Chinese growth is going to weigh on commodity intensive Latam bourse heavily through the declineContinue reading “Negative Outlook: Chile, Peru and Brazil”

Chinese and Asian High Yield Corporate Bonds: Feeling the Heat

The jitter surrounding Evergrande’s solvency problem has spread to other Chinese property developers that account for sizeable portion of Chinese and Asian High Yield Corporate index. Chart 1 and 2 show spreads of Chinese and Asian USD bonds have widened to 16% and 11.5%, respectively, while the total return index declined 18% and 12% fromContinue reading “Chinese and Asian High Yield Corporate Bonds: Feeling the Heat”

USDBRL – Better Entry Point Ahead

We are currently cautious on the BRL. Although valuation is cheap, deceleration in global growth and rising downside risk for global equities and commodities mean there will be a better entry point to short USD/BRL. Shorting EUR/BRL is a more attractive trade given the risk of a stronger dollar in such macro environment. First, theContinue reading “USDBRL – Better Entry Point Ahead”

Central and Eastern European Countries: Rising Rates Will Lift All Boats

Download PDF: Central banks in Czech and Hungary have begun to raise their policy rate this year amid acceleration in inflation as their domestic recovery unfolds, creating a tailwind for the koruna and forint against the Euro, which will not see the ECB raising its borrowing cost anytime soon (Chart 1). With Central and EasternContinue reading “Central and Eastern European Countries: Rising Rates Will Lift All Boats”

South Africa: The Not So Good, The Bad, and The Ugly

Download PDF: Last November we discussed the cyclically bullish but bleaker longer-term outlook for South African assets, in which the former has played out nicely until the end of second quarter this year. Our long position on South African bond was closed on August 10 with 10.2% gain while our overweight recommendation on South AfricanContinue reading “South Africa: The Not So Good, The Bad, and The Ugly”

Brazil: Fiscal Crisis in the Making?

Download PDF: The Brazilian 10-year bond yield has continued to shoot up to 11% this month amid the political debacle in the country and lack of credible proposal from the government to reign its growing public debt. A hawkish Fed, deterioration in Chinese growth and flareup of the pandemic globally all point to downside riskContinue reading “Brazil: Fiscal Crisis in the Making?”