Category: Investment Strategies

Lippo Malls Indonesia Retail Trust: Sponsoring the Sponsor

Summary

Geography

Indonesia

Sector

Real estate investment trust

Credit rating

B1/NR (Moody’s/S&P)

Report date

23-NOV-2020

 

Executive Summary

Since our 28-May initiation report on Lippo Malls Indonesia Retail Trust (LMIRT)’s two perpetual bonds (LMRTSP 6.6% and 7% Perpetual (in SGD)) and LMRTSP 7.25% 6/24 (in USD)) with an Underweight recommendation, the perpetuals underperformed while the senior bonds outperformed. Read the rest

Alan Brazil SOM Macro

The US After Trump And COVID

Step 1: Identify Macro Themes

What Will The US Look Like After The 2020 US Elections And The Second Wave of COVID?

The US After Trump And COVID 2 The US After Trump And COVID 3

Step 2: Fundamental Economic Framework

Surge In Cases Not Just An Artifact of A Surge In Testing–Hospitalizations Are Rising

The US After Trump And COVID 4 The US After Trump And COVID 5

 

As With The Last Time, Economies Will Suffer From Lockdown Unless There Is A Vaccine

The US After Trump And COVID 6 The US After Trump And COVID 7

 

US Economy Could Be Headed For Another Lockdown Given The Surge In Cases

The US After Trump And COVID 8 The US After Trump And COVID 9

 

On The Surface The Biden Agenda Looks Relatively Benign Even If The Dems Control The Senate

Biden Polices

Tax Policies

Increase corporate tax rate to 28% from 21%
Allow Trump bonus depreciation to phase down
Increase marginal tax rates to pre-Trump levels (39.6%) for incomes over $400,000 Phase out itemized deductions for incomes over $400,000
Apply the 12.4% social security tax on income over $400,000
Tax capital gains and dividends at the same rate for incomes over $1 million
Allow other Trump tax changes to expire in 2026

Regulatory and Spending Polices

3+ trillion stimulus package focused on helping state and local governments

Green New Deal

Restore limits for oil and gas operations
No new federal oil and gas leasing
100% of new car sales including trucks will be zero emissions Carbon pollution from power sector by 2035
Net zero emission by 2050
Rejoin Paris agreement
Reduce carbon footprint of building by 50% by 2035
2.5 trillion of climate focused infrastructure spending next two years

Health Care

Extend and improve Obama Care 2+ trillion of spending

Tax Changes Pushes Revenue Back To Normal After Trump

The US After Trump And COVID 10

Rising Deficits Under Biden Could Put Pressure On The Dollar And Crowd Out Capital Growth

The US After Trump And COVID 11 The US After Trump And COVID 12

 

At Its Heart, However, The Biden Plan Is A Massive Income Redistribution Plan From The 1%

The US After Trump And COVID 13 The US After Trump And COVID 14

 

Biden Tax Policy Would Push Top Tax Rates To Historical Highs And Reduce National Savings

The US After Trump And COVID 15 The US After Trump And COVID 16

 

Step 3: Identify Potential Repricing Catalysts

Biden Plan Reduce Future US GDP From Higher Tax Rates And Climate Policy

The US After Trump And COVID 17 The US After Trump And COVID 18

 

Any Outcome In Georgia Election Is A Likely A Positive Tailwind For the Economy GDP And Risk Assets

The US After Trump And COVID 19 The US After Trump And COVID 20
 
 

The Election Tailwind Combined With An Effective Vaccine Could Unleash The US Economy In 2021

The US After Trump And COVID 21 The US After Trump And COVID 22

 

Near Term Expect More QE And Short-Term Rates Being Held Lower-For-Longer

The US After Trump And COVID 23 The US After Trump And COVID 24

 

More QE And Rates Lower-For-Longer Could Mean Another USD Weakening Cycle

The US After Trump And COVID 25 The US After Trump And COVID 26

 

The Rise of The Yen: Abenomics QE Could Be Over And That Could Mean Weaker USD

The US After Trump And COVID 27 The US After Trump And COVID 28

 

Weakening USD Could Drive Up Commodity Prices And Push Up Commodity EM GDP

The US After Trump And COVID 29 The US After Trump And COVID 30

 

Step 4: Identify Asymmetric Trades

Trade 1: Buy US Cyclical Equites Or An Equally Weighted Equity Index

Trade Thesis

  • Tailwinds from 2020 election and an effective vaccine could return the US economy to it’s pre-COVID growth trajectory

  • Accelerating economic growth would drive up US equities particularly in those sectors exposed to cyclical growth

– Person-to-person contact related equities have the most beta to this scenario, e.g.

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Global Letter: A tale of toggle PIKs

Credit market excesses typically occur in times of low interest rates, when investor demand for higher-yielding instruments leads to the creation of asset classes with returns that, in hindsight, were out of line with the risk involved.… Read the rest

Bond Critic Logo

Olam International: Cocoa Against COVID

Summary
Asset Class Credit
Quality High yield
Geography Singapore
Sector Agricultural
Credit rating NR
Report date 4-June-2020

Executive Summary

 We initiate our coverage of Olam International Limited (Olam), a leading global food and agri-business with >30 years of track record, headquartered in Singapore and majority-owned by the Singapore quasi-sovereign Temasek Holdings.… Read the rest

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NEPTUNE ORIENT LINES: Cost Control Confidence

Executive Summary

Summary
GeographySingapore
SectorMarine
Credit ratingNR/NR (Moody’s/S&P)
Report date23-June-20

Since our last report, the NOLSP complex (in SGD) has outperformed as COVID-19 situation improved in many countries as well as the announcement of CMA CGM’s 1Q’20 results on 5-June.… Read the rest

Bond Critic Logo

Dr. Peng Telecom & Media Group: On Ventilator

Executive summary:

Summary
Geography China
Sector Telecommunications
Credit rating Caa1/WR (Moody’s/S&P)
Report date 11-May-2020

Dr. Peng Telecom & Media Group Company Limited (Dr. Peng) is a guarantor of Dr. Peng Hong Kong Holding Limited, an issuer of USD500m bonds maturing 1st June 2020 (CHEDRP 5.05% 6/20s).… Read the rest