FSMOne SG - Research Highlights

2022-02-25 16:56:41 Macro Research

Our take on the Russia-Ukraine Crisis

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• In the absence of a meaningful de-escalation, we expect commodity prices to remain at elevated levels, while further escalations will likely result in an energy price shock. The flight to safe-haven assets is likely to continue in reaction to escalating tensions.

• Any direct impact on trade, due to sanctions, will largely fall upon European countries. There will also likely be an indirect impact on already-elevated inflation levels, which could potentially lead to stronger policy tightening by global central banks. Further policy tightening, coupled with the growth drag from the Omicron variant, will weigh on the global economic recovery.

• We believe there is no need for investors to panic sell, as geopolitical crises are also hard to predict and price. Investors should be strategically positioned for a trend of rising interest rates and tilting their portfolios towards part of the market that can outperform in such an environment.

• Specifically, we believe investors should consider diversifying their portfolio, and recommend Asian ex-Japan equities. Investors can also consider commodity-related equities as a hedge as commodity prices are likely to remain at elevated levels in the current environment. We also recommend a tilting towards value in equities, and reducing duration in fixed income, in response to the rising interest rate environment.

: Read the full article here Open / Comment

2022-02-25 06:35:06 ETF Idea

Look out for this sector in face of rising inflation

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• Commodity prices, including agricultural commodities, have been rising steadily since last year. The momentum appears well supported as rising inflation has been rippling through the global economy.

• Agricultural prices could extend their climb in 2022 as adverse weather – driven by La Niña, threatens to lower crop yield returns.

• Additionally, broader secular trends such as population growth and rising income levels, underpin the industry’s long-term growth prospects.

• The VanEck Vectors Agribusiness ETF (NYSE:MOO) provides investors with the opportunity to hedge against inflation, and leverage on the exponential growth in the global population, which is driving up food demand.

• Our 2023 target price is USD 115, and this offers investors an upside potential of about 25%, based on the closing price of USD 92.15 on 23 February 2022.

: Read the full article here
: VanEck Vectors Agribusiness ETF (NYSE:MOO) Open / Comment

2022-02-19 15:07:42 Fund Idea

A one-size-fits-all option for exposure to both traditional finance and fintech

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• Investors should consider incorporating fintech players as part of their portfolio on top of traditional financial institutions to gain comprehensive exposure across the broad financials universe.

• We like the BlackRock World Financials A2 USD for its flexibility to invest across the broad financials universe, including off-benchmark positions in fintech. It also has a strong track record relative to its peers.

• This is a good one-size-fits-all option for investors looking to gain exposure to both traditional financial institutions and fintech players – all in a single product.

: Read the full article here
: Blackrock World Financials A2 USD Open / Comment

2022-02-19 06:42:07 Is Suntec’s fountain of wealth overflowing as the REIT sees a 13.5% YoY increase in gross revenue? We dig deeper into their credit performance: https://bit.ly/3GYHlNI

You might not have heard of Lai Sun Development, but you would probably know Causeway Bay, within which Plaza 2 is under the company’s portfolio. In this article, we analyse the performance of this Hong Kong developer: https://bit.ly/3BtXSrN Open / Comment

2022-02-18 13:26:58 Macro Research

Digital Economy: Long-term growth intact, but limited upside

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• US big-tech stocks continued their fine performance in 2021, as companies continued to beat earnings estimates, pushing valuations to a record high. However, the strong earnings growth seen over the past year may be difficult to sustain in the coming quarters.

• Lofty valuations, a potential slowdown in earnings growth, rising interest rates, and regulatory risks are factors that may limit the upside of internet companies in the near term. Therefore, we hold the digital economy at a rating of 2.5 Stars “Neutral”.

• Segments exposed to corporate demand (cloud, digital advertising, cybersecurity) have done better compared to those exposed to consumer demand. This trend is expected to continue as businesses speed up their digital transformation efforts.

• Long-term, there are massive digital transformation opportunities for traditional industries. Recent catalysts, such as Covid-19, labour shortages in the US, as well as supply chain disruptions, will help to accelerate the shift.

• The O'Shares Global Internet Giants ETF (BATS:OGIG) is trading at 44X 2023 earnings, suggesting that it is more or less fairly valued based on the fair PE multiple of 45X we have assigned for this sector. At 45X PE, the target price is USD 43.

: Read the full article here
: O’Shares Global Internet Giant (BATS: OGIG) Open / Comment

2022-02-18 03:37:38 Stock Idea

Will China’s draft rules for online medical services threaten Ping An Good Doctor?

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• On 27 October 2021, China's National Health Commission (NHC) issued draft rules for stricter regulation of the country’s fast-growing internet healthcare sector, leading to a massive sell-off in Chinese online healthcare stocks.

• The draft rules, released to solicit public feedback, indicates that medical judgements must be conducted by a registered doctor, while also calling for greater supervision of the internet healthcare sector.

• It raises the requirements for increasing the quality of online medical services, to filter out companies engaging in fraudulent medical activities.

• However, the long-term growth story of the internet healthcare sector remains intact as Chinese patients have become increasingly receptive to these digital health services.

• Nevertheless, near-term headwinds remain, and we revise our 2023 target price for Ping An Good Doctor to HKD­­­­­­­­ 56, based on a fair PS multiple of 5.0X, translating to an attractive upside potential of 124%,

: Read the full article here
: Ping An Good Doctor (HKEX:1833) Open / Comment

2022-02-17 03:31:26 Keen on Malaysia’s automotive industry? With a long-standing history, Tan Chong Motors Holdings has a new A+ rated issue slated to be priced in the week of 28 Feb: https://bit.ly/3HNF0q7 Open / Comment

2022-02-16 13:38:23 ETF Idea

Why it is still a good time to consider Chinese government bonds

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• From a monetary policy perspective, China is in a different place as compared to the rest of the world. It is likely to keep an easy monetary policy in order to stabilise the economy, which would bode well for the prices of Chinese government bonds (CGBs).

• Unlike the US, China’s inflation remains manageable. CGBs are offering higher as well as positive real yields, which is rare to find in most major economies these days.

• Historically, CGBs have shown low correlation with global peers as their performance is mainly driven by domestic factors. This provides investors with diversification benefits.

• The ICBC CSOP FTSE Chinese Government Bond Index ETF (SGX:CYC) provides investors with a pure-play exposure to CGBs. In comparison to peers, the ETF comes with a lower expense ratio, and also stacks up well in terms of other measures such as liquidity.

: Read the full article here
: ICBC CSOP FTSE Chinese Government Bond Index (SGX:CYC) Open / Comment

2022-02-16 03:41:50 In this week’s Bond Market Monitor, Asian high yield bonds recorded modest losses last week in spite of a volatile equity market. Plus, updates on Logan Group, Nagacorp and Cathay Pacific: https://bit.ly/3gL8p8g

Can’t stop, won’t stop: already the number one sponsor of public REITs in the Asia Pacific region, ESR Cayman has become the largest real asset manager in the same region with its acquisition of ARA Asset Management: https://bit.ly/34F2Fur Open / Comment

2022-02-15 13:30:20 Macro Research

4Q21 Market Report Card – Developed Markets Lead the Way

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• Global markets (MSCI ACWI Index) grew in 4Q21 (+5.8% in SGD terms). Our top 3 performers (in SGD terms) were US (+10.1%), Taiwan (+7.8%), and Europe (+5.0%).

• US: We remain neutral on US. We already saw a sharp correction for US equities in Jan 2022, but valuations are still slightly elevated and vulnerable to earnings disappointments and policy uncertainty.

• Taiwan: We are optimistic on Taiwan, with its high allocation of Semiconductors equities (especially TSMC). While there is a risk of a near-term supply glut, the broader long-term outlook remains very positive for Semiconductors due to digitalization, and therefore for Taiwanese equities as a whole.

• Europe: We are also positive on Europe. Though they are currently facing a fresh wave of Omicron variant which has hurt sentiment, the Euro Stoxx 600’s cyclical tilt can benefit from the global economic recovery. Investors looking for Developed Markets Exposure should look towards European equities, especially with valuations in Europe much more attractive than in the US.

: Read the full article here Open / Comment