Category: Re-Search

Investors are at a critical juncture where various issues are reaching the tipping point and could impact their investment outcomes. We discuss the advent of modern monetary theory (MMT) policy, rising unrest to reverse wealth inequality, high-velocity tech disruptions, the verge of deglobalisation, profound impacts of the upcoming demographic trends, and conflicting interest in environmental action. Faced with all vicissitudes, we also share our learning on how investors could regain control and thrive in a fast-changing world.

 

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We establish that the ongoing US-China trade war is part of a much larger geopolitical rivalry that can have profound consequences to the investment world. This could include a disruption of the flow of goods and capital, the de-pegging of the Chinese yuan, global inflation, and countries being forced to pick a side in this conflict. We see opportunities in Indonesia resulting from shifts in global supply chains and precious metals as a play on higher inflation in the coming years.

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This report covers our road trip in which we tried out Indonesia’s newly built trans Java toll road. Aside from reduced traveling time, we also noted other economic benefits of the new road, such as flourishing local shops and restaurants, improved product availability, booming ‘road trip’ hospitality, and much better movement of goods. Our observations convinced us that it is no longer the question if Indonesia is improving infrastructure, and are excited to see how President Jokowi will copy-paste the success stories across the country during his second term.

 

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We describe how we are in a golden era of entrepreneurship, thanks to technology. There are fewer limiting factors to success as technology provides access to markets, funding, knowledge, and infrastructure. We expect that the Zeitgeist of entrepreneurship will speed up innovation especially in developing countries like Indonesia.

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In light of the 10th anniversary of the GFC, this report covers what has changed since then. We point to the elevated debt levels and the rise of populism worsened by unequal recovery. Trade wars are a big threat beyond just the global economy. With this backdrop, we foresee structural increase in interest rates and inflation after 35 years of deflation.

 

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With the US in quantitative tightening mode, EM countries suffered due to their all-time high debt levels issued in foreign currency. This resulted in a dislocation of valuations in the financial markets, which present exciting investment opportunities for long-term investors. We learned that we need to master our fear to be able to enjoy the excitement from the EM underperformance. In this quarter, we saw opportunities in live streaming and industrial gas sectors.

 

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This report covers how to invest in an era where inflation is set to rise. First, we discuss four potential drivers of inflation, being quantitative tightening (surprisingly), higher production costs in China, higher oil prices, and food security issues. We then highlight what kind of companies should do well during a period of higher inflation and elaborate on BISI as an Indonesian specimen of such company. Finally, we provide an update on Indonesian agriculture, which showed signs of increased output.

 

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Inspired by Netflix series Blackmirror and the book Homo Deus by Yuval Noah Harari, this report is about how technology is accelerating change and making the world less predictable for investors. Looking at China we try to see hints of the future. What we see there is the rise of fintech start-ups disrupting the banking industry, and that access to (partners with) offline presence is key to online companies that sell physical goods. We also make an introduction to blockchain technology and revisit the role of precious metals in this era of cryptocurrencies.

 

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We discuss how China is advancing in the tech race and how two Chinese tech giants built their ecosystems. With the growing influence of the Chinese tech giants in SE Asian markets, we expect that local incumbents with a strong franchise and large footprint could be beneficiaries as either a partner or acquisition target of such tech ecosystems. We name Go-Jek as a potential first true Indonesian ecosystem. We also point to warning signs that innovation can drive the rise of destructive monopolies and that governments may step in to curb their power.

 

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We note how many companies in various industries are being killed-off by innovative tech businesses. We point to the rising fund flows to index ETFs and how this passive investment trend may create more market anomalies – such as divergence in valuation of big-cap vs small-cap firms – presenting opportunities to the true active investors. We point to brick-and-mortar businesses as potential beneficiaries of the O2O trend among online retailers. Lastly, we take inventory of what has been the impact of Indonesia’s agricultural reforms so far, which seems promising.

 

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