Cachet's Insight 14/04/2020

As of 8 April, JACI Total return index delivered -0.32% for the week. More new issuance activity, in particular IG, was seen last week, and a further pick up in primary activities may be expected in the coming weeks. Japan declares a state of emergency in 7 administrative divisions and announced the largest ever stimulus package of USD 992 billion to support households and businesses.

Markets have edged up since the sell-off in March, though volatility remains as sentiments are still fragile. The COVID-19 situation continues to worsen as the number of cases reported worldwide now exceed 1.5 million and many economies remain in lockdown. 10Y UST yields widened 15 bps this week to 0.75% as of 8 April close. Investors should keep a close watch on developments of the coronavirus spread and oil price collapse, and their impact on market liquidity and issuer fundamentals, and maintain defensive posture, focus on liquidity through UST and cash.

Oil gained as the world's largest oil producers agreed to an output reduction. Investors should closely monitor the geopolitical events especially Saudi-Russia oil price war, US-China trade progress and Middle east tensions as global geopolitics remain volatile. Investors can look for attractive opportunities upon recent spread widening and may selectively add risk, with preference for shorter dated names.

US ISM non-manufacturing PMI in March dropped to 52.5 from 57.3 and is likely to not have captured the full extent of the virus impact. Similarly, Eurozone and UK Services PMI for March came in weaker than earlier flash estimates, suggesting a deep economic impact of COVID-19. India Services PMI came in below expectations and fell into contraction at 49.3 in March. As new issuance begins to pick up in the IG space, investors can participate selectively.

Hot Topic

China’s Consumer Price Index (CPI) went up by 4.3% year-on-year in March 2020, with an increase of 4.0% in urban areas and 5.3% in rural areas. The food prices went up by 18.3%, and the non-food prices increased by 0.7%. The prices of consumer goods went up by 6.2%, and prices of services grew by 1.1%.

People are rushing to buy basic necessities, fearful of how long they may be stuck in their homes, Xinhua reported last week.

Analysts at Nomura expect inflation to taper off a little in February, adding that the timing of the Lunar New Year holiday distorted the figures somewhat.

E-commerce giants Alibaba (9988.HK/BABA.US), (JD.US), and Meituan(3690.HK) each announced that they would monitor prices closely and remove overpriced items or ban merchants for price-gouging.

Chart of the week

Last week’s turn higher in gold prices hint that the bottom is approaching for stocks, not that it’s in yet -- at least on the basis of the 2008 template.

During the acute phase of the last U.S. recession’s stock sell-off, gold fell along with everything else, driven lower by an extreme demand for cash as investors faced margin calls and asset-liability liquidity mismatches. But gold turned higher first, forming a bottom in October 2008, while global equities did so the following March.

In fact, the bottom for equities didn’t come until gold’s volatility returned to pre-crisis levels -- this metric still hasn’t shown any sign of peaking. (And remember, there’s some evidence that gold price movements have a positive skew, so the break-neck rally may yet support vol in the immediate term.)

Of course, using the 2008 GFC as a template is flawed -- that crash was driven by economic conditions, this one is the result of a natural disaster. But the normalization of financial conditions should at least have some similarities.

Hot Stock

Numerous governments around the world are calling on us to “Stay at home”. Some countries have even imposed lockdowns. Millions of employees are working from home during the coronavirus crisis. This is how the world is trying to break the chain of infections and stop the spread of the coronavirus. Social distancing or, more accurately, physical distancing, is the order of the day. This requires digital infrastructure which now benefits those who already have solutions set up.

A boost for digitalization

Millions of employees are working from home. The enforced physical distancing radically changed the working habits of millions of people in just a few weeks. Out of necessity, communication between colleagues and supervisors are now being carried out using digital means.

The learning curve of the users when employing digital channels and communication aids is rising sharply. There is no doubt about it, this crisis is giving digitalization a major boost. Offers from tech companies are being actively used.

User numbers are soaring

Microsoft's Teams platform, for example, which enables digital cooperation and communication between employees and is competing with the independent provider Slack, reported a 37 percent growth to 44 million daily users within just one week.

Cisco System's Webex and Zoom are experiencing a boom in demand for video conferencing. The daily active users of Zoom founded nine years ago, increased 67 percent in the first three months of 2020. The app has been downloaded 50 million times from the Google play app Store over the past few weeks.

It goes without saying that the intensive use of digital platforms and services makes cyber security especially important. The more interactions that take place via digital channels, the better they need to be protected against attacks.

Home Office (WFH) Names

Investment Ideas

Extract yield from the market volatility by choosing Abott(ABT), Amazon(AMZN) and Google(GOOGL), top market-cap names in US listings, investors may feel safe to receive stock at 50% strike ,otherwise investors will receive a comfortable 7% coupon.

Product: Daily Range Accrual (DRA):

Asset Allocation

Asia Bond Market

Indonesia has the largest dollar issuance, and sales in the Asian bond market this week more than doubled, from about 2 billion last week to about 5.4 billion. Despite the increase in deaths, the pressure on the global credit market is still easing toll from the outbreak of coronavirus. Investors focus on whether Malaysia Petronas Next week brings the expected large dollar bonds, while other new transactions are rare pipeline.

Asian average spread Investment grade by last Thursday, U.S. dollar bonds have tightened by about 3 basis points, and it is expected that for the first time in eight weeks, weekly decline high yield propagation After the Fed announced measures to purchase certain US high-yield bonds, the region contracted 33 basis points last Thursday, the highest level in nearly two weeks. chain reaction in other regional markets; Asian junk bond premium fell 54 basis points a week.

Berkshire Hathaway set the price of 195.5-billion-yen (1.8 billion US dollars) bonds last Thursday, and September release Compared with the increase in the cost of issuing bonds, the spreads around the world have risen sharply due to the outbreak of coronavirus. Hainan Airlines Seeks Maturity Extension on 750 million Yuan Bond.


  • 1953.HK Rimbaco Group Global Limited (2020/04/14-04/17)

  • 9926.HK Akeso, Inc. (2020/04/14-04/17)

Newly Listed

  • 1942.HK MOG Holdings Limited (2020/04/15)

  • 3390.HK Tycoon Group Holdings Limited (2020/04/15)

  • 6063.HK Lotus Horizon Holdings Limited (2020/04/15)

Analyst Recommendation

  • Nomura gave its price target on China Tower Corp Ltd (0788.HK) to HK$2.35 a share and gave the buy rating.

  • MorningStar gave its price target on JPMorgan Chase & Co (JPM.US) to US$117.00 a share and gave the buy rating.

  • Goldman Sachs gave its price target on Johnson & Johnson (JNJ.US) to US$156.00 a share and gave the buy rating.

  • China Merchant Securities gave its price target on Toly Bread Co Ltd (603866.CH) to RMB$55.00 a share and gave the strong buy rating.

Global Indices

  • SSE Composite Index was down 0.33% last week.

  • Hang Seng Index was up 4.58% last week.

  • Dow Jones Industrial Average index was up 12.67% last week.

  • NASDAQ Composite Index was up 10.59% last week.

  • S&P 500 Index was up 12.10% last week.

Result Announcement


  • Quarter: 8265.HK China Trustful Group Ltd

  • Quarter: SRC.US Spire Inc

  • Quarter: GHG.US GreenTree Hospitality Group Ltd

  • Quarter: FAST.US Fastenal Co

  • Quarter: CONN.US Conn's Inc


  • Annual: 0921.HK Hisense Home Appliances Group Co Ltd

  • Annual: 1011.HK China NT Pharma Group Co Ltd

  • Quarter: JPM.US JPMorgan Chase & Co

  • Quarter: WFC.US Wells Fargo & Co

  • Quarter: JNJ.US Johnson & Johnson


  • Annual: 0631.HK Sany Heavy Equipment International Holdings Co Ltd

  • Annual: 0144.HK China Merchants Port Holdings Co Ltd

  • Quarter: C.US Citigroup Inc

  • Quarter: GS.US Goldman Sachs Group Inc/The

  • Quarter: BAC.US Bank of America Corp


  • Interim: 1765.HK Hope Education Group Co Ltd

  • Annual: 603866.CH Toly Bread Co Ltd

  • Quarter: STT.US State Street Corp

  • Quarter: ABT.US Abbott Laboratories

  • Quarter: ISRG.US Intuitive Surgical Inc


  • Annual: 0788.HK China Tower Corp Ltd

  • Annual: 2280.HK HC Group Inc

  • Annual: 600897.CH Xiamen International Airport Co Ltd

  • Annual: 603385.CH Huida Sanitary Ware Co Ltd

  • Quarter: SLB.US Schlumberger Ltd

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