Strategy Note /

Tellimer's top picks: May 2022

  • We present five of our best current calls across economies, sectors, stocks and bonds for May

  • This month's picks: Sell GoTo, Buy Uzbekistan bonds, China – the highest ranked equity market, lithium to power upwards

  • We also caution that banks in Pakistan, Ghana, Egypt and India have highest exposure to indebted sovereigns

Tellimer's top picks: May 2022
Tellimer Research
1 May 2022
Published byTellimer Research

1. Sell Indonesian tech company GoTo

We initiated coverage on GoTo in the past week, with a Sell recommendation.

The ASEAN tech company is headquartered in Indonesia and is the product of the merger between Gojek and Tokopedia in 2021. It provides e-commerce, ride-sharing and fintech services.

We think the stock is overvalued. GoTo is a cash-burning machine and is likely to run out of road in the three-way ASEAN tech slugfest with Grab and Sea Ltd.

Net cash position (US$bn): GoTo versus competitors

See the full report for our detailed valuation, operating metrics and financial forecasts for GoTo.

Report: GoTo initiation – Running out of cash

2. Buy Uzbekistan

We have a Buy recommendation on UZBEK '31 bonds.

UZBEK '31s z-spread (bps)

Given strong reserves coverage, we suspect Uzbekistan sovereign bonds should be less sensitive to external financing conditions than others.

An investor concern may be that Uzbekistan gets drawn into Moscow's sphere of influence, as Putin seeks to re-create the Soviet bloc, either willingly (like the Presidents of Belarus or Kazakhstan) or unwillingly (like Georgia or Moldova). However, this seems less likely to us under Uzbekistan's reform-minded president.

Report: Uzbekistan – IMF paints positive picture despite headwinds

3. China – the highest-ranked equity market

China is the highest-ranked out of around 50 emerging equity markets in our new Tellimer EM Country Index.

Abridged Tellimer EM Country Index (US and Asia)

Report: A new index for ranking the investability of emerging markets

4. Lithium prices to power upwards

Our machine learning model forecasts the price of lithium carbonate to steadily rise to 675,000 yuan/tonne over the next 12 months.

Rising energy prices have catalysed the transition away from fossil fuels, adding to the booming demand for electric vehicles – which are powered by lithium batteries.

Half of all new vehicles will be electric by 2030

Report: Soaring lithium prices could cripple sustainability plans

5. EM banks with the greatest exposure to indebted sovereigns: Pakistan, Ghana, Egypt and India

Domestic sovereign debt now typically accounts for c17% of EM bank assets and 1.6x their regulatory tier 1 capital.

These levels are at all-time highs, meaning that the sovereign-bank nexus – where the financial health of banks and countries is intertwined – is much stronger than in the past.

Tighter financial conditions are now placing pressure on emerging market government finances, which in turn could put banks at risk.

Our research highlights banks in Pakistan, Egypt and Ghana as having the largest exposures to the most indebted sovereigns.

EM banks' sovereign debt exposure versus sovereign indebtedness

Report: The EM banks with the largest indebted sovereign exposures as ‘doom loop’ looms