Investors Turn More Bearish...Investing in India...Japan's Boom in Renewables

[Goldman Sachs]( [BRIEFINGS] August 12, 2019 Marquee QuickPoll: Bears, Brexit and Tariffs Trade tensions, Brexit and bearish positioning were key issues for approximately 1,100 Goldman Sachs clients who participated in the firm’s latest QuickPoll, which ran on the Securities Division’s Marquee platform on August 1-2. Key findings include: Return of the Bears. Investors’ view on risk assets turned more bearish this month with nearly 60% of respondents describing their view as bearish or somewhat bearish and nearly a quarter of them saying they plan to decrease their risk levels in portfolios. While August has typically been a time of declining liquidity and light trading, 42% of those surveyed say they expect the S&P 500 Stock Index to end the month lower. No-Deal Brexit? Clients cited Brexit developments as their top concern in August. A large risk premium seems to be priced in UK-related assets with, at one extreme, 54% of respondents citing a “no deal” Brexit as their base case scenario for November 1st and, at the other end, less than 1% expecting Article 50 to be revoked, which would in effect cancel Brexit. Tariffs and Trade. On the flip side, the increasingly confrontational rhetoric on trade took the market by surprise. The percentage of clients who now expect a further deterioration in talks between the US and China more than doubled to 32% this month from July, explaining the outsized moves of the last few trading sessions. For more information about QuickPoll and Marquee, [reach out to the team](mailto:gs-marquee-sales@ny.email.gs.com?subject=QuickPoll%20and%20Marquee). SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Marquee%20QuickPoll%3A%20Bears%2C%20Brexit%20and%20Tariffs&body=) Podcast: What’s Driving GDP Growth – and Investor Appetite – in India? Above (L to R): Jake Siewert and Prachi Mishra of Goldman Sachs Foreign investors’ appetite for Indian assets has swelled this year, buoyed by Prime Minister Narendra Modi’s decisive general election victory announced in May, says Goldman Sachs’ chief India economist Prachi Mishra in the latest episode of our Exchanges at Goldman Sachs podcast. Given the government’s strong majority in Parliament, asset managers are anticipating sweeping structural reforms in areas like land use and labor to boost growth. India has already attracted net capital inflows of about $13 billion so far this year – which contrasts with net outflows of $11 billion last year -- and Mishra expects that trend to continue. While the Central Bank of India recently cut interest rates to stimulate the economy, the country’s longer-term growth is underpinned by changing demographics. According to Mishra, average GDP growth in India over this decade has been about 7 percent a year, and three-quarters of that is attributable to consumption. “India has a large and growing middle class with increasing aspirations and this middle class wants to consume and save less,” says Mishra. [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Podcast%3A%20What%E2%80%99s%20Driving%20GDP%20Growth%20%E2%80%93%20and%20Investor%20Appetite%20%E2%80%93%20in%20India%3F&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fpodcasts%2Fepisodes%2F08-05-2019-prachi-mishra.html) Talks at GS with Cecile Richards Above (L to R): Colleen Foster of Goldman Sachs and Cecile Richards of Supermajority The growing number of women entering public office is actively shaping the conversation on topics that have been too long regarded as “soft” issues, according to Cecile Richards, co-founder of Supermajority, a nonpartisan organization that aims to involve more women in politics. “I think it's exciting that issues like equal pay, or the fact that we don't have affordable childcare in America, or issues that have kind of been relegated to being women's issues are now finally getting up on the main stage, because they're fundamental economic issues for everybody,” said Richards during a recent episode of Talks at GS. “One of the things I hope we think about is not just who could we elect if you continue to have the same envelope of voters, but who could you elect if young people were really inspired to vote, if people who've been historically disenfranchised were inspired to vote, because then all the calculations are off.” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Talks%20at%20GS%20with%20Cecile%20Richards&body=https%3A%2F%2Fwww.gs.com%2Finsights%2Ftalks-at-gs%2Fcecile-richards.html) Briefly…on Japan’s Boom in Renewables after Fukushima Eight years after the Fukushima nuclear disaster, Japan has diversified its energy supply through its investment in renewables. We sat down with Toru Inoue in Goldman Sachs’ Investment Banking Division to discuss the implications for investors and the energy landscape. Tell us a little about the renewables space in Japan. Toru Inoue: Japan’s clean-energy capacity has grown exponentially in the wake of the 2011 earthquake and tsunami, which triggered a nuclear accident in Fukushima prefecture. The accident highlighted the need for an alternative to nuclear energy and jump-started renewables in a way that was previously unimaginable. As nuclear power plants nationwide were taken offline, the country set out to aggressively increase the proportion of renewables in its energy mix by introducing generous feed-in tariffs – or long-term contracts with renewable energy producers that are designed to accelerate investment. Startup ventures and developers globally piled in alongside major Japanese corporations to help the country build capacity quickly. Solar sector growth has been particularly strong, with a nearly 70-fold increase in installed capacity, from 550 megawatts in 2011 -- the year before the new incentives went into effect -- to almost 38 gigawatts at the end of 2017, according to data compiled by Bloomberg NEF. How has this growth in renewables been financed? Toru Inoue: Since banks have traditionally dominated the corporate-finance sector in Japan, a company’s ability to access credit often depended on having friendly relationships with local lenders. This has been true even in the infrastructure sector, despite the fact that infrastructure projects often require financing over a term longer than most banks are prepared to lend. As a result, these projects require frequent refinancing, creating additional costs and complexity since interest rates reset with each refinancing. The renewables boom, however, has been a catalyst for change. Overseas developers struggled to secure financing without local connections or corporate guarantees since Japanese banks weren’t sure how to price loans for these products. “Non-recourse” debt – which is secured only with collateral – and green project bonds in particular emerged as potential solutions. A common means of financing infrastructure in North America and Europe, this debt is repaid purely from the cash flows generated by a given project. In this way, renewables have unlocked a long-awaited opportunity to connect infrastructure investment with capital market investors in Japan. Who is investing in this non-recourse debt? Toru Inoue: Japanese life insurers were the first to favor this new asset class as the long-term nature of infrastructure financing dovetails with these investors’ need to fund large portfolios of long-term liabilities comprised of their customers’ life insurance policies. Interestingly, Japanese regional banks have also become purchasers, which reflects their appetite for stable, yen-denominated yields amid Japan’s zero-interest rate environment and sluggish loan demand. As renewable-energy plants tend to be located outside of the big cities, being able to support a local enterprise is another draw for these regional lenders. More recently, pension funds have also started to show interest. They initially took a wait-and-see attitude because they needed a certain level of liquidity. Now, given that five years have passed since Japan Renewable Energy – one of Japan’s largest renewable energy companies -- issued Japan’s first green-project bond, the market is sufficiently liquid and deep enough for these influential investors to consider making an entry. Read more on the development of [renewables in Japan](. SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Briefly%E2%80%A6on%20Japan%E2%80%99s%20Boom%20in%20Renewables%20after%20Fukushima&body=) Goldman Sachs Media Highlights CNN - August 10 Sachs CEO doesn't expect a recession soon]( (3:41) Des Moines Register - August 8 [Small business course helping Iowans weigh next steps extended to another year]( CNBC - August 8 [Santelli Exchange: The impact of volatility on markets]( (2:27) The Information - August 8 [As IPO Changes Loom, Goldman Sachs Tops The Information Banker Survey]( Reuters - August 6 [Apple, Goldman Sachs start issuing Apple Cards to consumers]( BRIEFINGS will return September 3, 2019. [Subscribe]( [Unsubscribe]( The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. 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