Asia biased macro & technical analysis, Untying The Gordian Knot

Untying The Gordian Knot

Asia biased macro & technical analysis

A differentiated process with a primary focus on Asia. Technical Analysis as core and Macro drivers that could bring the view to fruition & changes that could make the idea fall apart. The objective is to be the best in class, hence corner shop.

Technical Analysis

Philadelphia Stock Exchange Semiconductor Index / Technical Analysis

Philadelphia Stock Exchange Semiconductor Index

<ul><li>Dr. Copper has the moniker of the global economy's health as the essential metal used in almost every fixed asset investment (FAI) and manufacturing.</li><li>It remains vital, although I think Nickel is now equally important in our modern-day lives as it is used in alloying, coatings, and batteries.</li><li>Iron ore is significant for China's FAI and much more critical than copper in its growth.</li></ul>

Dr. Copper has the moniker of the global economy's health as the essential metal used in almost every fixed asset investment (FAI) and manufacturing.It remains vital, although I think Nickel is now equally important in our modern-day lives as it is used in alloying, coatings, and batteries.Iron ore is significant for China's FAI and much more critical than copper in its growth.

Fixed Income and Currency Strategist

Gautam Jain, PhD, CFA

FX & Rates

<ul>
<li>The Turkish lira has become the worst-performing currency this year as the central bank is holding the policy rate steady despite sharply accelerating inflation, leading to highly negative real rates.</li>
<li>The lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means real rates become more negative, hurting the currency.</li>
<li>High inflation is also weighing on the economic outlook, which combined with worsening current account and fiscal deficits and depleting international reserves, is adding to the depreciation pressure.</li>
</ul>


The Turkish lira has become the worst-performing currency this year as the central bank is holding the policy rate steady despite sharply accelerating inflation, leading to highly negative real rates.
The lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means real rates become more negative, hurting the currency.
High inflation is also weighing on the economic outlook, which combined with worsening current account and fiscal deficits and depleting international reserves, is adding to the depreciation pressure.


Turkish Lira Takes the Helm as the Worst-Performing EM Currency

<ul>
<li>The dollar has strengthened significantly since Russia's invasion of Ukraine, which has led to a broad risk-off environment. Among EM currencies, the worst performer has been the Hungarian forint. </li>
<li>Adding to the economic woes resulting from Russia's aggression, the forint has suffered as the central bank has signaled less aggressive monetary tightening even with inflation hitting a two-decade high.</li>
<li>PM Orban has worsened the situation with his pre-election spending and by going against the EU by resisting further sanctions on Russia. Relatedly, funding from the EU is at risk.</li>
</ul>


The dollar has strengthened significantly since Russia's invasion of Ukraine, which has led to a broad risk-off environment. Among EM currencies, the worst performer has been the Hungarian forint. 
Adding to the economic woes resulting from Russia's aggression, the forint has suffered as the central bank has signaled less aggressive monetary tightening even with inflation hitting a two-decade high.
PM Orban has worsened the situation with his pre-election spending and by going against the EU by resisting further sanctions on Russia. Relatedly, funding from the EU is at risk.


Which EM Currency Has Suffered the Most Since Russia’s Invasion of Ukraine?

<ul>
<li>In line with my view that the dollar remains strong in the near term, one of the trading strategies that I have suggested is relative-value trades within EM currencies.</li>
<li>The volatility of EM currencies continues to rise, which in theory is supportive of relative-value trades as such environments are usually accompanied by wide dispersion among EM currencies. </li>
<li>However, I find that cross-correlations among EM currencies have risen, leading to a narrowing of dispersion between them, which means the environment is no longer supportive of relative-value trades.</li>
</ul>


In line with my view that the dollar remains strong in the near term, one of the trading strategies that I have suggested is relative-value trades within EM currencies.
The volatility of EM currencies continues to rise, which in theory is supportive of relative-value trades as such environments are usually accompanied by wide dispersion among EM currencies. 
However, I find that cross-correlations among EM currencies have risen, leading to a narrowing of dispersion between them, which means the environment is no longer supportive of relative-value trades.


Is the Environment Supportive of EM FX Relative-Value Trades?

<ul>
<li>In line with my view of the dollar remains strong in the near term, one of the trading strategies that I have suggested hedging an EMFX portfolio with the euro.</li>
<li>I show that the hedge has performed well by breaking down and comparing the return of the hedged portfolio with the unhedged version.</li>
<li>For me to recommend taking off the euro hedge, we would need to see the volatility of US rates and the probability of recession falling. </li>
</ul>


In line with my view of the dollar remains strong in the near term, one of the trading strategies that I have suggested hedging an EMFX portfolio with the euro.
I show that the hedge has performed well by breaking down and comparing the return of the hedged portfolio with the unhedged version.
For me to recommend taking off the euro hedge, we would need to see the volatility of US rates and the probability of recession falling. 


How Well Is Hedging EM Currencies with the Euro Working?

Taiwan

The New Taiwan dollar is the official currency of Taiwan

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Dr. Semiconductor

Dr. Copper has the moniker of the global economy's health as the essential metal used in almost every fixed asset investment (FAI) and...

Untying The Gordian Knot

Turkish Lira Takes the Helm as the Worst-Performing EM Currency

The Turkish lira is effectively in a vicious cycle: weakening currency adds to inflationary pressures, which with the central bank on hold means...

Gautam Jain, PhD, CFA

Which EM Currency Has Suffered the Most Since Russia’s Invasion of Ukraine?

Adding to the economic woes from Russia's aggression, the Hungarian forint has suffered as the central bank has signaled less aggressive monetary...

Gautam Jain, PhD, CFA

Is the Environment Supportive of EM FX Relative-Value Trades?

The rise in the volatility of EM currencies should in theory be supportive of relative-value trades, but of late, the dispersion between them is...

Gautam Jain, PhD, CFA

How Well Is Hedging EM Currencies with the Euro Working?

I go over the performance of one of the trading strategies that I have suggested in line with my view of the dollar remaining strong in the near...

Gautam Jain, PhD, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)