Macro

• On 25 July, the South Korean government announced that it plans to lower highest bracket inheritance taxes from 50% to 40%. 
• This is a significant move since excessively high inheritance taxes has been one of the key reasons for poor corporate governance in Korea. 
• A reduction in the highest bracket inheritance taxes from 50% to 40-45% is likely sometime in 4Q24 to 2025 which should help to improve corporate governance in Korea.

• Welcome to our weekly EM editorial, where we touch upon the most tradeable topics in liquid EM markets and how they interact with main themes in G10 markets.
• The overwhelming story centers around the position squaring party that has been triggered by the reversal of the carry trade in USDJPY.
• The real rate spread is no longer trending upwards, leaving the fair value lower than 150 now that the spec long positioning in USD versus JPY is getting squeezed.

• US crude inventories fell for the fourth straight week, with a 3.7 mb drawdown. Gasoline stocks dropped by 5.6 mb, the largest decline since March.
• As of 19/Jul, US natural gas inventories were up 8.4% YoY and 16.4% above the 5-year seasonal average.
• TotalEnergies’ Q2 revenue fell 5.2% YoY, missing estimates by 7.3%. EPS dropped 7.5% YoY and missed estimates by 7.2%.

• Welcome back to our weekly positioning update.
• It’s hard not to touch upon the recent moves in equities once again, with markets trying to digest whether it was the beginning of a broader outflow from large cap / tech into small cap stocks and indices like Russell 2000, or if it was simply a hiccup due to extended positioning and a profound fear that the cutting cycle was already fully priced in, leaving tiny room for extensive gains in large cap stocks, which were up >20% YTD before the CPI report.
• We provide 3 reasons as to why it was not a rotation below.

• The inflation rate for the first half of July stood at 0.71%, driven by increases in the prices of agricultural and energy products.
• However, core inflation continued its downward trend in annual terms, approaching 4.0%.
• This reinforces the expectation that the Board of Governors of Banxico will opt for a 25 basis points cut in the reference rate, in a decision that we anticipate will be divided.

• The Norwegian rates case is always interesting when we see significant moves in NOK, foreign rates, and energy prices.
• Norges Bank is in contrast to other central banks extremely structured/mechanical around their rate decisions and the upcoming policy bias can hence be tracked with a decent precision in real time.
• Here is a brief summary of the current status of the (semi)-mechanical adjustments to the rate path from June, given recent development.

• Take aways: As liquidity and growth improve so will equity markets.
• The RTY rotation story is not all rosy. Momentum suggests that we are not as concentrated in equity markets as we think
• Three weeks ago, when the dovish CPI print landed, the immediate reaction was a sell-off in large caps followed by an influx into small caps, with RTY rising >10% over the week following the release.

• In this brief update on the business cycle, we will present a comprehensive overview of the current economic situation in Sweden.
• The Riksbank initiated its first rate cut in May, and we anticipate additional cuts throughout the autumn.
• This makes Sweden an ideal “live-studio” for observing the effects of early rate cuts on the economic cycle.

• Insurers / In Depth: Electric cars are draining the batteries of China’s insurers
• Plenum /Plenum Explained: China to combat cross-border corruption, improve constitutional review
• Personnel /: Communist Party creates financial graft-busting committee

• Credit spreads have traded in a tight range despite various market events
• High yield spreads have tightened throughout the month
• Macro factors like growth, inflation, and Fed policies are more important for credit markets than the political environment

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Headline CPI rose 1.33%MoM in Jun’24, because of a 3.17%MoM spike in food CPI. Consequently, headline CPI rose 5.08%YoY, driven by food inflation of 9.36%YoY.
• Although core inflation was at 3.1%YoY in May-Jun’24, India targets headline inflation, not core. Vegetable inflation (+29.3%YoY) remained the main culprit pushing up headline inflation. Fiscal solutions will take time.  
• Headline CPI inflation is likely to stay close to 5%YoY in Jul-Sep’24 (vs earlier expectations of it abating below 4%YoY). The first rate cut is therefore unlikely before Dec’24. 

• The lack of specific stimulus from China’s 3rd plenary meeting and minor rate cuts led to a 2.5% decline in iron ore prices, highlighting market disappointment.
• Despite a 13.7% MoM increase in iron ore imports, market concerns arise from stockpile accumulation rather than domestic consumption, suggesting potential future import slowdown.
• SGX Iron Ore options showed a bearish trend with a weekly volume put/call ratio of 2.1 and notable put option increases for September and October expiries, indicating market pessimism.

• Business executives blame regulations for hindering innovation and making products more expensive
• Supreme Court overturned Chevron deference, giving businesses more power to challenge regulations
• The end of Chevron rule may lead to confusion and legal challenges for businesses in regulated industries

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• The PMIs proved surprisingly resilient in the flash releases for July, especially in the US where its already high level pushed up further rather than converge down to its peers.
• Residual seasonality should be depressing the activity data, as appears to have occurred in the EA. Other US data softened, including the ISM, leaving the PMI as an outlier.
• Central banks seem set to conclude that policy is still tight amid broader softening signals. Indeed, we still expect the Fed to start a short rate-cutting cycle in September.

• Southern Copper (SCCO US) posted a 6% EBITDA beat and a 17% EPS beat buoyed by higher pricing of copper and by-products
• Sales/EBITDA/Profit increased by 35.5%/61%/72% YoY. It also guided a positive outlook for copper, highlighting a tightening of the physical market boding well for future quarters. 
• The board paid a 1.20 USD/share quarterly dividend in 50:50 scrip/cash. It will probably continue this practice, considering the elevated capex/ debt repayment of 500 mn USD in April 2025.

• The FY25 Budget projects a fiscal deficit of 4.9% of GDP (vs previous projection of 5.1%), but the 12mma of the fiscal deficit was already 4.8% of GDP by May’24. 
• With real GDP likely to grow 8.5% this year, direct tax revenue should considerably exceed official projections. Government’s lower borrowing requirement should crowd-in private investment, further fuelling RGDP. 
• Hikes in LTCG and STT (on derivatives) are near-term negatives for stocks. But fiscal prudence, employment generation and agricultural productivity enhancements will create a virtuous circle in the medium-term. 

• Whoa, yet another completely historical weekend in the US Presidential Race.
• President Biden is out of contention in what was perhaps the most predictable thing in a completely unpredictable race so far.
• Now, as we discussed  yesterday, Kamala Harris is entering the race as an underdog, but a Trump landslide in November is far from a foregone conclusion.

• The likelihood of imminent rate cuts has increased due to recent cooling in core CPI, driving anticipatory normalization of the yield curve.
• According to FedWatch, expected rate cuts totaling 100 basis points by March 2025 are driven by cooling inflation, improving economic data, and the increasing fiscal burden of U.S. debt.
• Historical data shows yield spread between 2Y and 10Y treasuries recovered just before and after rate cuts, signaling investor expectations front-running monetary easing. 

• Plenum /: Plenum Explained: Beijing outlines reforms to boost foreign trade and promote the private sector
• U.S. /Cover Story: U.S. presidential race upended by Biden’s withdrawal, assassination attempt on Trump
• Corruption /: China’s top prosecutors order arrest of former vice chair of Hunan legislature

• The Financial Secretary has forecast a budget deficit of HKD 101.6 billion for the 2023-24 fiscal year, almost double its original estimate of HKD 54.4 billion 28 Feb 2024 (KPMG)
• Although Hong Kong is undergoing the fourth deficit in five years and can be preamble to Crisis, fiscal reserve, estimated HKD 733.2 billion, remain a strong backbone to prevent crisis. 
• The turning point from healthy to crisis is still to be observed, depending on if the government would scale back fiscal deficit in its next 5-year budgets.

• Ever since the Hang Seng touches new high of 32,601 in February 2018, it has trended down  to 17,417 on latest trading day.
• Whether it can touch new high again depending on the revision of Mainland authorities’ policy towards big private enterprises and China’s future growth rate
• Local drivers such as Hong Kong GDP growth also play surprisingly important role in the performance of Hang Seng Index.

• Donald Trump’s running mate, JD Vance, discussed economic policy during his nomination speech.
• Further investigation provides some insight into what these policies might look like in practice.
• However, understanding the specifics of a potential ‘Trump Trade’ policy remains difficult.

• US oil and gas rig count increased by two to 586 for the week ending 19/Jul, rising for the second time in the last three weeks.  
• US oil rig count fell by 1 to 477, declining for the second straight week. Gas rigs rose by 3 to 103, after falling by one the week prior.
• The EIA has increased its US crude production forecasts in its latest STEO report, raising them by 0.8% YoY for 2024 and 0.4% YoY for 2025. 

• Welcome to the “Week at a Glance,” where we examine the key releases and themes for the week ahead through the lens of macro trading.
• China has reduced the 7-day repo rate by 10 basis points, following up with a cut in the loan prime rate.
• This move mirrors the strategy from June 13, 2023.

• Gold has signalled a false breakout and is likely to tread water for a couple of months.
• More strength ahead for the Japanese Yen and weakness for the Japanese markets?
• Copper signals further lows to come unless it rallies soon

• The Third Plenum of the Chinese Communist Party ended last Thursday and emphasise supporting private enterprises to take the lead in participating in major national technology projects.
• The resolution emphasises on small-scale private enterprises and offer nothing for big tech enterprises except vague, questionable tax reform.
• Therefore, as the resolution confines only to small-scale private enterprises, big techs like Tencent and Alibaba are hardly benefited.

• Japan’s markets have again failed to break to new highs creating a potential for a double-top pattern.
• Trump’s policies which target lower interest rates and a weaker dollar will put pressure on Japan’s markets as can be seen from the high correlation between the JPY and TPX.
• Sectors such as trading companies, autos and semiconductors could see the most pressure under a Trump presidency.

• Malaysia’s strong GDP growth in 2Q24 was driven by a broad-based recovery across major economic sectors, with manufacturing making a turnaround after a difficult 2023. 
• The labour market, domestic demand, and external sector indicators also bode well for the country’s growth prospects for the remainder of the year. 
• Pending the release of the confirmed GDP figures, we expect full-year growth of around 4.8%, up 25bps from our previous view. 

• Take aways: China will flood markets with copper supply
• Copper har decoupled from macro fundamentals according to our PCA tool
• It’s a tuck or war between positioning and fundamentals in metals. Crude tumbling despite all time highs in global flight data and crowded congestion

• EM assets are being compared to other asset classes ahead of the US elections, with a general presumption that EM will be more negatively impacted by a Trump presidency.
• EM currencies have experienced some risk premium in the lead up to the elections, particularly in Latin America, but overall EM markets have not shown significant underperformance due to US election concerns.
• Valuation models that consider fundamental drivers do not indicate any significant risk premium being priced into EM assets for the US elections at this time.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• The betting odds on a Trump victory in November have risen substantially, but the markets haven’t fully discounted such an outcome.
• Investors who want to position for Trump 2.0 should seek long inflation exposure (long gold/short bonds) and short globalization (long domestic producers/short transportation and logistics).
• Notwithstanding the growth outlook, equity returns may be more challenging as Trump 2.0 will see the S&P 500 at more lofty multiples than the P/E ratio of Trump 1.0.

• The media are universal in their belief that a second Trump presidency will produce higher inflation. Fed Chairman Powell would serve the remaining segment of his current term if elected. 
• A further reduction in corporation tax and making the 2017 personal income tax cuts permanent are key fiscal policy goals of President Trump if elected for a second term.
• Import substitution will raise inflation pressures unless there is supply-side transformation in the economy. Protectionism will reduce capital flows to the detriment of long-term interest rates and dollar exchange rate.

• The stock market recently underwent a Great Rotation. Leadership violently rotated from growth to value, and from NASDAQ stocks to small-cap stocks. 
• The reversal was accompanied by a sudden downdraft in the S&P 500. Is this the start of a correction?
• Even though breadth indicators are improving, which is bullish, we would not be so quick to buy any dip that appears.

• 24 days after his catastrophic debate, and 29 days before the Democratic convention, President Biden dropped out of the presidential race and endorsed VP Kamala Harris as the Democratic nominee. 
• The latest polls showed Trump leading Biden by 3pp in the average of polls, including big leads in all seven battleground states. Harris is marginally closer in match-ups against Trump. 
• Trump-Vance have momentum after RNC. To be competitive, Harris (if endorsed by DNC) would need to pick an exciting, moderate candidate (eg, PA governor Shapiro) and hew to the centre.

• John Greenwood, the Father of the Hong Kong Linked Exchange Rate System, has formed a model for debt crisis. And that framework is predicting monetary contraction in the U.S. economy.
• As leveraging goes down and the monetary conditions contract, the market can experience a sharp correction in stage 3.
• Since the monetary conditions in the U.S. easily find its way to Hong Kong through the Linked Exchange Rate System, There might be a rough outlook ahead for Hong Kong.

• Copper retreated by more than 5% due to China’s weak print on TSF. The plenum’s lack of concrete stimulus measures also did not help matters. 
• Check out our initiation, Copper Primer: What We Like About Copper And What to Play, where we provide our long-term bullish outlook on copper. 
• Also, see our initiation, Southern Copper: In a League of Its Own. The company reported a stellar Q2 FY24, beating the street estimates by 20%.

• Iron ore has remained rangebound between 95 and 130 USD/ton for three years, with cost-curve support kicking in on the higher cost curve at around 100 USD/ton.
• Last week, quarterly operational updates released were for Vale, BHP, Kumba, and Mount Gibson. Except for BHP, all companies were disappointed due to provisional pricing impacts and mix changes.
• Read our recent production preview Fortescue Metals Group (FMG AU): High Dividend Yield of 9%, What to Expect From Q4 FY24, to be declared on the 25th of July. 

• Today, I am going to address three main topics of concern for investors given the current conflicting signals from the US economy.
• These are the key questions I will address, and I will summarize both the pros and cons of each viewpoint, including my own bottom line: Is liquidity no longer improving, but rather at risk of weakening in the coming months? Is the economy accelerating rather than slowing? Is the commodity complex heavily undervalued or overvalued?
• The equity rotation paired with the sharp sell-off in Tech has had me thinking, and we therefore need to litmus-test every corner of our current thesis. Follow along below.

• Shift to the right in favor of Trump accelerated after assassination attempt
• Republican momentum challenging expectations for a divided Congress
• Gold and oil likely to benefit under GOP control, with potential increase in demand and production respectively

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Korea Value-Up index is finally expected to be launched in September 2024 which is likely to include at least 100 companies in KOSPI and KOSDAQ.
• There are expectations that Korea’s Value Up index could resemble JPX Prime 150 index which is a Japanese version of the value up index launched last year.
• We provide 70 stocks in Korea that could be included in the Korea Value Up index. These 70 stocks could outperform the market in the next several months.

• Productivity has declined 0.95%YoY on average over the latest 8 quarters, with Singapore’s economic growth depending entirely on rather rapid 4.85%YoY average growth in employment. 
• Jun’24’s 6.7%YoY decline in real NODX indicates real GDP growth for Q2CY24 will be revised down to 2.5%YoY (from the 2.9% advance estimate); strong re-exports also suggest manufacturing’s declining competitiveness. 
• Fiscal policy has returned to its contractionary norm, with this year’s surplus likely to be over 1% of GDP, reining-in RGDP growth to 2% for 2024 (and 1.3%YoY for H2CY24). 

• Good Afternoon from Europe. It’s incredibly hard for me not to begin this weekly EM blog by emphasizing how bearish I am becoming on Copper, given the current developments out of China.
• Chinese trends are diverging rapidly both internally and externally—the export sectors are performing well, while internal consumption growth is far from firing on all cylinders.
• Ahead of the conclusion of the CCP Plenum, we noted that China Daily posted several upbeat stories on the GDP outlook following the release of a slightly disappointing Q2 report.

• The manufacturing survey shows that the stagnation in manufacturing production in May stems from a combination of slowing external demand and stagnation in domestic demand.
• At the sectoral level, there is great heterogeneity in the capacity used.
• Last week, the National Institute of Statistics and Geography (INEGI) informed that manufacturing production stagnated in May (0.01% MoM) and accumulated a contraction of -1.8% so far this year (https://bit.ly/MXDAILYESP_2024_07_12).

• US stock market is diverged in the past week, as DOW breaks new time height and NASDAQ retreats. S&P500 declines likewise.
• Hong Kong Hang Seng is down but is still within our forecast range of 16000 level to 18000 level.
• We suffer huge loss as our long call bets on Nvidia, Apple, Microsoft went sour. We are still keeping the positions in the hope that the trades will turn around.

• Once again, Mexican stocks had a negative day in line with the pessimistic sentiment observed in the North American stock markets.
• In particular, the IPC index fell 1.31% to trade slightly above 53 thousand units. At the end of the session, 27 of the 35 companies included in the main local index had falls in their share prices
• The mining company Industrias Peñoles (PE&OLES * -4.65%) and the financial company Regional (R A -4.43%) had the largest share price declines at the end of the session. 

• UK economic data was mostly as expected, but increased services inflation tipped the balance towards a hawkish stance. The ECB maintained flexibility but is likely to cut rates in September, and the BoE may need to reassess previous data to avoid a rate cut in August.
• The Bank of Canada may respond to rising unemployment and low inflation with a likely consecutive rate cut, rather than adhering to the Fed’s hold position.
• Key data to watch include the flash PMIs, US GDP for Q2, and core PCE inflation for June.

• In face of the recent speeches by several FOMC members, we are changing or non-consensus view of no rate cut this year to one rate cut in September
• Under rate cuts, several asset classes such as real estate stocks, gold, and other safe haven currencies will rise.
• However, we still believe there will not be continuous series of rate cuts in the remainder of this year such that various asset classes listed above will only rise modestly. 

• To assess US equity direction before rate cut, we must first forecast the next rate cut. Our house forecasts that there will only be one rate cut during 2024.
• We believe S&P500, after hitting all-time high this week is due a 10% correction until the rate cut in September. Rate cuts are essential for S&P500 to tread new high. 
• But we believe the rate cut is going to be one-off as the labor market remains bullish and inflation still comes off a tad higher than the Fed target.

• US crude oil inventories fell by 4.9 million barrels in the week ending 12/Jul, marking the third consecutive weekly decline.
• As of 12/Jul, US natural gas inventories were up 8.4% YoY and 16.9% above the 5-year seasonal average.
• UBS expects Chevron’s Q2 earnings to fall short of expectations due to LNG project downtime and lower international refining margins.

• Good evening from Europe! The quarterly refunding announcement is due on July 29, and it always holds the potential to spook duration markets and liquidity betas.
• The release of the updated budget projections from the CBO in June garnered attention as they raised their budget deficit projections by around $400 billion compared to the winter projections in February.
• Not all of these outlays are newsworthy for the US Treasury.

• BYD / In Depth: Tesla’s Chinese rival hits accelerator on smart driving
• Fraud /: Fugitive Chinese billionaire Guo Wengui convicted in United States
• Bonuses /: Mainland financial firms’ Hong Kong units tell staff to repay bonuses

• My hybrid G3 nowcasting framework harnesses varied inputs from US, Euro Area (both through June) and Japan (mostly through May)
• Although 2Q 2024 headline GDP growth for the G3 overall is tracking better, 3Q might be soggier   
• The individual nowcasts imply prospective upside risk for Japan in the near-term, and perhaps emerging downside risk for the US and Euro Area in the offing

• The ECB unanimously held its policy rates in July, as widely expected after June’s cut, and refused to pre-commit to any outcome in September.
• Its policy will depend on the data in the weeks and months ahead, with some policymakers likely to firm up their positions before September’s highlighted meeting.
• We still expect another cut in September, encouraged by the Fed and BoE also easing policy. However, their premature steps could swiftly require reversals in 2025.

• The UK unemployment rate remained at 4.4% in May as the H1 increases are grinding to a halt in a similar pattern to 2023. Underlying changes are also becoming more neutral.
• Weekly vacancies data have rebounded to March levels while redundancies remain low and monthly pay growth is consistently annualising above 5%.
• The dovish BoE can welcome a renewed slowing in the headline wage growth rate despite current levels remaining inconsistent with the inflation target.

• The ECB kept key interest rates unchanged in July, following June’s rate cuts, to manage persistent inflationary pressures while supporting economic recovery.
• Future interest rate decisions will be data-driven and flexible, avoiding pre-commitments to specific rate paths and based on ongoing assessments of inflation, economic data, and monetary policy transmission.
• Economic and financial risks, including geopolitical tensions and global trade dynamics, will influence the ECB’s policy adjustments to ensure the stability and effectiveness of monetary policy transmission.

• We’ve received loads of feedback from our clients regarding our Trump versus Biden basket.
• As a result, we will provide a detailed breakdown of both baskets and explain the rationale behind each.
• We are updating the baskets regularly based on the political proposals of the two candidates.

• We cover the Trump assassination attempt in other spaces, so in this we’ll focus on the political fallout and touch upon other relevant topics, including the Chinese Policy Plenary.
• Firstly some thought on Trump picking J.D. Vance as his running mate.
• As a staunch Trump supporter, Vance represents a more grassroots, anti-establishment figure compared to others like Nikki Haley.

• Recent changes in Canada’s M&A rules have restricted critical metal companies from selling to Chinese investors
• Chinese investors have played a key role in funding the exploration and development of copper porphyries, which are vital for global production
• The uncertainty caused by these rules may lead companies to relocate outside of Canada, potentially harming the country’s mining industry and economy

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• In the short-term, meaningful policy reforms needed out of the Third Plenum
• Chinese data continues to be lacklustre as expected while markets tread water
• What can we expect from the Third Plenum to galvanise the next stage

• Greetings from Copenhagen! Alas, it seems like there are quite a few bears out there who have been infected with recession vibes, thus the doctor has ordered some medicine for the patients which we’ll gladly provide to the likes of Jan Hatzius et. al..
• Firstly, the Dallas Fed’s Weekly Economic Index is at its highest since early 2022 and far far away from anything that smells like recession.
• Real GDP y/y should stay above 2% and the WEI is currently hinting at 3% real GDP growth.

• Hello everyone, and welcome back to our weekly positioning watch.
• The debates about whether the US is heading for a recession are still touring the charts, as the labor market and other economic data soften back towards pre-pandemic levels.
• However, while some might be uncomfortable watching the US economy slow more than anticipated, the lack of ringing alarm bells and Powell’s recent victory lap on inflation have greenlighted markets to price in a soft landing as a 95-99% probability event by now when looking across positioning data.

• The final EA inflation print confirmed the flash at 2.52% in June, with services refusing to slow from 4.1%. Median inflation rates broadly rebounded, stabilising the 3mma.
• Divergences between member states’ underlying pressures are balancing slightly above a target-consistent pace. The ECB is unlikely to be concerned about that.
• Stability in the ECB’s medium-term forecast seems sufficient for it to cut again in September. Tight labour markets may yet renew pressures and pause cuts later.

• UK inflation was broadly unchanged and close to expectations in June, although resilient services price strength was offset by temporary weakness in goods again.
• Seasonal goods discounting is unsustainable disinflation. Underlying pressures remain too high, and their persistence keeps raising consensus forecasts.
• An August BoE rate cut remains most likely, albeit less than before. It can point to the headline rate matching its forecast and lean on its expectation that things will improve.

• Bank Indonesia kept its policy at 6.25%, aligning with market expectations to ensure inflation control and Rupiah stabilization amid ongoing global financial uncertainties.
• Future interest rate decisions will be influenced by persistent global financial market uncertainty, particularly the US monetary policy direction, and strong domestic economic growth driven by robust consumption and investment.
• Ensuring Rupiah stability and maintaining inflation within the 2.5 ± 1% target range remain central to Bank Indonesia’s strategy, supported by a mix of pro-market monetary operations, macroprudential policies, and digitalization efforts to foster economic resilience and growth.

• China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7%.
• That’s slower than the 5.3% year-on-year GDP increase in the first quarter, and misses the 5.1% expectation.
• Retail sales for June missed expectations, while industrial production figures beat.

• Following the iron ore rally at the start of the month, prices have corrected sharply lower owing to downbeat economic data and an inventory buildup.
• Option activity over the past week was notably skewed towards put options suggesting a negative sentiment. Weekly options volume was sharply lower WoW.
• Recent bearish sentiment has been accompanied by a decline in IV. Outcome from the plenary meeting is likely to reignite volatility in the coming weeks.

• China State Construction International and Sinopec Engineering have short term reversal patterns indicating profit taking from recent advances.
• China Resources Cement reverses downtrend with volume indicating some near term gains after reporting that 1st half profit was under pressure.
• Yum China continues to show downward pressure given the increasing competition in the retail food segment, while Nongfu Spring collapses on news about the safety of its products.

• Average active fund returns of 6.75% match the iShares Asia Ex-Japan benchmark, with 50.8% of funds outperforming.
• Technology Sector Again Drives Returns: Taiwan Technology contributes the most to absolute returns, aided by China & HK and India positions.
• Key Stock Overweights Pay Off: Overweights in SK Hynix, Tencent Holdings and HDFC Bank helped offset the drag from Cash holdings over the quarter.

• Average active fund returns of 3.91% fail to beat the iShares MSCI EM ETF return of 4.39%, with 54% of funds underperforming.
• Consensus overweights in Brazil, Mexico and Indonesia proved costly, though Materials underweights, Saudi underweights and strong stock selection in South Korea stemmed relative losses.
• Tencent and TSMC underweights costly: Both stocks are among the top underweights among active GEM investors. Strong performance this quarter contributed to underperformance.

• Korean stock market ranked #1 in net inflow of foreign funds among emerging Asian countries so far in 2024.
• There has been a net inflow of US$19.4 billion into Korea this year, more than the inflow into China (US$4.9 billion), Taiwan (US$3.6 billion), and India (US$2.0 billion) combined. 
• Three major factors impacting higher foreign capital inflow into Korean stock market this year included Corporate Value Up program, turnaround of DRAM/semiconductor sector, and political uncertainties in China and India. 

• Goods export growth of 4.6%YoY was outpaced by import growth of 7.8%YoY (Apr-Jun’24), widening the merchandise deficit by 13.5%YoY. This was partly offset by the Apr-May24 services surplus widening 16.5%YoY. 
• In Q4FY24 (Jan-Mar’24), India had a current account surplus (0.6% of GDP) as the merchandise deficit of USD50.3bn was offset by a USD42.7bn services surplus and USD13.9bn incomes surplus.
• With oil prices remaining subdued (USD75-90/bbl), goods exports and the services surplus expanding, India is likely to report a current account surplus of 0.5% of GDP in FY25. 

• The BoE’s gilt holdings and sales are creating fiscal costs that are unnecessarily large. Restoring the proper separation between the BoE, HMT, and DMO would help.
• Swapping the BoE’s gilt portfolio for T-Bills with the Debt Management Account would break undesirable linkages and avoid crystalising mark-to-market losses to the deficit.
• Borrowing would be about £10bn per year less, creating welcome fiscal space and the political victory of clearing up a costly Conservative mess of institutions Labour set up.

• Strong American harvest driving downward pressure on Wheat, likely to offset reductions in EU and Russia.
• Corn saw modest recovery, driven by muted ending stocks, below trade estimate, but the harvest is going to be the third largest ever.
• US soybean production remains muted, in line with the Acreage report, and led to moderate recovery in early trading on Friday, but bearish sentiment persists.

• This week we look at the changing dynamics behind Southeast Asia’s e-commerce landscape as TikTok effectively moves into second place but the dynamics can change rapidly as it restructures Tokopedia. 
• We also look at Vinfast as it delays its US factory launch until 2028 versus 2025 due to slower EV sales and we examine the Grab & Trans-cab situation. 
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• Happy Sunday from Copenhagen after the atrocious assassination attempt in Pennsylvania late Saturday.
• Trump was apparently struck by some fragments but managed to raise his fist and greet his supporters in a strong show of defiance as he was escorted off the stage.
• This incident will undoubtedly dominate the campaign in the coming days and weeks, transforming his appearance at the upcoming Republican Convention into a near-messianic event.

• Morning from Europe! Remember that we release our “Week at a glance” publication instead of the “Something for your Espresso” every Monday before lunch-time.
• Our aim is to digest the release calendar in an actionable way and assess the risk/reward around the macro themes in the context of the economic release calendar.
• This week, we will focus on the US consumer (Retail Sales), UK inflation (CPI) and the EUR rates (ECB meeting).

• The past week saw Insights on Delfi Ltd (DELFI SP), Second Chance Properties (SCE SP), Jollibee Foods (JFC PM, and Vietcombank.    
• There were also macro insights on Indonesia from both Prasenjit K. Basu and Manu Bhaskaran on Indonesia together with commentary on Malaysia macro and Lippo Karawaci‘s Fitch Downgrade.
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

• The Opec secretariat has made a bullish July forecast for oil demand, which deviates from the industry’s near-consensus.
• The industry’s consensus is more aligned with the International Energy Agency’s assessment.
• Given this, the recent increase in the price of Brent crude should be approached with caution.

• European financial markets have been remarkably calm in the wake of political upheaval, particularly in France. Continued weak potential GDP growth lays the foundations for capital migration to the US.
• US political turbulence has not unnerved financial markets, despite inflationary implications of President Trump’s agenda. High retail investor participation in the rally in US equities is sending a warning signal.
• US equities are priced to perfection in absolute valuation and relative to inflation. Secular valuations appear rich relative to history, suggesting a period of consolidation would be a welcome development. 

• Due 16 July, US June retail sale is expected to see a weak end to Q2 from US retail sales, with a 0.6% decline, and a 0.3% decline ex autos.
• Industry data suggests a significant dip in auto sales though trend in autos continues to have no clear direction. Gasoline prices look set to restrain sales values.
• June retail sales seems set to convey an end to economic prosperity and will be sending signal of an upcoming economic down turn.

• Takeaways: Copper diverging from its fundamentals – we continue to hold a bearish outlook as prices and positioning appear disconnected from macro variables
• Inventories in the US are building
• Shipping lanes are easing, and our Trump basket gives you the green light to continue in crude et. al. 

• US oil and gas rig count fell by 1 to 584 for the week ending 12/Jul, after rising by 4 the previous week. 
• US oil rig count fell by 1 to 478, indicating 59 fewer oil rigs as compared to the same week last year. It is at its lowest since December 2021.
• Despite a decline in the US oil rig count, US crude oil production matched the all-time high production of 13.3m bpd for the week ending 5/Jul, according to the EIA.

• BHP and Lundin rumored to be considering a joint bid for Filo Mining in the Vicuna district, an emerging copper super district in Chile and Argentina.
• Lundin Mining owns the most advanced project, Jose Maria, in the region which is permitted and fid ready.
• Argentina now has a supportive business regime, making it an optimal time for development in the region. Lundin Group retains a 33% stake in Filo while BHP owns a 6% stake.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Even if it is premature to proclaim the death of manufacturing-led growth, the strategy that drove the success of the East Asian miracles may no longer be easily replicated. 
• The services sector has several advantages such as a large degree of labour absorption and continued momentum in international trade. But there are other limitations. 
• There is little need to place all of a country’s eggs in a single industry’s basket; the menu of policies that are beneficial to both is not a short one.