Macro

• Nothing has changed since our last BMM and the SET has underperformed as expected, declining further to 1,364.5 on 24-May versus 1,398.1 on 28-February.
• Here we suggest on what the SET should do to move forward, now that the SET is seeking a new President. 
• Here are the five to-do list for SET. Read or Not…

• On 27 May, Lee Bok-Hyun (Head of FSC) remarked that short selling of stocks in Korea could resume sometime in 1Q -4Q 2025. 
• The centralized  system to detect short selling of stocks in Korea on a live basis could be completed as early as 1Q 2025.
• The financial investment income tax is likely to be LAUNCHED in January 2025, which could negatively impact the local stock market. 

• The past week saw insights on Kalbe Farma (KLBF IJ), Grab Holdings (GRAB US), Philippine Stock Exchange (PSE PM), Best World International (BEST SP), and PropertyGuru (PGRU US).
• There were also macro insights on Malaysia, Singapore, and Indonesia plus insights on Citicore Renewable Energy IPO, Singapore banks and CrossASEAN Ground Zero on Food Panda, GoTo, and PropertyGuru.
• 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.

• Expectations of an “above-normal” monsoon in 2024 currently help to keep prices for commodities that are in large parts grown in India under control.

• That includes rice as well as sugar prices.

• According to the IRI’s latest ENSO forecast, La Niña becomes the most probable category in Aug-Oct, 2024 through Jan-Mar, 2025.

• The natural gas trade has started to move in recent weeks as the supply side looks constrained again.
• While the current situation doesn’t exactly mirror 2021, there are some similarities when we look more closely.
• Firstly, given the new supply outlook post-energy crisis, we believe there are no fundamental reasons for TTF natural gas to trade in its pre-crisis range.

• The Korea Exchange introduced the Corporate Value Up program on the KIND website. This is a voluntary system aimed at boosting the corporate value of listed Korean companies.
• Five key investment indicators for the 2,400+ listed Korean companies include PBR, PER, ROE, dividend payout, and dividend yield. The detailed data these indicators can be easily downloaded on excel. 
• Corporate Value Up program is a marathon, not a sprint. In this race, the runners (Korean companies) also need some water (such as improvements to dividend/corporate income tax policy).

• Beijing has announced a range of measures to stabilise China’s housing market, including dealing with unsold inventory through government purchases and boosting demand via lower mortgage downpayments.
• A return to the 2016-2020 boom in housing activity is unlikely, while an extended L-shaped period of healing appears to be a plausible baseline scenario.
• Improvement in homebuyers’ confidence will be crucial in achieving a market bottom, particularly lower concerns about the financial health of developers and non-delivery risks for new homes.   

• We are not overly concerned about the capitulation of a prominent Wall Street bear on an intermediate-term basis.
• Stock prices are advancing on stable interest rates and continued economic and earnings growth.
• However, the stock market is showing some signs of bullishness exhaustion and it’s vulnerable to a short-term pullback.

• Key data releases in the upcoming week include PMI data from China, CPI data from Tokyo and Australia, GDP data from India, and Industrial production data from Korea
• US core PCE inflation data forecasted to be 0.252% for April, indicating a possible slowdown in inflation
• Fed expected to delay easing cycle start until September, with recent data showing signs of slowing growth and consumer sector cracks

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• Market fears production return will impact prices, with Wood McKenzie predicting increase in June production
• Northeast, Permian, and Haynesville expected to see production rebound in the coming months
• Price rally in US market driven by short summer positions, but weather will play a key role in price movements, with heat expected in the coming days potentially mitigating any retracement

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

• It’s been a break-through week for Crypto bros in many ways.
• First, the SEC made a massive u-turn and approved the spot ETH ETF and then Donald Trump fully endorsed the crypto space in his speech at the Libertarian Party forum over the weekend.
• Crypto has broken through to K-street and on top of the obvious positive side-effects, a BTC or an ETH is now becoming a politicized asset.

• This week we look at the sale of Food Panda Taiwan to Uber and what is next for Southeast Asian operations, and we look at the management changes at GoTo.
• We also look at Lazada’s latest capital raising, aCommerce’s results, and PropertyGuru (PGRU US), which slipped back into the red in 1Q2024. 
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• KRX announced changes to KOSPI 200 and KOSDAQ 150 indices. In KOSPI 200, 6 were added and 6 were removed. In KOSDAQ 150, 13 were added and 13 were removed. 
• The six additions to KOSPI 200 had an average share price increase of 17.7% YTD. The six deletions had an average share price decline of 2.5% YTD.
• One trading idea post the announcement of the KOSPI 200 and KOSDAQ 150 rebalances is to highlight the potential underperformers (including 20 lowest market cap stocks in KOSPI200/KOSDAQ150 post rebalance). 

• Welcome to our weekly Portfolio Watch.
• We have had a decent week as our short bet on Utilities has started to deliver, while a continued long bet in technology (and ETH) has been the game in town in the risk asset space.
• The liquidity trajectory is slightly murky over the next 2-3 weeks before a major reversal from mid-June and onwards as the net issuance pace of T-bills will be ramped up again into July tapping liquidity from the ON RRP along the way.

• Malaysia’s CPI inflation in April 2024 remained at 1.8% year-on-year, against the consensus expectation of a rise to 1.9%.
• The current rate is just 0.1 percentage points lower than the one-year average.
• This confirms broader stability at a near-target inflation rate.

• Steno Research PCA model Using a Principal Component Analysis (PCA) model to analyze assets across financial markets provides a powerful framework for investment decisions.
• By mapping out the macro anatomy of a given asset, PCA identifies key trends and underlying patterns that influence price fluctuations and market dynamics.
• In this process, we have defined what we see as the most important global macro factors, ensuring that our analysis is comprehensive and targeted.

• UK inflation was lowered due to falling utility prices, prompting a general election on 4 July. However, the fall and Ofgem cap cut were smaller than expected, leading to a delay in BoE rate cut pricing.
• Indicators suggest that real growth may have peaked and PMIs are expected to seasonally retrace.
• The upcoming week is relatively quiet due to a bank holiday and half-term breaks. The highlight is Friday’s flash HICP inflation data, with a consensus forecast of 2.5%. Colombia is one of the few countries with upcoming monetary policy decisions.

• Indonesia’s President-elect Prabowo Subianto’s impact on the economy is uncertain, with a need for increased foreign direct investment and improved economic strategies.
• China’s steady economic recovery features strong exports and government efforts to stabilize the property market, with a growing demand for wealth management products and longer-term bonds.
• The US Federal Reserve is expected to maintain higher interest rates throughout 2024 due to strong employment and high inflation, contrasting with more favorable borrowing conditions in China.

• Copper markets have been on a tear in recent months and our assessment is that the positive sentiment started when Chinese copper stock data points started supporting the notion that China was “hoarding” Copper concentrate ahead of 1) a devaluation, 2) an overhaul of the electrical grid or 3) a power grab on supply chains for EVs, Solar Panels, Data centers and the likes.
• On top of this, we have seen how US officials have highlighted the option of creating a strategic reserve of Copper Cathode in the US, potentially in response to the stockpiling of refined copper seen in China (chart 1).
• Why is the Chinese copper stock not receding here? That is the question macro-managers and geopolitical pundits are asking themselves daily!

• First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins
• Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap
• Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror

• A weekly review of recent events impacting our investment themes
• Regulators in seemingly global coordination raise margin requirements for certain commodities 
• Federal Reserve talks tough but the ingredients for inflation already baked in the cake.

• Dan Taniba moved to India 25 years ago, transitioning from the startup and venture capital world to public equities in 2007
• Discussion covers challenges of venture capital, investing in India, and the case for public equities
• Conversation delves into India capital’s perspective on various aspects of investing, with examples and personal anecdotes interwoven throughout.

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• The PMIs probably peaked in the spring, with the US’s jump beyond its peers in May setting it up for a more substantial drop during the summer.
• Residual seasonality from the pandemic-corrupted adjustment factors will likely exaggerate the US payback as part of a softening global story.
• A summer downturn should support the re-emergence of dovish debate in the US, where we still expect a September cut. However, global policy only looks a little tight.

• Singapore’s CPI inflation rate in April 2024 remained steady at 2.7% year-on-year, despite predictions of a decrease to 2.6%.
• This inflation rate is still lower than the one-year average.
• The core inflation rate matched predictions, with no change from 3.1%.

• Freight rates are rising rapidly again, and no news (from Gaza) equals bad news for those hoping for lower goods-inflation.
• Rates on benchmark routes are up 15-20% this week taking the monthly change above 50%, meaning that we are on a path towards doubling freight rates every other month.
• The routes from Shanghai to Europe and the US are both impacted despite the main trigger of the rising freight rates being the combination of a lack of shipping passage through the Suez paired with rising shipping volumes.

• The Bank of Korea has maintained the Policy Rate at 3.5%, consistent with the economic consensus, reflecting caution due to increased upside risks to prices from improving growth and exchange rate volatility.
• The global economic environment, characterized by differentiated monetary policies, geopolitical risks, and volatility in financial markets, will significantly influence future monetary policy decisions.
• Domestically, robust export growth and stable employment have led to stronger-than-expected economic performance. Still, financial stability risks from household debt and real estate financing necessitate a tight monetary stance.

• Hello everyone, and welcome back to our weekly positioning watch.
• Markets have been enjoying the easier financial conditions imposed by a weaker than anticipated inflation print, although yields have found their way back to pre-CPI levels.
• The big ongoing theme in markets seems to be the renewed pressures in commodities, as real world demand for crucial metals like copper and nickel has spurred significant flows into broad commodities.

• There is a chance for a correction in the HK markets as latecomers to the party get nervous
• All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.
• Don’t get bucked off that bull by a short-term correction!

• Asian Decline:  China & HK hits record lows and remains a key underweight.  Australia and Japan near ownership lows and India becomes a key underweight.  Taiwan powers to record highs. 
• Americas Dominance: The United States remains the top allocation and largest country underweight.  Value funds increase underweight in the USA but Growth funds reduce.  Argentina rises at Brazil’s expense.
• EMEA Conviction Overweight: The UK, France, and the Netherlands maintain near-record overweights. France sees some declining interest, while Belgium, Norway, and Finland play diminishing role. MENA underweight grows.

• The RBNZ maintained its policy rate at 5.50%, in line with economic consensus, emphasizing the need for restrictive monetary policy to control inflation.
• Domestic inflation remains above the target range, driven by higher costs in non-tradable sectors; future rate decisions will depend on the pace of inflation reduction and adjustment of inflation expectations.
• Global economic growth remains subdued with variations among trading partners; cautious global monetary policy and labour market dynamics will significantly influence the RBNZ’s future interest rate trajectory.

• Sweden’s unemployment rate in April 2024 dropped by 0.3pp to 8.9%, partially reversing the rise from March.
• The rate remains above the one-year average.
• This indicates ongoing labour market challenges in Sweden.

• UK CPI inflation exceeded expectations again as it only slowed to 2.3% in April amid broad resilience in the core and services. The 3m-o-3m and 6m rates are back above 2%.
• Firms continue to agree and pass through wage increases inconsistent with a sustainable return to the target. UK inflation’s median monthly impulse remains stuck at 3%.
• We still see excessive underlying pressures persisting but recognise the BoE’s dovish bias. It may only postpone its premature rate cut until August on upside news.

• The Indian economy’s stellar run has further to go, boosted by impressive improvements in infrastructure, financial inclusion and the ease of doing business.
• Private investment, however, has not played a major role, and a declining FDI share undermines the idea that India will be a big winner from supply chain diversification.
• Major barriers, both in terms of India’s economic foundations and policy direction, need to be overcome if India is to attract the capital formation needed to power further growth.

• Welcome to this week’s Great Game after an eventful week in Geopolitics.
• This week we cover four topics: Iranian President Raisi dies in helicopter crash. Russia begins to make gains in Ukraine. Foiled coup in DR Congo. Israeli government coalition begins to crack
• Iranian President Ebrahim Raisi died in a helicopter crash in Northern Iran on Sunday

• Prime Minister Lawrence Wong enters office with a considerable amount of goodwill, but his in-tray will be full as the city-state enters a riskier global environment. 
• His cabinet reshuffle and early policy signals suggest a cautious policy agenda but which would feature greater support for the left behind.    
• Singapore is likely to continue playing a delicate balancing act between Washington and Beijing in foreign policy, while fortifying economic partnerships with its neighbours.

• Genetic resources / Cover Story: China set to ease controls on genetic resources to plug biotech innovation gap
• Iran /: Xi offers his condolences after lran’s President dies in helicopter crash
• Corruption /: China’s minister of agriculture investigated for corruption

• Pass-through of past rate hikes will continue as households refinance their mortgages. Quoted rates have more than doubled, but monthly payments will only rise by 33-39%.
• Substantial wage increases fully offset the rise over 5yrs, preserving the same share of income servicing debt. Refinancing 2yr loans is painful but a relatively rare experience.
• We are not concerned about the marginal tightening, which will be less in 2024 than in 2023. The debt burden has inflated away, making higher rates sustainably affordable.

• The Chinese equity trends have really been eye-catching over the past weeks and despite US efforts to flare-up the trade war via new tariffs, the trend has just continued.
• The new Chinese efforts to prop up the sentiment in the Real Estate space have so far been successful and it seems like an attempt that is a LOT more serious and sizy than what we have seen so far.
• We are no longer talking about trial balloons or minor twists.

• Let me start by dwelling on the fact that Macro generalists such as myself and Thorsten Slok of Apollo suddenly spend countless hours watching Copper trends.
• It is probably a red flag in itself, but it just seems like these developments are so INCREDIBLY important for global macro- and geopolitics these months.
• We have been all over the Chinese copper story in recent months and also traded it with good luck, but we have admittedly been wrong in our call for a weaker CNY (so far).

• EMEA Momentum: EMEA is experiencing positive momentum across multiple countries, with record investments in the MENA region, strong momentum in Greece, Turkey reversing long-term declines, and Poland nearing new ownership highs.
• Asian Stall: Significant underweight in India suggests caution among investors, China weights remain depressed, Indonesia maintains a strong consensus overweight.  Select ASEAN nations show signs of potential comeback.
• LATAM Overweights: Investor sentiment in LATAM remains bullish, with Brazil and Mexico seeing most funds positioned overweight. Argentina hits new highs in fund ownership driven by strong conviction in MercadoLibre.

• The past week saw insights on Sea Ltd (SE US), Grab (GRAB US), Malaysia Airports Holdings (MAHB MK), Bangkok Dusit Medical Services (BDMS TB), and Great Eastern Holdings (GE SP).
• There were also macro insights on Indonesia, following the country’s recent 1Q2024 GDP from Manu Bhaskaran plus some macro commentary on the Philippines.
• 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.

• Welcome to the weekly “The week at a glance” publication where we look at the key figures during the week ahead and how to trade them.
• The Fed will release their meeting minutes Wednesday, and it will be interesting to see whether they address the unfolding re-inflationary commodity bull run.
• The Fed is seemingly too honed in on arguments to cut rates, and have so-far more or less ignored the reflation-story.

• Following our initiation on Mount Gibson Iron (MGX AU) and Kumba Iron Ore (KIO SJ), recently we initiate coverage on Champion Iron (CIA AU), a pure play with Canadian assets.
• Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability. 
• Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty. 

• Fund Managers are Long Commodities and Hate Real Estate Fund managers positioning in commodities and energy was virtually unchanged compared to last month, according to the latest BofA survey.
• Compared to the longer term z-score fund managers remain quite long commodities and slightly short energy.
• While the amount of fund managers that are overweight commodities has risen, it’s still nothing compared to April 2022 – right after Russia invaded Ukraine.

• Patriot raising funds with ASX investors involved
• US ban on Russian enriched uranium imports effective by 2028
• Ten X threatens to cancel existing orders if US utilities don’t secure waivers within 60 days

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• A soft CPI report was just what Commodities needed to take the next leg higher
• Inflation expectations fat tailed. Commodities on the move, but we still need oil. China to export inflation to Europe?
• Despite last week’s dovish inflation print, we are not sure that it is disinflation that we need to be worried about, both in the short- and long term.
• Let’s discuss three reasons for that.

• The UK election campaign, which is expected to be lengthy, has informally begun.
• Labour has initiated this campaign by launching six ‘pledges’.
• The success of these pledges is contingent on an economic growth boost, necessitating immediate action from the incoming government.

• Sweden’s central bank joined Switzerland’s in cutting its policy rate due to falling inflation. The Bank of England and European Central Bank could follow in June, ahead of the Fed.
• Housing has been adversely impacted due to the global monetary tightening cycle, but capitulating to political pressure to ease the pain by prematurely easing policy could undermine central banks’ credibility.
• US political patience towards the Fed’s “higher for longer” policy approach and a stronger dollar could be tested as the presidential election approaches, thereby placing pressure on the Fed. 

• Stock prices have achieved fresh all-time highs and there is nothing more bullish than new highs.
• Stocks are rising because of strong technical positions,  progress on disinflation, and continuing signs of growth.
• These three factors are combining to be supportive of high stock prices ahead.

• Fed’s decision to taper its balance sheet runoff has provided support to long-term treasuries, particularly 10-year notes, signaling a potential rise in demand and a move towards yield curve normalization.
• Recent treasury auction results reflect a divergence in demand across maturities; long-term 10-year treasuries show weaker performance compared to strong showings in shorter 3-year and 5-year maturities.
• Data-Dependent Fed is likely to be influenced by improving economic indicators, supporting a normalization of the yield curve. During normalization, the 10Y-2Y spread is the superior instrument for exposure. 

• US Inflation and Interest Rates: The US CPI for April met expectations, triggering a stock rally, but detailed figures suggest inflation remains high, casting doubt on imminent Fed rate cuts.

• Japan’s Economic Contraction: Japan’s GDP contracted by -2% annualized in Q1, marking the third consecutive quarter without growth, yet interest rate hikes are still expected despite the economic downturn.

• Indonesia’s Steady Growth: Indonesia reported a consistent 5.1% GDP growth for Q1, in line with expectations and historical performance, though the economy remains below its potential growth rate compared to peers like India and the Philippines.

• Wheat prices are experiencing a significant resurgence due to extreme weather events and global supply-demand imbalances. Price is 22% higher over the past month. 
• May WASDE report indicates a positive outlook for global wheat production despite recent weather challenges, suggesting potential underestimations in global supply disruptions. 
• The anticipated shift to La Niña, coupled with historically low stocks-to-use ratios, threatens global wheat supply, heightening the potential for increased market volatility and price spikes.

• The final EA HICP inflation print confirmed the unsurprising stability at 2.4% in the April flash release. Energy price base effects will probably push it higher again in May.
• Underlying inflationary pressures have continued falling, with most statistical measures under 3% y-o-y with monthly impulses at or slightly below the ECB’s target.
• Like the consensus, we expect inflation to stay close to 2%. This outlook and subdued underlying pressures will likely ease the ECB’s decision to start cutting rates in June.

• UK wage data continues to surpass expectations, however, the Bank of England remains unfazed. There are concerns that premature rate cuts could lead to a financial bubble and policy reversal, akin to the situation in 1998. The UK does not benefit from the Euro Area’s disinflationary data.
• The upcoming week will be dominated by monetary policy speeches and rate decisions from the Reserve Bank of New Zealand, Indonesia, Korea, and Chile.
• UK inflation data is the macro highlight of the week, with expectations aligning with the current CPI consensus. The release of Thursday’s flash PMIs is also of significance.

• The April CPI release, though market friendly, did not change the overall message  
• The key message that inflation is still above the Fed’s goal and that the level of trend inflation is uncertain remains unchanged  
• Although market-based expectations for a rate cut improved after the CPI data, the odds of potential Fed action are unsettled   

• Tariffs /Caixin Explains: How will the U.S. import tariff hikes impact Chinese industries?
• Corruption /: Bribes, booze and books uncovered in veteran securities regulator’s corruption probe
• Micro Connect /: Charles Li’s Micro Connect rallies key employees to invest in ‘leading sheep’ program

• Hello everyone, and welcome to a short and sweet look at the current business cycle, what to expect, and which assets to buy ahead of what could be significant cyclical expansion.
• April data has in general been week in our models and nowcasts, which was reflected in the fairly dovish CPI report yesterday.
• However, May actitivity is picking up momentum again, and our Truck Demand indicator points to the business cycle picking up again from May onwards.

• Although the Fed paused rate hikes in July 2023, the dollar remained strong buoyed by the US economy outperforming other advanced economies.  
• A strong dollar usually benefits domestic businesses and small caps but hurts export-focused companies and large caps in the US.
• The current account deficits of emerging nations have been worsening due to the strong dollar and rising energy prices.

• Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year.
• We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.
• We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.

• The BSP maintained its policy rate at 6.5%, aligning with the consensus forecast, reflecting a balanced approach amid persistent inflationary pressures and moderated economic activity.
• While the inflation forecast for 2024 eased slightly to 3.8%, the forecast for 2025 increased to 3.7%, indicating persistent inflation risks from higher transport, food, electricity, and oil prices.
• The BSP’s restrictive policy stance aims to anchor inflation expectations and ensure price stability, with readiness to adjust policy settings as necessary, supported by government measures to address supply-side pressures.

• The unemployment rate in Australia rose to 4.05% in April 2024, exceeding the predicted 3.9% and marking the highest level since January.
• This increase occurred despite a significant employment boost of 38,500 in April.
• The rise in unemployment was due to a faster growth in the labour force.

• Rate cuts are rare outside of recessionary regimes. The 1998 experience seems a more similar historical example for the BoE than 1989 or 2005, when its policy diverged.
• CPI inflation will probably be less benign because wage growth is much higher, so sterling may not stay as stable. The speed of possible policy reversal would be critical.
• Loosening monetary conditions when the real economy doesn’t need it risks stimulating a financial bubble. Carefully hedged investments would help avoid the eventual bust.