Macro

In today’s briefing:

In A Bitcoin Frenzy; Long BTC Miners & Short BTC
UK: Growing Through Pay Blip
CX Daily: Record River of Graft Leads to Death Penalty for One-Time Water Official
USD CPI Review – A slightly hawkish surprise
US Rates Nugget: More stagflation confusion from the NFIB

In A Bitcoin Frenzy; Long BTC Miners & Short BTC

BTC’s phenomenal +57% surge since September is propelled by key forces—ETF euphoria, a robust “Risk On” asset bull run, regulatory clarity, and the imminent BTC halving.
While BTC maintains resilience, mining firms, exemplified by Valkyrie Bitcoin Miners ETF (WGMI), have seen a 30% underperformance over the last 3 months.
Mining firms that have scaled up hash-rate over the past year and built up BTC holdings to support outperformance to BTC. However, ample cash reserves are vital.

UK: Growing Through Pay Blip

By Phil Rush

Adjusted UK labour market data report the unemployment rate at 4.2% again, with activity levels continuing to trend higher. Lower weekly job vacancies look seasonal.
Wages retreated in October after September’s surge, shocking expectations. Without revisions, which are consistently higher, growth may settle near 6% in the new year.
Wage settlements are resilient while the unemployment rate has stopped rising, suggesting the cyclical slowdown is ending prematurely, sustaining hawkish pressures.

CX Daily: Record River of Graft Leads to Death Penalty for One-Time Water Official

Corruption / Cover Story: Record river of graft leads to death penalty for one-time water official
Telecom fraud /: Chinese police issue wanted notices on 10 Myanmar cybercrime ring leaders
Macro /: China’s top leadership pledges stronger focus on growth next year

USD CPI Review – A slightly hawkish surprise

Conclusions up front: A hawkish CPI surprise, especially in the details
The FOMC can construct both a dovish and a hawkish narrative based on the data
Several indicators point to a re-acceleration in underlying price pressures

US Rates Nugget: More stagflation confusion from the NFIB

As per usual, we get some of the most interesting early evidence on inflation already ahead of the monthly CPI report with the release of the NFIB survey conducted among mostly service-based SMEs.
Price plans accelerated again over the past month, which is a headfake pattern that we have seen ahead of earlier recessions for example in 2007/2008, but…
Paired with rising compensation plans, it makes for an odd and almost stagflationary cocktail.

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Dec 12

Daily Brief Macro: 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 1 and more

In today’s briefing:

2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 1
Rate Cuts: How Much? How Quick? How Real?
Great Game – Climate, Chips and Corruption!
The Week That Was in ASEAN@Smartkarma – GoTo & TikTok, BliBli’s Omnichannel, and Malaysian Banks
Positioning Watch – Are markets ready for Powell Wednesday?
Energy Cable #49: Ouch …..
USD-flation Watch: Not a disinflationary home run as in Europe

2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 1

By Rikki Malik

Risk reward favours this shift in allocation between these markets.
Japan will suffer from base effects on economic data and earnings this year as JPY move reverses.
Year end Positioning could provide attractive entry points for both legs.

Rate Cuts: How Much? How Quick? How Real?

By Srinidhi Raghavendra

Western central bankers have made it amply clear that rate cuts are not a given. They remain data dependent. And the data is sending mixed signals.
Meanwhile markets are opting for selective hearing and are pricing sharp rate cuts soon. Inflation is hard to tackle in general. The last mile gets nasty. Are markets ready?
Base effects have contributed to the rapid slowdown in inflation. When these base effects fade, the false sense of safety could crater leading to a very different inflation narrative.

Great Game – Climate, Chips and Corruption!

By Mikkel Rosenvold

Welcome to your weekly geopolitical update from the Great Game! With a relatively quiet week in global affairs, we have time to dive into a couple of issues that we’ve been looking at over the past weeks.
But let’s start at the main stage with the current COP28 summit that’s about to wrap up.
Will “majlis” sit-downs save the climate?

The Week That Was in ASEAN@Smartkarma – GoTo & TikTok, BliBli’s Omnichannel, and Malaysian Banks

By Angus Mackintosh

The past week saw insights on GoTo Gojek Tokopedia (GOTO IJ), Global Digital Niaga (BELI IJ), Malaysian Banks, Indonesian banks, and Indonesian Cigarettes.
There was also a macro insight looking at Malaysia’s economy, and an update on nickel stocks including Trimegah Bangun Persada (NCKL IJ) and Merdeka Battery Materials (MBMA IJ).
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.

Positioning Watch – Are markets ready for Powell Wednesday?

With Powell taking the stage on Wednesday, likely turning more hawkish in his rhetoric after weeks of financial conditions easing, we have had a look at if we are starting to see signs of markets reversing their ultra-bullish positioning.
In general markets have taken a bit of a breather from a positioning perspective after the historically bullish sentiment seen throughout November, and people are now starting to hedge their longs based on recent option volumes, with the aggregate US intraday put-call ratio now back solidly above 1.
Looks like traders are starting to hedge their equity bets going into the central bank bonanza this week.

Energy Cable #49: Ouch …..

By Ulrik Simmelholt

Main take aways: Long utilities in Europe. OPEC looks like losing control with the market. SPR purchases could floor Oil markets here.
Last week wasn’t the best in terms of our trades in the energy space after an otherwise strong year in our tactical bets placed within the sector.
We have been stopped out of our natural gas trade and our crude oil long is now in the red.

USD-flation Watch: Not a disinflationary home run as in Europe

We see US inflation printing roughly 0.15%-points above consensus tomorrow driven by upside surprises in apparel prices, medical care services and used car prices.
This remains in sharp contrast to trends in Europe where inflation softens faster than expected.
The upside will be seen in both headline -and core inflation.

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Dec 11

Daily Brief Macro: Steno Signals #77 – Oil Demand Is ALL TIME HIGH and more

In today’s briefing:

Steno Signals #77 – Oil Demand Is ALL TIME HIGH
The Animal Spirits Are Still Alive
What Happens After the Momentum Chase?
Navigating the Fog: Modelling Illiquid Assets in Real-Time
Overdue Reality Check Required? Aggressive Fed Policy Rate Cut Expectations Underpin Risky Assets
China Aggregate Finance Under the Hood

Steno Signals #77 – Oil Demand Is ALL TIME HIGH

Happy Sunday and welcome to our weekly flagship editorial from Steno Research.
It has been an incredibly odd week in the economic calendar and our thesis of a strong year-end for USD key figures has so far been proven right, which especially after the NFP report re-ignited the USD and front-end USD rates, which has been our bet against especially European peers.
Most recent economic key figures from the US have not surprised positively to the extent we saw through the autumn, while Chinese key figures have woken up and made a decent comeback relative to expectations over the past months.

The Animal Spirits Are Still Alive

The combination of strong price momentum, supportive market positioning, positive liquidity, and intermarket factors argue for a rally into year-end.
However, the CPI report and FOMC meeting next week could derail the bullish scenario and become the source of market volatility.
Historically, positive year-end seasonality in a pre-election year starts about mid-month, which begins just after the FOMC meeting.

What Happens After the Momentum Chase?

The market appears to be setting up for a beta and momentum price melt-up into year-end. The question is what happens afterwards.
Top-Down macro indicators are supportive of the soft landing scenario.
From a technical perspective, the bulls need to broaden market leadership and allow the market to sustainably advance.

Navigating the Fog: Modelling Illiquid Assets in Real-Time

By Albert Maass

Advanced modelling of illiquid assets offers real-time valuation estimates, enhancing decision-making in multi-asset portfolios with elements like Private Equity LP interests.
These techniques go beyond traditional analyses, correlating assets with macroeconomic factors for a comprehensive view of portfolio performance.
Implementation includes adjusting the latest Net Asset Value for market dynamics, with back-testing ensuring continual accuracy and relevance.

Overdue Reality Check Required? Aggressive Fed Policy Rate Cut Expectations Underpin Risky Assets

By Said Desaque

Fed Chairman Powell has been more balanced with his policy outlook rhetoric. The recent easing of financial conditions makes it more difficult to become dovish about imminent policy rate reductions.
The dovish tilt in Fed policy rate expectations has been very bullish for US equities, although the impact on currencies has been somewhat more nuanced, particularly against the euro.
Gold prices are suggesting that easier Fed policy could produce the return of rising inflation. Ideally, the Fed would like to sit on the side lines next year.

China Aggregate Finance Under the Hood

By Untying The Gordian Knot

Xi-Biden Summit: Geopolitical Tensions Easing, But Underlying Issues Remain
The Xi-Biden summit has led to a perception of easing geopolitical tensions and a conscious effort to de-escalate the situation.
Topics included talks on fentanyl, military matters, and artificial intelligence.

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Dec 09

Daily Brief Macro: Bumper Brazil Harvest To Depress Near-Term Sugar Price Despite Indian Export & Blending Restrictions and more

In today’s briefing:

Bumper Brazil Harvest To Depress Near-Term Sugar Price Despite Indian Export & Blending Restrictions
Yen Soars past 200d DMA Clocking a Record Daily Move on BoJ Governor Remarks
Inflation Watch: Another Deflation Shocker from Europe? UK, Sweden and Norway Are Under the Loop!
Mint Macro Roundup: Dissecting The Recent Jobs Data
The Weekly Market Monitor – Oil & China Bear Markets, but Liquidity Saves the Day!
CX Daily: China’s Internet Content Kings Struggle to Keep Users Paying

Bumper Brazil Harvest To Depress Near-Term Sugar Price Despite Indian Export & Blending Restrictions

India is top global sugar producer & exporter. India ordered mills to halt ethanol blending on domestic shortage concerns in addition to export restrictions imposed earlier this year.
Sugar prices soared to a 12 year high in late Oct. Despite India’s order on blending, global sugar prices have tanked 13% since start of Dec.
Brazil’s bumper sugar crop will depress near term prices. However, intensifying effects of El Niño could send sugar prices soaring during later part of next year.

Yen Soars past 200d DMA Clocking a Record Daily Move on BoJ Governor Remarks

By Srinidhi Raghavendra

The Yen clocked its biggest one-day move since 12/Jan. It soared to 141.601 to the USD breaching past its 200d DMA before settling at 144.092.
Overnight-Indexed swaps show a 45% (up from 3.5% chance just 2-days back) chance that the BOJ would end its negative interest rates policy at this month’s meeting.
Leveraged funds have ramped up their net-short positioning in the yen, the most since April 2022, according to CFTC data. Liquidations might have triggered sharp moves.

Inflation Watch: Another Deflation Shocker from Europe? UK, Sweden and Norway Are Under the Loop!

Ahead of a couple of big inflation weeks, we look into the details of the UK, Swedish, and Norwegian CPI here.
Despite some signs of rapidly rising electricity prices, the overall picture will likely look soft and especially recreation and culture prices have the potential to surprise markedly on the downside.
Conclusions up front:– The UK CPI is likely to look very soft.

Mint Macro Roundup: Dissecting The Recent Jobs Data

Nonfarm payrolls showed 199k jobs added, higher than October and above expectations; Unemployment fell to 3.7% but wage growth strong at 4% YoY.
Earlier this week, JOLTs survey showed job opening slide 6.7% to 8.73 million, lowest in 2.5 years with jobs declining across industries.
Job market observed to be loosening and on-track to achieving soft-landing. going forward, it’s vital to watch for job losses.

The Weekly Market Monitor – Oil & China Bear Markets, but Liquidity Saves the Day!

Despite the USD declining and OPEC pledging more production cuts, oil has entered a Bear Market. We discuss the disadvantages of being a (price) cartel.
Will the Bank of Japan finally end its extremely loose monetary policy? While investors are betting it will happen as soon as mid-December, the latest inflation data and previous statements of central bank Governor Ueda suggest otherwise.
Next to Federal Reserve hopium, the unanimous embracing of the soft landing, liquidity has boosted equities and other liquidity-driven asset classes like Bitcoin and Gold.

CX Daily: China’s Internet Content Kings Struggle to Keep Users Paying

Internet / In Depth: China’s internet content kings struggle to keep users paying
Hong Kong /: Hong Kong remains key in finance, innovation, city’s leader says
AMEX /: American Express doubles down for majority stake in China bank card clearing business

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Dec 08

Daily Brief Macro: What Do They Actually Mean by Inflation? and more

In today’s briefing:

What Do They Actually Mean by Inflation?
EM by EM #33: Early Hikers = Early Steepeners?
Macro Regime Indicator: What Technically Rising Liquidity Means for Your Portfolio
EIA Watch: ALL TIME HIGH Oil demand, but so what?
CX Daily: China-Latin America Ties Deepen Amid Boom in Cross-Border Auto Trade, E-Commerce
Greek Economy – Quarterly Macro Note
When Rising Real Rates Are Not Dovish

What Do They Actually Mean by Inflation?

Not too long ago, the Fed Chairman forced us to focus on a very specific inflation figure, the 3-month annualized Core Services ex-Housing CPI. But not anymore.
Perhaps this is because of the fact that this measure has risen for four consecutive months and reached 4.9% in October, significantly higher than both headline and core inflation.
Another inflation metric has faded into the background. Powell’s inflation measure to justify a 0.75% hike back in 2022 rose to its highest level in 15 years in November!

EM by EM #33: Early Hikers = Early Steepeners?

By Emil Moller

The early hikers club comprising e.g. Brazil and Mexico could be a decent steepener trade from here as long as FX vol remains relatively muted
Receiving rates in Brazil, Poland or India amidst this global bond party makes sense
As markets have outpaced central banks and vanilla economists in pricing in future rate cuts while eagerly purchasing bonds, the question that arises is how to effectively navigate this transition from a period of rapid buying to an anticipated rate cutting cycle in the emerging markets.

Macro Regime Indicator: What Technically Rising Liquidity Means for Your Portfolio

By Elias Lisberg Glistrup

With the turn of the calendar, it’s once again time for our monthly assessment of the current and upcoming macroeconomic circumstances.
To carry out this evaluation, we utilize two critical tools: our Macro Regime Indicator framework and the interactive Structural Asset Allocation Model.
These integrated resources enable us to establish a portfolio allocation that is empirically supported, taking into account the prevailing macroeconomic conditions and the driving factors within financial markets.

EIA Watch: ALL TIME HIGH Oil demand, but so what?

Welcome to our weekly EIA watch, where we look at the implied energy demand numbers in the US economy and pair them with trends on the supply side.
Price action remains abysmal in US energy markets (if you are bullish that is), and we are admittedly caught wrong-footed here after otherwise strong price action ahead of the OPEC meeting last week.
Conclusions up front:– Weekly numbers on Oil demand reached an ALL TIME HIGH in week 48– Nat Gas flows trends were largely reversed towards the end of the month and now look normal– Congestion is still rising compared to usual seasonal patterns meaning that the transportation fuel demand is strong– Unless the EIA numbers are 100% out of whack with the reality, the US demand side is NOT behind the weakness in energy space. Let’s have a look at the details.

CX Daily: China-Latin America Ties Deepen Amid Boom in Cross-Border Auto Trade, E-Commerce

By VRS (Valuation & Research Specialists)

China-Latin America / In Depth: China-Latin America ties deepen amid boom in cross-border auto trade, e-commerce
Social security /: China to allow social security fund to buy domestic pension products, futures
Citic /: China picks new party chief for Citic Group

Greek Economy – Quarterly Macro Note

In 2022, Greece experienced a significant rise in its GDP growth, as Real GDP (2015 Prices) reached €190.65 billion, reflecting a 5.56% increase compared to the previous year.
Progressing onward, the OECD, IMF, and EU have forecasted average growth rates of 2.34% for 2023 and 1.92% for 2024.
Despite steady increases in nominal values of Public Debt, as indicated by both ELSTAT data and IMF-EU Commission projections, there holds a favorable aspect in the declining Debt-to-GDP ratio based on projections.

When Rising Real Rates Are Not Dovish

By Phil Rush

Some unrealistically academic policymakers worry that rising real rates from disinflation will excessively tighten monetary conditions. We firmly believe they are mistaken.
Cost shocks eroded disposable income, but this real income and expenditure squeeze is fading. The income channel is far more important than the interest rate one.
Uncertain policymakers should rely more on the data than misapplied theories. Resilient demand and persistent inflation would tell them to wait longer before cutting.

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Dec 07

Daily Brief Macro: The Dollar Smile Theory Explains USD Strength Heading Into Final Central Bank Meetings For 2023 and more

In today’s briefing:

The Dollar Smile Theory Explains USD Strength Heading Into Final Central Bank Meetings For 2023
Taking the Bitcoin Halvings Out of Isolation
5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates
CX Daily: Will Hong Kong’s Tax Tweaks End Its Real Estate Slump?
UK Private Debt Looking Less Burdensome

The Dollar Smile Theory Explains USD Strength Heading Into Final Central Bank Meetings For 2023

DXY is up 1% in Dec after a 3.7% decline in Nov. USD strengthening indicates portfolio positioning & dollar hedging going into final policy meetings for the year.
The US Fed is expected to hold rates steady. Markets anticipate rate cuts as early as March 2024. USD will remain strong backed by bullish equities & policy divergence.
Fed officials signal peak rates for now but remain hawkish with clear warnings against premature rate cut bets by markets.

Taking the Bitcoin Halvings Out of Isolation

Even though the number of observations is limited, we believe looking at the broader picture surrounding previous Bitcoin halvings provides valuable insights.
For example, all previous halvings occurred during equity bull markets, modest GDP growth, mild inflation, and easy or easier Federal Reserve monetary policy. Similar circumstances are on the horizon.
Declining Bitcoin supply, because of the halving and the rise of long-term investors, combined with the approval of US spot Bitcoin ETFs will likely become this halving’s catalyst.

5 Things We Watch – Liquidity, Bond positioning, Oil, Consumer spending & Rates

We’ve spent the past 2 days in London, meeting clients and hedge funds, and there was a lot of support for the idea/notion that SOFR-Fed Funds spreads reveal that USD Liquidity is not ample and that the Fed will have to end QT early.
The spread widening in SOFR – Fed Funds, caught a lot of attention over the past few days and it is interesting how swiftly the market jumps to the conclusion that it will lead to the Fed panic-ending QT already in Dec or January.
Why are SOFR – Fed Funds spreads widening and how do we deal with it?

CX Daily: Will Hong Kong’s Tax Tweaks End Its Real Estate Slump?

Hong Kong / In Depth: Will Hong Kong’s tax tweaks end its real estate slump?
PMI /: China services activity picks up momentum on stronger demand, Caixin PMI shows
Index /: Caixin China New Economy Index falls on lower capital inputs

UK Private Debt Looking Less Burdensome

By Phil Rush

The BoE’s financial stability report updated its projections for how the debt burden will increase with the transmission of past interest rate rises.
Although debt servicing costs will consume more income, the share of households with high cost-of-living adjusted debt servicing ratios no longer rises from current lows.
Corporate earnings growth also reduced the proportion of firms breaching vulnerability thresholds. Monetary tightening is not delivering the brutal shock many feared.

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Dec 06

Daily Brief Macro: Global Liquidity On The Rise: Is This Gold’s (And BitCoin’s) Breakout Moment? and more

In today’s briefing:

Global Liquidity On The Rise: Is This Gold’s (And BitCoin’s) Breakout Moment?
FSS Provides Further Details of Korean Companies That Plan to Change Dividend Payout System in 2024
Gold Soars to Record High on Rising Rate Cut Expectations
Great Game – War over Oil… In LatAm?
Out of the Box #25: Europe. From Technical Recession to an Real One?
CX Daily: Chinese Nickel Miners In Indonesia Face Threat From Falling Prices

Global Liquidity On The Rise: Is This Gold’s (And BitCoin’s) Breakout Moment?

By Michael J. Howell

High street inflation could fall in 2024 and real interest rates stay high, but the gold price and BitCoin (BTC$) may still break higher
Gold has a 1.5-1.6 times sensitivity factor to the growth in Global Liquidity. BitCoin is a whopping 5 times this! It is ‘exponential gold’
Global Liquidity looks set to double in size over the next decade driven by soaring World debts. Alongside, the US dollar has been eclipsed as the marginal World reserve asset

FSS Provides Further Details of Korean Companies That Plan to Change Dividend Payout System in 2024

By Douglas Kim

FSS provided further details as to the number of Korean companies that plan to change their dividend payout system to their shareholders in 2024.
There are 636 companies out of a total 2,267 listed companies in Korea (28%) that have confirmed that they will change their dividend payout system starting 2024.
As listed companies set different voting rights and dividend record dates from the end of the year, investors need to check the dividend record date and dividend amount before investing.

Gold Soars to Record High on Rising Rate Cut Expectations

By Srinidhi Raghavendra

Continued central bank buying, geopolitics, and de-dollarisation concerns have kept gold prices buoyant over the last two years.
Gold has been at record high in non-USD terms for some time now. On 4th Nov, it rallied to an all-time high of USD 2,135 per troy ounce.
Not just gold, but digital gold (“bitcoin”) also rallied to its highest in 20 months as excitement of rate cuts captured the zeitgeist of investors.

Great Game – War over Oil… In LatAm?

By Mikkel Rosenvold

Welcome to this week’s geopolitical round-up.
We’ll have a look at the most recent events of which we have seen quite a few! In a surprisingly self-assured and bold move, Venezuela moved troops close to the Guyanan province of Essequibo, seemingly preparing for a full-scale invasion.
Guyana has been the center of attention for the oil business in recent years after the discovery of significant oil reserves in the Essequibo province.

Out of the Box #25: Europe. From Technical Recession to an Real One?

By Emil Moller

The Eurozone is on the brink of recession but with rates front-running the ECB we may see some odd patterns as the bullwhip reverses while the weakness spills over to the service sector.
The ECB needs to go on the front foot to avoid a recession or the impact of higher real incomes and FCI easing has to surprise big time (which we find unlikely).
Either way EUR duration still has further to go and we remain long- soft landing cuts or emergency cuts should leave the long end lower.

CX Daily: Chinese Nickel Miners In Indonesia Face Threat From Falling Prices

Nickel / Cover Story: Chinese nickel miners in Indonesia face threat from falling prices
China-EU /: Xi to meet EU leaders in Beijing for first in-person summit in four years
Obituary /: Pioneer who helped set up China’s capital markets dies

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Dec 05

Daily Brief Macro: Positioning Watch – Everything better turn out the way markets want it and more

In today’s briefing:

Positioning Watch – Everything better turn out the way markets want it
Solid Brazilian Rains Dampen Soybean Prices
Energy Cable #48 – Natural Gas Longs to Scholz: “Thank You!”
The Week That Was in ASEAN@Smartkarma – Indofood’s On Track, ROTI’s Rising, and BliBli’s Omnichannel
Malaysia: Rate Cut by Mar’24, Lower Fiscal Deficit to Spur Cyclical Recovery in 2024
India Politics: State Elections Show Favourable Political Winds for Modi
Regional Economics: Can China’s Struggles Re-Open Window for Growth in Emerging Asia?

Positioning Watch – Everything better turn out the way markets want it

Hello everyone, and welcome back to our weekly positioning watch, where we dig into everything positioning and sentiment-related.
This week will be all about equities and fixed income, which seems to be running the show at current junctures – just give the gold chart a look, which jumped some 2% on the back of pivot hopes and strong buying activity this morning during Asian hours, while sellers were nowhere to be seen, but fast-forwarding 10-11 hours, gold is now down somewhere near 0.2%.
A huge turnaround in markets which smells a lot like a short-squeeze or tight liquidity in the Asian markets today.

Solid Brazilian Rains Dampen Soybean Prices

Brazil’s weather is set to improve with forecasts suggesting milder weather and rainfall; This alleviates concerns over Brazilian Soy crop.
Seasonal trends during El Niño years differ: Soybean provides negative returns in December-February. Worsening El Niño likely to lead to more favorable conditions for Brazilian Soy crop.
Technicals point to price reversal and bearish outlook. Options OI and futures positioning per COT report reaffirms bearish outlook.

Energy Cable #48 – Natural Gas Longs to Scholz: “Thank You!”

By Ulrik Simmelholt

Takeaways: Cohesion back at OPEC, but for how long?
US the biggest winner in crude oil markets.
Last week’s much anticipated OPEC meeting concluded with the decision to cut production further by 1 million barrels per day.

The Week That Was in ASEAN@Smartkarma – Indofood’s On Track, ROTI’s Rising, and BliBli’s Omnichannel

By Angus Mackintosh

The past week has seen insights on Indofood CBP Sukses (ICBP IJ), PT Nippon Indosari Corpindo (ROTI IJ), Global Digital Niaga (BELI IJ), OCBC (OCBC SP) and Vinfast (VFS US).
There were also macro insights on the Philippines and Vietnam from Manu Bhaskaran and insights on Leader Energy IPO, Mkh Bhd, Vale Indonesia, Aneka Tambang, Bank Tabungan, and Medco Energi.
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.

Malaysia: Rate Cut by Mar’24, Lower Fiscal Deficit to Spur Cyclical Recovery in 2024

By Prasenjit K. Basu

Real GDP growth in 2023 will likely be less than 3%, with near-zero net FDI inflow and net foreign portfolio outflows of 2.9% of GDP in Jan-Sep’23.
But with inflation moderating, we expect BNM to cut its policy rate by Mar’24, spurring a rebound to 4.5% real GDP growth in 2024, and inducing positive net FDI inflows.
Budget 2024 credibly widens the tax base, raises services taxes, and begins the tough process of targeted subsidy rationalisation. The lower fiscal deficit should crowd-in private investment. We’re cautiously bullish.

India Politics: State Elections Show Favourable Political Winds for Modi

By Manu Bhaskaran

Premier Modi’s BJP outperformed expectations by winning three state assembly elections, putting it in prime position for re-election in the 2024 general election.
Modi’s personal appeal and welfarist policies will likely deliver dividends in the next elections. But a landslide win is far from guaranteed given the political dynamics.
The government will thus avoid rocking the boat in terms of economic policy.

Regional Economics: Can China’s Struggles Re-Open Window for Growth in Emerging Asia?

By Manu Bhaskaran

China’s prior dominance in international trade and attracting investments closed off access to advanced markets by other Asian markets, denying them crucial dynamic benefits.
Emerging Asian economies experienced stymied structural transformation as they geared their structures towards exporting to China, made worse by policy mismanagement.
Shifts in the global economic and geopolitical architecture, as well as in domestic and regional policy are cause for optimism that the region can exploit this opportunity.

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Dec 04

Daily Brief Macro: The Fate of Quantitative Tightening: Not Solely in the Hands of the Fed and more

In today’s briefing:

The Fate of Quantitative Tightening: Not Solely in the Hands of the Fed
Steno Signals #76: The Fed Has Lost Control of Liquidity Trends
Sell Signal Setups Are Appearing, But Don’t Panic
The Market Meaning of a Gold Breakout

The Fate of Quantitative Tightening: Not Solely in the Hands of the Fed

By Said Desaque

The twin pillars that underpinned US monetary policy since the global financial crisis made policy normalisation difficult. Investors believe quantitative tightening (QT) ceases once the federal funds rate is lowered.
Contrary to the fears encountered during the taper tantrum in 2013, QT has not dramatically tightened US financial conditions since 2017, thereby raising questions about whether any cessation is required.
High levels of bank reserves do not guarantee financial stability, but elevated Treasury borrowing and lower repo market liquidity pose threats that could ultimately force the Fed to end QT.

Steno Signals #76: The Fed Has Lost Control of Liquidity Trends

Happy Sunday from frosty Copenhagen and welcome to our flagship editorial! The underlying demand trends are not strong.
Running credit card data has been weak in October/November, the credit impulse is worsening and there are signs of actual labour market softening around the otherwise sticky service sectors in the West, yet markets are partying like there is no tomorrow.
What is causing this disconnect and could it continue into the year-end?

Sell Signal Setups Are Appearing, But Don’t Panic

Technical indicators are flashing very preliminary warning signs of an impending market top, but it’s too early for traders to take action.
Price momentum is still positive and other bearish tripwires have not turned bearish yet.
We are inclined to trust the seasonal pattern of December market strength.

The Market Meaning of a Gold Breakout

Gold bulls became very excited when gold tested resistance at the 2000–2100 level. We have been more interested in the drivers of gold strength than trying to forecast gold itself.
Our analysis indicates that gold is rising on expectations of falling real rates, which also depresses the USD.
These factors should be bullish for the price of risky assets. Specifically, we would focus on financials and other early market cycle groups.

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Dec 02

Daily Brief Macro: Crude Prices Tank Despite OPEC+ Supply Cuts; Brazil to Join OPEC+ and more

In today’s briefing:

Crude Prices Tank Despite OPEC+ Supply Cuts; Brazil to Join OPEC+
India: Real GDP to Sustain 8%+ YoY Growth over the Next 18 Months
CX Daily: China Mourns Loss of ‘Old Friend’ Kissinger
Portfolio Watch: Time to fade soft landers entirely?
The Weekly Market Monitor – Gold Shines, Oil Slumps, and Yields Should Reverse

Crude Prices Tank Despite OPEC+ Supply Cuts; Brazil to Join OPEC+

Virtual OPEC+ meeting was held on 30th November after being delayed by five days. Outcome was an increase and extension of supply cuts till Q1 2024.
WTI rallied 2.5% heading into the meeting but fell 4% shortly after due to scepticism over members following through on cuts and short-term nature of agreement.
OPEC+ announced that Brazil would join the coalition in early 2024. A move that unites most top crude oil producers in the cartel with major geopolitical ramifications.

India: Real GDP to Sustain 8%+ YoY Growth over the Next 18 Months

By Prasenjit K. Basu

11%YoY growth in GFCF enabled real GDP to grow 7.6% YoY in Q2FY24, well ahead of the 6.8% consensus. Manufacturing, construction, utilities and mining grew over 10%YoY in Jul-Sep’23.
Services should grow over 8%YoY in H2FY24 (in line with 26-year average). Manufacturing should grow 9%YoY, delivering 8%+ growth in H2FY24. Reform and productivity enable 8% growth in FY25.
The 12mma of the fiscal deficit fell to 5.8% of GDP in Oct’23, and should fall to 5.5% by Mar’24. This will crowd-in private investment, generating virtuous circle of growth.

CX Daily: China Mourns Loss of ‘Old Friend’ Kissinger

Kissinger /: China mourns loss of ‘old friend’ Kissinger
Shanghai /: Xi’s Shanghai visit focuses on tech innovation, affordable housing
Migrant workers /: China aims to ensure migrant workers get paid before Lunar New Year

Portfolio Watch: Time to fade soft landers entirely?

By Emil Moller

With November in the rearview mirror, markets are finally starting to discount the disinflation story aggressively.
There’s a growing gap between what’s happening in financial markets and what central banks are doing: Traders are now betting more heavily on interest rate cuts in the United States and Europe as the soft inflation prints (which we of course forecasted, we don’t mind reminding) and risks have been partying through November.
We’ve been emphasizing the last phase of the last US leg being absent but today’s ISM manufacturing data fell significantly short of both our estimates and market expectations. So, it looks like we might need to change our tune on that one.

The Weekly Market Monitor – Gold Shines, Oil Slumps, and Yields Should Reverse