Macro

In today’s briefing:

End of Mandatory Lock-Up Periods for 53 Companies in Korea in December 2023
Charting Beyond the Equity Market Headlines
EA: Inflation Slumps Into Trough
OPEC, EIA and Nat Gas Watch: A Lukewarm but Bullish Supply Cut
Philippines Economics: Marcos’ Investment Drive Starting to Show Results
Bond Investors Are Overdoing It!
CX Daily: Five Things to Know About Huawei’s New Smart Car Venture

End of Mandatory Lock-Up Periods for 53 Companies in Korea in December 2023

By Douglas Kim

We discuss the end of the mandatory lock-up periods for 53 stocks in Korea in December 2023, among which 6 are in KOSPI and 47 are in KOSDAQ.
These 53 stocks on average could be subject to further selling pressures in December and could underperform relative to the market.
Among these 53 stocks, top five market cap stocks include Doosan Robotics, Studio Dragon, Asicland, Manyo Factory, and Curocell.

Charting Beyond the Equity Market Headlines

By Thomas Lam

One common measure of global equity market valuation has hovered consistently below the US ratio over the last decade or so
Two different measures of valuation suggest that the US equity market appears to be fairly stretched
Over the next decade, the real return on US equities is likely to be lower than the last 10 years, perhaps with some risk of it being subzero on average

EA: Inflation Slumps Into Trough

EA inflation undershot expectations for the third consecutive month by falling by 49bps to 2.41% in Nov-23. That is 0.3pp under the consensus and 16bps less than we expected.
The downward bias in outcomes since the Oct-22 peak is substantial, even if half of that merely invalidates consistently exaggerated expectations for positive payback.
Base effects from German energy utility support are set to break the downtrend in Dec-23. Underlying inflation isn’t below the target, so ECB cuts should wait until 3Q24.

OPEC, EIA and Nat Gas Watch: A Lukewarm but Bullish Supply Cut

After a load of speculations and postponements, the OPEC group finally delivered a press release, but there are still many uncertainties around the actual outcome of the meeting.
On the surface, the supply cut deal is intensive, but given early hints of non-compliance from a couple of the African members, the market is not overly convinced.
We disagree with the market take-away and see this as a strong supply message, but admittedly have to monitor the compliance on an ongoing basis in coming months.

Philippines Economics: Marcos’ Investment Drive Starting to Show Results

The administration’s ramp-up in investment spending, notably in transport and infrastructure, is supporting the short-run outlook and longer-run growth prospects.
Investment-Related metrics are on the up, including a notable rise in foreign investment approvals directed towards renewable energy. Regulatory reform is providing a boost.
Managing Manila-Beijing ties will continue to pose a tricky balancing act for Marcos.

Bond Investors Are Overdoing It!

By Jeroen Blokland

Our estimate of the fair value 10-year US Treasury yield currently stands at 4.63%.
With a difference of 38 basis points, the gap between the fair value estimate and the actual yield is historically large.
Hence, we adjust our portfolio and remove the overweight in Treasuries.

CX Daily: Five Things to Know About Huawei’s New Smart Car Venture

Huawei /: Five things to know about Huawei’s new smart car venture
Banking /: China’s Bank of Communications added to global too-big-to-fail banks list
Corruption /: Former Guangdong prison chief expelled from Party for graft

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Nov 30

Daily Brief Macro: The US Fed May Find It Hard NOT to Cut Rates in 2024 and more

In today’s briefing:

The US Fed May Find It Hard NOT to Cut Rates in 2024
5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics
CX Daily: Zhongzhi Vice President Xie Among Those Probed Over Group’s Collapse
EM by EM #32: Keep Calm & Carry Lira?
Euroflation Nugget: Deep deflation tomorrow?
UK Trend Inflation Problem

The US Fed May Find It Hard NOT to Cut Rates in 2024

By Michael J. Howell

Risk asset markets are driven by rising Global Liquidity and falling inflation. Low inflation in 2024 will be sufficient to justify a significant change in direction by the US Fed
Cyclical analysis points to a further sizeable improvement in Global Liquidity conditions over the next 12-18 months
Investment regime is heading towards its next phase of Calmwhich favors equities and sees steeper yield curves ahead

5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics

We start off this week’s 5 Things We Watch by having a look at the reactions of CBs.
This is followed by talking about EURflation and the upcoming OPEC meeting and we then move on to talking about the Ifo numbers released last week while lastly finishing off with Dutch politics.
The Fed is the most plausible “pauser”.

CX Daily: Zhongzhi Vice President Xie Among Those Probed Over Group’s Collapse

Zhongzhi / Exclusive: Zhongzhi vice president Xie among those probed over group’s collapse
Meeting /: Politburo weighs new rules to tighten party control over foreign affairs
GDP /: China to hit 5% GDP growth target for 2023, PBOC chief says

EM by EM #32: Keep Calm & Carry Lira?

Main points upfront: Erdogan’s foreign policy decisions, including tighter economic integration with the UAE and other Arab states, are causing him to distance himself from the West.
This could lead to ongoing security concerns within the NATO alliance, and he may seek concessions in exchange for compliance.
Mehmet Simsek’s “Mission Normalization” is progressing slowly in a challenging environment.

Euroflation Nugget: Deep deflation tomorrow?

Hello everyone, and welcome to a shorter piece on today’s regional CPI numbers, and what to expect for tomorrow’s print.
Main conclusions up-front: HUUGE dovish surprises in German and Spanish inflation numbers today, smack dab at our forecast from yesterday, where we wrote about the potential of Black Friday sales shining through in this week’s inflation numbers.
Germany and Spain combined amount to around 50% of the total EZ CPI basket, so a dovish surprise tomorrow is likely.

UK Trend Inflation Problem

The BoE’s medium-term inflation forecasts have been grinding higher amid evidence of persistence from wages. Historical errors clustered in regimes lasting several years.
Inflation proved more predictable in 2023, with spot surprises no longer skewed so heavily. Still, the trend exceeded other expectations, and we expect a 2024-25 repeat.
Wage settlements are too high and reinforced by myopic government policy before the election. Second-round effects still delay rate cuts to 2025, in our view.

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Nov 29

Daily Brief Macro: VIX Isn’t Broken. It Is Diluted by 0DTE Options That Have Shifted Target Risk Windows. and more

In today’s briefing:

VIX Isn’t Broken. It Is Diluted by 0DTE Options That Have Shifted Target Risk Windows.
Vietnam Poised to Be Winner in Global Competition for Investments
EUR Inflation Watch: Another Dovish Surprise Due to Black Week/Month?
The Great Game – Dutch Right Swing
G3 Central Bank Watch: More Fuel to the 2007 = 2023 Analogy
Energy Cable: The Review that Became a Preview!
CX Daily: Thanksgiving Dinner Reveals Price of ‘Bidenomics’

VIX Isn’t Broken. It Is Diluted by 0DTE Options That Have Shifted Target Risk Windows.

By Srinidhi Raghavendra

Geo-Politics are tense. Monetary policies are in contraction. Rates are on hawkish pause. Inflation is far from tamed. Financial conditions remain tight. VIX should be anything but sanguine.
Any misjudgment across politicians, central bankers or businesses could send equities tanking or soaring. Yet the VIX is sending a calming signal.
VIX isn’t broken. It has been diluted by rise of Zero DTE (0DTE) options which have shifted risk pricing windows away from VIX target expiry range.

Vietnam Poised to Be Winner in Global Competition for Investments

Vietnam’s economy is regaining its footing after a difficult first half in 2023. Industrial activity and trade picking up, complementing still-healthy growth in the services sector. y.
Despite the cyclical difficulties, foreign investments into Vietnam are on the up. Advantageous economic geography and diplomacy are powerful pull factors.
However, defective infrastructure, including in transport and utilities, limits the scope of Hanoi’s economic ambitions. These must be fixed if investments are to remain in Vietnam.

EUR Inflation Watch: Another Dovish Surprise Due to Black Week/Month?

We see clear downside risks to the consensus forecasts for November inflation in Europe due to small seasonal expectations for price cuts in various seasonally dependent cost categories.
In our preview, we will assess the scope for surprises in the core countries and on the aggregate Euro area level.
Especially German inflation looks seasonally high in the consensus forecast.

The Great Game – Dutch Right Swing

By Mikkel Rosenvold

Welcome to this week’s Great Game, where we cover the most important news in global politics and how they affect your portfolio.
This week, we’ll cover the landslide win of Geert Wilders in the Dutch general elections as well as the most recent developments in the Middle East.
Is Wilders a non-event for markets?

G3 Central Bank Watch: More Fuel to the 2007 = 2023 Analogy

We have used the 2007 = 2023 analogy a few times already this year and we continue to find coincidental evidence that looks a lot like the emerging pressures built up in the quarters preceding the financial crisis.
The outcome of 2024 is still up in the air, but credit indicators do not look pretty ahead of next year when we combine the impulse in China, the US and the Euro area in an aggregate model and judging from the central bank behavior, we see a lot of similarities to 2007 across the BoJ, the Fed and the ECB.
Let’s briefly explain why in this central bank watch piece!

Energy Cable: The Review that Became a Preview!

Our apologies for the slightly delayed Energy Cable.
IWhat a week for OPEC! Sources in OPEC+ leaked that Russia and Saudi Arabia were in agreement to delay the meeting due to issues around some other producers (which made us laugh hard given Russia’s own export numbers compared to their quotas).
We have had a look at OPEC production and export numbers and it seems like production is much more price-bullish than actual net exports (meaning a draw on local OPEC inventories).

CX Daily: Thanksgiving Dinner Reveals Price of ‘Bidenomics’

Bidenomics / Cover Story: Thanksgiving dinner reveals price of ‘Bidenomics’
Trade /: China, Japan, South Korea foreign ministers agree to work on reviving leaders’ summit
Private /: China to offer private firms bigger helping hand

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Nov 28

Daily Brief Macro: Positioning Watch – All About the Soft Landing Narrative and more

In today’s briefing:

Positioning Watch – All About the Soft Landing Narrative
Inflationary Expectations and Service Sector Inflation: Crucial to Fed Interest Rate Reductions
The Week That Was in ASEAN@Smartkarma – Alfamart’s Expansion, Erajaya, and Anwar’s Malaysia
Ifo Nugget: Should We Believe the Numbers?

Positioning Watch – All About the Soft Landing Narrative

Hello everyone, and welcome back to our weekly positioning watch, where we as always try to dig down into the latest positioning data and give you an overview of what’s moving narrative currently.
Sentiment and positioning are still skewed towards hopes of a soft landing, with bets being placed on lower yields, a weaker dollar, booming equities and almost non-existent credit spreads – ironically a prime condition for an upcoming recession (which is still our base case for H1 2024).
General media and story counts are also all about the soft landing vs recession, with the mentionings of “recession” back at pre-COVID levels, while soft landing counts are on the rise, although pulling a bit back from recent highs.

Inflationary Expectations and Service Sector Inflation: Crucial to Fed Interest Rate Reductions

By Said Desaque

Lower inflationary expectations will raise the ante on the Fed to reduce nominal interest rates to avoid an unintended policy tightening via a rise in inflation-adjusted measures.
There are significant differences in the formulation of inflationary expectations between the corporate sector and financial markets. Survey-based measures of inflationary amongst households remain higher than the Fed’s 2% target.
The ability of the Fed to aggressively lower the federal funds rate will depend on the FOMC’s assessment of the neutral policy rate and future service sector inflation trends.

The Week That Was in ASEAN@Smartkarma – Alfamart’s Expansion, Erajaya, and Anwar’s Malaysia

By Angus Mackintosh

The past week saw insights on Sumber Alfaria Trijaya (AMRT IJ), Erajaya Swasembada (ERAA IJ), and Bumrungrad Hospital (BH TB), Sido Muncul (SIDO IJ), AND Uchi Technologies (UCHI MK)
There was also a macro insight on Malaysia plus insights on Singapore Airlines (SIA SP), XL Axiata (EXCL IJ), Malindo Feedmill (MAIN IJ), and Lippo Karawaci (LPKR 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.

Ifo Nugget: Should We Believe the Numbers?

Before we get going we have to stretch that this month’s number comes with a yuuuge caveat, namely that of the German Constitutional Court’s decision from 1 and a half weeks ago.
The court decided to block the funds intended by the German government to subsidize electricity prices for both households and companies and since the decision was taken on the 15th of this month we strongly suspect that some submissions were sent before the ruling.
That would of course mean that the companies would have had a lot more bullish outlooks before the 15th.

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Nov 27

Daily Brief Macro: Investment Opportunities From A Global Leadership Review and more

In today’s briefing:

Investment Opportunities From A Global Leadership Review
Steno Signals #75 – The 2007/2008 Playbook Is Useful Again
7 Reasons to Embrace the Melt-Up Into Year-End

Investment Opportunities From A Global Leadership Review

By Cam Hui

Global equities are surging, led by growth stocks. Stay with the current leadership until year-end as hedge funds are likely to engage in a beta chase for performance.
U.S. stocks are still the leaders, especially the megacap growth stocks.
Set-Ups for a new leadership are emerging in Europe and EM ex-China. Wait until early 2024 to re-evaluate the evolution of leadership before making any decisions on rotation.

Steno Signals #75 – The 2007/2008 Playbook Is Useful Again

Happy Sunday and welcome to our weekly flagship editorial.
The soft landing narrative has seen material tailwinds over the past 6-8 weeks, while the recession narrative is fading fast.
This is the first prerequisite for an actual recession as a recession never arrives when everyone plans for one.

7 Reasons to Embrace the Melt-Up Into Year-End

By Cam Hui

We wouldn’t go as far as to call the current circumstance a generational buying opportunity, but a rare “fat pitch” that comes along only once or twice per decade.
The current episode of strong breadth thrust off the market bottom in late October is a rare and clear, and extraordinary, trading signal of a major market bottom.
We believe investors should, at a minimum, embrace the likely melt-up into year-end and re-evaluate market conditions in January.

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Nov 26

Daily Brief Macro: Unpacking Implications of OPEC Meeting Postponement and more

In today’s briefing:

Unpacking Implications of OPEC Meeting Postponement

Unpacking Implications of OPEC Meeting Postponement

By Srinidhi Raghavendra

OPEC meeting rescheduled by five days. What’s the big deal? Turns out that is. Brent crude prices tanked nearly 5% on the announcement.
Oil options turned sharply bearish too with the Brent crude put option volumes surging to 211,000 on Wednesday, the biggest volume on record.
OPEC majors are determined to keep oil prices trading in the range of $80-$100 a barrel. Given the infighting, don’t discount the possibility of this deal imploding.

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Nov 25

Daily Brief Macro: CX Daily: China Battles Surge in Respiratory Infections Among Children and more

In today’s briefing:

CX Daily: China Battles Surge in Respiratory Infections Among Children
Portfolio Watch: The last dance?
EM by EM #30: It’s Time for Milei to Grapple with the Real World
The Weekly Market Monitor – VIX Hits Multi-Year Low, Investors Can’t See Any Risks!

CX Daily: China Battles Surge in Respiratory Infections Among Children

Infections / China battles surge in respiratory infections among children
Corruption /Exclusive: Chairman of China Cosco’s leasing unit under probe
Proposal /: Financial sector has potential to better serve China’s real economy, lawmakers say

Portfolio Watch: The last dance?

Conclusions up front:1) A long USD bet is a good way to express 1) strong US data seasonality compared to peers until year-end and a bet on extreme help from spreadsheets / seasonal adjustments in the ISMs, 2) The oil market is the only cyclical market not responding to the current positivity.
Will we see a ketchup effect should OPEC+ deliver next week?
3) EUR-duration continues to look attractive ahead of a likely soft CPI print next week.

EM by EM #30: It’s Time for Milei to Grapple with the Real World

Summary of our view: Argentine equities are disconnected from underlying risks; ARS remains a depreciated currency with mounting pressure due to the current balance sheet composition.
Milei may possess economic knowledge, but he must transform into a skilled politician to navigate between domestic politicians and foreign powers.
If Biden/Blinken are prudent, they should seize the opportunity to strengthen ties with Argentina by offering financial assistance to facilitate a transition toward economic sustainability.

The Weekly Market Monitor – VIX Hits Multi-Year Low, Investors Can’t See Any Risks!

By Jeroen Blokland

Volatility Has dropped off a cliff, signaling that investors are unable to see any risk currently. That feels at least a bit complacent.
We take a deep dive to determine which asset class will likely benefit most from the first Fed rate cut and the start of the easing cycle. Spoiler alert! It’s not Equities.
OPEC’s resilience to continue production cuts is being tested. At the same time, our Fear & Frenzy Sentiment Index has moved even further into FRENZY territory.

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Nov 24

Daily Brief Macro: KOSPI 200 and KOSDAQ 150 Rebalance Additions and Deletions Announced (December 2023) and more

In today’s briefing:

KOSPI 200 and KOSDAQ 150 Rebalance Additions and Deletions Announced (December 2023)
EIA and OPEC Watch: Depending on Nigeria and Iran
Out of the Box #24 : Too Little Too Late Powell?
Investing Is About Return and Risk – Update 34027
CX Daily: Five Things to Know About China’s Unusual Sovereign Bond Issue
PMIs Passed Seasonal Trough

KOSPI 200 and KOSDAQ 150 Rebalance Additions and Deletions Announced (December 2023)

By Douglas Kim

Korea Exchange announced KOSPI 200 rebalance additions and deletions today. There were 14 new additions and deletions (7 each).
Some surprises in KOSPI 200 rebalance included addition of Seah Besteel and deletion of HDC Hyundai Development.
There were a lot more additions and deletions in KOSDAQ 150 (34 total additions and deletions). Among the KOSDAQ 150 additions included Neowiz, JNTC, Lunit, and Jeio.

EIA and OPEC Watch: Depending on Nigeria and Iran

Welcome to our weekly EIA watch paired with a few remarks on the postponed OPEC meeting.
We have had a look at OPEC production and export numbers, and it seems like production is much more price bullish than actual net exports (meaning a draw on local OPEC inventories)
Interestingly, the US, Nigeria, Iran, UAE (among others) have managed to fill a lot of the production gap left open by left open by Saudi Arabia.

Out of the Box #24 : Too Little Too Late Powell?

Main points: Fed is riding a blind horse by letting the market dictate policy as we enter Q1 and we think that the cumulative effect of the great tightening along with the pending lags won’t be undone by the temporary easing of Financial Conditions
Rates will struggle to keep up at these levels as the disinflation (also) has a tightening component to it if rates don’t follow suit
Current labour market easing we have seen since peak is still consistent with usual recessionary patterns but is unlike to evolve in a linear manner from here.

Investing Is About Return and Risk – Update 34027

By Jeroen Blokland

In the past four months or so, stock prices haven’t done all that much. The MSCI World Index measured stands 1.5% higher than at the beginning of July.
However, cash has performed just as well as equities, or even slightly better in the case of the MSCI World Index, with much lower risk.
If we were to compare the Sharpe ratios (return divided by realized volatility) of stocks and cash over the past months, the gap between the two categories would be huge.

CX Daily: Five Things to Know About China’s Unusual Sovereign Bond Issue

Bonds / : Five things to know about China’s unusual sovereign bond issue
Students /: U.S. draws fewer Chinese students, report says
Wanda /: Wanda unit seeks extension for $600 million dollar bonds

PMIs Passed Seasonal Trough

The UK and Euro area flash PMIs increased by more than expected, making summer’s weakness increasingly look like the trough in activity growth.
2023’s path follows 2022 and the inverse of 2020 because we still see the pandemic corrupting seasonals. The five months ahead will be bullish if this pattern continues.
Labour markets still look tight, albeit with some evidence of loosening. Monetary policy needs to stay tight until excess demand and inflation normalise.

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Nov 23

Daily Brief Macro: 5 things we watch: IFO and more

In today’s briefing:

5 things we watch: IFO, US rates, Earnings revisions, USD & Gasoline
USD’o’meter: Is King USD about to reverse?
5 Things We Watch: IFO, US Rates, Earnings Revisions, USD & Gasoline
CX Daily: China Asks Banks to Boost Real Estate Lending
UK: Buying Votes With Inflationary Policy

5 things we watch: IFO, US rates, Earnings revisions, USD & Gasoline

We start off this week’s 5 Things We Watch by having a look at the Ifo survey coming up this Friday in the midst of the Schwarze Null ruling.
This is followed by talking about US rates and Nvidia earnings and we then move on to talking about the USD while lastly finishing off with gasoline demand.
This week we are watching out for the following 5 topics within Global macro: IFO, US Rates, Earnings revisions, The USD, Gasoline.

USD’o’meter: Is King USD about to reverse?

In this piece, we will try to assess the USD outlook in a structured way by looking at:1) Relative rates, 2) Relative inflation, 3) Relative Growth, 4) Relative energy.
We combine the four filters in an aggregate probability-based model and find that the USD is still likely to increase in value for the next few months.
Let’s have a look at the details.

5 Things We Watch: IFO, US Rates, Earnings Revisions, USD & Gasoline

We start off this week’s 5 Things We Watch by having a look at the Ifo survey coming up this Friday in the midst of the Schwarze Null ruling.
This is followed by talking about US rates and Nvidia earnings and we then move on to talking about the USD while lastly finishing off with gasoline demand.
Chancellor Olaf Scholz’s government is challenged by the Constitutional Court’s ruling from last week on special fund financing outside the regular budget.

CX Daily: China Asks Banks to Boost Real Estate Lending

Property / China drafts list of developers eligible for funding, asks banks to boost real estate lending
Israel-Hamas /: China calls for ‘early ceasefire’ in Gaza conflict in meeting with Arab-Islamic ministers
Personnel /: Premier Li takes helm of China’s top financial regulator

UK: Buying Votes With Inflationary Policy

The UK Autumn Statement announced tax cuts that broadly spend the entire windfall from a less enormous current fiscal deficit while reinforcing inflation’s persistence.
Voter income is boosted ahead of a general election through surging benefits, pensions, and minimum wage rates. National insurance cuts also raise take-home pay.
Fiscal headroom of £13bn is preserved, although that uses the flexibility of extending the target date. Its existence still relies on excessively bullish potential GDP forecasts.

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Nov 22

Daily Brief Macro: The Land of Swaying Yen: Will The BoJ Intervene? How Will Yen Respond? and more

In today’s briefing:

The Land of Swaying Yen: Will The BoJ Intervene? How Will Yen Respond?
Asia Geopolitics: Following Biden-Xi Meeting, Asia Is a Safer Place For Now
Taiwan: Underowned, Yet Gaining on Peers
US Rates Nugget: 4 Charts on Why November Data Will Reignite the Hawks
Malaysia Economics: What Has the Anwar Administration Achieved in One Year?
Great Game – Truce in Gaza?

The Land of Swaying Yen: Will The BoJ Intervene? How Will Yen Respond?

By Pranay Yadav

Japan faces a raft of economic headwinds which shows up in Yen’s underperformance. BoJ’s job is not one to be envied given near-term issues plus structural challenges.
Since the start of Sep, the Yen has underperformed the most among currency majors declining to a 33-year low relative to the USD.
A frail outlook warrants continued loose monetary policy. However, that creates other problems forcing BoJ intervention to support the Yen.

Asia Geopolitics: Following Biden-Xi Meeting, Asia Is a Safer Place For Now

The Biden-Xi meeting signals a positive phase for lower geopolitical risks in the Asia Pacific. Beijing and Washington are prioritising handling its domestic challenges over ratcheting up competitive activity.
Taiwan’s presidential polls also motivate China’s “wait-and-see” approach as the Sinoskeptic DPP faces headwinds in maintaining its grip on power.
Japan’s more nuanced strategy has gained it traction with Asian nations. It is why it is emerging as a real winner in the geo-political game in Asia.

Taiwan: Underowned, Yet Gaining on Peers

By Steven Holden

The percentage of Global funds invested in Taiwan hits an all-time high of 57.8%.
Taiwan has been a key beneficiary of manager rotation alongside India, Argentina and South Korea over the last 6-months.
TSMC is the dominant stock holding, with 49.8% of funds holding a position and has hit record ownership among Global funds.

US Rates Nugget: 4 Charts on Why November Data Will Reignite the Hawks

Welcome to this US rates nugget with three charts on why November data from the US economy could refuel the hawkish bias within the Federal Reserve.
First, our ISM Services model hints at a large rebound in the ISM number released on December 5.
ISM Services jumps to >60 in our models when you adjust for the spreadsheet wizardry of the Institute of Supply Management (remember the abysmal prints in Nov/Dec of 2022) as the seasonal adjustment factors are much more helpful than a year ago.

Malaysia Economics: What Has the Anwar Administration Achieved in One Year?