Macro

In today’s briefing:

Global Liquidity … Still Rising?
Out of the Box #11 – Sticky Is the New Transitory – Watch Series
The Week That Was in ASEAN@Smartkarma – Ace Hardware Shines, Alfamart’s New Quest, and SCMA for 2H23
EM BY EM #11 Hangover After the Gold Rush? – Steno Signals

Global Liquidity … Still Rising?

By Michael J. Howell

Global Liquidity matters hugely for World financial markets. Although Fed Liquidity is slowing, there are compelling signs that liquidity is rising elsewhere
Foreign holdings of US dollars are expanding once again, as flow migrate towards Asia. Many policy makers are monetizing these inflows.
China’s PBoC stepped up her liquidity injections, adding RMB 1 trillion to money markets through June. This should have a positive effect on the Chinese and World economies

Out of the Box #11 – Sticky Is the New Transitory – Watch Series

We take a look at the inflation in necessities and whether it is fair to assume that sticky inflation has become the new transitory.
The peak hours 4-5 pm were priced at -1000 DKK/MWh in West Denmark and close to -1900 EUR/MWh just south of the border in Germany.
These are unprecedented price levels and complete uncharted territory for electricity prices.

The Week That Was in ASEAN@Smartkarma – Ace Hardware Shines, Alfamart’s New Quest, and SCMA for 2H23

By Angus Mackintosh

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 South East Asia.
The past week saw insights on Ace Hardware Indonesia, Sumber Alfaria Trijaya (AMRT IJ), Medikaloka Hermina (HEAL IJ), AKR Corporindo, and PT Surya Citra Media (SCMA IJ).
There were also insights on Panin Financial, Delta Electronics Thailand, Singapore Airlines (, Bangkok Bank, Krung Thai Bank (KTB TB), and a thematic insight on Asia Pacific Luxury Goods.

EM BY EM #11 Hangover After the Gold Rush? – Steno Signals

By Emil Moller

Gold has managed to maintain its ground recently and remains above the $1900 level on the back of stronger-than-expected hard data on both sides of the Atlantic.
But markets are of course forward-looking and though recent strength has offered some momentum and the “inevitable recession” keeps getting postponed, markets are nonetheless expecting inflation to decelerate and central banks to change course in the coming months.
If so the historic downsizing of balance sheets will be done already (the temporary bottom was so far in during Q4-2022).

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Jul 03

Daily Brief Macro: Japanese Equities Underpinned by BoJ and Buybacks and more

In today’s briefing:

Japanese Equities Underpinned by BoJ and Buybacks, but Longer-Term Issues Persist
A Q2 Global Market Review
Macro Watch – Why Surveys Struggle to Get Anything Right in This Environment
Afc Vietnam Fund Update – 30th June 2023
Is the Bidenomics Electoral Focus a Contrarian Economic Indicator?
Second Order China RMB Weakness
Sri Lanka Is Bouncing Back – AFC on the Road – Sri Lanka
TPW Advisory July Monthly: The Great In Between
CX Daily: Proposed Biden Curbs Could Starve Chinese Tech of Early Funding, Expertise

Japanese Equities Underpinned by BoJ and Buybacks, but Longer-Term Issues Persist

By Said Desaque

Continued monetary accommodation by the Bank of Japan (BoJ) and hype about corporate governance improvements are the main reasons for the uptrend in equity prices.
Unlike the late-1980s, forward P/E multiple valuations have not become completely divorced from the real economy due to the proliferation of value companies, although the Buffet Ratio is elevated.
Value companies will benefit the most from the Tokyo Stock Exchange’s directive to boost their valuations via an improved return on equity, but buybacks can only help in the short-term.

A Q2 Global Market Review

By Cam Hui

A review of the relative performance of global equities shows preliminary signs of faltering U.S. leadership.
Japan is slowly gaining and showing constructive signs of revival.
Anecdotal bottom-up indications of a Chinese cyclical rebound could spark a rally in China-sensitive stocks around the world,

Macro Watch – Why Surveys Struggle to Get Anything Right in This Environment

The spread between surveys and the reality is all-time-wide due to inflation
When will soft data turn into realiable indicators again ?
We find credit data to be a game-changer and credit is not looking pretty in Europe – especially not in France.

Afc Vietnam Fund Update – 30th June 2023

By Asia Frontier Capital

In June, the VN-Index showed a robust increase of 3.87% in USD terms to reach 1,120.2 points, accompanied by a significant improvement in market liquidity.
However, our fund slightly underperformed against the index, gaining 2.6% to reach a NAV of USD 3,205, according to internal estimates.
The month of June brought several positive developments that supported the market.

Is the Bidenomics Electoral Focus a Contrarian Economic Indicator?

By Cam Hui

President Joe Biden’s focus on his economic record based on Bidenomics may be a contrarian economic signal in the current environment of elevated recession risk.
While indicators show a mixed picture, equity risk is high.
Investors should find better clarity from the results and guidance from Q2 earnings season.

Second Order China RMB Weakness

By Untying The Gordian Knot

Yesterday, the People’s Bank of China fixed the CFETS Basket to be stronger than expected in a survey.
State banks intervened to support offshore CNH.
However, the strength of CNY is starting to wear off as industrial profits data were announced this morning to be at minus 18.

Sri Lanka Is Bouncing Back – AFC on the Road – Sri Lanka

By Asia Frontier Capital

Ruchir Desai, co-fund manager of the AFC Asia Frontier Fund, travelled to Colombo from 19th-21st June 2023 to meet with policymakers and various Sri Lankan companies, some of which the fund is invested in.
On my last visit to Sri Lanka in November 2022, my key takeaway was that the economy and stock market had bottomed out as inflation and interest rates had peaked, and the country was on the verge of gaining approval for an IMF (International Monetary Fund) loan.
Fast forward to June 2023: inflation has reduced significantly, benchmark interest rates have been cut by 250 basis points, and the IMF has disbursed the first tranche of its loan to Sri Lanka.

TPW Advisory July Monthly: The Great In Between

By TPW Advisory

We remain zeroed in on the multiple transitions we see occurring across risk assets and economies. We focus on 5 transitions in this monthly:
From rate hikes to rate cuts – from a finished Fed to a just getting started EM cutting cycle – inflation is a DM not EM problem
From monetary to fiscal policy – aka from the Fed to Bidenomics & its EU equivalent

CX Daily: Proposed Biden Curbs Could Starve Chinese Tech of Early Funding, Expertise

By Caixin Global

Investment /: In Depth: Proposed Biden curbs could starve Chinese tech of early funding, expertise
Summer Davos /: Global debt crisis requires China, U.S. to put aside their differences, economist says
Law /: New law sets out China’s foreign relations goals, response to national security threats

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Jul 01

Daily Brief Macro: Eurozone: When Deflation? and more

In today’s briefing:

Eurozone: When Deflation?
Japan: Early Signs of a Potential Re-Weight
EA: HICP Trends Extend in Jun-23

Eurozone: When Deflation?

Based on monthly producer price decreases during a recession, the PPI will fall more than 10% in August, increasing the likelihood of a negative CPI print that month.
If we take the relationship between Spanish CPI and PPI as an input, Eurozone headline inflation should decrease to practically zero.
However, based on the long lag between Eurozone CPI and money supply growth, Eurozone headline inflation will not turn negative until at least March next year, if at all.

Japan: Early Signs of a Potential Re-Weight

By Steven Holden

Global Active Funds make tentative moves back in to Japanese equities after a 5-year decline.
Buying seen in Daiichi Sankyo, Keyence Corp and Sumitomo Mitsui Financial Group, with Japan capturing $1.3bn of new fund investment since September 2022.
Ownership levels still near record lows, with clear potential for further ownership growth from here.

EA: HICP Trends Extend in Jun-23

By Phil Rush

Flash EA inflation fell by 59bp to 5.51% in Jun-23, undershooting expectations by 0.2pp. Downward trends in the headline rate and surprises remain encouraging.
Core inflation ticked up almost as far as expected, but energy prices are falling faster than forecast. Non-core weakness should keep driving most of the headline slowing.
We expect less progress in July and August before stepping low enough in September to comfort the ECB, assuming underlying pressures keep easing.

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Jun 30

Daily Brief Macro: Outside the Box #10 What if China Favors Bridges over Credit Cards once More? and more

In today’s briefing:

Outside the Box #10 What if China Favors Bridges over Credit Cards once More?
EUR Liquidity Watch – How Well Are Depositors Protected? Italy with the Largest Bill to Pay (Again)

Outside the Box #10 What if China Favors Bridges over Credit Cards once More?

By Emil Moller

CCP is in a tough place and is forced to balance between long-term policy goals and short-term costs
The CCP could be incentivized to back investment (as per usual) despite rhetoric suggesting a policy pivot. This could lead to further tensions with Washington
There is not much pointing to a comeback for the Yuan no matter what policy path Beijing chooses

EUR Liquidity Watch – How Well Are Depositors Protected? Italy with the Largest Bill to Pay (Again)

The Deposit Guarantee Scheme requires multiple countries to pay a large bill by year-end
Italy will likely be the biggest loser of all of this as Italian banks don’t look robust enough
Tighter regulation is necessary in order for the ECB to maintain a functioning safety net

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Jun 29

Daily Brief Macro: U.S Debt Watch: Do We Need This Conversation Again? and more

In today’s briefing:

U.S Debt Watch: Do We Need This Conversation Again?
Transforming the Truck Tonnage Index into a Superior-Performing Investment Strategy
5 Things We Watch – Panel Discussion, EU Fragmentation, Riksbank, EU Banks & The EM Rate Cycle
China Property: Using Weekly Data To Predict Monthly Figures – What To Expect For June 2023
EUR Inflation Watch: 7 Charts on EUR Inflation Ahead of the June CPI Report
GBP Crosses, Banks and Rates

U.S Debt Watch: Do We Need This Conversation Again?

By Mikkel Rosenvold

Pheew… close call! The bipartisan debt ceiling bill saved the U.S from economic disarray.
But is the danger really over? Or could we be looking at another government shutdown risk?
We take a look at the appropriations conundrum and the potential ramifications

Transforming the Truck Tonnage Index into a Superior-Performing Investment Strategy

The Truck Tonnage Index (TTI) ‘explains’ up to 95% of the variation in US GDP and explains more than 80% of the levels of US stock markets.
A strategy that goes 100% long US equities when the TTI-based fair value estimate exceeds the current index level beats a traditional buy-and-hold strategy.
However, with the current fair value estimate 20% lower than current index levels, this superior strategy would currently be in cash rather than stocks.

5 Things We Watch – Panel Discussion, EU Fragmentation, Riksbank, EU Banks & The EM Rate Cycle

Central banks likely need to keep the hawkish tone at today’s panel discussion
Riksbank could surprise markets with another 50bps hike as they follow Norge’s bank
Emerging Markets have done WAY better than US and Europe in this inflation cycle when it comes to monetary policy

China Property: Using Weekly Data To Predict Monthly Figures – What To Expect For June 2023

By Robert Ciemniak

Weekly new home sales data for select cities can serve as a good indicator for the direction of the monthly national-level data – published a few weeks later
Weekly data for 17 major cities with consistent data to the week ending June 25 shows the YTD y/y growth decelerated to +3% from +7% for the prior week
National NBS New Home Sales data for June is due mid-July, and the weekly figures suggest the monthly data would show further weakness on a YTD basis

EUR Inflation Watch: 7 Charts on EUR Inflation Ahead of the June CPI Report

We see increasingly compelling signs of a sharp disinflation in Europe over the next 3-5 months
Several large sectors now report of deflation in selling prices in Germany
Here is a chart deck on the trends we find most interesting to watch in EUR-flation

GBP Crosses, Banks and Rates

By Untying The Gordian Knot

The Core Core CPI is currently at 7.1% and persistently high. The Bank of England is facing a difficult situation with no simple solutions.
Raising rates by 50 bps was a step in the right direction.
The headline June and July CPI may appear lower due to the base effect of Energy prices.

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Jun 28

Daily Brief Macro: ‘Stealth QE’ Continues At The Fed … Probably and more

In today’s briefing:

‘Stealth QE’ Continues At The Fed … Probably
Singapore’s Cyclical Downturn Could Worsen Before It Gets Better
The New “De-Risking” Equilibrium and Its Implications for Asia
EUR Liquidity Watch – The ECB Will Have to Punish Governments More..
UK: Desperate Policies for Disinflation

‘Stealth QE’ Continues At The Fed … Probably

By Michael J. Howell

Fed Liquidity is trending higher through a ‘Stealth’ QE, despite latest dip in weekly numbers
Liquidity is the key ingredient driving asset markets higher it pays investors to closely monitor these vital inflow of funds
Fed Liquidity feeds into Global Liquidity, which includes the actions of other policy-makers, as well as the activities of private back and lenders. It has risen sizeably since late 2022

Singapore’s Cyclical Downturn Could Worsen Before It Gets Better

By Manu Bhaskaran

The city-state’s cyclical downturn has further to go: external headwinds are strengthening while the post-pandemic bounce in domestic spending is flagging.
Further uncertainties loom: major economies show signs of deceleration and pose risks to trade, while household consumption may be hit by cost-of-living worries. The domestic sector, however, exhibits respectable resilience.
While inflation remains a concern, we observe a welcome easing of inflationary persistence. Expect monetary policy to stand pat for the short-term future.

The New “De-Risking” Equilibrium and Its Implications for Asia

By Manu Bhaskaran

A new geopolitical equilibrium will see Washington and Beijing seeking to gain the upper hand against the other but using measured tactics to minimize risks of direct conflict.
Hence the shift from hawkish talk of “decoupling” to a more measured “de-risking”: this means measures in selected economic sectors to reduce excessive dependence on China.
Consequently, companies are already adjusting their behaviour, producing shifts in trade and investment flows, firm locational decisions, and corporate structures. Asian economies stand to make tactical gains

EUR Liquidity Watch – The ECB Will Have to Punish Governments More..

The outlook for financial stability doesn’t look quite as good in Europe as hoped for.
The ECB is trying to push governments to add liquidity, but they will have to do more
European liquidity trends will prove to be outright abysmal over summer

UK: Desperate Policies for Disinflation

By Phil Rush

High living costs are becoming increasingly problematic for the UK Conservative Party, which had been happy to paper over costly policies by stoking nominal value growth.
Monetary medicine is a bitter pill that can only have its most acute side effects treated through forbearance. Blaming profiteering doesn’t help fix the problem.
Ending trends from the pension triple-lock, proportional living wage hikes, and new environmental fees would help. The government has probably lost already.

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Jun 27

Daily Brief Macro: Everybody Wants Bitcoin! and more

In today’s briefing:

Everybody Wants Bitcoin!
The Week That Was in ASEAN@Smartkarma – Rationalizing Grab, Bank Rakyat Rising, and Big C Retail IPO
EM BY EM #10 2021 in Reverse: Will EM Central Banks Outsmart DM’s Once Again?
Soybeans Spike Due to Weather Worries – The Credit Crunch Isn’t over Yet

Everybody Wants Bitcoin!

BlackRock is feeding Bitcoin animal spirits. The last time the SEC rejected a product offering from the ‘inventor’ of iShares was in 2014. BlackRock has a success ratio of 99.8%.
The SEC’s main objection to approving a physical Bitcoin ETF has always been ‘price manipulation.’ Hence, BlackRock has entered a ‘surveillance-sharing’ agreement with Nasdaq
We updated our Bitcoin as a gold-like insurance premium scenario analysis to provide estimates about Bitcoin’s future price.

The Week That Was in ASEAN@Smartkarma – Rationalizing Grab, Bank Rakyat Rising, and Big C Retail IPO

By Angus Mackintosh

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 South East Asia.
The past week saw insights on Grab Holdings (GRAB US), Bank Rakyat Indonesia (BBRI IJ), Big C Retail IPO, JMT Network Services (JMT TB), and Thonburi Healthcare Group (THG TB).
There were also insights on Indonesian property, South-East Asian Plantations, Ace Hardware Indonesia (ACES IJ), and leading Indonesian diagnostic player Prodia (PRDA IJ).

EM BY EM #10 2021 in Reverse: Will EM Central Banks Outsmart DM’s Once Again?

By Emil Moller

EM’s were the first movers in this hiking cycle that is coming to an end
We think there is a decent chance they will be ahead of the curve once again
But this time around it will probably be the commodity exporters who cut rates first

Soybeans Spike Due to Weather Worries – The Credit Crunch Isn’t over Yet

By The Commodity Report

Soybeans spike due to weather worries The worst U.S. Midwest drought since 2012 expanded over the past week despite mild temperatures as a lack of rain across the heart of the American farm belt threatened newly seeded crops.
Below-average rainfall and high winds also exacerbated drought conditions in many regions.
In the early growing stage of the crops, drought can be compensated by more rain in the later stages.

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Jun 26

Daily Brief Macro: Is the Fed Deliberately Engineering A Recession? and more

In today’s briefing:

Is the Fed Deliberately Engineering A Recession?
US Equities and the Real Economy: Large Disconnect Vulnerable to Prolonged Hawkish Fed Policy Stance

Is the Fed Deliberately Engineering A Recession?

By Cam Hui

We rhetorically ask whether the Fed is deliberately trying to engineer a recession. The answer is a qualified no.
The Fed is primarily focused on coincidental and lagging indicators of inflation, which have been sticky, while forward-looking indicators are cooling.
This is leading to an increased risk of recession which many models indicate is on the horizon.

US Equities and the Real Economy: Large Disconnect Vulnerable to Prolonged Hawkish Fed Policy Stance

By Said Desaque

Historically, US equities have frequently displayed a tendency to become disconnected from the real economy, but the order of magnitude since the global financial crisis is unprecedented.
Higher equity valuations will be under threat if the Fed is forced to further alter forward guidance in a hawkish manner due to sticky inflation.
Fed Chair Powell received no political pushback at his semi-annual Congressional testimony on monetary policy to raising interest rates further if necessary.

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Jun 25

Daily Brief Macro: The Weekly Market Monitor – Another Hawkish Twist and more

In today’s briefing:

The Weekly Market Monitor – Another Hawkish Twist

The Weekly Market Monitor – Another Hawkish Twist

That Bank of England had to increase the pace of interest rate hikes so late in the tightening cycle is incontrovertible evidence that the central bank remains behind the curve.
Based on the historical relationship between consumer and producer prices, with a PPI of 1.0%, German headline inflation should be just below 2%
The NASDAQ Index and the US interest rates are diverging rapidly. This is not what is supposed to happen in a discounted cash flow model for growth stocks.

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Jun 24

Daily Brief Macro: EM Growth Funds Raise Out-Of-Benchmark Exposure to Japan and more