Macro

In today’s briefing:

9 Charts on the US CPI Report: Enough Downside to Prompt a Skip !
Labor Watch – Hairdressers and Cleaning Ladies Are Holding the Labor Market Above Water
The Week That Was in ASEAN@Smartkarma – CPALL’s Recovery, ASSA Back on Track, and Amman Mineral IPO
The Case for Oil // Farmer Sentiment continues to fall
Japan @ Inflexion
Don’t Write off Hong Kong as a Vibrant Global Hub
1Q23 GDP Roundup and Outlook: Worst Case Scenario Averted

9 Charts on the US CPI Report: Enough Downside to Prompt a Skip !

The evidence on inflation gathered through the month of May has been extremely dovish
We see a high likelihood of US inflation printing below consensus as the broadening of the disinflation theme has continued through May
The April CPI report was held up by Gasoline and Used Cars – both of which have changed trends since the April report

Labor Watch – Hairdressers and Cleaning Ladies Are Holding the Labor Market Above Water

Taking a look at the recent NFP report, it is evident that the services sector is clearly what holds the labor market up
We are beginning to see the first signs of a dramatic slowdown in the services and manufacturing sector judging by the ISM figures
NFP might not tell the true story about the labor market based on the technicalities of the survey

The Week That Was in ASEAN@Smartkarma – CPALL’s Recovery, ASSA Back on Track, and Amman Mineral 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 CP ALL PCL (CPALL TB),. Adi Sarana Armada (ASSA IJ), Amman Mineral Internasional IPO, Challenger Technologies (CHLG SP), and GoTo (GOTO IJ).
There were also macro insights on Indonesia and Singapore economies, identifying potential cracks plus insights on Mitratel, Merdeka Copper Gold,Bumi Serpong Damai, and Nam Long Investment (NLG VN).

The Case for Oil // Farmer Sentiment continues to fall

By The Commodity Report

Farmer Sentiment continues to fall Producer sentiment fell to its weakest reading since July 2022 as the Purdue University/CME Group Ag Economy Barometer declined 19 points to a reading of 104 in May.
The Index of Future Expectations was down 22 points to a reading of 98 in May, while the Index of Current Conditions was down 13 points to a reading of 116.
This month’s lower sentiment was fueled by drops in both of the barometer’s sub-indices and likely triggered by weakened crop prices, according to the University of Purdue.

Japan @ Inflexion

By Untying The Gordian Knot

Equity: It’s noteworthy that the Japan Index performance is gaining significant attention across several notable platforms, including CNBC and Chinese Wealth Management magazine.
The assets of ETFs listed on Chinese exchanges that track Nikkei 225 doubled in May.
It’s also essential to highlight Overseas investors bought a net JPY 2.7 trillion (USD19.3 billion) in May in Japanese equities/funds with the uptrend in equity prices, recording another month of heavy buying and taking YTD net inflows to JPY 4.1 trillion(USD 29.4 billion), which is quite remarkable.

Don’t Write off Hong Kong as a Vibrant Global Hub

After the travails of dynamic zero-COVID, Hong Kong’s economy is back on the mend. The surge in retail sales and inbound tourism is helping to offset a trade slowdown.
Are Hong Kong’s long-term growth prospects intact? Many of its traditional strengths such as the rule of law, an open society and its allure to global talent are in doubt.
There are, however, new growth opportunities originating from developments in the mainland, particularly the Greater Bay Area, and regional trade integration.

1Q23 GDP Roundup and Outlook: Worst Case Scenario Averted

Global growth continues to hold up, with indicators showing advanced and emerging markets chugging along. The worst fears of a global recession seem to be averted.
The ongoing trade slump, however, darkens the outlook for export-reliant Asia. China’s faltering recovery also means that hoped-for positive spillovers are not forthcoming.
Internal dynamics will dominate the cyclical outlook; continued resilience in private consumption and investments will bolster growth in emerging Asia.

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Jun 12

Daily Brief Macro: Debt Ceiling Deal Means Fed Has Less Control Over US Financial Conditions and more

In today’s briefing:

Debt Ceiling Deal Means Fed Has Less Control Over US Financial Conditions
How the Treasury Refresh May Not Be Catastrophic

Debt Ceiling Deal Means Fed Has Less Control Over US Financial Conditions

By Said Desaque

The most significant feature of the recently signed debt ceiling compromise is the pending resumption of government- guaranteed student loan payments that have been suspended since March 2020.
Compromise debt ceiling agreement gives the Treasury a green light to replenish its General Account balance at the Fed, thereby incurring implications for financial markets and the banking system.
Real economic activity remains resilient despite hype of tighter Fed policy, while financial conditions are not particularly tight and have eased since the concerns about the banking system in March.

How the Treasury Refresh May Not Be Catastrophic

By Cam Hui

The U.S. Treasury market is expected to see a flood of new issuance which would draw liquidity from the financial system and create headwinds for the price of risk assets.
Tthere may be a narrow benign liquidity path for the Treasury account reset if the assets parked at the Fed’s reverse repo facility shift into Treasury paper.
Separately, a review of technical and sentiment conditions indicates that near term risk and reward are tilted to the downside.

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Jun 11

Daily Brief Macro: The Weekly Market Monitor (23) – Fighting Sentiment? and more

In today’s briefing:

The Weekly Market Monitor (23) – Fighting Sentiment?
Out of the Box #7 – A Fistful of Euros – The European Crossroads and How to Trade It

The Weekly Market Monitor (23) – Fighting Sentiment?

Since 1970, there hasn’t been a single time continuing claims were up as they are today, without a recession attached to it.
After being bearish for nearly the entirety of the past 18 months, US retail investors have capitulated. A strong contrarian signal.
And we look at drawdowns and the distance to the 200-day moving average to find cracks in market sentiment.

Out of the Box #7 – A Fistful of Euros – The European Crossroads and How to Trade It

By Emil Moller

Europe is NOT the safe haven Markets treat it like
The inherent contradictions making up the Eurozone come to show in bad times
We are betting distress will start to show in the coming months

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Jun 10

Daily Brief Macro: Breaking Point? The Impending Credit Crunch in America and more

In today’s briefing:

Breaking Point? The Impending Credit Crunch in America
CX Daily: Where Are Chinese Consumers Willing to Spend?
TPW Advisory Friday Musings: Where There’s Smoke There’s Fire

Breaking Point? The Impending Credit Crunch in America

We anticipate that the US economy is either heading for or already in a credit crunch, which will worsen with an additional rate hike from the Federal Reserve.
Very tight lending standards suggest that the decline in loan growth will accelerate in the coming months and quarters.
The upcoming credit crunch will be accompanied by a new default cycle. Yet, high yield bond spreads refuse to reflect even the slightest possibility of this scenario.

CX Daily: Where Are Chinese Consumers Willing to Spend?

Consumption /In Depth: Where are Chinese consumers willing to spend?
AI /: China puts drafting AI law on national legislative agenda
Counterterrorism /: China, Pakistan and Iran hold first trilateral counterterrorism meeting

TPW Advisory Friday Musings: Where There’s Smoke There’s Fire

By TPW Advisory

Given how apocalyptic the NYC skyline looked Wednesday morning it seemed only fitting to use the title above in my comments on BTV’s The Open show later that morning.
However, I wasn’t referring solely to the Canadian forest fires burning well north of us and the resulting smoke over NYC which was something I had only witnessed in Delhi or Beijing.
Thankfully, the smoke has cleared out of NYC joined perhaps by our famed Curtain of FUD (Fear, Uncertainty & Doubt).

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Jun 09

Daily Brief Macro: Navigating the Yield Curve: What It Means for Equities and more

In today’s briefing:

Navigating the Yield Curve: What It Means for Equities, Other Assets, and Recession
EA: Technically in Recession
CX Daily: The March of Chinese Robots Into Domestic Factories
US Debt Watch: Who’ll Absorb the Blow?
RidgePoint Global: Q2- 2023 Outlook
UK 2-10 Yield Curve

Navigating the Yield Curve: What It Means for Equities, Other Assets, and Recession

Based on the historical lag between yield curve inversion and the beginning of a US recession, the next downturn should commence in Q4 of this year or Q1 of 2024.
Our research reveals that all asset classes performed quite well between the start of yield curve inversion and the start of a recession.
None of the asset classes in our sample experienced negative returns between the first inversion and the start of the US recession.

EA: Technically in Recession

By Phil Rush

EA GDP growth extended the disappointment from the initial Q1 estimate by flipping the sign into a 0.1% q-o-q decline, while Eurostat also revised 4Q22 into a fall.
Although technically a recession, the EA is not enduring a typical correction of excesses as employment is still booming. Surveys disagree about the Spring performance.
Activity suffers short-term from real wage weakness, but that is better than the alternative in the UK, where bumper pay deals feed gratuitous second-round effects.

CX Daily: The March of Chinese Robots Into Domestic Factories

Robots /In Depth: The march of Chinese robots into domestic factories
Dam /: China expresses ‘grave concerns’ over Ukraine dam collapse
Compensation /: Wrongfully convicted man seeks $2.9 million in state compensation

US Debt Watch: Who’ll Absorb the Blow?

The recommended issuance presents a weighted average maturity of 9.47 years, which is almost two years further out than seen since Nov/21 and through 2022 and 2023 so far.
All in all, we should expect the USD liquidity to shrink at a pace around $150bn a month.
We expect that the effects from the ON RRP will lessen the blow for equities and other risk assets.

RidgePoint Global: Q2- 2023 Outlook

By RidgePoint Global

Geopolitics — Russia’s war in Ukraine enters dangerous spring
China — Unconvincing growth as tensions mount
Climate — Green investing rises despite ESG blowback
Digital Assets — Banking crisis didn’t kill crypto

UK 2-10 Yield Curve

By Untying The Gordian Knot

UK two-year gilt yields backed off from the Quarterly pivot S2 of 4.54% (high 4.58%).
They have since been consolidating, but dips in yields have seen bond selling.
A close above 4.54% would signal that the next phase of higher short-term yields has likely resumed.

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Jun 08

Daily Brief Macro: Korea Eliminates Foreign Investor Registration Requirement: Impact on the Korean Stock Market and more

In today’s briefing:

Korea Eliminates Foreign Investor Registration Requirement: Impact on the Korean Stock Market
The Rise of Private Debt: Seizing Opportunities in a Dynamic Investment Landscape
CX Daily: U.S. Tensions Could Sap Chinese EV-Battery Makers’ Global Ambitions
Macro Regime Update June – Falling Inflation in the Limelight with Wobbly Liquidity

Korea Eliminates Foreign Investor Registration Requirement: Impact on the Korean Stock Market

By Douglas Kim

On 5 June, FSC announced that effective 14 December 2023, it will no longer require foreigners to register in advance with the FSC before investing in listed stocks and bonds.
The elimination of the foreign investor registration requirement will help to reduce the “Korea Discount” which clearly exists in the Korean stock market.
It is uncertain how much foreign capital that could flow into Korea from this change in this regulation. The bigger picture is the eventual inclusion in MSCI Developed status.

The Rise of Private Debt: Seizing Opportunities in a Dynamic Investment Landscape

By Albert Maass

Private debt is a compelling alternative investment asset with higher yields, income stability, and portfolio diversification compared to traditional investments.
It has gained popularity due to low interest rates (at least until recently), the demand for income-based returns, and the diversification it offers to investor portfolios.
Private debt carries risks such as credit risk, interest rate risk, liquidity risk, and other risks. ESG integration is also becoming important in private debt investment decisions.

CX Daily: U.S. Tensions Could Sap Chinese EV-Battery Makers’ Global Ambitions

Batteries /In Depth: U.S. tensions could sap Chinese EV-battery makers’ global ambitions
China-U.S. /: Senior China, U.S. officials meet in Beijing to discuss mending frayed relations
Funds /: Registrations for private fund managers nosedive after new rules take effect

Macro Regime Update June – Falling Inflation in the Limelight with Wobbly Liquidity

Falling inflation is back in the limelight due to a range of soft forward-looking indicators, while liquidity “wobbles along” and remains above levels seen during the autumn of 2022.
In USDs, it is now almost a certainty that liquidity will shrink after the debt deal has been signed.
EUR liquidity will shrink a lot faster than USD liquidity both from a nominal and a relative perspective.

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Jun 07

Daily Brief Macro: Singapore’s Cyclical Outlook Masks Structural Woes and more

In today’s briefing:

Singapore’s Cyclical Outlook Masks Structural Woes
CX Daily: China’s Consumers Are Flush With Cash, So Why Does the Recovery Have the Wobbles?
Indonesia’s Ore Export Bans: A One-Trick Pony?
The State of the US Labor Market – The Good, the Bad, and the Ugly

Singapore’s Cyclical Outlook Masks Structural Woes

Singapore’s cyclical downsides are a worry but are ultimately manageable, with business confidence, labour markets, and regional spillovers helping to offset the slowdown.
Less positive is the structural issue of low productivity growth. A contraction in investments is a sign of further troubles given Singapore’s reliance on capital formation.
Structurally-Entrenched inflation is also threatening to erode economic competitiveness. Stubborn core inflation is a tell-tale sign of unfavourable wage-price dynamics.

CX Daily: China’s Consumers Are Flush With Cash, So Why Does the Recovery Have the Wobbles?

Economy /Cover Story: China’s consumers are flush with cash, so why does the recovery have the wobbles?
Ukraine-Russia /: Russia, Ukraine open to peace talks but obstacles remain, China’s peace envoy says
Debt collection /: Chinese debt collector suspends business after police raids

Indonesia’s Ore Export Bans: A One-Trick Pony?

Jakarta’s claims of the nickel export ban’s success should be taken with some skepticism, given that the increased activity was induced by massive policy largesse and regulatory favours.
Contrary to its aspirations, “downstreaming” increases Indonesia’s exposure to commodity risks, especially if global moves to reduce nickel use in batteries succeed.
Imposing a similar restriction on bauxite and other minerals may not yield similar results, given the lack of leverage Indonesia has in those respective markets.

The State of the US Labor Market – The Good, the Bad, and the Ugly

The good: payrolls, ADP, initial jobless claims, job opening, and wage growth.
The Bad: ISM Services Employment, Permanent Job Losers, and Quits Rate
The Ugly: Average Weekly Hours, Continuing Jobless Claims, the Fed Tightening Cycle

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Jun 06

Daily Brief Macro: Stabilising China’s Residential Property Market Produces Unintended Consequences and more

In today’s briefing:

Stabilising China’s Residential Property Market Produces Unintended Consequences
Political Risk and Investing: Seeking Opportunity Amidst Disruption
Credit Watch – What’s Going on with Credit Spreads?
The Week That Was in ASEAN@Smartkarma – Mitra Keluarga’s Growth, NFCX Leads in 2W EVs and BFIN’s Era
CX Daily: Lower Fares and a Regional Focus Help China’s Private Airlines Win Race to Profitability
AFC Iraq Fund May 2023 Update: “Market Takes a Breather, While the Currency Stabilises”
The World Has a New No. 2 Copper Supplier – El Nino Effects Start to Sink In?

Stabilising China’s Residential Property Market Produces Unintended Consequences

By Said Desaque

Rising stress in China’s residential real estate sector become more evident in 2022. Tough market conditions in lower tier cities will depress national home sales in 2023.
The People’s Bank of China lowered mortgage rates to stimulate housing demand. Removing the national mortgage rate floor on a city-by-city basis has, however, created an uneven funding environment.
Removal of the national mortgage rate floor has benefitted first time buyers, but existing mortgagors have engaged in prepayments to the detriment of banks’ profits and consumer spending.

Political Risk and Investing: Seeking Opportunity Amidst Disruption

By Massif Capital Research

Frequent readers of our blog posts and research papers likely are well acquainted with our underlying philosophy that commodity prices alone do not provide a compelling rationale for investing in real asset businesses
Instead, as a result of decomposing the returns of individual real assets businesses, we have found that these stocks often exhibit a broader range of return drivers
One such driver is political risk.

Credit Watch – What’s Going on with Credit Spreads?

Credit spreads remain low amidst banking turmoil and a weakening economy (despite the job market)
The current risk appetite in the equity space and other markets spills over to credit spreads
Shorting everything cyclical and going long defensives would be THE play if spreads increase

The Week That Was in ASEAN@Smartkarma – Mitra Keluarga’s Growth, NFCX Leads in 2W EVs and BFIN’s Era

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 Mitra Keluarga Karyasehat Tbk (MIKA IJ), NFC Indonesia (NFCX IJ), BFI Finance Indonesia (BFIN IJ), Challenger Technologies (CHLG SP), and Aapico Hitech (AH TB).
There was also an insight on Indonesian macro and insights on PT Avia Avian (AVIA IJ), Saigon Beer Alcohol Beverage (SAB VN), and the introduction of Thai SDRs in Singapore.

CX Daily: Lower Fares and a Regional Focus Help China’s Private Airlines Win Race to Profitability

Airlines /: Lower fares and a regional focus help China’s private airlines win race to profitability
PMI /: China’s factory activity gets back to growth, but recovery remains patchy, Caixin PMI shows
NDB /: BRICS-backed New Development Bank issues record $1.2 billion of panda bonds

AFC Iraq Fund May 2023 Update: “Market Takes a Breather, While the Currency Stabilises”

By Asia Frontier Capital

The AFC Iraq Fund, and the market, took a breather after a great three-month run from the January 2023 lows, during which the fund was up 49.1%, and the RSISX USD Index was up 43.8%.
For the month, the AFC Iraq Fund was down an estimated 11.3%, underperforming its benchmark, the Rabee Securities RSISX USD Index, which was down 8.7%.
For the year, the AFC Iraq Fund is up an estimated 31.2%, outperforming the index’s increase of 24.9%.

The World Has a New No. 2 Copper Supplier – El Nino Effects Start to Sink In?

By The Commodity Report

El Nino effects start to sink in? During last week grain prices saw building up some momentum.
The DSCI drought index also surged after many weeks of continuous declines.
Nevertheless, we should actually see lots of rain during the summer in the US if we’ll see a classic El Nino.

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Jun 05

Daily Brief Macro: Cross Asset Watch – Bye Bye Inflation and more

In today’s briefing:

Cross Asset Watch – Bye Bye Inflation, Hello Lay-Offs? Here Is What to Trade..
A Global Market Review: Risks and Opportunities
A Different Kind of Fed Pivot?
ISM Down, Rates Up, Valuation Ballooning; What Could Go Wrong?
Oil Watch: MBS Vs. Biden Intensifies
Securing the Future: Managing and Regulating AI Risk
AFC Uzbekistan Fund May 2023 Update: Uzmetkombinat Advances Rights Offering
The British Pound Flirts with a 6-Year High
TPW Advisory June Monthly: The Birth Of The New

Cross Asset Watch – Bye Bye Inflation, Hello Lay-Offs? Here Is What to Trade..

Inflation is now waning fast in headline terms in both the US and Europe
Could lower inflation prove to be a trigger for lay-offs?
And which sectors and geographies are likely to perform in such an environment?

A Global Market Review: Risks and Opportunities

By Cam Hui

It’s time to take a quick trip around the world to review the state of global equity leadership. U.S. equities have surged, but the leadership is narrow.
Japan appears to be on the verge of a relative breakout that could become a global leader. The weakness in China may not be as dire as the headlines indicate.
Europe has pulled back, but it remains the global leaders and should be bought.

A Different Kind of Fed Pivot?

By Cam Hui

After a series of staccato rate hikes, the Fed hinted that it was ready to pause.
However, the recent stronger-than-expected April PCE may have changed the narrative from a pause to another rate hike.
We believe that incoming data indicates a further quarter-point rate hike in the near future, either at the June or July FOMC meeting.

ISM Down, Rates Up, Valuation Ballooning; What Could Go Wrong?

The ISM Manufacturing Index fell to 46.9 and reveals clear downside for equities based on the historical relationship.
The US labor market remains way too hot for the Fed and significantly increases the odds of another rate hike even as a massive drop in inflation materializes.
The P/E ratio of Big Tech stocks equals 56, while earnings growth has turned negative in recent quarters. Not the best starting point with the MOVE/VIX ratio >8.

Oil Watch: MBS Vs. Biden Intensifies

Mohammed Bin Salman seems increasingly keen on hitting Bidens chances of getting re-elected
The OPEC+ meeting concluded with a messy deal and the price response is not given
The short-term reaction may likely be even lower oil price before a medium-term rebound

Securing the Future: Managing and Regulating AI Risk

By Albert Maass

Artificial Intelligence (AI) has made incredible progress in various industries, providing opportunities for business growth and innovation while introducing new risks.
AI risk encompasses categories such as cyber risk and operational risk, along with unique dimensions like ethical risk, bias risk, transparency risk, autonomy risk, and long-term existential risk.
While new AI regulations are still being discussed, managing AI risk requires a comprehensive approach, including defining risk, establishing tolerance, conducting assessments, implementing mitigation strategies, establishing governance, and monitoring processes.

AFC Uzbekistan Fund May 2023 Update: Uzmetkombinat Advances Rights Offering

By Asia Frontier Capital

May saw the final announcement for the long-delayed rights offering of Uzbekistan’s largest steel company, Uzmetkombinat (TSE:UZMK), as well as continued broad buying in the stock market, which led the May 2023 fund NAV to rise to an estimated USD 1,804 (+1.6%) or +80.4% since inception on 29th March 2019.
While historical precedent in Uzbekistan’s capital markets has been for state-owned enterprises (“SOEs”) to increase equity capital by selling all new shares to the government at par value, thereby drastically diluting minority investors, since Uzbekistan back in 2018 “re-opened to the world”, this has become a figure largely relegated to the past.
In recent years, SOEs in financial services, consumer goods, and the industrial sectors have been providing pre-emptive rights for minority investors, which is a very basic, but nonetheless positive development in Uzbekistan’s capital markets development as it reinforces the governments focus on improving minority shareholder rights.

The British Pound Flirts with a 6-Year High

By ByteTree Asset Management

Who’d have thought that the pound, universally ridiculed by the FT’ies (lefties who read the Financial Times), would be on the verge of a 6-year high? Only the Swiss Franc and the Singapore Dollar, both financial safe havens, are ahead of the pound over this post-Brexit period.
The pound has also been doing well against emerging market currencies, with just the Mexican Peso ahead.
With consistently high real interest rates (rates above inflation), the Mex has been a standout performer, even ahead of the Swiss Franc.

TPW Advisory June Monthly: The Birth Of The New

By TPW Advisory

The past few years have felt very sped up – dealing with the 3Cs of Covid, Climate & Conflict in an Age of Speed will do that.
Now we are thru Covid & past the energy shock and attendant inflation spike, its time to focus on what comes next – the birth of the new.
Birthing something takes time, is often messy and can mess with one’s head.

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Jun 03

Daily Brief Macro: Alpha Generation Through Share Buybacks in Korea: May 2023 and more

In today’s briefing:

Alpha Generation Through Share Buybacks in Korea: May 2023
India: Net Exports and Investment to Ensure 7%+ RGDP Growth as PSBR Moderates
US 10-Year | Jun 2, 2023
Bubble or Breadth: Evaluating the State of the Stock Market

Alpha Generation Through Share Buybacks in Korea: May 2023

By Douglas Kim

In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in May 2023.
We provide a list of 25 stocks in the Korean stock market that have announced share buyback programs in May 2023.
The top five market cap stocks that have announced share repurchases include Hyundai Elevator, DGB Financial, Com2Us, Miwon Commercial, and Jeisys Medical.

India: Net Exports and Investment to Ensure 7%+ RGDP Growth as PSBR Moderates

By Prasenjit K. Basu

RGDP grew 7.2% in FY2023 driven by 10.4% growth in GFCF and 7.5% growth in PCE. Improved terms of trade will boost net exports, ensuring 7.2% growth in FY2024 too.
Services (over half of GDP) have averaged 8% annual real growth for the past 25 years (8.7% excluding the covid year), underpinning growth. Manufacturing set to gain from relocating supply-chains.
With tax (personal, corporate and GST) revenues growing in double-digits YoY, the fiscal deficit (and PSBR) are undershooting official estimates, helping to crowd-in stronger investment spending.

US 10-Year | Jun 2, 2023

By Untying The Gordian Knot

The five-year and ten-year yields have reached significant turning points, correcting their previous overbought positions.
This shift in sentiment has led to a bullish trend in bonds, which are now considered oversold.
The recent Chicago PMI inflation numbers have further contributed to this bond rally.

Bubble or Breadth: Evaluating the State of the Stock Market