Macro

• On 19 November, the Financial Services Commission (FSC) announced major rule changes on corporate mergers and acquisitions have been approved by the Korean government.
• Revised rules have three specific goals: Improve rules on calculating and determining merger prices when M&As take place between nonaffiliated business entities, strengthen disclosure duties, and improve external evaluation system.
• If the Korean government is really serious about making positive rule changes, they need to apply these new laws not just for NON-AFFILIATED companies but more importantly for AFFIILATED companies.

• We went long Taiwan equities end-2023 in expectation of regional outperformance. The TAIEX is up 31% CYTD. It has further to run. Ignore geopolitics, stay overweight equities and the NT$.
• The economic and corporate earnings outlooks are positive. The Taiwanese business cycle is in a broad-based upswing.  Corporate fundamentals are healthy. The investment and credit cycles are strengthening. 
• Meanwhile China dependence is declining.  Exporters are diversifying away, and manufacturers are sensibly hedging against geopolitical risks and the Chinese economy by investing beyond.

• SGX Iron Ore Futures dropped to USD 96.71/ton, down USD 5.49/ton, hitting a low of USD 96.30/ton amid pressure from declining housing prices and industrial output in China.
• Chinese portside inventories increased by 120k tons WoW to 148.51m tons last week, while average daily port discharge volumes rose by 131k tons WoW to 3.18m tons.
• Despite weak economic data from China, SGX Iron Ore Futures may rebound in November-December as pre-Lunar New Year restocking boosts steel demand.

• October’s final Euro area inflation print confirmed its surprisingly steep rise to 2% y-o-y. Strength was not only broad across countries but components with median rates rising.
• Underlying inflation pressures were broadly above expectations and target-consistent levels. Upwardly revised labour cost growth won’t help sustain 2% HICP inflation.
• Confirmed price and wage inflation strength adds to hawkish GDP and unemployment news, curbing the case for 50bp to remain less likely than the dovish market hopes.

• Mining / Cover Story: China digs in to boost mining in Democratic Republic of Congo
• Stabbings /: Eight killed in stabbing at vocational college in East China
• Futures /: Futures firm linked to fugitive tycoon seized by securities regulator

• For H1FY25, the fiscal deficit was only 29.4% of the FY25 target, with strong income-tax, GST and customs revenue. The 12mma of the fiscal deficit narrowed to 4.6% of GDP.  
• Corporate tax revenue grew just 2.3%YoY in H1FY25, reflecting slower profits growth. Stronger government spending likely in H2FY25, but fiscal deficit will still be well below 4.9% of GDP. 
• CAD likely to be 1.3% of GDP in H1FY25. Lower oil prices, stronger G&S exports should allow a small CA surplus in H2FY25, shrinking FY25 CAD to 0.2% of GDP.

• European natural gas market facing uncertainty due to potential end of Russian gas flows through Ukraine
• North American LNG supply delays causing imbalance in global market
• Price relationship between summer 2025 and winter 2526 dependent on weather, supply sources, and storage refill mandates

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

• Donald Trump is committed to reducing energy prices by 50% within a year.
• However, uncontrollable factors may hinder this goal.
• As such, he may only achieve a modest success, if any.

• Welcome back to Macro Regime Watch, where we dive into our nowcasting models to analyze Growth, Inflation, and Liquidity trends.
• Over recent months, we’ve dedicated substantial time to upgrading our models and refining the data we use.
• But the core question remains: how do we interpret the complexities of the macro environment, and how can these insights inform financial market strategies?

• Happy Sunday, everyone! If you can’t show it in a meme, then it’s not true.
• That’s my modus operandi in the research business, and I stumbled upon this tremendous meme of the business cycle and how JPoww and his ilk respond to it.
• This has been the Fed’s operating model for a while: exaggerating the business cycle in both directions.

• Happy Friday and welcome to our weekly Portfolio Watch.
• Many have been puzzled by the weakness in US markets towards the end of the week, with explanations largely pointing to an exhaustion of the Trump trade.
• This trade had been roaring across USD, USD bond yields, USD equities, and Crypto.

• Market fluctuations in CNY and Euro currencies, potential impact of PBOC reaction function and ECB policies
• Possibility of increased pessimism in Europe not fully priced in, with potential for further downside in Euro
• Recommendations for underweight positions on Euro compared to USD, Swiss Franc, and Japanese Yen, with potential for continued market movement

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

• The Ministry of Finance has decided to end the 13% export tax rebate on copper effective December 1st, 2024. Copper semi-producers rely on this rebate to remain profitable. 
• Copper semi-producers might rush to sell their inventory by 1st December when changes take effect, which may affect prices and distort differentials on the SHFE-LME. 
• As long-term bulls, we like Southern Copper (SCCO US); under 100 USD/share, it is worth exploring. We also believe a long LME short SHFE trade in the short-term could work.  

• The past week saw insights on Grab Holdings (GRAB US), Sea Ltd (SE US), Avarga Ltd (AVARGA SP), The Keepers Holdings (KEEPR PM), and Jollibee Foods (JFC PM). 
• There were also insights on Shakey’s Pizza (PIZZA PM) and Bumrungrad Hospital Pub Co (BH TB) plus commentary in the AI push from Indosat and GoTo Gojek Tokopedia (GOTO IJ).
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• OPEC cut its 2024 demand growth forecast by 5.7%, marking the fourth consecutive monthly downgrade, while the EIA and IEA raised their forecasts by 7.6% and 7%, respectively.
• Although the EIA and IEA raised 2024 demand projections, they lowered 2025 estimates. They anticipate an oversupplied oil market in 2025, with supply growth expected to outpace demand.
• The EIA raised Q4 2024 oil price forecasts on geopolitical tensions and inventory withdrawals but cut post-Q2 2025 estimates due to expectations of rising inventories from higher output.

• The US oil and gas rig count fell by 1 to 584 for the week ending on 15/Nov, after remaining steady for three weeks in a row.
• For the week ending 08/Nov, US oil production inched down to 13.4m bpd after remaining at 13.5m bpd for four consecutive weeks.
• US energy producers added two rigs in New Mexico and one in Pennsylvania while cutting two rigs in Texas and one each in Oklahoma and Utah.

• Gold prices have staged multi-year breakouts in multiple currencies, indicating a long-term bullish outlook.
• In addition, gold is on the verge of staging relative breakouts against global equity markets that point to multi-year outperformance ahead.
• The U.S. macro outlook calls for a re-acceleration of inflation, which is also positive for gold.

• Declining political approval ratings were sending a clear message to the Democrats that all was not well during the current post-pandemic economic recovery, notably tight household finances for many.  
• Markets are discounting only 50 basis points of Fed easing in 2025, raising the spectre of criticism about political bias against the incoming Trump administration’s fiscal policy agenda. 
• Chairman Powell will argue that policy is data-dependent. The magnitude of recent easing cannot be justified by incoming information over this period, thereby exposing the Fed to potential flak.

• U.S. equities have surged in the wake of Trump’s electoral victory while stock markets in the rest of the world have been flat to down.
• While the combination of narrowing global leadership and elevated U.S. valuation are concerns, we remain cautious but not bearish on the U.S. and global equity markets.
• Fundamental and macro momentum are strong, and there are no signs of reversal in funding costs.

• Consortium appeals to farmers not to sell below INR 200/kg
• Supply to market expected to fall by 30% in coming days
• Compound rubber imports go up by 47.5% YoY until Sept

• Trump and Powell have had an acrimonious relationship since Trump’s first term and that continues today.
• Trump’s fiscal policies will create crosscurrents for the US economy and run counter to Powell’s objectives as chairman of the Fed.
• Although tariffs can be implemented quickly, they must run concurrently with other policies to restrain their inflationary effects on the US economy.  Other policies will take longer to implement.

• In our inaugural report on Asian Equities, we argue that this asset class is likely to outperform in the medium term, though the near term could be choppy.
• “Republican sweep” in the US could drive near term US equity outperformance. Higher US bond yields and stronger US Dollar could continue to drive foreign outflows in Asia as well. 
• In the long term, far cheaper Asian valuations, favorable growth and demographics and eventual USD moderation driven by gradual Fed rate cuts enthuse us about Asia. Interesting opportunities galore here.

• The US dollar and rates continued to rise over the past week, causing an increase in UK yields despite poor unemployment and GDP data. The possibility of a December Fed cut remains due to US inflation data.
• Bank Indonesia’s decision was the main event in a quiet week for monetary policy decisions.
• UK inflation saw a significant increase due to changes in regulated energy prices. Other awaited data includes flash PMIs and final HICP.

• A review of recent events/data impacting our investment themes or outlook
• In the markets we follow, China, Gold and the JPY most impacted
• Which ones should we fade and where has the trend changed?

• Inflation and monetary policy remain pivotal themes globally.
• Asian markets, despite recent sell-offs, offer medium- to long-term growth prospects.
• Cryptocurrency and fiscal policies warrant closer scrutiny amidst macroeconomic uncertainties.

• China faces more clashes if Trump chooses hawk Rubio as Secretary of State, experts say Rubio, if confirmed, would bring his “bias against China”
• Reporter’s Notebook: Peru unveils Chancay Port at APEC Summit … with a little help from China
• BNP Paribas cuts China investment banking jobs

• For the week ending 08/Nov, US crude inventories rose by 2.1m barrels, surpassing expectations of a 0.4m barrel increase. Meanwhile, gasoline and distillate stocks unexpectedly declined.
• US natural gas inventories rose 42 Bcf for the week ending 08/Nov, exceeding analyst expectations of a 34 Bcf buildup. Inventories are 6.1% above the 5-year seasonal average.
• Occidental beat revenue and EPS estimates by 0.7% and 34.8%, respectively led by higher hydrocarbon output. Analysts upgraded their 12-month PTs on Occidental, Chevron, Exxon, and Halliburton.

• During the period under consideration, i.e. September 12th, 2024, to October 14th, 2024, the EUR/USD pair posted both downward and upward swings.
• In the beginning, it faced a general increase, until September 26th where the pair faced a sharp decrease.
• After that, it fluctuated sideways in a slight but steady downward momentum, and by the end of the period the price traded at a lower level than September 12th. 

• Luxembourg’s economy is projected to show moderate growth in 2024-2026, with real GDP growth rates of 1.26%, 2.68%, and 2.49% respectively, rebounding from a 1.09% contraction in 2023, according to the IMF.
• However, Real GDP per Capita is expected to decrease from €100,065.85 in 2022 to €97,065.86 by 2026.
• Total investments are projected to stay steady at 16-17% of GDP, while Gross National Savings are expected to decline slightly from 25.40% in 2022 to 23.19% in 2026.

• Donald Trump’s victory in the presidential election could be a boon for TikTok, potentially offering the Chinese-owned short-video app a reprieve from the impending federal ban that would cost it one of its biggest markets.
• President Joe Biden signed a bill into law this April that gave a choice to ByteDance Ltd., the Chinese parent company of TikTok — sell the app by January next year or face a ban from the country’s app stores.
• The reason given for the bill was concern that Beijing could access U.S. users’ information and use TikTok to influence citizens — although TikTok denied both claims.

• Following another reasonably hot U.S. CPI report yesterday, it’s time to dust off the old sell-side charlatan chart comparing today’s inflation to the 1970s.
• Honestly, I find this comparison absurd in many ways, as the drivers of inflation are different now.
• Still, there is an interesting resemblance, which got me thinking…Inflation in the U.S. is trending around 3-3.5%, and the Fed has made no progress over the past 3-4 months toward the 2% target.

• We review our current coverage given recent headlines, including potential FX depreciation, trade moves and migration changes.
• Within Consumer, we see most of our covered companies as solidly positioned, as most of these companies have at least a third of their revenues originated in the U.S., with mostly minimal export-import relationship.
• In Cement, our covered companies are also well positioned, supported by their exposure to the U.S. market, with a significant portion of their EBITDA generated in this country.

• This was not about Left versus Right, it was about a generational shift, from the Boomers to Gen X.
• This will then also move the children of the Boomers – the Millennials – down in favour of the next generation, the Zoomers of Gen Z.
• The economy and the markets will now shift in line with their traits and behaviours.

• Premium brands focus on high-value large rims, leaving small-rim markets.
• Factory closures signal overcapacity as brands exit small-rim tire production.
• New players gain ground in small-rim segments in Europe and North America.

• Thailand likely to receive less rains in the coming one-month period  
• Indonesia, Vietnam, Cambodia likely to have above normal rains  
• WMO predicts 60% chances of La Nina developing

• Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.
• This reduction hints at an unwillingness to increase production in the near future.
• Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.

• US inflation’s unsurprising October print should reassure market expectations for a December rate cut after pricing became overextended by post-election exuberance.
• Although the seasonally adjusted rates annualised above the target again, unadjusted rates are trending at dovishly subdued levels, with no headline exceptions since April.
• These numbers are arguably old news but don’t discourage a December cut. The shocks from Trump policies won’t hit until 2025 and pre-empting them seems too presumptive.

• We’re at a critical juncture in sovereign bond markets, with liquidity running razor-thin and the game changing fast.
• German Bunds, traditionally rock-solid, are now trading through swaps and nearing zero on cross-currency swaps (ESTRON/SOFR) – a first in modern market history.
• The takeaway? Major central banks, especially the ECB, are pressing too hard on QT, and the markets are about to hit back hard if they don’t ease up soon.

• Discussion on US elections and Fed policy implications
• Impact of policy uncertainty on calendar spreads and wild card options
• Investor positioning and its influence on various bond contracts

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

• Malaysia’s budget saw the government continue to make minor tweaks to tax and spending, even as the data show that fiscal consolidation is slowing down. 
• The proposed tax-raising measures are too narrowly targeted, limiting their scope to expanding the tax base and raising substantial revenues. 
• Without more decisive action, the government risks missing its deficit and debt targets, which it set under the Medium-Term Fiscal Framework. 

• Private companies ex property developers have seen a small pay down of debt, but the largest remaining portion of non-financial debt ex LGFV is central and local SOE’s. 
• They have low profitability and have shown few signs of increased leverage.  This leaves the onus on fiscal policy.  
• Reports suggests that the LGFV debt swap for local and central government bonds could be Yuan6trn through end 2027, but what is happening to other non-property developer corporate debt?

• SGX IO Futures fell for the second consecutive week, closing USD 4.15/ton lower at USD 101.70/ton on 18/Oct, with a trading range of USD 9.75/ton.
• Short-Term moving averages signaled a bearish reversal, with a downward 9-day moving average and failure to break above key pivot points.
• Heavy selling pressure and expanded China stimulus measures disappointed market expectations, signaling continued bearish trends with a potential test of USD 97.5/ton support.

• Fenix Resources (FEX AU) is a small-cap iron ore miner/logistics provider with massive upside based on an increasing sales profile from 1.3 to 4 million tons over FY25/26. 
• The company is also positioning itself as a logistics provider with the potential to transport 10 million tons of material through the Geraldton Port with its infrastructure in place. 
• Trading at 5.4x FY25e PE with a 1.8 EV-EBITDA, >38% of the market cap in cash, this is a stock worth exploring.

• As agricultural prices have completed their correction, we do not expect more downward surprises in inflation.
• Meanwhile, we estimate energy prices to rise this fortnight because of the withdrawal of summer electricity subsidies.
• As a result, we estimate headline inflation at 0.41% bw, consistent with its historical average.

• Morning from Copenhagen, I spent my Sunday evening in the company of Interpol (the band, not the police, doh!), allowing myself a day off for once after the big announcements we made last week.
• As a result, Steno Signals was released this Monday morning instead.
• The recent repricing of EUR rates versus peers is extremely interesting, as the ECB is suddenly considered the only G3 central bank with a feasible path to 50bp cuts.

• Stimulus / Cover Story: China tries new tack to spur economic growth through stimulus effort

• High-speed railway /: The view from Indonesia’s China-built high-speed railway, one year on

• Export /Caixin explains: China’s new export controls and how they will work

• Morena’s political dominance has strengthened with Claudia Sheinbaum’s election and judicial reforms, allowing them to shape the Supreme Court.
• This boosts their ability to push controversial policies, like state control of Mexico’s energy sector.
• However, economic slowdown and potential U.S. political shifts, such as a Trump victory, could dampen investor confidence and derail nearshoring momentum by 2025.

• Happy Monday from Copenhagen.
• Our nowcasts of the US economy have proven useful in predicting the direction of incoming macro releases over the past couple of months, accurately capturing both the downtrend in July and the subsequent strength observed throughout September and October relative to expectations.
• The US economy is performing much better than feared at the moment, resulting in stronger equities, higher rates, and a stronger USD.

• In the Mexican housing sector, total sales will continue with their positive trend; however, a mix oriented to the affordable segment and lower land sales will result in margin contractions.
• The sector’s total sales will advance 8%, supported by higher volume sales.
• In contrast, the sector’s EBITDA is expected to gain 3%, mainly explained by a sales mix oriented to houses with lower prices.

• During the period under consideration, i.e. August 28th, 2024 to September 27th, 2024, the EUR/JPY exchange rate fluctuated between 155.97 and 162.63.
• The MA-10 line was moving above the MA-20 line for the first week, and then it crossed below the MA-20, maintaining a steady downward movement until it crossed over it again on September 26th MA-20 line retained an immovable declining trend throughout the entire period.
• Based on Graph 2, the CCI (red line) was moving in a descending trend at the beginning of the period under consideration but after September 6th the movement changed to the opposite direction, reaching the price of 100 and ending up slightly above the 50 level.

• Hello everyone, and welcome back to our positioning update.
• The big theme in markets currently is how markets are responding, positioning-wise, to the dwindling momentum in Chinese equities, and which geographies that money is being moved to now that the China story is slowly but surely fading.
• Today’s briefing on the outlook for the property market was, once again, a disappointment, and it seems like China is boosting supply to solve a demand problem, likely because they are focusing more on their annual 5% GDP growth target than on solving the structural issues at hand.

• Misconception that China’s stimulus was a panic move due to economic crisis
• Obsession over the size of the stimulus package without considering policy approach
• China aimed to boost confidence and avoid doom loop through stimulus measures, including support for the stock market

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

• The USD has regained ground alongside USD rates since the 50bp from the Fed in September, which reignited both growth- and inflation expectations simultaneously.
  
• The conundrum around Fredi9999 pushing Polymarket towards making Trump a large election leader in betting markets is likely partially (but obviously not fully) linked to this surge of the USD and USD inflation expectations as well, and we note that bond yields and inflation expectations have disconnected from traded commodity markets over the past 2-3 weeks accordingly. 
• The stronger USD has wreaked havoc with cross-market positioning in many ways, with USD still being underweight across our positioning gauges, but we doubt that the inflation story has got legs here unless it is a clean sweep for The Donald in early November, given the current price action in inflation-linked markets.

• The US elections, excluding the Senate, are currently very close.
• There are four potential outcomes, each with a probability of 20% or higher.
• The scenarios suggest that a Trump administration would have a greater ability to implement its agenda than a Harris administration.

• The past week saw insights on Siloam International Hospitals (SILO IJ), Global Digital Niaga (BELI IJ), Delfi Ltd (DELFI SP), Bangkok Bank (BBL TB), and Dyna Mac Holdings (DMHL SP) 
• There were also macro insights on Indonesia and Thailand and further insights on Sai Gon Cargo Service (SCS VN), Top Glove Corp (TOPG MK), and Airports of Thailand (AOT TB).
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• RBI’s failure to cut the policy rate at its last two policy meetings is a policy error. Although vegetables caused a headline-inflation spurt, core inflation moderated to 2.7%YoY in Sep’24. 
• High real interest rates have caused real GDP to decelerate to 6.7%YoY in Apr-Jun’24, and industrial output to decline in Aug’24. The policy error is hurting the economy. 
• Cleverer stance would be to take every opportunity to cut rates when headline inflation is at/below target. When vegetable prices hold policy hostage, it hits investor confidence. (Evidence: FX Reserves).  

• Inventory lowest since February 2024
• Arbitrage widens for African and Indonesian rubber
• Expansion in imports & exports in August

• China’s Corn Under Extreme Weather Threat China’s corn production is currently under pressure due to extreme weather events in the country.
• Still, as it seems this might not be enough to even lift prices up a little bit. Local prices have ticked higher since the end of September, but they’re still close to four-year lows.
• Stockpiles of corn are plentiful, and demand is currently sluggish as the second-largest economy of the world battles its own economy demons at the moment.

• WTI futures dropped 9.1% for the week ending 18/Oct, driven by easing Middle East tensions and mounting concerns over China’s slowing economy.
• WTI options Put/Call volume ratio remained flat at 0.52 compared to last week (11/Oct), as put volume dropped by 22.6% WoW and call volume fell by 21.3%.
• WTI OI PCR fell to 0.74 (18/Oct) from 0.76 last week. Call OI fell by 13.2% WoW, while put OI dropped by 15.4%.

• US natural gas prices dropped 14.2% for the week ending 18/Oct, marking a third consecutive weekly decline due to milder winter forecasts and the lingering effects of Hurricane Milton.
• Henry Hub Put/Call volume ratio shot up to 1.54 (18/Oct) from 0.69 (11/Oct) the previous week as put volumes increased by 81.3% WoW, while call volumes fell by 18.4%.
• Put OI rose for contracts expiring in November, April, and May, while call OI increased for December, January, February, and March expiries.