Macro

• Markets are reviewing their outlook about a return to a lower Fed policy rate in a more hawkish manner. Their long-standing secular stagnation thesis could be jettisoned. 
• The Fed’s low estimate for the neutral policy rate (r*) is based on perceived degradation of US economic growth after the bursting of the internet bubble and global financial crisis.
• Higher US short-term interest rates may have been stimulative due to high levels of interest-earning financial assets held by corporations and households, while large budget deficits also support economic activity.

• We peered into 2025 to see how U.S. inflation may evolve, focusing on changes in immigration policy , the evolution in productivity and the effects of the election on inflation.
• Upward pressures on inflation will come from changes in immigration policy and a Trump win. Productivity gains are uncertain and AI-driven gains will take a long time to be realized.
• Such an environment is typical of a mid- or late-cycle expansion. It is bond price unfriendly, and neutral or positive for stock prices, depending how the nominal growth outlook evolves.

• A monthly review of how the markets and our themes are currently performing
• Analysing what went wrong and what went right in stocks and sectors
• Highlighting positions added or removed from the thematic investment portfolio

• We believe the bullish implication of Triple 70 Breadth Thrust triggered on May 6 is still alive.
• The U.S. equity market has just hit a temporary air pocket and should experience a shallow pullback.
• The key risk is how the bond market reacts to a continuing flood of issuance in June, which could put upward pressure on yields and downward pressure on risk appetite.

• While most central banks worldwide are on-hold currently, on average, rate cuts are preferred over rate hikes 
• The easing proportion of EM central banks is greater than that of DM central banks at this time
• The majority of central banks globally are typically inclined toward the policy rate preferences of the Fed and BoE on balance 

• Happy Sunday and welcome to our weekly flagship editorial.
• The inflation progress has stalled, and it is not just a US phenomenon.
• It is spread to Europe and with freight rates rapidly on the rise, we are likely no longer getting any help from goods inflation in coming quarters.

• Hello everyone, and welcome back to our weekly portfolio watch, where we shed light on the most important factors driving our Macro and Crypto portfolio over the past week.
• Macro Portfolio – Reflation bets have lost momentumWe have been banging the drum on a combination of slightly higher prices and a continuation of the rebound in manufacturing on a more global scale, placing bets in broad commodities and cyclical equities like Materials.
• The recent rally in BCOM has however been put to a halt over the past week, and it looks like we are in for a smaller correction in industrial metals, where clustering risks have turned more profound in copper and silver especially, as right about everyone has placed longs in the copper July contract.

• This week we look at Shopee and Lazada as they are investigated for anti-competitive behaviour around logistics, Grab’s OpenAI collaboration, and Cinema XXI (CNMA IJ) as GIC looks to exit. 
• We also look at the increasing focus by governments around Southeast Asia on cheap imports from China, as Thailand joins the through imposing VAT on low-value products previously exempt.
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• EA inflation rebounded beyond expectations to 2.6% y-o-y in May, 5bps above our forecast. Services inflation surged to 4.1%, its highest since Oct-23.
• The upside news in services was broad-based across member states, albeit partly offset by a lesser rebound in energy prices. The consistency of these surprises raises concerns.
• Higher underlying inflation and wage settlements amid falling unemployment are unambiguously hawkish, but the ECB’s data dependence only applies beyond June’s cut.

• Resurgent services inflation surpassed expectations in the May flash, increasing the EA headline rate. Additionally, an unexpected drop in the EA unemployment rate and a wage settlement increase make it difficult for the ECB to reduce rates.
• The ECB has essentially pre-committed to a rate cut on 6 June, meaning recent developments will likely impact future decisions, potentially leading to a hawkish cut.
• The Bank of Canada is also expected to make a rate cut on 5 June, indicating that the ECB will not be the only bank making such a move this week.

• PM Anwar’s effective abandonment of the multi-racial agenda he advocated during his quarter-century in Opposition has led to large net outflows of FPI and FDI, especially in Q1CY24. 
• The trend weakening of the BoP current account was temporarily reprieved in Q1 by a sharp decline in the incomes deficit. Medium-term challenges still pressure MYR, as FX reserves stagnate.
• Cyclical recovery likely to peter out, with structural fiscal deficit at 5.5% of GDP, and scant scope for monetary stimulus. We recommend being Underweight Malaysia, with Penang-linked stocks the exception. 

• Death sentence / Caixin Explains: The extreme graft cases dealt a death sentence without reprieve
• Insights /: Currency diversification can coexist with dollar dominance, vice finance minister says
• Corruption /: China investigates two more ex-financial overseers for corruption

• Li Auto / In Depth: Mega blunder adds to Li Auto’s troubles as Huawei rivalry hots up 
• Insights /Overcapacity: could be repurposed as ‘Chinese Marshall Plan,’ expert says
• Credit /: China’s credit demand sluggish as economic sentiment sours, expert says

• With the release of freight rate data earlier today, there are still good reasons to believe that goods inflation will arrive throughout the summer across USD, EUR and GBP inflation.
• While the exact impact and lags of rising containerized freight prices are yet to be discovered, it’s possible to study which markets will be hit hardest should goods inflation rise through a simple “what-if” study.
• The increase in freight rates seem to have cooled a bit compared to April / early May, but we are still placed around 3-5% in weekly increases across the key routes globally, and the current “no news from Gaza” scenario leaves few arguments as to why the increase should suddenly stop over the coming months, especially given the futures curve hinting at substantially higher freight rates.

• Litigation funding offers third-party financing for lawsuits in exchange for a share of the settlement or judgment.
• It has emerged as an attractive asset class due to high returns and diversification benefits.
• The market is driven by institutional involvement, technological advancements, and the rise of ESG litigation.

• OPEC’s 12-members command 40% of the world’s crude production. Combine that with Russia and its allies, the OPEC+ represents three-fifths of global oil production.
• Although chances of OPEC+ keeping its supply cuts intact remain high, negotiations between the members are expected to be rocky.
• On average, IV eases as the meeting approaches. Post-meeting, IV shrinks further. IV averaging hides extreme moves. Observations over the last 19 meetings exhibit a standard deviation of 10%.

• Record Low Allocations: Real Estate holdings in active China equity funds have plummeted to a new low of 2.51%, with only 76.4% of funds maintaining any position.
• Recent Fund Rotation: Closures by key investors and a downturn in ownership metrics since October last year highlight the sector’s declining appeal.
• KE Holdings Exception: Amidst the decline, KE Holdings (2423 HK) stands out, achieving an all-time high in fund ownership.

• Exchanges / In Depth: It’s curtains for China’s local financial asset exchanges
• Biotech /Caixin Explains: How China is overhauling regulations on genetic resources
• Cyberbully /: Public security official loses lawsuit for online attacks on murdered couple’s daughters

• The nationwide figure was released today at 14.00 CET, and despite headline CPI surprising a tad dovish compared to consensus of 0.2% MoM, we had the right lean on overall price pressures with rates markets clearly viewing the report as hawkish news with the longer end of the yield curve selling off.
• In general regional figures showed a slight dovish surprise in headline terms, which is de facto the mandate of the ECB, but core prices and key components of the HICP basket were not a pleasant surprise for policymakers, which will likely weigh on the rhetoric from ECB in their June meeting.
• Notably we saw a slight hawkish surprise in the HICP figure compared to CPI, as the categories recreation and culture and restaurants and hotels weigh relatively more in HICP compared to CPI, while food prices weigh less.

• Hello everyone, and welcome back to our weekly positioning watch.
• Equities have been dragged higher over the past week after NVIDIA published yet another earnings surprise, and markets were funnily enough buying into other Tech equities on the back of NVIDIAs earnings – strengthening the argument as to why AI / NVIDIA has proven to be a major driver in the equity space.
• Every single time NVIDIA or other GPU companies’ earnings surprise positively, we are witnessing a subsequent boom in the amount of AI related news, which are rapidly increasing at the moment.

• Despite pre-election polls suggesting a landslide win for Modi’s party, lower turnout and a reliance on hard-handed campaign tactics suggest that the election is no walk in the park. 
• With the BJP’s core vote maxed out in 2019, expanding its parliamentary majority will require harder-to-pick fruits beyond its traditional base. 
• While more-ambitious parts of the economic reform agenda may be set back, improved checks and balances in India’s political system is by no means a negative. 

• Welcome to our weekly overview of the most important key figure releases and how to trade them.
• We generally see a week of bad inflation news ahead of us and it will likely continue to emphasize recent trends in EUR (and GBP rates), also relative to USD rates.
• EUR/USD (and GBP/USD) could continue to see support from relative rates as a consequence.

• Welcome to this week’s Great Game after an eventful week in Geopolitics.
• This week we cover four topics:Israel-Egypt border stand-off. Mexican election. Chinese drills around Taiwan.
• Israel-Egypt border stand-off situation: An Egyptian soldier was killed after at minor exchange of fire with Israeli troops near the Gaza-Egypt border on Monday.

• Pension / Cover Story: China’s pension plan faces prospect for change or going bust
• Exports /China facing container shortage as exporters rush to beat looming U.S. tariffs
• Personnel /Chinese foreign ministry promotes long-time spokesperson to vice minister

• Globalisation is unravelling rapidly The timing of the US tariff announcement was clearly political and aimed at voters and producers rather than consumers.
• However, it marks an important shift in unravelling the world of Globalisation, as well as threatening EU unity and exposing the inherent contradictions in believing net zero is a job creating policy.
• The timing of the announcement last week that the US would impose tariffs of 100% on Chinese exports of EVs, as well as varying % tariffs on steel, batteries, solar cells, and critical minerals was obviously political, as many of the key swing states in the upcoming US Election are facing intense competition from China and politicians need to promise jobs in order to get elected.

• Prime Minister Rishi Sunak’s decision to call a general election earlier than expected has some economic and political rationale.
• Despite this, it is likely that Sunak’s Conservative Party will face a significant loss.
• The Labour Party, still affected by the events of 1992, is expected to be the main beneficiary of this defeat.

• South Korean Pivot:  Asia Ex-Japan investors move to overweight South Korea for the first time in our history, SK Hynix and Kia Corp among the beneficiaries. 
• India Fatigue: Despite India’s outperformance and rising fund weights, managers show caution, with nearly 2/3rds of funds underweight the benchmark.
• China All-Time Lows: China & HK fund weights have dropped significantly from 53.5% in 2020 to 34.8% today, just above a 13-year low, signaling a critical juncture for re-evaluation.

• Nothing has changed since our last BMM and the SET has underperformed as expected, declining further to 1,364.5 on 24-May versus 1,398.1 on 28-February.
• Here we suggest on what the SET should do to move forward, now that the SET is seeking a new President. 
• Here are the five to-do list for SET. Read or Not…

• On 27 May, Lee Bok-Hyun (Head of FSC) remarked that short selling of stocks in Korea could resume sometime in 1Q -4Q 2025. 
• The centralized  system to detect short selling of stocks in Korea on a live basis could be completed as early as 1Q 2025.
• The financial investment income tax is likely to be LAUNCHED in January 2025, which could negatively impact the local stock market. 

• The past week saw insights on Kalbe Farma (KLBF IJ), Grab Holdings (GRAB US), Philippine Stock Exchange (PSE PM), Best World International (BEST SP), and PropertyGuru (PGRU US).
• There were also macro insights on Malaysia, Singapore, and Indonesia plus insights on Citicore Renewable Energy IPO, Singapore banks and CrossASEAN Ground Zero on Food Panda, GoTo, and PropertyGuru.
• 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.

• Expectations of an “above-normal” monsoon in 2024 currently help to keep prices for commodities that are in large parts grown in India under control.

• That includes rice as well as sugar prices.

• According to the IRI’s latest ENSO forecast, La Niña becomes the most probable category in Aug-Oct, 2024 through Jan-Mar, 2025.

• The natural gas trade has started to move in recent weeks as the supply side looks constrained again.
• While the current situation doesn’t exactly mirror 2021, there are some similarities when we look more closely.
• Firstly, given the new supply outlook post-energy crisis, we believe there are no fundamental reasons for TTF natural gas to trade in its pre-crisis range.

• The Korea Exchange introduced the Corporate Value Up program on the KIND website. This is a voluntary system aimed at boosting the corporate value of listed Korean companies.
• Five key investment indicators for the 2,400+ listed Korean companies include PBR, PER, ROE, dividend payout, and dividend yield. The detailed data these indicators can be easily downloaded on excel. 
• Corporate Value Up program is a marathon, not a sprint. In this race, the runners (Korean companies) also need some water (such as improvements to dividend/corporate income tax policy).

• Beijing has announced a range of measures to stabilise China’s housing market, including dealing with unsold inventory through government purchases and boosting demand via lower mortgage downpayments.
• A return to the 2016-2020 boom in housing activity is unlikely, while an extended L-shaped period of healing appears to be a plausible baseline scenario.
• Improvement in homebuyers’ confidence will be crucial in achieving a market bottom, particularly lower concerns about the financial health of developers and non-delivery risks for new homes.   

• We are not overly concerned about the capitulation of a prominent Wall Street bear on an intermediate-term basis.
• Stock prices are advancing on stable interest rates and continued economic and earnings growth.
• However, the stock market is showing some signs of bullishness exhaustion and it’s vulnerable to a short-term pullback.

• Key data releases in the upcoming week include PMI data from China, CPI data from Tokyo and Australia, GDP data from India, and Industrial production data from Korea
• US core PCE inflation data forecasted to be 0.252% for April, indicating a possible slowdown in inflation
• Fed expected to delay easing cycle start until September, with recent data showing signs of slowing growth and consumer sector cracks

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

• Market fears production return will impact prices, with Wood McKenzie predicting increase in June production
• Northeast, Permian, and Haynesville expected to see production rebound in the coming months
• Price rally in US market driven by short summer positions, but weather will play a key role in price movements, with heat expected in the coming days potentially mitigating any retracement

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

• It’s been a break-through week for Crypto bros in many ways.
• First, the SEC made a massive u-turn and approved the spot ETH ETF and then Donald Trump fully endorsed the crypto space in his speech at the Libertarian Party forum over the weekend.
• Crypto has broken through to K-street and on top of the obvious positive side-effects, a BTC or an ETH is now becoming a politicized asset.

• This week we look at the sale of Food Panda Taiwan to Uber and what is next for Southeast Asian operations, and we look at the management changes at GoTo.
• We also look at Lazada’s latest capital raising, aCommerce’s results, and PropertyGuru (PGRU US), which slipped back into the red in 1Q2024. 
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• KRX announced changes to KOSPI 200 and KOSDAQ 150 indices. In KOSPI 200, 6 were added and 6 were removed. In KOSDAQ 150, 13 were added and 13 were removed. 
• The six additions to KOSPI 200 had an average share price increase of 17.7% YTD. The six deletions had an average share price decline of 2.5% YTD.
• One trading idea post the announcement of the KOSPI 200 and KOSDAQ 150 rebalances is to highlight the potential underperformers (including 20 lowest market cap stocks in KOSPI200/KOSDAQ150 post rebalance). 

• Welcome to our weekly Portfolio Watch.
• We have had a decent week as our short bet on Utilities has started to deliver, while a continued long bet in technology (and ETH) has been the game in town in the risk asset space.
• The liquidity trajectory is slightly murky over the next 2-3 weeks before a major reversal from mid-June and onwards as the net issuance pace of T-bills will be ramped up again into July tapping liquidity from the ON RRP along the way.

• Malaysia’s CPI inflation in April 2024 remained at 1.8% year-on-year, against the consensus expectation of a rise to 1.9%.
• The current rate is just 0.1 percentage points lower than the one-year average.
• This confirms broader stability at a near-target inflation rate.

• Steno Research PCA model Using a Principal Component Analysis (PCA) model to analyze assets across financial markets provides a powerful framework for investment decisions.
• By mapping out the macro anatomy of a given asset, PCA identifies key trends and underlying patterns that influence price fluctuations and market dynamics.
• In this process, we have defined what we see as the most important global macro factors, ensuring that our analysis is comprehensive and targeted.

• UK inflation was lowered due to falling utility prices, prompting a general election on 4 July. However, the fall and Ofgem cap cut were smaller than expected, leading to a delay in BoE rate cut pricing.
• Indicators suggest that real growth may have peaked and PMIs are expected to seasonally retrace.
• The upcoming week is relatively quiet due to a bank holiday and half-term breaks. The highlight is Friday’s flash HICP inflation data, with a consensus forecast of 2.5%. Colombia is one of the few countries with upcoming monetary policy decisions.

• Indonesia’s President-elect Prabowo Subianto’s impact on the economy is uncertain, with a need for increased foreign direct investment and improved economic strategies.
• China’s steady economic recovery features strong exports and government efforts to stabilize the property market, with a growing demand for wealth management products and longer-term bonds.
• The US Federal Reserve is expected to maintain higher interest rates throughout 2024 due to strong employment and high inflation, contrasting with more favorable borrowing conditions in China.

• Copper markets have been on a tear in recent months and our assessment is that the positive sentiment started when Chinese copper stock data points started supporting the notion that China was “hoarding” Copper concentrate ahead of 1) a devaluation, 2) an overhaul of the electrical grid or 3) a power grab on supply chains for EVs, Solar Panels, Data centers and the likes.
• On top of this, we have seen how US officials have highlighted the option of creating a strategic reserve of Copper Cathode in the US, potentially in response to the stockpiling of refined copper seen in China (chart 1).
• Why is the Chinese copper stock not receding here? That is the question macro-managers and geopolitical pundits are asking themselves daily!

• First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins
• Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap
• Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror

• A weekly review of recent events impacting our investment themes
• Regulators in seemingly global coordination raise margin requirements for certain commodities 
• Federal Reserve talks tough but the ingredients for inflation already baked in the cake.

• Dan Taniba moved to India 25 years ago, transitioning from the startup and venture capital world to public equities in 2007
• Discussion covers challenges of venture capital, investing in India, and the case for public equities
• Conversation delves into India capital’s perspective on various aspects of investing, with examples and personal anecdotes interwoven throughout.

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

• The PMIs probably peaked in the spring, with the US’s jump beyond its peers in May setting it up for a more substantial drop during the summer.
• Residual seasonality from the pandemic-corrupted adjustment factors will likely exaggerate the US payback as part of a softening global story.
• A summer downturn should support the re-emergence of dovish debate in the US, where we still expect a September cut. However, global policy only looks a little tight.

• Singapore’s CPI inflation rate in April 2024 remained steady at 2.7% year-on-year, despite predictions of a decrease to 2.6%.
• This inflation rate is still lower than the one-year average.
• The core inflation rate matched predictions, with no change from 3.1%.

• Freight rates are rising rapidly again, and no news (from Gaza) equals bad news for those hoping for lower goods-inflation.
• Rates on benchmark routes are up 15-20% this week taking the monthly change above 50%, meaning that we are on a path towards doubling freight rates every other month.
• The routes from Shanghai to Europe and the US are both impacted despite the main trigger of the rising freight rates being the combination of a lack of shipping passage through the Suez paired with rising shipping volumes.

• The Bank of Korea has maintained the Policy Rate at 3.5%, consistent with the economic consensus, reflecting caution due to increased upside risks to prices from improving growth and exchange rate volatility.
• The global economic environment, characterized by differentiated monetary policies, geopolitical risks, and volatility in financial markets, will significantly influence future monetary policy decisions.
• Domestically, robust export growth and stable employment have led to stronger-than-expected economic performance. Still, financial stability risks from household debt and real estate financing necessitate a tight monetary stance.

• Hello everyone, and welcome back to our weekly positioning watch.
• Markets have been enjoying the easier financial conditions imposed by a weaker than anticipated inflation print, although yields have found their way back to pre-CPI levels.
• The big ongoing theme in markets seems to be the renewed pressures in commodities, as real world demand for crucial metals like copper and nickel has spurred significant flows into broad commodities.

• There is a chance for a correction in the HK markets as latecomers to the party get nervous
• All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.
• Don’t get bucked off that bull by a short-term correction!

• Asian Decline:  China & HK hits record lows and remains a key underweight.  Australia and Japan near ownership lows and India becomes a key underweight.  Taiwan powers to record highs. 
• Americas Dominance: The United States remains the top allocation and largest country underweight.  Value funds increase underweight in the USA but Growth funds reduce.  Argentina rises at Brazil’s expense.
• EMEA Conviction Overweight: The UK, France, and the Netherlands maintain near-record overweights. France sees some declining interest, while Belgium, Norway, and Finland play diminishing role. MENA underweight grows.

• The RBNZ maintained its policy rate at 5.50%, in line with economic consensus, emphasizing the need for restrictive monetary policy to control inflation.
• Domestic inflation remains above the target range, driven by higher costs in non-tradable sectors; future rate decisions will depend on the pace of inflation reduction and adjustment of inflation expectations.
• Global economic growth remains subdued with variations among trading partners; cautious global monetary policy and labour market dynamics will significantly influence the RBNZ’s future interest rate trajectory.

• Sweden’s unemployment rate in April 2024 dropped by 0.3pp to 8.9%, partially reversing the rise from March.
• The rate remains above the one-year average.
• This indicates ongoing labour market challenges in Sweden.

• UK CPI inflation exceeded expectations again as it only slowed to 2.3% in April amid broad resilience in the core and services. The 3m-o-3m and 6m rates are back above 2%.
• Firms continue to agree and pass through wage increases inconsistent with a sustainable return to the target. UK inflation’s median monthly impulse remains stuck at 3%.
• We still see excessive underlying pressures persisting but recognise the BoE’s dovish bias. It may only postpone its premature rate cut until August on upside news.