Category

Macro

Oct 23
0

Daily Brief Macro: Global Fallout from Strong Dollar Spreads and more

By | Daily Briefs, Macro

In today’s briefing:

  • Global Fallout from Strong Dollar Spreads, but the Fed Does Not Care

Global Fallout from Strong Dollar Spreads, but the Fed Does Not Care

By Said Desaque

  • Strong safe-haven demand for dollars is contributing to currency strength, as well as the Fed’s domestically-focused policy stance. Previous dollar bull markets have enjoyed considerable longevity, thereby suggesting further appreciation.
  • Further interest rate increases by the Fed will accelerate capital outflows from the Asia Pacific region. While large-scale devaluations are unlikely, Asian corporations with dollar-denominated debt face higher financial stress.  
  • High imported energy and food prices have boosted European inflation. The weak euro has tightened European financial conditions due to the rise in dollar-denominated liabilities at banks and corporations. 

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Oct 22
0

Daily Brief Macro: UK: Retail Mourns Funeral with Closures and more

By | Daily Briefs, Macro

In today’s briefing:

  • UK: Retail Mourns Funeral with Closures

UK: Retail Mourns Funeral with Closures

By Phil Rush

  • The hangover from Prime Day deepened to mourning in September as the UK returned to something akin to lockdown with widespread closures for the Queen’s funeral.
  • A worse crash cut another tenth from our Sep-22 GDP forecast to -0.4% m-o-m but leaves Q3 at -0.5% q-o-q in our below-consensus call. October should rebound more.
  • Housing market pains may be the next blow to consumers after surging inflation and rates, as its sharp slowdown looks like a stalling that could easily roll into a crash.

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Oct 21
0

Daily Brief Macro: CX Daily: The Sudden Reversal of the Global Chip Shortage and more

By | Daily Briefs, Macro

In today’s briefing:

  • CX Daily: The Sudden Reversal of the Global Chip Shortage
  • A Chat With The Top Macro Hedge Funds

CX Daily: The Sudden Reversal of the Global Chip Shortage

By Caixin Global

  • Chips / In Depth: The sudden reversal of the global chip shortage

  • Hong Kong / Hong Kong unveils new visa, property tax policies to stanch talent exodus

  • Central bank / China’s central bank gets new deputy governor

A Chat With The Top Macro Hedge Funds

By The Macro Compass

  • This crispy European gentleman is somebody with a long history in global fixed income strategy and fund management who now runs a rates & credits focused macro hedge fund. ‘‘Alf, where is the trade?’’
  • I love this – you can chat macro narratives all you want, but where is that good risk/reward trade we all look for?
  • He sees the world healing from inflationary pressures: the global supply chain is easing, core goods inventories abound while new orders remain weak, a big deleveraging in China is likely to keep that demand engine at bay etc.

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Oct 19
0

Daily Brief Macro: CX Daily: The Sweeping Impact Of New U.S. Semiconductor Restrictions and more

By | Daily Briefs, Macro

In today’s briefing:

  • CX Daily: The Sweeping Impact Of New U.S. Semiconductor Restrictions

CX Daily: The Sweeping Impact Of New U.S. Semiconductor Restrictions

By Caixin Global

  • Cover Story: The sweeping impact of new U.S. semiconductor restrictions

  • Xi calls on Communist Party to build modern socialist China by mid-century

  • Hong Kong may deploy BioNTech’s omicron-specific shot next spring

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Oct 18
0

Daily Brief Macro: Indonesia: 2024 Presidential Election Is Shaping Up Into A 3-Horse Race and more

By | Daily Briefs, Macro

In today’s briefing:

  • Indonesia: 2024 Presidential Election Is Shaping Up Into A 3-Horse Race
  • China: Stimulus Is Flowing Through, But Challenges Abound
  • Singapore Monetary Policy: Another Move In April 2023 Looks Likely
  • The Week That Was in ASEAN@Smartkarma – TAC, Sea Ltd, and SCG Packaging
  • UK: Fiscal Oh-Turn
  • The Commodity Report #73

Indonesia: 2024 Presidential Election Is Shaping Up Into A 3-Horse Race

By Nicholas Chia

  • Three key factors will shape the 2024 race: First, the qualities that the candidates themselves bring to the contest.
  • Second, political parties are re-positioning themselves for the 2024 elections. The Gerindra party moved first to nominate Prabowo as its presidential candidate, while non-aligned parties did the same with Anies. 
  • The popular incumbent President Jokowi retains sufficient political clout to have a strong say. He will want to ensure that a candidate who will preserve his reform agenda succeeds him.

China: Stimulus Is Flowing Through, But Challenges Abound

By Nigel Chiang

  • China may finally be inching towards a turnaround, according to the latest data. 
  • The recent monetary data show that stimulus is finally flowing through to the real economy.
  • But whether that is sufficient to offset weak demand, real estate sector weakness and zero-Covid measures remains moot.

Singapore Monetary Policy: Another Move In April 2023 Looks Likely

By Manu Bhaskaran

  • The MAS tightened monetary policy again, responding forcefully to inflationary pressures which have clearly intensified since the off-cycle monetary tightening in July. 
  • Further tightening in April 2023 or even earlier in another off-cycle meeting cannot be ruled out as multiple upside risks to inflation remain, from wage pressures and imported inflation.
  • The SGD1.5bn package to help lower-to-middle income groups cope with inflation will add to inflationary pressures too.

The Week That Was in ASEAN@Smartkarma – TAC, Sea Ltd, and SCG Packaging

By Angus Mackintosh

UK: Fiscal Oh-Turn

By Phil Rush

  • The embattled UK government has binned almost all its announced tax cuts and its policy platform. Most were reversing previous hikes, so policies go full circle. 
  • Household energy prices will surge for at least some in Apr-23. We hope it will merely cap the units of cheap energy to avoid stoking inflation statistics and monetary policy. 
  • Cancelling fiscal stimulus reduces hawkish pressure on the BoE. It does not negate the realised volatility discouraging UK investments nor fix the macroeconomic outlook.

The Commodity Report #73

By The Commodity Report

  • Respect the trend – inflation continues to trend down but also continues to surprise on the upside in terms of analysts’ expectations.
  • Getting inflation back into the target corridor will be a slow and painful process as inflation is broadly driven by the components of shelter, transportation services, medical services, and not only food and energy, which get the most headlines in the newspaper.
  • On the other hand, we’re on the right track, as the YoY comparisons have declined since July.

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Oct 17
0

Daily Brief Macro: How Bears Turn Into Bulls and more

By | Daily Briefs, Macro

In today’s briefing:

  • How Bears Turn Into Bulls
  • Why The Pivot May Be Closer Than You Think
  • Lack of Labour Market Slack and Preserving High Operating Margins Precludes Fed Policy Pivot
  • A very British Coup
  • Time and Momentum

How Bears Turn Into Bulls

By Cam Hui

  • The U.S. market is undergoing a change in market leadership.
  • Leadership change can be indicative of a long-term bottom process as the old leaders falter and the new leaders take up the baton.
  • The market is also very oversold and it is poised to undergo a bear market rally. 

Why The Pivot May Be Closer Than You Think

By Cam Hui

  • Market conditions may be on the verge of triggering a pause in the global hiking cycle.
  • Possible contagions from uncertainties in the gilt market and euro area bonds, lack of liquidity in the onshore and offshore USD market that increases financial stability concerns for central bankers.
  • A monetary policy pivot may be far closer than the market expects.

Lack of Labour Market Slack and Preserving High Operating Margins Precludes Fed Policy Pivot

By Said Desaque

  • Looming weakness in the housing sector is not sufficient for a Fed policy pivot. The current state of labour market conditions precludes the existence of significant supply slack.
  • The recovery in the participation rate of prime-aged workers means that an important safety valve for wage inflation is absent. Upward pressure on wages could persist, while productivity may suffer. 
  • Operating margin forecasts remain optimistic due to the envisaged ability of companies to pass-through higher input costs via price increases, an outcome which will slow the return of price stability. 

A very British Coup

By Mark Tinker

  • The marvellous British word ‘defenestration’ is seemingly only ever used when a politician is metaphorically thrown out of the proverbial window and as such will doubtless be all over the UK press in the next few days as Chancellor Kwasi Kwarteng loses his job and the administration of Liz Truss hangs by the proverbial thread.
  • Already arch Remainer Jeremy Hunt has been appointed in his place and will doubtless be working assiduously to unpick any policy that might offer the UK any competitive advantage over the EU.
  • To pick up on the title of Chris Mullin’s political thriller, this has been a very British Coup, engineered by the Remain establishment that has, until now, been frustrated by a brief flurry of democracy (the Brexit referendum) and the rules of the Conservative Party that elected first Boris Johnson and now Liz Truss.

Time and Momentum

By Mark Tinker

  • A very helpful and nuanced article from the Wall Street Journal about the CCP conference starting this weekend is a welcome change from the China-phobic rhetoric that had become increasingly dominant in the US, in particular the marking of US claims about China as exactly that, claims, rather than presenting them as ‘fact’.
  • However, as usual, it has something of a laundry list of what is ‘going wrong’ in China, including on the one hand the fact that youth unemployment is high, as well as the fact that the population is set to shrink – when the latter is actually a ‘solution’ to the former.
  • For us though, perhaps the most interesting statistic was that he has “appointed all but seven of the 281 members of the Communist Party’s provincial-level Standing Committees as of June”, confirming our earlier thoughts about his consolidation of power, and by extension his ability to obtain a third term.

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Oct 15
0

Daily Brief Macro: CX Daily: What to Look Out For at the 20th Party National Congress and more

By | Daily Briefs, Macro

In today’s briefing:

  • CX Daily: What to Look Out For at the 20th Party National Congress
  • Danger UXB

CX Daily: What to Look Out For at the 20th Party National Congress

By Caixin Global

  • Caixin Explains: What to look out for at the 20th Party National Congress

  • China has no timetable for easing ‘zero-Covid’ policy yet, top epidemiologist says

  • Former South China city disease control chief gets 10 years behind bars for graft

Danger UXB

By Mark Tinker

  • Danger UXB was a British TV series about a company of soldiers dealing with UXBs, or Unexploded Bombs, left in London after the Blitz.
  • Made in the late 1970s it will doubtless be familiar to BoE governor Andrew Bailey and certainly the former Deputy Governor Andy Haldane, whose presentation given back in 2014, highlighted the problems of regulations like FRS 17 moving risk back from those most able to take it (the financial system) to those those least able to – pension fund sponsors and pensioners.
  • In particular he discussed how asset allocation was being driven further and further out of equities and into low yielding bonds and how the tendency would be to buy more bonds as rates fell, creating an overshoot.

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Oct 14
0

Daily Brief Macro: The Pension Funds Drama Explained and more

By | Daily Briefs, Macro

In today’s briefing:

  • The Pension Funds Drama Explained

The Pension Funds Drama Explained

By The Macro Compass

  • The size of the global pension fund industry is estimated to be in the $35-40 trn area.
  • It’s a very large and systematically important industry not only because of its size, but also because of its social impact – most of us look forward to retirement after decades of hard work.
  • We recently got some scary headlines coming from the UK: pension funds were about to blow up, and the Bank of England had to backstop them by limiting the relentless rise in 30-year yields.

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Oct 12
0

Daily Brief Macro: China: Capital Flight Limits Easier Money Amid Spreading Crisis in Property Markets and more

By | Daily Briefs, Macro

In today’s briefing:

  • China: Capital Flight Limits Easier Money Amid Spreading Crisis in Property Markets
  • UK: BoE Pulled Two Ways
  • CX Daily: ByteDance Faces Tough Sell Abroad in Bid to Commercialize TikTok

China: Capital Flight Limits Easier Money Amid Spreading Crisis in Property Markets

By Prasenjit K. Basu

  • Over the latest 12 months, China’s FX reserves declined by US$177bn despite a trade surplus of US$889bn, implying net services/income and capital outflows of US$1.07trn within the past year. 
  • China cut mortgage rates twice in May-Aug’22, but residential property prices declined on a 12mma basis for the first time, & floor space completed/sold declined by the most ever.
  • Amid global monetary tightening, China can’t ease without a further RMB slump. Real GDP will only grow 3% in 2022, with risks to the downside as property/industrial overcapacity are exacerbated. 

UK: BoE Pulled Two Ways

By Phil Rush

  • The UK unemployment rate fell again in Aug-22 to a record low of 3.5% as leaving the labour market remains too attractive a draw. 
  • Vacancies fell further from their highs, but the pent-up demand keeps stoking wages above levels consistent with the inflation target, pulling the BoE to tighten forcefully.
  • Policies are moving fast and breaking things, most visibly in the gilt market. The BoE is pulled to draw a line in the sand and should reconsider QT in November.

CX Daily: ByteDance Faces Tough Sell Abroad in Bid to Commercialize TikTok

By Caixin Global

  • Cover Story: ByteDance faces tough sell abroad in bid to commercialize TikTok

  • Xi briefs Central Committee on Party Congress work report

  • Analysis: How a Chinese mRNA Covid vaccine was approved in Indonesia

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Oct 11
0

Daily Brief Macro: Gap Trades in Korean Prefs Vs Common Share Pairs in 4Q 2022 and more

By | Daily Briefs, Macro

In today’s briefing:

  • Gap Trades in Korean Prefs Vs Common Share Pairs in 4Q 2022
  • Is China Close to a Turning Point?
  • The Game Is On: Malaysia’s Most Unpredictable Election Ever
  • The Week That Was in ASEAN@Smartkarma – Metrodata Electronics, JCNC’s Discount, and SCB in Thailand
  • Malaysia’s Budget 2023: A Sceptic’s Note
  • The Philippines: All Indicators Flashing Green
  • The Commodity Report #72

Gap Trades in Korean Prefs Vs Common Share Pairs in 4Q 2022

By Douglas Kim

  • In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 4Q 2022. 
  • The excessive gaps in the preferred and common shares of Hotel Shilla and GS Holdings could reverse in the next several months, in our view. 
  • We see some attractive longer-term opportunities for Doosan Fuelcell, Amorepacific Corp,  CJ Cheiljedang, and LG Chem, which have especially high discounts for the preferred shares versus their counterpart common shares.

Is China Close to a Turning Point?

By Nigel Chiang

  • Policy support is being ramped up – in the last week, for instance, three additional support measures were announced for the property sector.
  • The PBoC is also stepping up credit provision to favoured sectors by resuming the Pledged Supplemental Lending (PSL) programme with CNY108.2bn of such loans issued to the 3 policy banks.
  • Then, there is growing talk about further relaxation of China’s stringent pandemic restrictions, as they are applied to foreigners.

The Game Is On: Malaysia’s Most Unpredictable Election Ever

By Manu Bhaskaran

  • Three separate coalitions – Barisan Nasional, Pakatan Harapan and Perikatan Nasional – will duke it out. That makes for great uncertainty in a first-past-the-post election system. 
  • Much will hinge on electoral pacts, voter turnout and how tactical the voters are likely to be.
  • The two most likely outcomes are a win by an UMNO-led coalition, or a hung parliament similar to the one dissolved today, although this is subject to considerable uncertainty.

The Week That Was in ASEAN@Smartkarma – Metrodata Electronics, JCNC’s Discount, and SCB in Thailand

By Angus Mackintosh

Malaysia’s Budget 2023: A Sceptic’s Note

By Manu Bhaskaran

  • The budget tabled merely three days earlier may provide some clues to the government’s intentions if it is indeed re-elected.
  • Much of the fiscal consolidation can be attributed to the withdrawal of COVID-era fiscal aid, rather than structural measures to improve government efficiency.
  • Given that the government has attempted a modest contraction in expenditures despite the electoral pressures, our view is that the fiscal stance is broadly appropriate for the economic circumstances.  

The Philippines: All Indicators Flashing Green

By Nicholas Chia

  • In the Philippines, the bottom-up indicators paint a sanguine picture for the economy.
  • Manufacturing held up, labour market conditions improved further, and NPLs trended down.
  • Watch for lagged effects of rate hikes moving forward, with an expected ~300bps in rate hikes this year.

The Commodity Report #72

By The Commodity Report

  • The group announced to cut its output limits of as much as 2 million barrels a day, using current targets as a starting point.
  • While a significant reduction, the impact on global supply will be much smaller because several countries are already pumping below their quotas.
  • Most analysts expect that the real supply cut will be around 700 to 800 bpd.

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