Macro

In today’s briefing:

Global Economic Outlook: Shifting Gears to the Downside
US-China: A Thaw Of Sorts Soon But It Will Not Go Far

Global Economic Outlook: Shifting Gears to the Downside

By Said Desaque

The global economic outlook has been negatively due to higher inflation, more hawkish central banks and geopolitical conflict in between Russia and Ukraine.
The depth and duration of slower global growth hinges on the ability of central banks to raise interest rates without materially impacting labour demand.
Elevated inflation creates a high bar for the Fed to suddenly pivot to a dovish stance. Rising service sector inflation raises the risks of the Fed remaining hawkish for longer.

US-China: A Thaw Of Sorts Soon But It Will Not Go Far

By Manu Bhaskaran

US-China relations are moving into a new phase.: A Biden-Xi call is likely to take place soon and could pave the way for an in-person meeting in November.
What the US and China seem to be aiming at is an understanding which ensures that their more intense strategic competition does not lead to unwanted crises or clashes.
What will not change, however, is the increased contestation between the two nations, especially in East and Southeast Asia. Te

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Jul 12

Daily Brief Macro: NPS Sells SK Bioscience and more

In today’s briefing:

NPS Sells SK Bioscience, Naver, & LG Electronics and Buys Kakao Bank, Lotte Corp, & Samyang Foods
Hong Kong’s Next 25 Years: A Great Global Hub with Chinese Characteristics
Asian Monetary Policy: On the Cusp of More Aggressive Tightening
The Week That Was in ASEAN@Smartkarma – Bank Rakyat, Golden Agri, and KBANK Back to MSCI

NPS Sells SK Bioscience, Naver, & LG Electronics and Buys Kakao Bank, Lotte Corp, & Samyang Foods

By Douglas Kim

In this insight, we discuss the recent buying and selling by the Korea National Pension Service (NPS) of Korean stocks.
Of the 176 Korean stocks in which NPS reported changes in ownerships in 2Q 2022, NPS increased its stakes in 115 companies and reduced stakes in 61 companies.
NPS mostly increased stakes in aerospace, defense, construction equipment, and energy sectors while reducing stakes in telecom and tourism related stocks.

Hong Kong’s Next 25 Years: A Great Global Hub with Chinese Characteristics

By Nicholas Chia

Hong Kong’s standing as a great global heart of commerce and finance has taken a knock as a result of China’s tightening grip on it.
There is a risk that its unique positioning as a bridge between China and the world could weaken and talent may leave and governance standards be undermined.
The net effect – it remains a global hub of towering importance but its character will change as it becomes more integrated with China.

Asian Monetary Policy: On the Cusp of More Aggressive Tightening

By Manu Bhaskaran

Inflation in the region is rising with the closing of output gaps, tightening labour markets, supply-side disruptions and elevated food and energy prices.
Governments have come under pressure to respond, at the expense of public balance sheets, through a mix of cash transfers, fuel tax cuts/subsidies, food aid and price controls.
Monetary policy guidance has turned more explicit, with palpable upside risk to rates in the Philippines, Korea and India. Holdouts – BI and BOT – are expected to move soon.

The Week That Was in ASEAN@Smartkarma – Bank Rakyat, Golden Agri, and KBANK Back to MSCI

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 Bank Rakyat Indonesia, Merdeka Copper Gold, Golden Agri Resources, and Kasikornbank plus two insights on the Emperador Inc (EMP PM) Singapore listing.
We also saw insights on Jasmine International, Singapore Press Holdings, Mapletree Commercial Trust, Hwa Hong Corp, and Sri Trang Gloves plus a broad range of sector coverage in Thailand.

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Jul 11

Macro: A Bigger Crash?! and more

In today’s briefing:

A Bigger Crash?!
The Bears Threw a Party But No One Came
China Blinked, But Can It Save the World Again?
Korean Prefs Vs Common: Closing the Gaps on Select Stocks

A Bigger Crash?!

By Michael J. Howell

Global Liquidity Index (GLI) tests a low 29.5 (range 0-100). World economy now in recession
World Central Bank Liquidity even weaker at index of 15.9, with US Fed Liquidity at index 41.6, trailing other policy-makers notably ECB . More squeeze ahead
Risk exposure of investors still too high at index 19.1 (range -50 to +50) given upcoming recession

The Bears Threw a Party But No One Came

Market psychology has taken a sudden shift from bullish to bearish as recession risks have surged, but the stock market has become increasingly numb to bad news.
We interpret this to mean that equities are undergoing a bottoming process.
Downside risk is limited and upside potential is high, though investors should be prepared for some short-term bumpiness.

China Blinked, But Can It Save the World Again?

The China stimulus news may be a catalyst for a relief rally of unknown magnitude.
While a V-shaped recovery is always a possibility, the odds favour a re-test of the old lows in the coming weeks.
The bears aren’t done yet, and the FOMC fear and rally cycle may not be done either.

Korean Prefs Vs Common: Closing the Gaps on Select Stocks

By Douglas Kim

We discuss two positive factors pushing greater demand for Korean preference stocks (value & new government) offset by one major negative factor (market liquidity) this year.
The 28 common shares are on average down 17% YTD versus their preference counterparts which are down on average 17.3% YTD.
The sharp increases in common vs preference shares on Amorepacific Corp, Hotel Shilla, and LG H&H last month may be a bit excessive and the gaps are likely to narrow.

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Jul 09

Macro: So and more

In today’s briefing:

So, Recession?
July Market Thinking

So, Recession?

By The Macro Compass

Amongst the many forward-looking economic indicators I focus on, you will know by now that one of my preferred metrics is my G5 Credit Impulse series: it measures the pace of change of credit creation in the 5 largest economies worldwide and it serves as a very reliable leading indicator (6-15 months lead time) for economic growth and the performance of several asset classes.
Why? Because as our structural ability to deliver economic growth is impaired by weak demographics and stagnant productivity, we learnt that printing money out of thin air works as a (temporary) substitute: the more money we inject in the private sector, the more likely we’ll get a cyclical boost to economic growth.
Slow down that process, and growth will cyclically slow down too.

July Market Thinking

By Mark Tinker

June ended with one of the worst first half performances for capital markets for decades, representing a serious blow to wealth in that both Bonds and Equities have been hit badly.
We continue to believe that the underlying stress is coming from fixed income markets, which remain the key area to watch as they unwind the excess liquidity pumped into them over a decade of QE and more recently at the start of Covid, when the Fed had to inject liquidity to prevent a run on the whole fixed income ETF complex.
At the end of May/beginning of June we saw a few signs of stabilisation only to see them unwind rapidly in the first half of the month.

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Jul 08

Macro: CX Daily: China Takes Another Step to Unshackle Interest Rates and more

In today’s briefing:

CX Daily: China Takes Another Step to Unshackle Interest Rates

CX Daily: China Takes Another Step to Unshackle Interest Rates

Caixin Explains: China takes another step to unshackle interest rates
Uproar over a baby taken during the one-child policy days
Shenzhen codifies living wills, giving terminally ill patients more rights

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Jul 07

Macro: BoE Pressure Eases With Expectations and more

In today’s briefing:

BoE Pressure Eases With Expectations
CX Daily: How Law Professors Take Turns to Serve China’s Courts

BoE Pressure Eases With Expectations

By Phil Rush

The BoE warned it would hike more aggressively if inflation pressures became more persistent. Market pricing levels and responsiveness have fallen, relaxing that pressure.
Consumers are baulking at price rises to the extent that businesses are starting to curb their expectations for future price rises.
Wage settlements appear to have at least topped out and, with rising unemployment, are consistent with the cycle burning out soon. The BoE should not raise its hiking pace.

CX Daily: How Law Professors Take Turns to Serve China’s Courts

Scholars / In Depth: How law professors take turns to serve China’s courts
Forum / China, U.S. urged to manage ‘cutthroat’ competition and avoid war over Taiwan
Flu / Flu epidemic sweeps South China as Covid wanes

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Jul 06

Macro: Emerging Asia – Moving Ahead Despite The Headwinds and more

In today’s briefing:

Emerging Asia – Moving Ahead Despite The Headwinds
Singapore: The Next Generation Leadership Sets Out to Make Its Mark
Japan: The Winner from This Year’s Spurt of Inflation

Emerging Asia – Moving Ahead Despite The Headwinds

By Manu Bhaskaran

First, our baseline view is that the US will avoid a recession and that capital spending there – which has a strong influence on Asian exports – can grow.
Second, we see China recovering in 2023 and adding to Asian export demand. Third, commodity prices are likely to continue supporting several Asian economies.
Finally, there are structural forces which will help promote investment into Asia – supply chain reconfiguration, reforms that improve the appeal to investors and infrastructure spending.

Singapore: The Next Generation Leadership Sets Out to Make Its Mark

By Nicholas Chia

The launch of the “Forward Singapore” exercise provides an opportunity for Deputy Prime Minster Lawrence Wong, the anointed successor to Prime Minister Lee to raise his profile.
The policy priorities of the next generation of leaders can be gleaned from the exercise and it reinforces DPM Wong’s leadership style of consensus building.
A significant departure in the policy priorities of the next administration is highly unlikely, however.

Japan: The Winner from This Year’s Spurt of Inflation

By Prasenjit K. Basu

Given public debt of 248% of GDP, inflation (however generated) is a solid net positive for Japan, boosting government revenue and reducing the fiscal deficit & public debt/GDP ratios.
The depreciated Yen (at a 14-year low at end-June) is a boon for exports and import-competing manufacturers. Despite Kuroda’s jawboning, the Yen is likely to stay weak, boosting Japan’s manufacturers.
The equity market is trading at 14.1x, far below its 10-year mean PE of 21.3x. The dominance of exporters should bolster index earnings. Japan will be a winning equity bet.

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Jul 05

Macro: The Week That Was in ASEAN@Smartkarma – Adaro’s Sustainability and more

In today’s briefing:

The Week That Was in ASEAN@Smartkarma – Adaro’s Sustainability, ROTI’s Diversification, and BUKA.
CX Daily: Overturning of Abortion Rights Lays Bare the Polarization of America

The Week That Was in ASEAN@Smartkarma – Adaro’s Sustainability, ROTI’s Diversification, and BUKA.

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 Adaro Energy, Nippon Indosari Corpindo (ROTI), and Bukalapak, as well as Sea Ltd (SE US), as Tencent‘s lock-up expirres.
There were also insights on Thai Life Insurance (TLI TB) as it heads for IPO, Axiata Group (AXIATA MK) post the Link Net deal approval, and BG Container Glass in Thailand.

CX Daily: Overturning of Abortion Rights Lays Bare the Polarization of America

Cover Story: Overturning of abortion rights lays bare the polarization of America
Communist Party completes provincial reshuffle ahead of national congress
12 bodies recovered after crane sinks in the South China Sea

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Jul 04

Macro: The Seven Reasons Why This Cycle Is Different and more

In today’s briefing:

The Seven Reasons Why This Cycle Is Different
When Does The Pain End?

The Seven Reasons Why This Cycle Is Different

The main reason why stock prices haven’t skidded further in the face of earnings downgrades is because this cycle is different from others.
This has been an extraordinarily rapid rate hike cycle. Not only has the market discounted a recession, it may already be discounting Fed easing in 2023.
The acid test for market psychology will be Q2 earnings season. More immediately, the June Employment Report will serve as another guidepost for the trajectory of monetary policy.

When Does The Pain End?

The market is very worried about falling growth and an inflation rate that’s slow to decelerate.
Few have considered a scenario of a combination of small improvements in supply and demand destruction from higher rates is just enough to soft-land the economy.
The rise of recession hysteria has meant that risk/reward is becoming tilted to the upside for equity investors.

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Jul 02

Macro: CX Daily: How SoftBank Wrestled Back Control of Arm China and more

In today’s briefing:

CX Daily: How SoftBank Wrestled Back Control of Arm China
EA: Inflation Trend Stays for Summer

CX Daily: How SoftBank Wrestled Back Control of Arm China

In Depth: How SoftBank wrestled back control of Arm China
Analysis: China’s ‘zero-Covid’ policy is here to stay despite relaxing of quarantine rules
Charts of the Day: China’s trade deficit with Russia balloons

EA: Inflation Trend Stays for Summer

By Phil Rush

EA inflation continued its trend with another 0.6pp rise to 8.64% in June-22. The surprise pressures are moving back from the core components to energy and food.
Despite the upside headline surprise, Germany undershot our already low forecast, but Spain was beyond even our distant high view. Other countries skew to the upside.
We now forecast a more substantial increase in July to 8.9%, extending the trend further into the summer. The ECB has already committed to responding.

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