Macro

• A weekly review of recent events impacting our investment themes
• Changing consumer preferences impact the Chinese May day  travel data
• Cosnumers in the US and Japan face different issues  with real incomes declining

• Central bank decisions came as expected with cuts or cautious progress towards them, but the Bank of England’s unexpected guidance disrupted predictions and market pricing. An August cut is now anticipated, though there are concerns it could be a mistake.
• Next week, macro data is expected to drive the market more, with US inflation data due on Wednesday, UK labour market data on Tuesday, and ongoing updates on HICP, GDP, and employment around the Euro Area.
• The only notable rate decision expected is from the Philippines.

• We were honestly puzzled by the weakness in Manufacturing PMIs in April as our models pointed in the other direction.
• The timely data delivered by daily congestion numbers point in a positive direction (also adjusted for seasonality), which is typically a strong sign that the lagging consumption numbers (of energy, food and the likes) will see upside.
• The congestion based now-cast from ports, roads and air data sources point to 5-6% YoY increase still and the US truck market demand index rebounded in the first few weeks of May as well after a soft path in April.

• Norway’s CPI inflation decreased from 3.9% to 3.6% year-on-year in April 2024, slightly exceeding market expectations of 3.5%.
• The small decline in inflation was driven by an unexpected increase in core inflation.
• Core inflation was at 4.4%, 0.1pp higher than market expectations.

• Welcome to our monthly flagship asset allocation analysis – the “Macro Regime Indicator”.
• Coming into April, we wrote that “The macro environment is turning worse on both inflation -and liquidity metrics, while the growth variable remains positive (measured by the cyclical manufacturing momentum).
• This leaves us in a classic “QT” environment with less obvious “gung ho” risk taking through April compared to the full-on risk positive environment we have seen over the past 4-5 months as continuously flagged and traded via our allocation tools.”Without the growth parameter being a home-run in our models, we mostly got the April correction right and also capitalized decently well on the liquidity withdrawal and the hot inflation report.

• This week we look at the noise surrounding the entrance of new EV players to Indonesia and suggest that Astra International is well-positioned to face the renewed competition. 
• We also look at CVC’s move on Siloam International Hospitals, Kopi Kenangan’s expansion plans, and Microsoft’s commitment to invest US$1.7bn in the AI space in Indonesia. 
• 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’s monopoly is expected to end next year with the launch of ATS (Alternative Trading System) sometime in 1H 2025 (as early as March) in Korea.
• The company that is responsible for operating the ATS is called Nextrade which was established in November 2022. Nextrade’s ATS received its preliminary approval in July 2023. 
• Korea Exchange has been a money making machine. Although there have been repeated discussions of a potential listing of Korea Exchange in the past decade, this has yet to materialize. 

• US commercial crude oil inventory fell by 1.36 million barrels for the week ending on 3/May, after rising by 7.3 million barrels the week before.
• EIA increased its global liquid fuels production for 2024 and 2025 by 110,000 bpd and 40,000 bpd, respectively.
• EIA forecasts OPEC’s spare production capacity around 4 million bpd through 2025.

• The BoE’s unsurprising decision to maintain the Bank rate at 5.25% was accompanied by rare pushback against prevailing market pricing. MPC members are more dovish.
• June’s outcome will depend on developments in their inflation persistence assessment, including wage settlements where the current data are tracking excessively high.
• That upside seems unlikely to discourage the MPC for long, so we now expect the MPC to start cutting in August but with a pause in February and a risk of a reversal.

• Series of mysterious and unexplained stock market crashes involving major companies like Viacom, Discovery, Tencent, and Baidu
• A little-known family office called Archegos Capital Management led by Bill Hwang is revealed to be the mastermind behind the chaos
• Bill Hwang’s past involvement in hedge fund scandals and illegal activities sheds light on the criminal nature of the implosion of Archegos Capital Management

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

• In the second half of April, headline inflation stood at 0.25% bw.
• In the fourth month of the year, inflation rebounded from 4.42% YoY to 4.65% YoY due to pressures in the prices of some agricultural products and gasoline.
• In contrast, core inflation continued its downward trend, decreasing from 4.55% YoY to 4.37% YoY in April.

• The decision by Bank Negara Malaysia to maintain the OPR at 3.00% aims to balance the need to support economic growth while managing domestic inflation amid complex global economic challenges, including persistent inflation and geopolitical tensions.
• Moderate inflation levels in early 2024 and a positive economic growth outlook underscore the effectiveness of the current monetary policy—however, the policy trajectory links to developments in subsidy and price control measures and global economic conditions.
• The ringgit’s valuation and stabilization are critical concerns for the MPC, influenced by external monetary policies and geopolitical factors, with ongoing strategic interventions to align the currency more closely with Malaysia’s economic fundamentals.

• The anomalous behavior of the unemployment rate bears further monitoring
• The ongoing labor market rebalancing could prospectively result in a higher unemployment rate with a lag
• While the April survey data implies potentially soggy headline growth in 2Q 2024, my weekly recession odds indicator remains relatively benign for now 

• Q1 Performance Analysis for active Global EM funds.  Country/Sector/Stock Positioning relative to benchmark for Global funds
• Spotlight on Indonesia activity among Asia Ex-Japan investors.  Sector Dispersion in USA funds
• Extreme Stock Positioning in UK Small/Midcap funds. Ownership Trends in the Financials sector among MSCI China funds.

• Rate hikes are unlikely to resume unless forthcoming cuts prove premature. Cutting outside recessionary regimes has historically been prone to reversals to higher peaks.
• 1998’s cuts followed a shock that failed to prove recessionary. Fed cuts in 1967 sowed the seeds of a severe inflation problem. Both cutting cycles were more than reversed.
• Independent ECB hikes in 2008 and 2012 were rapidly proven policy mistakes. The BoE’s single 2005 cut was also wrong. Hopes that 2024 is benignly like 1989 may be misplaced.

• The monthly inflation reports have proven to be the catalysts for the repricing of USD rates in recent months and we fear another 1-2 sigma event next week.
• Our calibrated nowcasts have settled on the hottest inflation forecast in town, which will likely prove to be a shocker now that USD duration bets are back in fashion.
• Our nowcasts hint at 0.45% MoM headline inflation and 0.38% MoM core inflation, which is well above consensus at 0.3% MoM for both (see full details in chart 7)The uniformity in the early consensus numbers is striking with right about every analyst on earth expecting a 0.3% MoM print, which has oddly turned into the mechanical monthly forecast every single month.

• The Riksbank reduced the policy rate to 3.75%, motivated by inflation nearing the target amid a weakening economic outlook, with indications of further rate cuts if the favourable inflation outlook persists.
• Based on ongoing economic evaluations, future interest rate decisions will be cautiously managed, with potential additional rate reductions contingent on sustained positive inflation trends and economic stability.
• The central bank remains cautious about inflation risks related to external economic factors and the krona’s volatility, ensuring a responsive and flexible monetary policy to navigate potential economic fluctuations effectively.

• The FSS mentioned it has uncovered 211 billion won of naked short sales by Credit Suisse and 8 other global banks of Korea-listed stocks between 2021 and 2023. 
• The current ban on short selling stocks could be extended to at least 1H 2025. 
• The Korean government’s imposing these large fines on the foreign brokers is sending a message to the foreign brokers to not engage in naked short selling.

• Shipbuilding /Cover Story: U.S. widens China trade fight to shipbuilding which it lost decades ago
• China-France /: Xi looks to cement friendship and enhance trust on France visit
• Hang Seng Index /: Beijing’s show of resolve helps drive Hang Seng on 10-session winning streak, analysts say

• The RBA held the cash rate at 4.35% amid ongoing but moderating inflation, particularly in the services sector, reflecting a cautious approach to ensure inflation returns to the 2-3% target range by the second half of 2025.
• Economic uncertainties, including persistent services inflation, global geopolitical risks, and the effects of previous rate hikes on consumption and economic growth, continue to influence the RBA’s policy decisions.
• The RBA maintains a flexible policy outlook, indicating that future rate adjustments will be data-driven and contingent upon evolving economic conditions and inflation trajectories, with a strong commitment to achieving its inflation target.

• The ‘battle for Labour’s soul’ will be determined by Sir Keir Starmer’s ambition.
• Starmer’s ambition is understated but undoubted.
• The outcome will also be influenced by the Third Way principle that ‘what matters is what works’.

• Philippines CPI inflation in April 2024 was 3.8% y-o-y, lower than the predicted 4.1%, showing a decrease from the previous period.
• The current CPI inflation rate is the highest since December 2023, yet it is 0.72 percentage points below the one-year average, indicating a slower price growth in the economy.
• The inflation rate is also 1.75 percentage points below the long-run average, indicating a significant deviation from the historical trend.

• The past week saw insights on Bank Negara Indonesia (BBNI IJ), Bukalapak,Astra International,Siloam International Hospitals, Bumrungrad Hospital, Multi Bintang Indonesia, Sai Gon Cargo Service (SCS VN).
• There were also macro insights on Indonesia and Vietnam, and a sector insight on Indonesian banks, and a further insight on Sheng Siong (SSG SP). 
• 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.  

• ”Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.”

• With this sentence, the Fed announced the tapering of their QT program last week.

• The Federal Reserve has been running QT (Quantitative Tightening) since mid-2022: this process is aimed at unwinding the multi-trillion Fed bond holdings accumulated during previous QE episodes

• Everything you need to know about the key figures in the week ahead and how we trade them.
• This week we focus on the BoE, the Riksbank, Norwegian CPI numbers and Japanese wage-flation.
• Markets see August as the most likely timing for a cut from the Bank of England and as the March inflation report surprised on the high side of consensus, the services inflation still runs at a 0.4-0.5% MoM pace adjusted for seasonality.

• -30% // Cocoa Bubble Has Busted Just two weeks ago, the most-active contract hit a record of almost $12,000 a ton as the industry grappled with the fallout of severe supply shortages.
• “It’s important to underscore that the recent downturn in cocoa prices is primarily a result of trading maneuvers, not a realignment of market fundamentals,” analysts at Fitch Solutions’ BMI unit said in a note, adding they expect volatility to persist.
• Volatility spiked as bigger margin requirements spurred traders to close out positions, helping to drive aggregate open interest in cocoa futures to the lowest in more than a decade.

• Malaysia’s government announced intentions to hike civil servant salaries by 13% beginning in December 2024. The fiscal impact, we opine, is largely manageable. 
• There are political motivations behind this move; the unity government coalition will be hoping to win brownie points among the Malay-majority civil servant electorate. 
• But this move should not be viewed merely as a populist gimmick, the hikes should be seen as responding to the needs of broader civil service reforms. 

• Freight rates are rising again and it will likely impact USD inflation in Q2 already.
• The Saudis are trying to bring back the oil bulls via keeping the market tight. ‘
• Our models are close to entering a long oil bet again..

• In this insight, we discuss the use of Smartkarma Smartscore system to screen stocks in KOSPI 100.
• For top 50 companies (in KOSPI 100) in Smartscore rankings, their share prices were up on average 7% YTD. Bottom 50 companies had average share price decline of 7.8% YTD. 
• In using the Smartkarma Smartscore system, it may be appropriate to describe it in terms of “WHERE THERE IS SMOKE, STAY AWAY.” 

• Hello everyone, and welcome back to our weekly portfolio watch.
• A slightly positive week for our macro portfolio, which after a couple of days of sell-off in equities have gained ground again after the FOMC meeting Wednesday, revealing the Fed’s intend of lowering the monthly redemption cap on USTs from USD 60 bn. to USD 25 bn.
• The slight dovish narrative is back in market pricing, and the mix of dovish central bank vibes and added liquidity will likely rule markets in the coming weeks, as economic data from the US will continue its run.

• Stock Trader’s Almanac popularised Sell in May and go away. Repeated underperformance of the Dow Jones index during the six-month period from May to October lent credence to this.
• Twenty four years of data (May 2000 to April 2024) confirms the continuation of Nov to Apr outperformance over May to Oct.
• This outperformance gets exaggerated during election years. S&P 500 generated outperformance of 7.27% with Dow Jones delivering 9.18% followed by Nasdaq at 0.52%.

• Fed Chairman Powell offered markets a modestly dovish overview of the policy outlook after this week’s FOMC meeting, notably the more aggressive tapering of quantitative tightening.
• US corporate profit results for Q1 have been respectable compared to the previous decade, but revenue performance has been below par. Operating margins are holding up well.  
• Analysts remain buoyant about the profit outlook for 2024 and next year, despite the Fed’s higher for longer approach, thereby suggesting that equity returns will be largely earnings-driven.

• A review of the main short-term drivers of stock prices, namely interest rates, geopolitical risk and the earnings outlook, are all pointing to higher stock prices.
• Short-Term technical indicators such as breadth and momentum are also bullish.
• The key risk to this bullish outlook is a continued deterioration in banking system liquidity that could pose headwinds to stock prices.

• Iron ore continued to lounge around the 117 USD/ton levels, but there is increased optimism for Iron Ore and The China Property/Auto Stimulus Angle 
• Spreads between 65 and 62 widened to 13.8 USD/ton from 12.6 USD/ton last week, and we expect this spread to build further. 
• The street now widely anticipates the China TSF number between 9-15th of May, which is expected to grow in April at 14.5% YoY on consensus estimates to 1.4 trillion Yuan.

• Happy Sunday from a wet Copenhagen!Let me just admit to it upfront.
• Last week didn’t play out according to my macro thesis.
• The US cycle suddenly showed signs of weakness in surveys, which alleviated some of the pressures in USD rates and in USD versus Asian FX.

• PMI Data: Mixed bag of Purchasing Managers Indices across Asia, with India showing record-breaking strength at 58.8.
• Trade Performance: Recent trade data indicates resilience in China’s exports despite global demand weakness.
• Japan’s Economic Struggles: Japan faces significant challenges, with exports below 2010 levels and key indicators pointing to deep economic trouble.

• A weekly review of recent events impacting our investment themes.
• No surprises at the Fed meeting and relief at no hint of rate hikes despite the data
• Prices Paid in the ISM predicting an uptick in CPI

• US Nonfarm Payrolls shows disappointing growth in jobs, much lower than the anticipated addition of 243,000 jobs.
• April’s print is also lower than the average monthly gain of 242,000 jobs over the previous 12 months.
• Unemployment rate comes in at 3.9%, marginally higher than analyst expectations of 3.8%.

• During the period under consideration, i.e. February 28th , 2024 to March 29th, 2024, the EUR/JPY exchange rate fluctuated between 160.55 and 165.17.
• The MA-10 line was moving above the MA-20 line for the first two weeks, and then it crossed below the MA-20, maintaining a steady movement until it crossed over again on March 22nd MA-20 line retained upward trend throughout the entire period.
• Based on Graph 2, the CCI (red line) was moving downwards at the beginning of the period under consideration but after March 12th the movement changed to the opposite direction.

• The Norges Bank has maintained the policy rate at 4.5%, aligning with expectations and previous forecasts, to control inflation that is still markedly above the 2% target despite a gradual slowdown.
• Economic activity in Norway is slightly better than expected, with resilient employment but continued low growth. Rising international policy expectations and a weaker krone complicate future monetary policy decisions.
• The Committee is prepared to adjust the policy rate up or down, depending on forthcoming economic data, focusing on inflation trends and economic growth rates.

• The Euro area economy narrowly avoided a technical recession in the second half of 2023 and started the new year with mixed macroeconomic fundamentals.
• Although decreasing inflation, solid wage growth, and a robust labor market are expected to boost consumer spending and business confidence, GDP growth rates fell sharply from 3.5% in 2022 to 0.5% in 2023, with private consumption stagnating and investment slowing due to high financing costs and uncertain economic conditions.
• Additionally, exports decreased due to lower foreign demand, although the trade balance remained positive.

• The Fed’s expectations surpassed the September call, leading to a shift from a hawkish to a neutral stance on the market. This change occurred just as a dovish Fed and payrolls emerged. There is still perceived value in using equity options to hedge against potential downside risk.
• Despite positive recent news, the Bank of England (BoE) appears eager to implement cuts. This bias is expected to persist in its decision, although there is no indication that a cut is imminent.
• Notable events include the end of the technical UK recession and rate decisions in Australia, Sweden, Malaysia, Brazil, and Peru.

• Some of the Corporate Value Up program’s initial guidelines proposed by the Financial Services Commission (FSC) were announced today.
• Overall, the initial guidelines were disappointing mainly because they lacked concrete figures with regards to tax incentives for companies that make significant improvements to their corporate governance.
• More concrete measures announced today included recommendations for overlapping parent company listing (split listing) and disclosure recommendations for the majority shareholder’s profit transfer to an unlisted private company (tunneling).

• NPS announced today that it will change its core asset allocation method, which aims to increase its purchase of risky assets including stocks and alternative assets. 
• Under the new system, the proportion of risky assets will increase to 65% of the NPS’ entire fund assets and the remaining 35% will be allocated to the safe assets.
• There is an increasing probability that a portion of the 24.6 trillion won (2.3% of AUM) could get allocated to risky assets including domestic equities. 

• Powell had to give a hawkish message and take the signal from three disappointing CPI reports but did so with a ‘dovish’ flavor.
• The Federal Reserve remains well-positioned to cut rates several times this year, especially now that economic momentum is turning.
• The question is if Powell’s statement reliefs markets from the stagflationary data that have come in recently

• Today’s ‘5 Things We Watch’ will center around tonight’s FOMC meeting, which will not be any surprise to markets looking at the interest rate decision itself, but the Fed is in a difficult position in regards to addressing the path for Fed Funds in 2024, and the rhetoric later today will be key.
• Powell promised 3 cuts in December, but market pricing is increasingly leaning towards no action from the Fed, likely forcing him to pivot from his pivot.
• With the Fed’s position as the big brother in central bank space, the choice of rhetoric will not be an easy task, as the ECB / BoE is hopefully waiting for the Fed to lead the cutting cycle to avoid balancing FX risks on top of inflation, and hawkish rhetoric from the Fed – although probably required to get financial conditions back under control again – could put fuel to the fire in Asian FX.

• Financial markets zigzagged mostly as a result of Chair Powell, to a lesser extent the post-meeting statement 
• The current policy debate is centered on the duration of the prevailing pause and the timing of the eventual rate cut 
• The latest market pricing for dialing back policy over the next three meetings is less than or roughly a coin-flip 

• Property restrictions removed in major cities, continuing the gradual process from the last 6-8 months
• A BIG signal to the market and the public with the relaxation of curbs in Beijing 
• China’s factory output continues expansion and travel data positive for consumption

• Chair Powell decided to maintain Fed fund rates at 5.25%-5.5% sticking to the much expected higher for longer strategy given the reverse direction of travel on rates.
• Forget rate cuts. Those hopes are diminishing. US prediction markets are pricing a 40% chance of zero rate cuts this year.
• Nonfarm Payroll numbers tomorrow will hint at the path of interest rate travel for the rest of the year. Continued strength will melt hopes of rate cuts further.

• Every year, for as long as we can remember, we have written a weekly or a monthly note with some variation of the ‘Sell in May’ trope, so we see no reason to break the habit this year.
• The chart (courtesy of Nick Glydon and team at Redburn Atlantic) shows the steady uptrend in searches for the expression every April over the last 14 years and while obviously there is a ‘usage factor’, it is certainly on a lot of traders’ minds at the moment.
• The historic rationale for the expression comes from the leveraged trading end of the spectrum and tended to reflect the fall in speculative activity in the commodities markets over the summer months and while the speculators have moved heavily into other markets since those days, the seasonal drop off in activity as the head traders head to the beach remains a factor – the juniors tend to flatten the books and keep things ticking over.

• In 1Q-24, the economy accumulated ten quarters of expansion, growing 0.2% QoQ. This dynamism was supported by the growth of commercial and service activities.
• According to the National Statistics Institute, in the first quarter of the year, agricultural activities contracted -1.1% QoQ while industrial activities did it by -0.4% QoQ. These setbacks were more than offset by the 0.7% QoQ expansion in commercial and services activities.
• The latter have been supported by a mix of a strong labor market, record remittances to the country, and the increase in the amount allocated to social programs.

• A sharp rise in market rates drove down equity prices in April. The correlated move was consistent with our suggestion before Easter to hedge the downside with equity options.
• We now believe the front end is broadly flat enough, so we have turned neutral on rates relative to the market despite being more hawkish than the consensus on the BoE.
• The potential for market expectations to overshoot again, extending the bearish trends, means hedging with options may still appeal over selling or hoping for recovery.

• 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

• Hello everyone, and welcome back to our weekly positioning/sentiment overview!Equity sentiment has soured a bit since we last spoke, with broad US traded ETF fund flows sent back into solid negative territory after a stunning start to the year.
• While most of it is due to the tax-season in April, the hawkish repricing of global central banks has also played its part in normalizing the über-bullish sentiment in US equities, with markets now also biting their nails as an ECB June cut is no longer a certainty.
• Chart 1: Rolling monthly US ETF fund flowsAfter a couple of weeks of outflows from XLE, the reflation bet is back on track with around 500 mn.

• The front end has been sufficiently flattened due to continuous rate cuts.
• Despite the potential for limited cuts in the future, rate hikes are not anticipated.
• There’s a possibility that market pricing could exceed expectations before adopting a dovish stance.