In today’s briefing:
- EM Gold Rush: The pressure valve amid Asian FX debasement risks?
- 5 Things We Watch – Rates Pricing, Bond Positioning, Equities Setback, USD Wrecking Ball…
- Asia Ex-Japan Q1 Performance & Attribution: Strong Start for Active Managers
- BoE Should Move Behind the Fed and ECB
- Australia Unemployment Rate 3.84% (consensus 3.9%) in Mar-24
- GEM Funds Outperform in Q1. Long-Term Active Vs Passive Performance Compelling.
- Scandi Watch: Assessing the path for SEK and NOK rates
EM Gold Rush: The pressure valve amid Asian FX debasement risks?
- Welcome to this week’s edition of our EM-focused weekly editorial.
- This week, we’ve decided to look into the reemerging weakness in Asian FX, and how this corresponds with the still strong momentum in gold prices.
- Gold rallies have historically coincided with a weaker USD.
5 Things We Watch – Rates Pricing, Bond Positioning, Equities Setback, USD Wrecking Ball…
- Macro is truly back with central banks and pricing of policy rates back on the top priority list amongst traders and investors.
- Powell’s remarks from yesterday confirmed fears of the Fed deviating from their promised rate cuts back in December, and the question will now be, whether they will cut rates at all.
- A pivot from a pivot is tough, but it might be exactly what’s going to happen.
Asia Ex-Japan Q1 Performance & Attribution: Strong Start for Active Managers
- Strong start to 2024 as majority outperform: Average returns of 3.3% beat the iShares Asia Ex-Japan benchmark, with 66% of funds outperforming.
- Technology Sector Drives Returns: Taiwan and South Korean Tech contribute the most to returns, whilst China Financials and Healthcare drag on performance.
- HDFC Bank and AIA Group costly: Both stocks are among the top overweights among Asia Ex-Japan investors. Poor performance this quarter cost managers ~ 50bps in losses versus the benchmark.
BoE Should Move Behind the Fed and ECB
- Hawkish surprises in the UK and US data pushed back rate cut pricing. Dovish comments from Bailey still weigh on BoE rates, inappropriately keeping pricing below the Fed.
- Underlying inflationary pressures are worse in the UK, where wage growth is persistently high and not backed by productivity, causing the UK’s services inflation to be higher.
- Prevailing policy settings don’t seem set to drive down UK inflationary pressures before the US. Unemployment is trending similarly, suggesting similar monetary tightness.
Australia Unemployment Rate 3.84% (consensus 3.9%) in Mar-24
- Australia’s unemployment rate in March 2024 increased slightly less than predicted, showing relative stability in the labour market.
- The 3.84% unemployment rate is still higher than both the one-year and long-term averages.
- Employment decreased, indicating a weaker demand in the labour market.
GEM Funds Outperform in Q1. Long-Term Active Vs Passive Performance Compelling.
- Strong start to 2024 as majority of GEM funds outperform: Average returns of 2.8% beat the iShares MSCI EM ETF by 0.66%, with 63% of funds outperforming.
- Technology Sector Drives Returns: Technology sector the key contributor to returns, with TSMC accounting for just over half of total fund returns on the quarter.
- Active vs Passive: Q1 performance adds to GEM active fund’s impressive record of outperformance. 5-year average GEM fund returns are +7.4% ahead of the benchmark iShares MSCI EM ETF.
Scandi Watch: Assessing the path for SEK and NOK rates
- Welcome to a short and sweet Scandi special.
- After years of working at the biggest bank in the Nordics, I have developed a strong understanding of the rate path model of Norges Bank and we have developed a “cheat sheet” that can live track the path, if it was to be hypothetically updated daily.
- The overwhelming conclusion is that the path has shifted in a dovish direction since the MPR-1 meeting in March in contrast to global developments.