Macro and Cross Asset Strategy

1. OVER THE HORIZON: Thematic Review Year-To-Date

By David Mudd

• Our most prominent theme this year has been to BUY HK/China markets.  We are still very bullish on these SECULAR BULL markets.
• We have been Bullish on gold and discussed the asymmetry of its price movements given the global tightening starting in 2021/22.  Gold will continues to benefit from negative real rates.
• We have been Bearish on Japan since publishing Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend on April 2nd.  Japan’s market is facing significant headwinds going forward.

2. Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)

By David Mudd

• Hong Kong Dollar continues to trade at the strong end of its band  resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.
• HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.
• Xtep International (1368 HK) , Xiaomi Corp (1810 HK) and China Education Group (839 HK) all had breakouts to form uptrends.  All are part of the consumption sector in China

3. GEM Funds Underperform in Q3.

By Steven Holden, Copley Fund Research

• Active EM Funds delivered an average return of +6.85% in Q3, underperforming the iShares MSCI Emerging Markets ETF by 0.83%, with 38.8% of funds beating the index.
• Morgan Stanley Developing Opportunity and Aikya Emerging Markets topped the performance charts for the quarter.
• Underweights in Alibaba Group Holding and Meituan, and overweights in SK Hynix and cash holdings hurt performance.

4. HK/China: DOOM AND GLOOM? DON’T GET FOOLED AGAIN

By David Mudd

• As HK/China markets complete their retracements after the best rally in more than a decade, the exaggerated pessimism from the media and analysts returns.
• The government continues to roll out measures to relieve the pressure on the property market in what is a multi-year process with no quick fix.
• Even after a historic rally, the HSI still trades at a significant valuation discount which will narrow in the coming months.

5. China Watch: Time to play briefing bingo again..

By Andreas Steno, Steno Research

• Welcome to our China Watch series, where we look at the Chinese case through the lens of Western investors.
• Tomorrow, we will have another briefing aimed at boosting the property market, which is one of those tricky conundrums to deal with.
• Housing starts have already dropped back 20 years, and the value of unsold homes and projects is sky-high.

6. Steno Signals #121: Whatever It Takes—In the US, but NOT in China

By Andreas Steno, Steno Research

• Happy Sunday from Copenhagen!I spent most of Saturday morning discussing the fiscal briefing with clients.
• Even though I’m admittedly not as actively involved in business with China as I was a few years ago, I still feel relatively comfortable assessing the ramifications of the briefing.
• It was exactly what I feared: a big nothing burger.

7. Portfolio Watch: China needs to deliver, or it could end in tears

By Andreas Steno, Steno Research

• The fiscal briefing in China tomorrow will be crucial, as inflows into the country have significantly diminished in recent days.
• This highlights the need for a constant stream of positive news to sustain the rally.
• Given the expectations building around the message from Chinese authorities, we don’t have high hopes that they will exceed market consensus.

8. The Week at a Glance: No Bazooka from China (Yet) – Over to You, ECB

By Andreas Steno, Steno Research

• The recent Chinese fiscal briefing was underwhelming, as expected.
• China continues to focus on supply-side measures, which remain ineffective in addressing the pressing need for increased demand.
• Instead of stimulating consumption across the economy, China is attempting to incentivize asset demand and reshuffle credit profiles—approaches unlikely to produce meaningful results.

9. Comparison Between China and Japan Debts

By Alex Ng, Fortress Hill Advisors

• China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption.
• Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a structural headwind for China GDP.
• Though China corporate debt/GDP ratio is higher than Japan in 1990, China LGFV debt is 50% of GDP and will be swapped for local and central government debt.

10. CrossASEAN Ground Zero  – Bukalapak, Astra International, OhHaju, and Sea Ltd

By Angus Mackintosh, CrossASEAN Research

• This week we look at Bukalapak, as Emtek increases its direct stake, Astra‘s latest healthcare push into cardiology, and Ohhaju (OKJ TB), Thailand’s latest organic food IPO. 
• We also look at Sea Ltd (SE US)‘s latest move to apply for a digital banking licence in Thailand, which will help to further increase the platform’s regional footprint.   
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

1. HK/CHINA: Market Pullback and Investors’ Cognitive Dissonance

By David Mudd

• The investment community’s response to the historic rallies in HK and China markets over the last couple of weeks unsurprisingly continues to be pessimistic.
• China’s objective of changing market sentiment is beginning to bear fruit as mainland investors open stock accounts at a record pace.  Household wealth has increased by 20T yuan last month.
• Technical market indicators point to continued high volatility during this leg of the secular bull market.

2. Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.

By Rikki Malik

• A correction was natural after the fast, strong move up
• Any detailed fiscal stimulus plan will come from the State Council or the MoF
• Capital market reforms moving in the right direction with continued focus on consumption.

3. HK/China: THE BIG SHORT (SQUEEZE)

By David Mudd

• Although the tech sector in Hong Kong has surged over the last couple of weeks there appears to be minimal short covering in US-listed China tech names.
• The performance of the “Magnificent 5” China tech names has led the rally as we outlined in Hong Kong: The Glass Is Half Full, Time to BUY Beta .
• The combination of of large outstanding short positions and a significant underweight of HK/China in international funds will lead to further upside in the tech sector.

4. Positioning Watch: Hedge Funds Caught in the China Storm, While Retail Investors Keep Piling In

By Andreas Steno, Steno Research

• Hello everyone, and welcome back to our weekly positioning watch.
• What a week it has been in global macro once again, with Chinese equities collapsing earlier this week after the Chinese stimulus frenzy fizzled out.
• However, we are now starting to hear that Chinese authorities are taking matters seriously, planning a new round of stimulus on the 12th of October.

5. Steno Signals #120 – Liquidity and rate cuts are incoming in an already OK economy

By Andreas Steno, Steno Research

• Just a few hours after the release of a much stronger-than-expected jobs report, Goolsbee of the FOMC highlighted the risk of undershooting inflation in the US.
• While Goolsbee is a dovish, soft-leaning member of the committee, it goes to show that you don’t turn around a supertanker like the Fed just because the NFP printed a bit better than expected.
• The Fed has set a direction, and it will take a lot to convince them not to continue cutting interest rates back toward neutral, around 3%.

6. Ministry of Finance Press Conference – First Take

By Rikki Malik

• Heavyweights attended as per previous conferences. Finance Minister (FM) Lan Foan and his three deputies
• Economists’ and market expectations damped down to RMB 1.5 – 2 Trillion in stimulus.
• Some major positive points we believe, but will be a disappointment to some

7. China: Lessons from the 1997-98 Asian Crisis

By Alex Ng, Fortress Hill Advisors

• Overall, the warning from slow real credit growth on reduced credit supply and demand is the main lesson from the Asia crisis 1997-98.  
• China High FX reserves; low borrowing overseas and dominance of domestic investors in Yuan markets argues against a currency crisis. 
• Asia widespread banking crisis are also unlikely to repeat in China, though we see growing stress among rural banks that in the worst case could be a rural banking crisis.  

8. China Economics: Is Beijing Finally Abandoning Policy Inaction?

By Manu Bhaskaran, Centennial Asia Advisors

• Beijing’s latest policy announcements show that it is no longer content with a managed slowdown. They are now committed to more energetic policy support for the economy. 
• Given the slowdown’s entrenched roots, partly due to Beijing’s prior reluctance, we do not think that the current package alone will turn things around. 
• But with Beijing taking the cyclical slump more seriously, further support measures are likely, which, cumulatively, may be sufficient to stabilize short-term economic conditions. 

9. Examining the Bear Case for China

By Rikki Malik

• Change in strategy by the Chinese authorities mean this is more than a trade
• Sentiment, valuations and positioning are still supportive despite the rally
• Overbought conditions in the very short-term and the technical picture is mixed 

10. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 11 Oct 2024

By Dr. Jim Walker, Aletheia Capital

• China’s economic policy remains focused on investment, with low expectations for a significant stimulus from the Ministry of Finance.
• International reserves are generally increasing across Asia, supporting currency appreciation, except for Indonesia.
• Japan’s recent data shows rising cash earnings but declining real wages and household spending, highlighting concerns in the real economy.

1. CHINA: Why so Many Investors/Analysts Got It Wrong and What’s Really Happening

By David Mudd

• HK/China stock markets are re-rating quickly sentiment became overly pessimistic.
• A stock market bottom precedes a property market bottom by years.
• China’s markets have languished due to the government’s focus on supply-side solutions.  That focus has now shifted to include demand-side stimulus efforts as the PBOC Put accelerates.

2. Portfolio Watch: The outlook is brightening into October

By Andreas Steno, Steno Research

• Everything is about the ongoing rally in Chinese equities at the moment, with China now being the best yielding country in the world in equity space after both the PBoC and the Politburo coming through with stimulus proposals, which has caught all China bears on the wrong side of the trade.
• We learned today that the PBoC is cutting the standing lending facility rates by 20 bps, a move not seen since the pandemic broke out.
• They have normally cut the interest rates in the lending facility by 10 bps at a time, so this is likely a sign that they’re truly willing to do something about the slump in growth / real estate.

3. Gap Trade Opportunities in Korean Prefs Vs Common Share Pairs in 4Q 2024

By Douglas Kim, Douglas Research Advisory

• In this insight, we discuss numerous gap trade opportunities involving Korean preferred and common shares in 4Q 2024.
• Among the 27 major pair trades (prefs vs. common shares), 16 of the pref stocks outperformed their common shares counterparts so far this year. 
• The 27 Korean preferred stocks’ average prices increased by 8.3% from end of 2023 to 2 October 2024 (excluding dividends), outperforming their common counterparts which were up on average 5.4%.

4. EM Fixed Income Focus: The impact of geopolitics on EM

By At Any Rate, At Any Rate

• Macro backdrop evolving with upcoming US elections and Middle East tensions impacting EM assets
• Mixed bag on macro side with softer inflation in EM, better revisions in US growth but soft manufacturing PMIs
• China as tiebreaker with further policy support, rally in equities, and implications for Fed and commodities prices; geopolitical risks and US election as wild cards to watch

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

5. China Liquidity Watch: USD easing allowed China to ease, but there is a caveat..

By Andreas Steno, Steno Research

• The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy.
• However, there is one issue: CNY liquidity is tightening now.
• Welcome to our weekly China Watch, where we examine Chinese assets through the lens of Western investors and markets.

6. The Winners and Losers From Central Bank Stimulus

By Cam Hui, Pennock Idea Hub

• Markets have taken on a risk-on tone on the news of global central bank stimulus. Gold has rallied the most as real rates fell, equities rose and bond prices fell.
• But the market’s risk-on psychology appears to be stretched and fragile.
• While the long-term bullish trend is quite real, the consensus is susceptible to reversals should growth disappoint in the near-term.

7. US Rates: Cash on the sidelines or just cash?

By At Any Rate, At Any Rate

• Money fund balances have continued to grow despite Fed rate cuts due to attractive yields relative to other liquidity products
• Most of the cash in money funds is liquidity money, making them a compelling place to park cash
• Money funds tend to see inflows heading into an easing cycle and persist even as the yield curve begins to disinvert or steepen, with outflows only occurring once the curve stabilizes.

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

8. Week at a Glance – Squuuuuuuuuueeeeeeze!

By Ulrik Simmelholt, Steno Research

• Happy Monday, let’s dive into the most critical stuff we are on the look out for this week.
• Morning moves: It seems like physical commodities markets are catching up to the China stimulus story from last week, in tandem with the Hang Seng.
• Over the end of last, Japan’s elections pushed USD/JPY lower, leading investors to sell the Nikkei rather aggressively due to a clear hawkish expected lean from the new PM Ishiba.

9. China’s Serial Rate Cuts: What Are Them and Are They Effective in Reviving the Falling Economy (2)

By Alex Ng, Fortress Hill Advisors

• Our earlier articles state the natures and description of several monetary actions by PBOC last week, highlighting a possibility of stock rallly
• This article on the other hand dicussess the economic benefits of the monetary policies, which are more relevant from the authority’s point of view.
• For stock market still, we believe the RMB 800 billion fund, given a RMB 2-3 trillions daily transaction volume and 60% LTV leverage , has long been dumped into market.

10. Asia Economics: Despite Geopolitical Risks, Emerging Asia Is at an Upward Turning Point

By Manu Bhaskaran, Centennial Asia Advisors

• Economic policy in the US and China, the two most important economic partners for emerging Asia,  is turning more supportive of global growth.
• Oil prices are also entering a period of “lower for longer”; Saudi Arabia’s signal of reversing its production cuts will exert downward pressure on oil prices, largely to Asia’s benefit.
• The overall result of these developments is to open up more scope for policy loosening, strengthen export demand and encourage more investments, to emerging Asia’s benefit. 

1. Announcement of Value-Up Index in Korea on 24 September

By Douglas Kim, Douglas Research Advisory

• The Korea Exchange is expected to announce its long awaited KRX Korea Value-Up index on 24 September. However, the actual launch of this index will begin on 30 September.
• It is expected to produce two types of indices including a basic price index (PR) and a total return index (TR) under the name of KRX Korea Value-Up index.
• In this insight, we also provide a list of 20 small cap stocks that could be included in the Korea Value Up index.

2. Steno Signals #117 – 25bp equals mayhem, while 50bp equals panic?

By Andreas Steno, Steno Research

• After a major dash for cash at the start of September, markets regained some optimism last week (much to my surprise, in all transparency).
• A weak USD, soft USD rates, and soaring precious metals characterized the week, especially after Mr. Fed source #1, Nick Timiraos, wrote an article suggesting that a 50bp cut is in play.
• USD weakness is something we often observe when the Fed begins cutting rates, as they are perceived to be much more reactive and aggressive than their peers.

3. Just when I Thought I Was Out, They Pull Me Back In – Time for Another Tradeable Rally in the HSI?

By Rikki Malik

• Sentiment, positioning and valuation provide a similar setup to January 2024
• External macro events leading to a better fundamental environment for China
• Foreign Investors’ disappointment in minimal fiscal stimulus provides an asymmetric opportunity

4. Portfolio Watch: Buy Bonds, Wear Diamonds (or Gold)?

By Andreas Steno, Steno Research

• We’ve generally experienced a “softer” September than anticipated in terms of interest rates.
• The typical September issuance seasonality takes a back seat to the upcoming first Fed cut in this cycle.
• Nick Timiraos has hinted that some officials are seriously considering going big already next week, so we may be in for a ride.

5. The Week at a Glance – Is a 50bps Cut Good if Paired with Economic Weakness?

By Andreas Steno, Steno Research

• Good morning from Copenhagen.
• It’s make-or-break this week with Powell taking the stage on Wednesday to reveal whether the rumors from Nick Timiraos about the Fed considering a 50bps cut were actually true after all.
• Markets have been desperately hoping for the 50bps cut, as evidenced by the price action where Fixed Income is being bought regardless of the economic news.

6. The Drill: The Party Seems Over In Freight Rates

By Ulrik Simmelholt, Steno Research

• Take aways: Freight rates dropped for the first time since 2022, signaling a slowdown in factors driving rate increases.
• Trade tariffs may have minimal impact on the USD and inflation, with fiscal policies playing a larger role.
• A BRICS monetary union could create instability, while Trump’s policies may push the U.S. toward economic risks.

7. In China: THE SKY FALLING? In the US: TREES GROW TO THE SKY?

By David Mudd

• China continues to be the outcast of the investment community even though its GDP is still projected to grow by 4.5% to 5% this year.
• China’s economy has substantial hurdles to overcome but is not in the dire situation portrayed by most commentators and not headed for “Japanification”.
• On the other hand, the US economy has steadied itself but is not in the “Goldilocks” period implied by the media.

8. US Rates: Schrodinger’s Cut

By At Any Rate, At Any Rate

• The Fed is expected to cut rates by 50 basis points on Wednesday, with additional cuts expected in November and December
• There is uncertainty in the markets with regards to the size of the rate cut, with equal probabilities for a 25 or 50 basis point cut
• Near term uncertainty is high, leading to bullishness on volatility in the markets

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9. Fed: 50bps Cut and 175bps More to Follow

By Alex Ng, Fortress Hill Advisors

• The 50bps cut in the Fed Funds rate to 4.75-5.00% will likely be followed with two 25bps cuts in November and December.
• For 2025, we now look for 125bps rather than 150bps, given our soft landing view and also the 50bps being delivered at the September meeting. 
• This would be a 3.00-3.25% Fed Funds rate and just above the revised long run estimate of 2.9%. 

10. The Slow March to Fiscal Dominance

By Cam Hui, Pennock Idea Hub

• The sovereign debt levels of major developed economies are well on the path to fiscal dominance, underpinned by the U.S. fiscal trajectory.
• Mario Draghi’s proposals for European competitiveness also highlighted a need for debt-financed investments that will also substantially raise EU debt to GDP ratios.
• Investors should expect a regime shift toward higher term premiums on bonds and from paper assets to hard assets in the coming years.

1. Gold: Fakeout or Generational Buying Opportunity?

By Cam Hui, Pennock Idea Hub

• Gold has reached another all-time high at 2500, will history repeat itself? Is this another generational buying opportunity or a bull trap fakeout?
• We conclude that the upside breakout in gold prices has more room to run, though the market is extended and could pull back at any time.
• A long-term point and figure analysis of monthly prices using a 5% box and 3-box reversal shows a measured objective of 4406.

2. India to Become Next China?

By Alex Ng, Fortress Hill Advisors

• India’s rapid economic growth, coupled with China’s recent economic challenges, has fueled discussions about whether India can become the next global economic power, as China has done for decades.
• China and India, Asia’s two largest economies, have taken different economic paths in recent years.
• Analysts at UBS Global Research pointed out: “China’s post-epidemic economic recovery is weak, while India’s performance is strong.”

3. Steno Signals #114 – A Powell Put is Ueda’s Catastrophe

By Andreas Steno, Steno Research

• Happy Sunday from Denmark!I’ve had a few days to digest Powell’s speech from Friday, and my takeaway is unequivocally dovish.
• Powell and the committee have signaled that they will not tolerate further cooling of the U.S. labor market without responding.
• This marks a full-blown shift in priorities, with inflation numbers now taking a backseat to labor market data going forward.

4. China Unlikely to Escape Middle-Income Trap Without Social or Political Reform

By Alex Ng, Fortress Hill Advisors

• As economic growth of China move to sub-5% level (a figure which may have been manipulated upward), the living standard of its lower-middle and lower class are hopeless to improve.
• Standing at USD12970 in 2023, the capita real GDP grows much slower than previous decade.
• This is the middle income trap which is experienced by other middle-income Asian countries as well, like Philippines, Thailand, and Malaysia.

5. EM Watch: 5 Charts on the Nosediving Chinese Indicators!

By Andreas Steno, Steno Research

• China’s exports fired on all cylinders during the spring, but we are now starting to see signs of fading inventories in the US (and to some extent, Europe) again.
• We believe the front-loading of imports, with rising freight rates being a symptom of this, propelled the Chinese economy ahead of the feared tariffs implemented by the Biden administration and potentially increased under a Trump presidency.
• We know that Chinese exporters have front-loaded exports of cars and other goods ahead of the tariff deadlines in both the US and Europe, and we are now seeing freight rates moderating alongside some concerning nowcasts out of China.

6. The Week At A Glance: The slippery slope of data revisions

By Andreas Steno, Steno Research

• Happy Monday from Europe.
• Powell is cutting, Ueda is hiking and USDJPY is heading lower.
• It sounds like a tune we have heard before, and while we are NOT on imminent recession watch, we need to be aware of the potential slippery slope once the revised cat is let out of the bag.

7. China Consumption Disappoints

By Alex Ng, Fortress Hill Advisors

• China consumption patterns are slowing and becoming more volatile at a sub sector level. There is also less certainty over new employment and wage growth.
• China’s consumption is vital to growth when production is transitioning from old economy dependency on residential investment, steel, cement and other industries. 
• We forecast GDP to slow in H2 and be 4.0% in 2025

8. Energy Cable: On the inventory build-up due to China-tariffs

By Ulrik Simmelholt, Steno Research

• The Chinese rebound story is losing momentum fast, which has important implications for Western economies and assets, while the impact from freight rates on inflation might not be as large as previously feared.
• Take aways Beta from freight rates to goods inflation is lower than usual due to inventory building in the USChinese retail and IP down some 10% from the pre-pandemic trend China’s export of disinflation will force policy makers in the West to introduce tariffs and subsidies Greetings from a sunny Copenhagen.
• This week we’ll discuss freight rates and what inventory data tells us to expect going forward and then we’ll dive into some more data points on the weak Chinese economic outlook.

9. Real Estate:  India/China Rotation Sparks Sector Growth

By Steven Holden, Copley Fund Research

• Uptick in Real Estate positioning driven by a shift towards Indian Real Estate stocks, which has outweighed reductions in exposure to China & HK Real Estate
• Three names stand out: Phoenix Mills, Macrotech Developers, and DLF Limited, all of which have seen ownership rise to record levels.
• New positions in Indian Real Estate by Allianz and JKC have been offset by closures in Chinese Real Estate by LO Funds and SEB, among others.

10. How Different Is the Current Unemployment Behavior?

By Thomas Lam

• A climb in the unemployment rate can be associated with recessions, especially when dominated by a negative change in employment
• But the recent rise in the unemployment rate through July does not seem to be consistent with the characteristics of prior recessions on balance
• Nevertheless, further increases in the unemployment rate need not be of the same breed   

1. Four Reasons To Be Tactically Bullish

By Cam Hui, Pennock Idea Hub

• The U.S. stock market is poised for a period of continued strength.
• Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive  internals.
• We continue to favour non-Magnificent Seven leadership for the next bull phase.

2. Energy Cable: China is killing the commodity super cycle

By Ulrik Simmelholt, Steno Research

• Take aways: Low margins and high stock levels mean that China will export its excess metal capacity. Other commodities like crude and its derivatives look weak as well. Gold only strong performing commodity in China due to domestic economic weakness .
• Welcome to this week’s energy cable with a focus on the economic troubles in China and its impact on commodity prices.
• This week’s piece will have a lot of charts, therefore we’ll keep the text short.

3. The Week at a Glance: The USD in the (Jackson) Hole amidst Over 1 Million Jobs Disappearing?

By Andreas Steno, Steno Research

• Welcome to our weekly “The Week At A Glance” publication, where we explore the most important key figure releases and tradeable themes for the upcoming week.
• We remain almost exclusively long on USD fixed income, and therefore, our attention is particularly focused on two key developments this week:
• The Jackson Hole Conference and Ueda’s Appearance in the Japanese Parliament. Revisions to U.S. Employment Data: The Bureau of Labor Statistics (BLS) will release first-quarter 2024 data from the QCEW on August 21, 2024, at 10:00 a.m. (ET).

4. VIX Went Cray Cray

By Alpha Exchange, Alpha Exchange

• Recent market disruptions, including a dramatic rally in the yen and a significant increase in the VIX, have raised concerns
• The convergence of US and Japan CPI rates may have contributed to the narrowing of Fed BoJ policy spread
• The VIX’s large move on August 5, 2019, has sparked concerns about the stability of the S&P options market and the potential impact on global risk levels

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

5. Emerging Markets:  Structural Shifts as Allocations Stabilise Among Global Funds.

By Steven Holden, Copley Fund Research

• Emerging Market allocations are stabilizing among active Global equity funds.
• Country-Level shifts show China & HK allocations more than halving since 2022, while Taiwan has seen strong gains. India becomes the top country underweight.
• Alibaba has declined to record lows, Tencent ownership is stabilizing, and TSMC has reached new highs.

6. BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)

By David Mudd

• Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.
• J&T Global Express (1519 HK) received upgrades after reporting strong 2Q24 results.  Its SEA and China business showed growth in revenue and profitability.
• Galaxy Entertainment Group (27 HK) received an upgrade after revenue and EBITDA approached pre-COVID levels.  FIT Hon Teng (6088 HK) is seeing improvement in AI server, AirPod, and EV segments.

7. China Is One Step Closer to Its ‘Event Horizon” in the Property Market

By Rikki Malik

• The latest policy proposal is one step closer but still incremental
• Incremental steps taken so far have been ineffective in the short-term
• The ideal solution would be full intervention by the Central Government

8. US Rates Strategy: July CPI, Jackson Hole, and Jittery markets

By At Any Rate, At Any Rate

• Inflation rates are gradually slowing, with both headline and core inflation in line with expectations and at multi-year lows
• Housing prices showed more firming than expected, particularly in rental markets
• Markets are pricing in very soft core CPI inflation over the coming months, with expectations for gradual disinflation and a focus on wage growth by the Fed

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

9. Macro/Rates Watch: When the entire foundation rests on liquidity

By Andreas Steno, Steno Research

• What a July we’ve had.
• The G3 central banks have now received plenty of labor market data that justifies cutting rates fairly aggressively.
• In our opinion, this is a tricky trend to resist, even if market pricing does admittedly seem aggressive.

10. Steno Signals #113 – Neither Inflation, Growth, Nor Liquidity is rising right now

By Andreas Steno, Steno Research

• As most of you know, we remained upbeat on the cycle until around mid-July, as growth parameters continued to perform solidly in real-time, while inflation also posed a risk of re-acceleration.
• Our real-time tracking of the three main macro parameters is the cornerstone of our macro thinking, and through July and August, we have begun to observe a significant shift.
• The risk of rising inflation has collapsed, while growth momentum has also weakened substantially.

1. Portfolio Watch: We Dare to Say the Bottom Is In for Risk Assets

By Andreas Steno, Steno Research

• We have successfully navigated our macro portfolio through yet another week of high volatility, especially following Monday’s (in hindsight) outlier event.
• Risk sentiment has turned, and recession fears are muted for now.
• With position squaring largely completed, equities have regained momentum.

2. Positioning Watch – Positioning Squaring in JPY is Complete

By Andreas Steno, Steno Research

• This week likely marks the end of the positioning squaring phase, as multiple positioning gauges now signal that trades are no longer as extended as they were 2-3 weeks ago across various assets.
• This shift provides an opportunity to revisit our strategies and assess where macroeconomic trends might be steering global assets next, now that the worst of speculative activity has subsided.
• As we all know, the CFTC report is always a week behind in updating markets on positioning, making last Friday’s report particularly interesting.

3. Global FX: Weeks where decades happen

By At Any Rate, At Any Rate

• Carry strategies experiencing drawdowns, wiping out YTD gains
• Market expected to stabilize after recent shocks, carry strategy appeal diminished
• Yen likely to take a breather, BOJ stance unchanged, market normalization ongoing.

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4. Modern Monetary Theory (MMT) Revisited

By Alex Ng, Fortress Hill Advisors

• The inflationary implications of Modern Monetary theory have finally been exposed in the aftermath of the COVID-19 pandemic after 2022
• The risks of inflation were underplayed due to prolonged disinflationary impulses stemming from decades of globalisation. Recent US practice of MMT could force the Fed to raise its inflation target.
• Japan pursued an MMT framework since 2013, but the continuation of quantitative easing and arrival of rising inflation is undermining the yen. The Eurozone faces the same predicament as Japan.

5. US Rates: July Morning turns into Cruel Summer

By At Any Rate, At Any Rate

• Weak employment data led to a shift in Fed forecast, with projected rate cuts in September and November
• Rates have backed off from lows, with markets pricing in a less dovish path
• Treasury market in transition, with dealer balance sheets at bloated levels and auctions showing poor results due to lack of demand from traditional investors.

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

6. Can Ukraine drive to Moscow?

By Mikkel Rosenvold, Steno Research

• Welcome to this week’s Great Game! Once again, we’re focused on the two big wars going on – Ukraine and Gaza.
• What are the risks, what will hit markets and what’s the outlook?
• Last Tuesday, Ukraine launched an offensive into Russian territory in the Kursk and Belgorod Oblasts.

7. Steno Signals #112 – Liquidity is BOTTOMING

By Andreas Steno, Steno Research

• Happy Sunday, folks!I hope you’ve enjoyed the weekend.
• After a bizarre week, starting with the rug-pulling in Japan on Monday morning, it was time for a well-deserved break over the past two days.
• We’ve encountered tons of questions about the size of the USDJPY carry trade, and here’s what we’ll say on the topic: Those claiming that the carry trade is 10-20 trillion USD have very little understanding of the netting of derivatives and/or the FX hedging policies of international investors.

8. EM Watch: The Chinese race towards 0% interest rates

By Andreas Steno, Steno Research

• Welcome to our Weekly EM Watch, where we look at China and other large EM countries through the lens of Western macro investors.
• Over the past week, we received the latest quarterly update on Chinese foreign direct investments and the situation went from dire to abysmal.
• There is a net negative inward FDI flow, and despite a significant $190 billion surplus in customs goods and services, the basic balance, which comprises both the current account and FDI, recorded a substantial deficit of $30 billion for the first time.

9. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 16 Aug 2024

By Dr. Jim Walker, Aletheia Capital

• Japan’s Q2 economic rebound may be misleading due to annualized reporting; future slowdown is a concern.
• Political instability in Japan and Thailand, with both countries’ leaders stepping down amid economic challenges.
• We maintain a cautious market outlook, especially on Thailand’s struggling economy and currency.

10. Assessing the Damage: It’s Not Just the Carry Trade

By Cam Hui, Pennock Idea Hub

• The recent disorderly risk-off episode can be attributed to the unwind of a series of trades that depend on a low-volatility and complacent environment.
• Historically, such unwinds have resolved in volatility spikes and higher equity returns soon afterwards
• The current environment is supportive of a quick market recovery, though the risk of a LTCM-style blowup could see a longer and more complex market bottom.