Macro and Cross Asset Strategy

1. The Carry Trade as Risk Driver

By Cam Hui, Pennock Idea Hub

• Risk appetite is undergoing a cross-asset carry trade-driven panic and a bottom is near. The equity market is sufficiently oversold and poised for a relief rally.
• Barring some unexpected exogenous event, downside risk is limited at these levels.
• Expect a short-term relief equity rally into August, led by small caps and value stocks.

2. Market Watch: Forget about emergency cuts. Here is what the Fed will do next!

By Andreas Steno, Steno Research

• Good evening from Europe.
• I will keep this analysis short and sweet as I know you are all trying to deal with these nasty markets and time is of the essence.
• We have thankfully made our way through this turbulence clearly in the money, but we are starting to see interesting counter-trends arising now.

3. Portfolio Watch – What can we trade in this weak labor environment?

By Andreas Steno, Steno Research

• What a crazy day (week), starting August off with a somewhat disastrous NFP report.
• Private sector jobs are trending down, government payrolls are trending down, while manufacturing and goods-producing jobs actually improved in July despite the recessionary ISM manufacturing report.
• This is a clue that the manufacturing sector is rebounding, as we have been alluding to, which is something that will likely become relevant for markets in the coming months.

4. BOJ and Carry Trade: THE BUTTERFLY FLAPPED ITS WINGS

By David Mudd

• The crowded JPY carry trade will not unwind quickly although future unwind episodes may not be as dramatic.
• The size of the carry trade is unknown, however its correlation to various asset classes is predictable.
• The largest question for global markets is whether the unwind of the JPY carry trade is a harbinger of tighter monetary conditions globally as markets decline and leverage tightens.

5. Quant Signals – Here is THE steepener to own in a cutting cycle!

By Andreas Steno, Steno Research

• We have examined the quantitative data surrounding the cutting cycle to optimise the curve steepener trade for hit ratios, carry returns, and ‘max contributions.’
• This is the steepener trade you want to own in a cutting cycle!
• In our Saturday Portfolio Watch, we discussed the potential value in steepeners and promised to more thoroughly backtest the curve in order to find the optimal steepening expression in a cutting cycle environment.

6. The Week At A Glance: On Credit Watch While Liquidity Is Turning Nasty

By Andreas Steno, Steno Research

• Welcome to our weekly “The Week At A Glance” publication, where we dig into the most important key figure releases and tradeable themes for the upcoming week.
• Everything is about assessing the USD economic cycle and the potential for rate cuts of the magnitude priced in after a crazy week last week.
• We ultimately have our doubts (especially as the labor market report on Friday was heavily impacted by the storm Beryl), but we are still waiting for potential triggers to bet on it.

7. Steno Signals #111 – More or less liquidity? More or less recession? More or less real?

By Andreas Steno, Steno Research

• Happy Sunday! What a week, and what a few months we have ahead!
• To use the words of my friend Boris Kovacevic, “it’s like 2024 never happened.” Everything we learned about the re-acceleration of inflation in H1 and the “high for longer” narrative has just vanished into thin air over the course of a few days.
• While it is hard to disagree that a cutting cycle is commencing, it is still very much up in the air whether this is a normal cutting cycle.
• We spent last week examining returns in various asset classes around the commencement of cutting cycles, and the saddening truth is that it very much depends on the type of cycle.

8. 6 Major Signs of Market Downturn and Strategy for Outperformance Amid Market Convulsions

By Douglas Kim, Douglas Research Advisory

• In this insight, we discuss strategies for outperformance amid market convulsions and downturn. 
• In particular, we highlight six reasons why it may be a wise move to position one’s portfolio more defensively (at least for the next several months).
• Warren Buffett slashed nearly half of his holdings in Apple, which was probably one of the main triggers of the tremendous market sell off in Asian markets on Monday.

9. Sajith Pai: Unpacking India – [Making Markets, EP.40]

By Web3 Breakdowns, Web3 Breakdowns

• Sajeet Pai, a VC at Bloom Ventures, provides insights on the Indian market, discussing unique features like low levels of debt and lack of trust.
• India’s massive population presents challenges and opportunities for investors, with a large segment of the population having low per capita income.
• Cultural differences, such as the prevalence of cash on delivery in e-commerce, highlight the need for a nuanced approach when entering the Indian market.

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

10. Asia Economics: The Market Panic Does Not Alter Medium-Term Trajectory

By Manu Bhaskaran, Centennial Asia Advisors

• Fears of a US recession and higher Japanese rates have sparked a market panic that may hurt Asian economies and markets in the very near term. 
• However, the Asian region should weather the storm so long as the US avoids a recession, as we believe it will. 
• Not all Asian central banks will follow the Fed in cutting rates. Improved growth in Asia and stable inflation yield a different set of tradeoffs than that facing the US. 

1. Absolute Principles of Stock Investment (주식투자절대원칙) – A Book Review

By Douglas Kim, Douglas Research Advisory

• This insight is a book review of 주식투자절대원칙 (Absolute Principles of Stock Investment), which was written by a famous Korean retail investor called Park Young-Ok.
• Park tries to capture his 30+ years of investing wisdom. I thought this book was excellent, especially because Park included a lot of local flavor of his mindset in investing. 
• This insight provides 11 major highlights of the book ‘Absolute Principles of Stock Investment.’

2. The Week At A Glance: Recession or not?

By Andreas Steno, Steno Research

• We are likely approaching the point where the squaring party triggered by USDJPY is starting to impact market pricing and sentiment in nonsensical ways, as deleveraging is ongoing, even if the dust has settled a little.
• Markets are pricing a small “insurance premium” for the September FOMC meeting, leaving more than 25bp in the forward pricing despite a week of mostly hawkish surprises last week.
• Everything this week is about watching USDJPY price action again, as it has the potential to impact all assets.

3. The Tipping Point for China’s Debt

By Alex Ng, Fortress Hill Advisors

• Concentration of debt, asset prices, and fiscal deficit will determine the tipping point of China’s debt. 
• If China does not continue to work on debt de-concentration, prop up its asset prices, or rein in fiscal deficit, China may as well face a debt crisis.
• To examine the conditions for China’s debt situation, it is vital to look at three key indicators of debt sustainability: concentration of debt, currency stability, and fiscal budget.

4. Technically Speaking, Breakouts and Breakdowns: HONG KONG (July 31)

By David Mudd

• The energy, materials and tech sectors have lost momentum, while telecoms and utilities sectors lead the market.  Consumer sectors are lagging.  HSCI has dipped below its 200 day moving average.
• Hong Kong & China Gas (3 HK) breaks to the upside as investors seek safety and yield.  
• PetroChina (857 HK) has broken down relative to the MSCI China index and Travelsky Technology Ltd H (696 HK) breaks down from a triangle formation  but downside is limited.

5. Nowhere to Run to Baby, Nowhere to Hide! Part 3

By Rikki Malik

• A lack of institutional investor interest in Hong Kong is a positive for once as the market is less influenced by international flows
• Investors are disappointed by the lack of short-term stimulus plans after the Third Plenum session
• What to do after the 17,500 level breached on the Hang Seng index?

6. Nowhere to Run to Baby, Nowhere to Hide! Part 2

By Rikki Malik

• Are we witnessing a short-term carry-trade unwind or a trend change?
• A short-term bounce in the USDJPY will provide an opportunity to reposition
• Industrial metals take the brunt of the unwind in the commodity sector

7. How to Trade the Great Unwind

By Cam Hui, Pennock Idea Hub

• U.S. equity investors saw a sudden and violent rotation from growth to value stocks and from large to small caps. The risk unwind is also evident in the currency markets.
• In the short run, some of our short-term equity indicators are oversold and flashed buy signals.
• Our base-case scenario calls for a short-term relief equity rally into August, led by small caps and value stocks.

8. Positioning Watch – Metals bets are finally being squared, but retail is piling in

By Andreas Steno, Steno Research

• Markets remain focused on 2-3 rate cuts from the Fed, growth not rolling over fully, and inflation continuing its downward trajectory.
• There seems to be no way to change this narrative among market participants.
• The slightly hawkish PCE in the US and today’s relatively high German inflation print (in harmonized terms) had a hard time moving rates markets, which are currently pricing more than 2.5 cuts from the Fed and more than 2 cuts from the ECB by year-end, with Fed September pricing even showing a tiny lean towards 50 bps.

9. Heading Towards a Currency War? US and Chinese Policy Outlooks Suggest Trouble Ahead

By Said Desaque, DeSaque Macro Research

• The US election campaign has taken significant twists in recent weeks, culminating with the removal of President Biden. Wall Street cannot be ambivalent about who wins in November, unlike 2020.
• The People’s Bank of China (PBoC) has unexpectedly lowered key lending rates, following disappointing Q2 economic growth. More aggressive interest rate cuts could happen once the Fed begins easing policy.  
• Exchange rate movements in Q4 could be key to diffusing protectionist sentiment against China. Easier monetary policy in Europe and the US will force the PBoC to support China’s exporters.

10. Asset Allocation Watch – What to buy in the upcoming Fed cutting cycle?

By Andreas Steno, Steno Research

• Markets are currently busy preparing for the upcoming cutting cycle from the Fed, expected to start in September.
• The simple playbook is often used when markets face a “high probability event,” and markets are now acting as if they know what’s ahead.
• A Fed cutting cycle is triggered by a recession; therefore, buy bonds, sell risk assets, and buy gold, etc.

1. Steno Signals #109 – What if We Are All Wrong on Liquidity, Rates and Commodities?

By Andreas Steno, Steno Research

• Today, I am going to address three main topics of concern for investors given the current conflicting signals from the US economy.
• These are the key questions I will address, and I will summarize both the pros and cons of each viewpoint, including my own bottom line: Is liquidity no longer improving, but rather at risk of weakening in the coming months? Is the economy accelerating rather than slowing? Is the commodity complex heavily undervalued or overvalued?
• The equity rotation paired with the sharp sell-off in Tech has had me thinking, and we therefore need to litmus-test every corner of our current thesis. Follow along below.

2. Trump Trades and the JAPAN Market Are Like Oil and Vinegar

By David Mudd

• Japan’s markets have again failed to break to new highs creating a potential for a double-top pattern.
• Trump’s policies which target lower interest rates and a weaker dollar will put pressure on Japan’s markets as can be seen from the high correlation between the JPY and TPX.
• Sectors such as trading companies, autos and semiconductors could see the most pressure under a Trump presidency.

3. The One Burning Question of the Great Rotation

By Cam Hui, Pennock Idea Hub

• The stock market recently underwent a Great Rotation. Leadership violently rotated from growth to value, and from NASDAQ stocks to small-cap stocks. 
• The reversal was accompanied by a sudden downdraft in the S&P 500. Is this the start of a correction?
• Even though breadth indicators are improving, which is bullish, we would not be so quick to buy any dip that appears.

4. South Korea Plans To Lower Inheritance Taxes

By Douglas Kim, Douglas Research Advisory

• On 25 July, the South Korean government announced that it plans to lower highest bracket inheritance taxes from 50% to 40%. 
• This is a significant move since excessively high inheritance taxes has been one of the key reasons for poor corporate governance in Korea. 
• A reduction in the highest bracket inheritance taxes from 50% to 40-45% is likely sometime in 4Q24 to 2025 which should help to improve corporate governance in Korea.

5. Positioning For Trump 2.0

By Cam Hui, Pennock Idea Hub

• The betting odds on a Trump victory in November have risen substantially, but the markets haven’t fully discounted such an outcome.
• Investors who want to position for Trump 2.0 should seek long inflation exposure (long gold/short bonds) and short globalization (long domestic producers/short transportation and logistics).
• Notwithstanding the growth outlook, equity returns may be more challenging as Trump 2.0 will see the S&P 500 at more lofty multiples than the P/E ratio of Trump 1.0.

6. False Breakouts and Breakdowns – The Nikkei, Gold, Copper and the JPY

By Rikki Malik

• Gold has signalled a false breakout and is likely to tread water for a couple of months.
• More strength ahead for the Japanese Yen and weakness for the Japanese markets?
• Copper signals further lows to come unless it rallies soon

7. EM Fixed Income: Goldilocks and the US election

By At Any Rate, At Any Rate

• EM assets are being compared to other asset classes ahead of the US elections, with a general presumption that EM will be more negatively impacted by a Trump presidency.
• EM currencies have experienced some risk premium in the lead up to the elections, particularly in Latin America, but overall EM markets have not shown significant underperformance due to US election concerns.
• Valuation models that consider fundamental drivers do not indicate any significant risk premium being priced into EM assets for the US elections at this time.

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

8. The Week At Glance: A look at US Cycle indicators. You sure consensus is right?

By Andreas Steno, Steno Research

• Welcome to the “Week at a Glance,” where we examine the key releases and themes for the week ahead through the lens of macro trading.
• China has reduced the 7-day repo rate by 10 basis points, following up with a cut in the loan prime rate.
• This move mirrors the strategy from June 13, 2023.

9. Business Cycle Watch: Why Sweden’s Resurging Momentum is a Must Watch

By Andreas Steno, Steno Research

• In this brief update on the business cycle, we will present a comprehensive overview of the current economic situation in Sweden.
• The Riksbank initiated its first rate cut in May, and we anticipate additional cuts throughout the autumn.
• This makes Sweden an ideal “live-studio” for observing the effects of early rate cuts on the economic cycle.

10. Trading Trump 2.0

By Alastair Newton, Heteronomics

• Donald Trump’s running mate, JD Vance, discussed economic policy during his nomination speech.
• Further investigation provides some insight into what these policies might look like in practice.
• However, understanding the specifics of a potential ‘Trump Trade’ policy remains difficult.

1. Investment Strategy Under Upcoming US Rate Cut

By Alex Ng, Fortress Hill Advisors

• In face of the recent speeches by several FOMC members, we are changing or non-consensus view of no rate cut this year to one rate cut in September
• Under rate cuts, several asset classes such as real estate stocks, gold, and other safe haven currencies will rise.
• However, we still believe there will not be continuous series of rate cuts in the remainder of this year such that various asset classes listed above will only rise modestly. 

2. Launch of Korea Value Up Index in September

By Douglas Kim, Douglas Research Advisory

• Korea Value-Up index is finally expected to be launched in September 2024 which is likely to include at least 100 companies in KOSPI and KOSDAQ.
• There are expectations that Korea’s Value Up index could resemble JPX Prime 150 index which is a Japanese version of the value up index launched last year.
• We provide 70 stocks in Korea that could be included in the Korea Value Up index. These 70 stocks could outperform the market in the next several months.

3. The Hang Seng Index Is at a Critical Juncture

By Rikki Malik

• In the short-term, meaningful policy reforms needed out of the Third Plenum
• Chinese data continues to be lacklustre as expected while markets tread water
• What can we expect from the Third Plenum to galvanise the next stage

4. Equity Watch: The Trump versus Biden Basket

By Ulrik Simmelholt, Steno Research

• We’ve received loads of feedback from our clients regarding our Trump versus Biden basket.
• As a result, we will provide a detailed breakdown of both baskets and explain the rationale behind each.
• We are updating the baskets regularly based on the political proposals of the two candidates.

5. Steno Signals #108 – A messianic Donald

By Andreas Steno, Steno Research

• Happy Sunday from Copenhagen after the atrocious assassination attempt in Pennsylvania late Saturday.
• Trump was apparently struck by some fragments but managed to raise his fist and greet his supporters in a strong show of defiance as he was escorted off the stage.
• This incident will undoubtedly dominate the campaign in the coming days and weeks, transforming his appearance at the upcoming Republican Convention into a near-messianic event.

6. The Week At A Glance: Another inflation shocker in the UK paired with a rebound in US retail sales?

By Andreas Steno, Steno Research

• Morning from Europe! Remember that we release our “Week at a glance” publication instead of the “Something for your Espresso” every Monday before lunch-time.
• Our aim is to digest the release calendar in an actionable way and assess the risk/reward around the macro themes in the context of the economic release calendar.
• This week, we will focus on the US consumer (Retail Sales), UK inflation (CPI) and the EUR rates (ECB meeting).

7. Technically Speaking: Breakouts & Breakdowns: HONG KONG (July 17)

By David Mudd

• China State Construction International and Sinopec Engineering have short term reversal patterns indicating profit taking from recent advances.
• China Resources Cement reverses downtrend with volume indicating some near term gains after reporting that 1st half profit was under pressure.
• Yum China continues to show downward pressure given the increasing competition in the retail food segment, while Nongfu Spring collapses on news about the safety of its products.

8. Where US Stocks Are Heading Before Rate Cut

By Alex Ng, Fortress Hill Advisors

• To assess US equity direction before rate cut, we must first forecast the next rate cut. Our house forecasts that there will only be one rate cut during 2024.
• We believe S&P500, after hitting all-time high this week is due a 10% correction until the rate cut in September. Rate cuts are essential for S&P500 to tread new high. 
• But we believe the rate cut is going to be one-off as the labor market remains bullish and inflation still comes off a tad higher than the Fed target.

9. China: Second Quarter 2024 GDP Growth

By Alex Ng, Fortress Hill Advisors

• China’s National Bureau of Statistics on Monday said the country’s second-quarter GDP rose by 4.7%.
• That’s slower than the 5.3% year-on-year GDP increase in the first quarter, and misses the 5.1% expectation.
• Retail sales for June missed expectations, while industrial production figures beat.

10. Great Game – Trump: Election or Coronation?

By Mikkel Rosenvold, Steno Research

• We cover the Trump assassination attempt in other spaces, so in this we’ll focus on the political fallout and touch upon other relevant topics, including the Chinese Policy Plenary.
• Firstly some thought on Trump picking J.D. Vance as his running mate.
• As a staunch Trump supporter, Vance represents a more grassroots, anti-establishment figure compared to others like Nikki Haley.

1. Steno Signals #107 – The 3 indicators you NEED to watch on recession risks

By Andreas Steno, Steno Research

• Happy Sunday and welcome to our flagship editorial!The ISM Services report admittedly made for recessionary reading, and it is not because we have been blind to such risks.
• We just found the risk/reward in betting on them incredibly weak, and we continue to hold that view.
• We actually laid out exactly that roadmap to a recession in Q4 2023, and correctly forecasted that the re-acceleration in cyclical sectors such as Manufacturing would lead everyone to conclude that recession risks were off the table in 2024, with a major bull run in assets accordingly.

2. Positioning Watch – No recession betting in markets yet

By Andreas Steno, Steno Research

• Hello everyone, and welcome back to our weekly positioning watch.
• Economic data from the US has been received by markets with a bit more skepticism after the recessionary ISM services report, and while the NFP report—judging by the markets’ reaction—made everyone from equities to fixed income happy, the overall picture of the US economy is still admittedly gloomier than we anticipated a few weeks back However, with increased access to real-time gauges of the economy, there is currently no reason to worry about a recession—or at least no reason to trade it.
• Recessions are always triggered by something; the economy almost never slow-drifts into one, which makes it impossible to time.

3. Macro Regime Indicator – Growth is the dark horse in July..

By Andreas Steno, Steno Research

• Coming into June, we wrote that the biggest “risk” was that we moved towards a goldilocks scenario.
• While our portfolio returns have mostly mirrored that regime (outside of Crypto), we have to admit that the growth component of the equation has slowed somewhat relative to our model base case.
• We reassess the picture on a macro level and on a quant basis in this analysis.

4. CPI Review: Gung Ho summer! Risk-off fall?

By Andreas Steno, Steno Research

• The inflation report provides a surprisingly soft set of data, aligning perfectly with the FOMC’s hopes, but not with their predictions.
• Back in June, the FOMC projected only one rate cut while hiking the inflation forecast to levels that now seem feasible to undershoot.
• This report, as soft as it gets, shows transportation services down by 0.5% for the month, and shelter prices have only increased by 0.17% MoM.

5. Portfolio Watch: Not worth betting on a recession (yet)

By Andreas Steno, Steno Research

• We haven’t made significant changes to our portfolio in recent days due to a lack of conviction in the current market price action.
• However, we are not blind to the risks currently present in the US economic cycle.
• The job market is normalizing linearly, but the risk is that it normalizes linearly until it weakens exponentially.

6. Technically Speaking: Breakouts and Breakdowns in HONG KONG (July 10)

By David Mudd

• Smoore International, China Communication Services and GDS have Bullish technical signals in a challenging market.
• After a 3 year run from the COVID lows, Samsonite has confirmed a Bearish technical signal.
• Hautai Securities hits an all time low and becomes a “Catch a Falling Knife” chart.

7. June Themes and Thematic Portfolio Review

By Rikki Malik

• 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

8. Indonesia Economics: Signs of Moderating Growth

By Manu Bhaskaran, Centennial Asia Advisors

• Indonesia saw inflation return to target thanks to a further softening in food inflation. There are however upside risks from imported inflation due to the rupiah’s weakness. 
• Demand-Side indicators suggest that the strong run of expansionary activity may be reaching its tail end; the latest PMI reading has only been marginally positive. 
• Jakarta’s trade policy erraticism was on full display as ministers contradicted each other on a proposal to slap tariffs on China-origin goods. 

9. Japan: Is the Balance Sheet Recession Over?

By Alex Ng, Fortress Hill Advisors

• Japan has suffered from a balance sheet recession, triggered by a sharp decline in asset value, since the 1990s.
• As the Nikkei treads new height, it raises the question of whther the balance sheet recession is over.
• Though some of the structural challenges remain, the balance sheet recession has improved in recent years.

10. US CPI Preview: Taking clues from China?

By Andreas Steno, Steno Research

• We already addressed the US CPI report in our “Week at a Glance”.
• Tomorrow’s US CPI report is the make-or-break moment we’ve been waiting for.
• To keep the risk asset party alive, we need a soft outcome, and it looks like we might just get it.

1. Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program

By Douglas Kim, Douglas Research Advisory

• The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
• For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
• For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won. 

2. Steno Signals #106 – The cycle is improving. Not weakening.

By Andreas Steno, Steno Research

• We spent most of last week examining cycle leads and lags as we continue to observe solid signs of re-acceleration in economies with low duration profiles and high sensitivities to interest rates and exports.
• The Riksbank in Sweden, the BoC in Canada, and partially the ECB in Europe have all cut interest rates amidst an already improving cyclical environment.
• We are already starting to see the positive ripple effects.

3. Union Budget 2024- What to Expect?

By Nitin Mangal, Trudence Capital Advisors

• All eyes will be on the upcoming Union Budget 2024 in July, marking the first of Modi Government 3.0.
• Job creation, tackling agriculture woes including farmers income and sustaining expenditure on infra are expected to be the core deliverables.
• Moreover, fiscal deficit is expected to continue its improvement run. Capital gains tax would not be touched but GST network could broaden.

4. Three Risk-Off Signals Offset by One Risk-On Signal?

By Douglas Kim, Douglas Research Advisory

• The three risk-off signals include the decline in the Bitcoin price, decline in the copper price, and the first day share price performances of recent Korean IPOs.
• These three risk-off signals are offset by one major risk-on signal which includes the U.S. Junk Bond-Treasury Yield spread. 
• An important risk-off signal is the first day share price performances of major Korean IPOs after listing. We have started to see some weakness on this signal in July. 

5. Japan Watch – Why BoJ Will NOT Intervene Anytime Soon

By Andreas Steno, Steno Research

• Recently, numerous JPY pairs have breached the levels where the BoJ / MoF intervened in April/May, prompting markets to wonder if (and when) authorities might step in again to support the Yen.
• The reaction in USDJPY post key events/meetings has been consistently uniform for the past 12-18 months.
• Markets build up a hawkish narrative prior to the event, only to unwind positions when the news turns out to be less hawkish than anticipated.

6. QE With Chinese Characteristics: What It Will Look Like.

By David Mudd

• PBOC announced that it will borrow and trade treasury bonds from primary markets. 
• The central bank will use Open Market Operations to not only control and steepen the yield curve, but also improve market liquidity.
• Last week the 50-year bond dropped below the 2.5% yield which was the minimal threshold the PBOC indicated before defense.

7. Preview to the 3rd Plenum of Chinese Communist Party

By Alex Ng, Fortress Hill Advisors

• The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy.  However, they are unlikely to be game changers.
• Major points to observe include unemployment and healthcare benefit boost, Hukou fine tuning, discussion about inheritance tax, and the 2-4 trillion Yuan of buying most unsold homes.
• Deepening of reform especially in boosting innovation and upgrading consumption will also be touched on, but there will seem no short-term effective measures.

8. Hong Kong: How Much GDP Is Deduced from the Northern Spending of Hong Kong Residents

By Alex Ng, Fortress Hill Advisors

• It is estimated that 0.8 million Hong Kong residents spend weekends at other Bay Areas
• These residents spend an average of HKD730 on a weekend in Shenzhen
• The value-added factor for food, alcoholic drinks, and tobacco as well as retail trade are both  0.12, which gives 3.64 billion HKD, or 3.5% in annual GDP

9. Non-Consensus Forecast: No Fed Rate Cut This Year

By Alex Ng, Fortress Hill Advisors

• We are against the majority opinion that Fed will cut rate in September meeting. Also majority forecast there will be 1-2 rate cuts this year but we forecast none.
• CORE PCE Price Index has been treading above 2% target, though it is on a decreasing trend two streaks on a roll and since Jan 2023.
• We believe instead of targeting at the static CORE PCE Index for one data point, the Fed will consider a dynamic series of data points, known as cumulative inflation targeting.

10. Response to Premier Li: Post COVID Chinese Economy

By Alex Ng, Fortress Hill Advisors

• In a recent forum, Chinese Premier Li Qiang is confident that Chinese economy was stagnant simply because of COVID. Now that COVID has gone, Chinese economy will eventually heal itself.
• We believe rather Chinese economy will still be bumpy after COVID, with three major arrows against Chinese Economy, namely property sector slump, local government debt, and weak private sector.
• Instead of the “self recovery” view of the economy proposed by Li, we believe government should more actively roll out fiscal and monetary stimulus.

1. CHINA: When Will Stocks Catch Up With Surging Debt Markets?

By David Mudd

• China’s debt markets are experiencing an historic bull cycle as government and companies take advantage by ramping up issuances this year.  
• Beijing will use its healthy balance sheet and continued debt issuance to clean up local government debt and simultaneously address the property sector problems.
• China’s healthy external position will provide continued support for its currency and debt markets with equity markets to follow in the coming months.

2. Inflation Watch: What if the Cyclical Prices Are Not Truly Tamed? Lessons from Canada and Sweden

By Andreas Steno, Steno Research

• If you know me, you know I have a thing for charts, especially those showing momentum in the macro cycle.
• Forget nominal levels; it’s the rate of change that really drives asset markets.
• This analysis is chock-full of rate of change charts, just to remind you that we’ve only managed to nudge inflation back to just above target levels—right as the cycle’s rate of change is shifting towards re-acceleration in many places.

3. EM Watch: Western investors are tired of China and Japan “crying wolf”

By Andreas Steno, Steno Research

• Welcome to our weekly EM Watch, with a particular focus on China and metals.
• Allow me to reflect on how the Chinese and Japanese investment cases look from the outside and how Western investors perceive the current rhetoric around the suffering local currencies in the region.
• The CNY once again “slow burns” versus the USD this week and we are approaching the 7.30 handle, which has typically been the line in the sand for the PBoC in China.

4. The Week At A Glance: Time to bet against the USD?

By Andreas Steno, Steno Research

• Greetings from Europe! The Week At A Glance replaces our Morning Report each Monday as it allows for a deep dive into the economic releases and major tradeable themes for the week ahead.
• We see a couple of major tradeable themes in the week(s) ahead.
• First, the Euro area data, which is still improving in forward-looking indicators, while spot data remains relatively soft, probably in part due to a plethora of (potential) election risks.

5. Energy Cable: Bullish Oil, Bearish Nat Gas, and Especially Metals! Here’s Why!

By Ulrik Simmelholt, Steno Research

• We start with crude oil, where positions in crude oil futures have returned to Covid-19 pandemic levels, which we believe is overly bearish.
• The economy is normalizing with rising travel and growing consumer energy demand.
• Despite this, the futures market’s bearish sentiment seems misaligned with these positive economic indicators.

6. Why the November Election Matters to Gold

By Cam Hui, Pennock Idea Hub

• The latest CBO fiscal update raises the odds of upside inflation surprises in the coming years, which would be bullish for gold.
• The intermediate-term outlook for inflation will largely depend on the outcome of the November election.
• We project that a Biden win would be bearish for bond prices and mildly bullish for stock prices. A Trump win would be bond and USD bearish and gold bullish.

7. The Heat Is On: News Flow and Sentiment in HONG KONG

By David Mudd

• China ETF flows in June continued to show positive momentum while other categories remained flat.  Southbound Connect Flows were positive while Northbound Connect recorded a Net Sell.
• Midea Real Estate Holdings jumped on plans to privatize its property development business
• Shanghai Microport fell after launching a share placement at a 15% discount.  The share price  is hitting all time lows.

8. Positioning Watch – Markets are buying into US Fixed Income, but fast money don’t agree

By Andreas Steno, Steno Research

• Welcome back to our weekly positioning watch, brought to you today from a sunny Copenhagen.
• The standings at the Euros almost perfectly mirror the current cross-regional uncertainties in equity markets.
• The European election has increased the option-implied volatility premium of European equities compared to US equities, while the FTSE 100 continues to stay “less volatile” in IV terms. 

9. Actinver – Macro Daily: Inflation 1h-Jun

By Actinver, Actinver Research

• Headline inflation increased by 0.21% bw, pressured by agricultural prices, returning to an annual rate of 4.78%.
• Core inflation rose by 0.17% bw, returning to an annual rate of 4.17%.
• Headline inflation was slightly above our estimate (0.21% vs. 0.19%), because some agricultural products registered higher price increases than estimated.

10. Why the Breadth Divergence May Not Be Bearish

By Cam Hui, Pennock Idea Hub

• Anxiety has been increasing among the technical analysis community over the blatant instances of narrow market leadership and negative breadth divergence. 
• The bearish consequences of a negative breadth divergence can take over a year to be realized. Instead, they are warnings of bearish conditions than actionable tactical sell signals.
• We interpret current market conditions as highly extended that can pull back at any time, but investors should also recognize that the situation could resolve itself in a benign manner.

1. Positioning Watch – Turmoil in Markets Is Returning

By Andreas Steno, Steno Research

• Hello everyone, and welcome back to our weekly positioning watch.
• The divergence between market-cap weighted and and non market-cap weighted indices is slowly normalizing, but the impact that NVIDIA (and some of the other big tech firms) has on both broad equity returns is notable with the 5 largest companies in the S&P 500 accounting for roughly 30% of the index by now.
• This does not only have implications for the distribution of returns between bigger indices (Nasdaq vs Dow Jones for instance), but also on indices option volatility, with the VIX ex NVIDIA hitting lows of around 9 in May (2017/2018 lows).

2. EM Watch: The China bet and the copper story are both old hat by now

By Andreas Steno, Steno Research

• Welcome to our weekly EM editorial where we travel across the liquid EM markets in the context of recent developments in USD markets.
• ISM Services jumped back to 53.8—time to put that recession chatter to bed for a few months again?
• Bloomberg’s latest alarmist piece on “business employment dynamics” showing a net job loss in Q3 of last year is probably the worst analysis I have read in a while.

3. Steno Signals #102 – Bad inflation news everywhere

By Andreas Steno, Steno Research

• Happy Sunday and welcome to our weekly flagship editorial.
• The inflation progress has stalled, and it is not just a US phenomenon.
• It is spread to Europe and with freight rates rapidly on the rise, we are likely no longer getting any help from goods inflation in coming quarters.

4. The Week at A Glance: The comeback of the (growth and inflation) cycle

By Andreas Steno, Steno Research

• Welcome to our short and sweet weekly overview of key events, our expectations and how we position for them.
• On ISM Manufacturing (Monday). Our forecast at Steno Research is 50.2 for the ISM Manufacturing Index, slightly above the consensus of 49.9.
• April’s activity was notably weak due to several factors: tax seasonality which withdrew liquidity, a hawkish build-up of expectations ahead of the early May FOMC press conference, and weak international impulses.

5. Is that It? Commodity Bull Market Over?

By Rikki Malik

• Recent signs of economic weakness in the US is a believable narrative for the current weakness
• OPEC +  announcement on increasing production adds to the noise
• Weakness spreads from the energy sector to other commodity sectors

6. Market Trends and Strategy: Hong Kong Bull Market Broadens

By David Mudd

• High dividend yield  names continue to outperform the broader market.  Energy and Materials sectors are best performers over the last year.
• Mainland buying has continued to buoy the Hong Kong market even through the pullback in May.
• Short selling is declining and market breadth is increasing supporting rotational buying between sectors.

7. ETFs Are Reaching Way Beyond Passive Investing

By Srinidhi Raghavendra, Mint Finance

• ETFs are synonymous with passive investing. It passive investing and beyond. ETFs have been stealing breakfast, lunch and dinner away from mutual funds.
• Active ETFs have jumped from obscurity to ubiquity. >70% of new ETF launches in the US over the last seven years have been active ETFs.
• Active ETFs in the cheapest quintile command AUM of USD 325 billion while those in the most expensive quintile hold merely USD 35 billion.

8. May Themes and Thematic Portfolio Review

By Rikki Malik

• 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

9. Impact of China’s Economic Deceleration on EM Economies

By Alex Ng, Fortress Hill Advisors

• China’s economic growth is expected to decelerate from the previous high-growth period in the 2000s and early 2010s. This will have an impact on other EMs. 
• We track the impact from the angles of China’s commodity imports, supply-chain position, and foreign investment.
• Commodity producer countries can be more heavily impacted. The impact on Asia will be mixed, suffering from regional trade, but some supply chains could be diverted away from China.

10. India Politics: Setback for Modi Heralds Era of Uncertain Coalition Politics

By Manu Bhaskaran, Centennial Asia Advisors

• The ruling BJP suffered major losses in the recent elections. It fell short of an overall majority and will have to rely on regional partners to form the next government. 
• Consolidation of the anti-BJP vote under the aegis of the INDIA coalition delivered dividends, but voters also were not enthused by Modi’s economic and social campaign rhetoric. 
• Expect short-term uncertainty as the major blocs attempt to cobble together parliamentary majorities. But more political checks and balances would be good for India.