In today’s briefing:
- 5 Things We Watch in Global Macro
- Abenomics Vs Yoonomics: Tipping Points of Corporate Governance Reforms in Japan and Korea
- The Next Leg Is Down: Risk Factors Are Stretched
- UK: Less Costly Energy Spares EPG Hike
- India: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely
5 Things We Watch in Global Macro
- APAC-Inflation is booming as a consequence of lagged effects of European energy buying and the Chinese reopening
- The new BoJ governor will be tested almost immediately due to rising inflation
- US wages have PEAKED, which is likely to spill-over to lower US inflation
Abenomics Vs Yoonomics: Tipping Points of Corporate Governance Reforms in Japan and Korea
- Despite differences in views on the legacy of Abenomics, many people agree that Abenomics played a key role and was a clear tipping point for corporate governance improvements in Japan.
- Likewise, we believe Yoonomics will follow similar steps and make significant efforts to improve corporate governance reforms in Korea.
- So far in 2023, CORPORATE ACTIVISM has been THE MOST IMPORTANT TOPIC in Korea’s equity markets.
The Next Leg Is Down: Risk Factors Are Stretched
- The performance of equities, especially highly shorted equities, since the turn of the year has been remarkable. (See below for names.)
- This performance was achieved via the embrace of the riskiest attributes: small caps, aggressive industries, lack of profitability, leverage, etc… as well as short covering. See below.
- We’re betting this begets a reversal over the coming weeks and months.
UK: Less Costly Energy Spares EPG Hike
- A mild start to the European winter has reversed the past year’s energy price surge. They remain painfully high and volatile by typical standards amid ongoing supply risks.
- Falling futures prices roll into a lower energy price cap. We now expect the government to cancel its planned Energy Price Guarantee rise to avoid a temporary spike in Q2.
- The price level effect lowers inflation for a year, helping the government meet its 2023 plan. A cut could still occur in Jul-23 if not offset by extra policy costs.
India: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely
- India’s real policy rate was +0.55% in Dec’22, as CPI inflation receded to 5.72%YoY, within the RBI’s 2-6% inflation target for the second consecutive month. No more rate hikes likely.
- Industrial output expanded 7.1% YoY in Nov’22, with consumer nondurables output up 8.9%YoY — tentative sign of a turnaround in consumption after a half-year of sluggishness. Consumer durables rebounded too.
- After a stagnant decade, capital goods output expanded 20.7%YoY in Nov’22 (+14.9%YoY in Apr-Nov’22), capital goods imports +15.4%YoY. Rebounding GFCF will ensure 7.5% RGDP growth in FY23, 7.2% in FY24.
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