In today’s briefing:
- A Dicey Short-Term FX Trade
- Japanese Banks Improved on Rate Hike Bets, Although True Impact Yet to Materialize
- Oil: A Fine Line
- Fund Managers Commodity Positioning // Cocoa’s Historic Run Continues…
- Are Chair Powell and I on the Same Page?
- Weekly note – Bulls are still loose, Japan shifts gear and Europeans start to talk about AI
- The Week That Was in ASEAN@Smartkarma – GoTo’s Rebirth, Cimory’s Dairy, and Far East Hospitality
A Dicey Short-Term FX Trade
- The catalyst: Japan’s Vice Finance Minister. ‘The current weakening of the yen is not in line with fundamentals and is clearly driven by speculation.’
- As the Bank of Japan will not or only marginally hike its policy rate from here, the interest rate differential can only go one way.
- China to the rescue? China needs a stable currency, at least not a weaker one.
Japanese Banks Improved on Rate Hike Bets, Although True Impact Yet to Materialize
- For the first time since 2016, the Bank of Japan has decided to raise interest rates, becoming the last country in the world to end its loose monetary policy stance, and signaling an end to the country’s deflationary cycle that has dominated policy decisions for the better part of the last decade. The impact of the BoJ’s policy move this week has led to volatility in global markets.
- The Japanese Yen (JPY) has also depreciated against major currencies since the central bank raised its policy rate, as the policy move is suggestive of a gradual transition from accommodative policy by the central bank, rather than a hard exit into a tighter monetary environment.
- Prior to the rate hike, the JPY has also seen a relatively softer appreciation against many developed currencies, especially the USD, as global markets priced in fewer than expected rate cuts by the Fed over the year making the interest rate differential still attractive.
Oil: A Fine Line
- The IEA has recently adjusted its 2024 supply/demand forecast to align more closely with Opec’s predictions.
- This adjustment is based on optimistic estimates for the Chinese and US economies.
- However, these estimates are contingent on the continued discipline of Opec+ members, which is not guaranteed.
Fund Managers Commodity Positioning // Cocoa’s Historic Run Continues…
- Fund Manager Positioning In March fund managers added to their energy position but reduced overall commodities like grains, softs and metals on a MoM basis — the latest BofA survey shows.
- Investors have been underweight commodities now for the past 4 months (longest underweight streak since Aug’19) Compared to the past 20-year z-score, fund managers remain heavily underweight in commodities and even more in energy.
- In March fund managers added to their energy position but reduced overall commodities like grains, softs and metals on a MoM basis — the latest BofA survey shows.
Are Chair Powell and I on the Same Page?
- The ongoing Fed pause puts emphasis on the interactions between financial conditions and headline growth
- My proprietary measure of financial market conditions seems to be broadly consistent with the Fed Board’s indicator of financial conditions
- Chair Powell alluded to the prospect that financial conditions are currently “weighing on economic activity”
Weekly note – Bulls are still loose, Japan shifts gear and Europeans start to talk about AI
- In straightforward terms, we are still in a risk-on environment with many analysts and market observers now thinking that US equities – a key momentum driver for all risk assets – are heading towards 6000 at some stage.
- The chart below from analysts at French investment bank SocGen is a useful tool for quickly mapping global, cross-asset class sentiment.
- It measures “market sentiment by looking at the short-term dynamics of six risk-related variables across different asset classes.
The Week That Was in ASEAN@Smartkarma – GoTo’s Rebirth, Cimory’s Dairy, and Far East Hospitality
- The past week saw insights on GoTo Gojek Tokopedia (GOTO IJ), Cisarua Mountain Dairy (CMRY IJ), Far East Hospitality Trust (FEHT SP), and Delta Dunia Makmur (DOID IJ).
- There was also a macro insight on Indonesia, with commentary on Ace Hardware Indonesia (ACES IJ), Astra International (ASII IJ), and DCI Indonesia Tbk PT (DCII IJ).
- 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.
💡 Before it’s here, it’s on Smartkarma
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