Daily Brief Macro: Absolute Principles of Stock Investment (주식투자절대원칙) – A Book Review and more

• 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.’

• US crude inventories fell for the fifth consecutive week by 3.4 mb, exceeding the 1.6 mb decline expected by analysts. Gasoline stocks also decreased by 3.7 mb.
• As of the week ending 26/Jul, US natural gas inventories were up 8.4% YoY and 15.7% above the 5-year seasonal average.
• European oil majors beat Q2 profit estimates. BP’s Q2 underlying net profit beat estimates by 7.7%. Shell’s Q2 EPS beat estimates by 5.1%. 

• Champion Iron Ore, also known as Champ, is a premium producer in the iron ore sector with potential for increased attention over time.
• Adriatic Metals is ramping up production at their Vares silver-zinc polymetallic deposit in Bosnia, but facing challenges with cash flow and development rates.
• Cash flow issues, teething problems with mining services, and logistical challenges are hindering Adriatic’s ramp up, but they are on track to reach their nameplate by Q4.

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• The BoE cut by 25bp to 5.0%, as we expected, but still provided dovish news as the decision was finely balanced for and between MPC members, the consensus and pricing.
• Confidence in the forecast increased enough for a rate cut, yet risks now skew to the upside from persistently high wage inflation. It is noncommittal about cutting again.
• We still expect another cut in November before pausing amid excessive wage growth. That modal call could invert to rate hikes if the Fed also cuts prematurely.

• Market sentiment improved as the prospect of a September Fed pivot increased following the July FOMC meeting
• While the July FOMC statement and Chair Powell’s presser hinted toward a rate cut, the former seems more ambivalent than the latter 
• Although the current focus is squarely on the timing of the first rate cut, the future path of policy remains unclear at this time

• FOMC held rates steady at 5.25-5.5%, but emphasized that “a reduction could be on the table…in September”. From inflation risks alone, the FOMC statement shifted focus to its dual mandate.  
• 0.9%YoY M2 growth (Jun’24) evidences restrictive monetary conditions. Withdrawing QT after Aug’23 led to Jan-Apr’24 shocks in MoM core PCE, but latter now reined-in by resumed QT since Mar’24.
• Core PCE inflation likely to wane to 2.3%YoY by Sep’24, enabling rates to decline 25bp at each of the next 3 FOMC meetings, ignoring political threats regarding the Sep’24 cut.

• Temu / In Depth: ‘Exorbitant’ fines land Temu in hot water with Chinese merchants
• Politburo /: Politburo promises new measures to tackle local debt risks and clear economic hurdles
• Regulators /: China securities regulator names law enforcement chief as vice chairman

• Supermarket 2Q24 results were overall mixed vs our estimates, with sales decelerating amid mostly calendar headwinds, and La Comer posting the best SSS and sales performance; all of our 3 covered players still beat the industry and thus continue to gain market share, as expected.
• In terms of profitability, the 3 companies were able to post solid gross margin expansion amid efficiencies and product mix, yet SG&A pressure, amid higher labor expenses, offset most of this pressure as expected; Chedraui was the only player able to post a slight EBITDA margin expansion.
• Having recently launched our Supermarkets coverage (link to report here), we continue to see Chedraui (Outperform, P$160 PT) as the best positioned supermarket for either consumer trade up or trade down, as well as with a healthy format and geographical diversification.

• Remittances: In June, USD 6.2 billion in remittances came to the country, the highest numbers for a single month, reinforcing its role as the main source of net dollars into the country.
• The accumulated flow in the year increased to USD 31.3 billion, 3.6% more than observed in the same period of 2023.
• Remittances have increased at both extensive and intensive levels.