In today’s briefing:
- China Hard Landing Scenario
- Energy Cable/Great Game: OPEC, things could get ugly!
- [US Crude Oil Options Weekly 2024/35] WTI Crude Oil on a Downward Trend as Demand Concerns Persist
- CrossASEAN Ground Zero – OVO & Superbank, SCG Packaging in Indonesia, Gig Revolt, and Data Centres
- [US Nat Gas Options Weekly 2024/35] Henry Hub Rebounds on Hot Weather but Excess Supply Limits Gains
- Inconsistent Pricing is Too Dovish
- CX Daily: China’s Increasingly Embattled Steelmakers
- Actinver Research – Macro Daily: Gross Fixed Investments
China Hard Landing Scenario
- We see a 30% probability of a harder landing in China GDP growth in 2025, which we most likely be in the 3-4% region but could persist into 2026.
- A large than projected slowdown in consumption would be a key concern, alongside persistently moderate negative deductions from residential investment.
- Negative inflation would only worsen this situation, while China authorities appear reluctant to go beyond targeted extra policy support towards aggressive action.
Energy Cable/Great Game: OPEC, things could get ugly!
- Hi all, Beginning this week, we’re merging our weekly coverage of the energy/commodity space and geopolitics.
- This will allow us to be even more actionable and specific when analyzing global events, as the ramifications of war and peace are most often felt in the commodity space.
- Take aways: Increasing crude production in the current environment likely means a >25% drop in crude oil prices. There’s significant open interest in December crude put options. Geopolitically, major players are closely monitoring OPEC’s decisions.
[US Crude Oil Options Weekly 2024/35] WTI Crude Oil on a Downward Trend as Demand Concerns Persist
- Despite a strong start, WTI prices fell 1.7% for the week ending 30/Aug, as demand concerns outweighed the worries of supply disruptions in Libya.
- WTI options Put/Call volume ratio increased to 1.72 from 1.13 the week prior as put volume increased 45.6% WoW while call volume declined 4.5%.
- WTI OI PCR increased to 0.78 (30/Aug) from 0.75 (23/Aug) as call OI rose 4.5% WoW and put OI increased by 8%.
CrossASEAN Ground Zero – OVO & Superbank, SCG Packaging in Indonesia, Gig Revolt, and Data Centres
- In this edition, we look at OVO and Superbank in Indonesia and how they will coexist, and SCG Packaging as it increases its Indonesia exposure through Fajar Surya.
- We also look at the implications of the recent gig worker protests in Indonesia and Telekomunikasi Indonesia‘s increasing focus on data centres and a strategic investor there.
- CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
[US Nat Gas Options Weekly 2024/35] Henry Hub Rebounds on Hot Weather but Excess Supply Limits Gains
- US natural gas prices rose 5.2% for the week ending 30/Aug, driven by warmer weather forecasts and low prices encouraging power generators to favour gas over coal.
- Henry Hub Put/Call volume ratio fell to 1 from 1.34 the previous week as put volumes dropped by 38.5% WoW, while call volumes declined by 17.5%.
- Put OI rose for expirations in Sep, Oct, and Nov, while call OI increased for contracts expiring in Dec, Jan, and Feb.
Inconsistent Pricing is Too Dovish
- Equity prices retested their peaks, but rate expectations for Dec-25 remain near their dysfunctional lows. Demand cannot be both high for revenues and low to justify easing.
- Residual pricing for a 50bp Fed rate cut exacerbates the inconsistency. Realising a 25bp cut should hawkishly reprice US rates relative to others, supporting the USD.
- The S&P500’s potential doesn’t seem worth the risk of a crash relative to the reliable money market yield, which could easily outperform, especially in risk-adjusted terms.
CX Daily: China’s Increasingly Embattled Steelmakers
- Steel / Chart of the Day: China’s increasingly embattled steelmakers
- Accident /: Bus hits crowd outside middle school in East China, killing 11
- Banks /: Another key executive at Bank of Beijing falls from grace, sources say
Actinver Research – Macro Daily: Gross Fixed Investments
- Gross fixed investment contracted by 1.0% MoM in June due to the completion of public infrastructure projects that impacted construction investment, and the contraction in imported machinery and equipment investment due to the depreciation of the peso.
- This suggests that the economic slowdown could persist in the second half of the year, pointing to GDP growth of 1.5% in 2024.
- Throughout 2024, there were mixed signs of deceleration in the components of fixed investment.
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