In today’s briefing:
- EM Watch: The Chinese race towards 0% interest rates
- Technically Speaking, Breakouts and Breakdowns: HONG KONG (AUGUST 15)
- Sectors to Look at for the Japanese Stockmarket’s Next Phase
- US CPI Watch: The old culprits are back, but the report is soft enough for the Fed to cut
- EM Economies Divergent Performance
- Norway Policy Rate 4.5% (consensus 4.5%) in Aug-24
- China Data: Weak Performance in July and into 2025
- China Data:
- Philippines Policy Rate 6.25% (consensus 6.5%) in Aug-24
EM Watch: The Chinese race towards 0% interest rates
- Welcome to our Weekly EM Watch, where we look at China and other large EM countries through the lens of Western macro investors.
- Over the past week, we received the latest quarterly update on Chinese foreign direct investments and the situation went from dire to abysmal.
- There is a net negative inward FDI flow, and despite a significant $190 billion surplus in customs goods and services, the basic balance, which comprises both the current account and FDI, recorded a substantial deficit of $30 billion for the first time.
Technically Speaking, Breakouts and Breakdowns: HONG KONG (AUGUST 15)
- Wide dispersion of returns has meant that industry sector investing was a major performance contributor in Hong Kong
- Lygend Resources & Technology (2245 HK) brokeout after Indonesia announced a moratorium on new nickel mining permits. Sino Biopharmaceutical (1177 HK) broke its falling wedge pattern after announcing results.
- Wynn Macau Ltd (1128 HK) broke to a new low after announcing a disappointing 2Q EBITDA. The sector is also affected by a crackdown on illegal money exchange operations.
Sectors to Look at for the Japanese Stockmarket’s Next Phase
- JPY sensitive names and foreigner favourites are unlikely to be the next driver of the market.
- Sectors not dependent on a weak Japanese Yen are more likely to be the next winners
- While individual stocks will still benefit from corporate governance reforms, a rising tide will not lift all boats as it has done over the last 18 months
US CPI Watch: The old culprits are back, but the report is soft enough for the Fed to cut
- Overall this print doesn’t change the picture a whole lot.
- Inflation is soft enough for the Fed to cut, but it is not a “slam dunk” disinflation report either.
- It is once again shelter and transportation that are standing in the way of a soft US CPI print.
EM Economies Divergent Performance
- Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.
- We see scope for a 2 wave of U.S. equity and Japanese Yen (JPY) correction, as September rate cut is approaching.
- Brazil and Mexico yield risk premia are high, though event risk surrounds Mexico with November’s U.S. presidential election . Some rotation could be seen into EM equities.
Norway Policy Rate 4.5% (consensus 4.5%) in Aug-24
- The Norges Bank kept the policy rate unchanged at 4.5%, consistent with expectations, as inflation trends lower but remains above target, and economic growth is subdued.
- This decision was influenced by a weaker krone, lower-than-projected inflation, and slightly higher unemployment, signalling the need for a cautious approach to monetary policy.
- The central bank is prepared to adjust the policy rate depending on future inflation trends, economic developments, and global factors, with the policy rate likely remaining at 4.5% for some time ahead.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
China Data: Weak Performance in July and into 2025
- Overall, the July data is consistent with our forecast of a weaker H2 and we still look for 4.7% GDP growth for 2024.
- The data is also consistent with our forecast of 4.0% in 2025 GDP growth. Consumption behavior could stall further and cause more of a drag than we anticipate.
- We now see a 30% probability that 2025 growth could be below 4%.
China Data:
- Overall, the July data is consistent with our forecast of a weaker H2 and we still look for 4.7% GDP growth for 2024.
- The data is also consistent with our forecast of 4.0% in 2025 GDP growth. Consumption behavior could stall further and cause more of a drag than we anticipate.
- We now see a 30% probability that 2025 growth could be below 4%.
Philippines Policy Rate 6.25% (consensus 6.5%) in Aug-24
- The BSP’s decision to cut the policy rate by 25 basis points to 6.25% defied consensus expectations. This strategic shift towards a less restrictive monetary policy responds to an improved inflation outlook.
- Domestic demand remains solid, and the economic environment is favourable, with strong GDP growth and declining unemployment.
- Future policy decisions will focus on balancing inflation risks with economic growth, with the BSP remaining vigilant and ready to adjust its stance based on evolving macroeconomic indicators.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
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