Daily Brief Macro: EM Watch: The Non-Feasible Return of the EM Carry Case Amidst a Global Slowdown and more

• Welcome to our weekly EM Watch, where we examine Emerging Markets (with a particular focus on China) through the lens of Western investors.
• It’s been a rough month for anything linked to China, including industrially sensitive commodities.
• According to one of the most reliable live gauges of Chinese energy demand—the Singapore Gasoil-Dubai Crude Crack Swap—we are still on a slippery slope toward weaker demand from China.

• Most Asia-Pacific economies continued to grow at healthy rates in 2Q24, maintaining momentum from 1Q24 despite ongoing uncertainties in global economic conditions.
• For the remainder of the year, the risk of slowdown in major economies and the delicate transition away from high interest rates may cause bursts of market turbulence. 
• But the region should benefit from looser monetary conditions globally, as well as the upsides associated with infrastructure investments and industrial relocations.    

• Odd Lots podcast discusses changing relationship with China on trade
• China’s economy slowing, yet current account surplus increasing
• Doubts about China’s export-driven economic model and overcapacity issues

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• Despite resilient US inflation and UK employment releases, market participants continue to anticipate a 50bp cut from the Federal Reserve. The European Central Bank has already made a cut and is likely to make another in December.
• The Bank of England appears likely to forego a cut this month, having already frontloaded its easing in August.
• A 25bp cut from the Federal Reserve is still expected, serving as a reminder for market participants not to challenge the Federal Reserve’s decisions. Despite market anxieties, there is no indication of an impending recession.

• Hang Seng moves sideway in the past week while S&P500 is up 1.61% as the market is overshadowed by expected Fed rate cut next week.
• Both the movements of Hang Seng and S&P500 are within our prediction range and will likely oscillate between narrow ranges until the rate cut next Wed. 
• We are long individual stocks (PLTR) in the US market and Hong Kong market (Link Reit), but bet on the overall market for Hong Kong side only.

• Investors / In Depth: China’s PE investors left empty-handed as cash-strapped startups flout
• Corruption /: Two ex-senior officials accused of holding on to classified materials
• IBM /Exclusive: IBM chief says closing China units is ‘done’ and ‘not reversible’