In today’s briefing:
- India: Mild Near-Term Negative for Stocks; Solidly Positive for Medium Term Growth
- Great Game – 5 Things I Expect from Kamalanomics
- Yield Curve Normalisation on Rate Cut Anticipation
- CX Daily: Beijing to Bolster Industrial Chains, Promote Private Sector
- Hong Kong Government Deficit: Early Preamble of Crisis to Come but Still Salvagiable
India: Mild Near-Term Negative for Stocks; Solidly Positive for Medium Term Growth
- The FY25 Budget projects a fiscal deficit of 4.9% of GDP (vs previous projection of 5.1%), but the 12mma of the fiscal deficit was already 4.8% of GDP by May’24.
- With real GDP likely to grow 8.5% this year, direct tax revenue should considerably exceed official projections. Government’s lower borrowing requirement should crowd-in private investment, further fuelling RGDP.
- Hikes in LTCG and STT (on derivatives) are near-term negatives for stocks. But fiscal prudence, employment generation and agricultural productivity enhancements will create a virtuous circle in the medium-term.
Great Game – 5 Things I Expect from Kamalanomics
- Whoa, yet another completely historical weekend in the US Presidential Race.
- President Biden is out of contention in what was perhaps the most predictable thing in a completely unpredictable race so far.
- Now, as we discussed yesterday, Kamala Harris is entering the race as an underdog, but a Trump landslide in November is far from a foregone conclusion.
Yield Curve Normalisation on Rate Cut Anticipation
- The likelihood of imminent rate cuts has increased due to recent cooling in core CPI, driving anticipatory normalization of the yield curve.
- According to FedWatch, expected rate cuts totaling 100 basis points by March 2025 are driven by cooling inflation, improving economic data, and the increasing fiscal burden of U.S. debt.
- Historical data shows yield spread between 2Y and 10Y treasuries recovered just before and after rate cuts, signaling investor expectations front-running monetary easing.
CX Daily: Beijing to Bolster Industrial Chains, Promote Private Sector
- Plenum /: Plenum Explained: Beijing outlines reforms to boost foreign trade and promote the private sector
- U.S. /Cover Story: U.S. presidential race upended by Biden’s withdrawal, assassination attempt on Trump
- Corruption /: China’s top prosecutors order arrest of former vice chair of Hunan legislature
Hong Kong Government Deficit: Early Preamble of Crisis to Come but Still Salvagiable
- The Financial Secretary has forecast a budget deficit of HKD 101.6 billion for the 2023-24 fiscal year, almost double its original estimate of HKD 54.4 billion 28 Feb 2024 (KPMG)
- Although Hong Kong is undergoing the fourth deficit in five years and can be preamble to Crisis, fiscal reserve, estimated HKD 733.2 billion, remain a strong backbone to prevent crisis.
- The turning point from healthy to crisis is still to be observed, depending on if the government would scale back fiscal deficit in its next 5-year budgets.
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