Daily Brief Macro: Korea Value Up Index – Surprising Inclusions and Exclusions and more

• There are some major surprises (both inclusions and exclusions) in the Korea Value Up index. 
• In particular, the telecom sector (SK Telecom and KT) and large cap holding companies (Samsung C&T and LG Corp) are surprising exclusions in the index.
• There are many surprising inclusions in the Korea Value Up Index. We provide 30 companies are surprising inclusions in the Korea Value Up Index (19 KOSDAQ and 11 KOSPI listed).

• Indonesia’s exposure among EM funds is beginning to taper, with 2.3% of funds closing positions and 6.3% shifting to underweight over the past six months
• Bank Central Asia and Bank Rakyat reached record ownership highs this year but have since faced closures by select funds
• On the fund level, closures have outpaced openings, led by Aubrey and BlackRock, with the majority of funds now holding allocations below 5%.

• Indonesia has been the recipient of significant investment flows for foreign investors with more of a “risk on” environment with a large portion flowing into Indonesian banks. 
• Indonesia stacks up from an investment perspective with a stable political environment, solid GDP growth of around 5% YoY, rising flows of FDI, and a more stable IDR.
• Despite the JCI knocking on all-time highs, valuations continue to look attractive with prospects of a better 2H2024 and lower interest rates. Top picks: Banks, property, consumer, and selective elsewhere. 

• The Federal Reserve’s larger-than-expected rate cut suggests that it saw an uncertain trajectory for the US economy with downside risks.
• Fed policy is in trial and error mode until it lands on a new equilibrium. There will be more turbulence and uncertainty for Asia and the rest of the world.
• For Asia, the immediate impacts will be felt in the currency and other financial markets. Real-economy impacts will be modest for now as monetary policy takes time to work.

• ADD slapped on the US, the EU, the UK, and Singapore imports
• ADD probe initiated against Canada, Japan and India
• Russia to be a major beneficiary of the measures

• As we enter the historically weak 7–10 days for markets, it’s a good time to be cautious.
• Banks are also preparing for quarter- and year-end window dressing, which tends to drain liquidity as they park USDs at the Fed to clean up balance sheets.
• We expect $225 billion to leave the market by month’s end, tightening liquidity more than in 2023 but less than in 2022.

• US natural gas prices rose by 5.6% for the week ending 20/Sep, driven by a shrinking storage surplus and an improved demand outlook.
• Henry Hub Put/Call volume ratio rose to 1.69 (20/Sep) from 1.45 the previous week as put volumes rose by 102.7% WoW, while call volumes grew by 74.4%.
• Put OI surged for contracts expiring on 25/Sep, Oct, and Nov. Call OI rose for expiries on Dec, Jan, Feb, and Mar.

• China has surprised and cut the 7 day reverse repo rate by 20bps to 1.5%, with a 50bps cuts in the RRR rate. 
• Combined with other measures this is a step-up in support and could help GDP on the margin, but the measures are not game changers as monetary policy is currently ineffective. 
• While further fiscal easing will likely arrive in the next few weeks, we still maintain our forecast of 4.0% GDP growth for 2025.

• Opec+ is forced to delay the unwinding of its voluntary cuts due to ongoing weak demand for oil.
• Without a significant geopolitical shock, Brent is likely to remain below USD70 per barrel.
• This price trend for Brent is expected to continue until at least mid-2025.

• Toby Rhodes became interested in Japan due to his grandfather’s stories about the country and its culture
• Toby is the co-founder and managing partner of Konami Capital, a value and quality oriented manager of small cap Japanese equities
• He discusses the past false starts of Japanese activism, recent changes in corporate governance, and Konami’s process for taking advantage of opportunities in the Japanese market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.