In today’s briefing:
- Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program
- Preview to the 3rd Plenum of Chinese Communist Party
- UK Politics: The Morning After
- India: Growth Ensures that the Market Is Not Too Expensive Despite Big 4yr Runup
- CX Daily: China’s Ultra-Long Bonds May Test PBOC’s Monetary Toolkit
- CrossASEAN Ground Zero – Campina Ice Cream, Mayapada Hospital’s Fundraise, and Xurya’s Solar Allure
- Actinver – Macro Daily: Domestic Demand: Investment and Consumption
- Navigating Frothy US Equities with S&P Spreads
- Gen AI Unleashes Hyper Demand for Data Centers
- Business Cycle Watch: Is the US in a recession already? Here are the pros and cons
Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program
- The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
- For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
- For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won.
Preview to the 3rd Plenum of Chinese Communist Party
- The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy. However, they are unlikely to be game changers.
- Major points to observe include unemployment and healthcare benefit boost, Hukou fine tuning, discussion about inheritance tax, and the 2-4 trillion Yuan of buying most unsold homes.
- Deepening of reform especially in boosting innovation and upgrading consumption will also be touched on, but there will seem no short-term effective measures.
UK Politics: The Morning After
- The incoming Labour government is prioritizing securing a second term from the start.
- The promised “change” in their manifesto will be gradual, aiming for a modest boost in economic growth.
- More radical measures are anticipated to be implemented in the potential second term.
India: Growth Ensures that the Market Is Not Too Expensive Despite Big 4yr Runup
- Despite more than doubling in the past 4 years, the BSE-Sensex is fairly valued (trailing P/E of 24.04x) relative to its 10-year mean (23.93x)– helped by sustained EPS growth.
- The trailing P/E is above the 20-year (21.34x) and 30-year mean (20.4x), but those reflect weaker growth prospects in earlier decades. 10yr mean better reflects new normal 8% RGDP growth.
- Net FPI inflows reached a record USD10.14bn in Dec’23, when the market was similarly valued. FPI flows into equity were minimal in H1CY24, but likely to rebound. Stay moderately Overweight.
CX Daily: China’s Ultra-Long Bonds May Test PBOC’s Monetary Toolkit
- Bonds / In Depth: China’s ultra-long bonds may test PBOC’s monetary toolkit
- Badminton /: Teenage Chinese badminton star’s death draws criticism of first responders
- Central bank /: PBOC bond-borrowing plan fuels expectation of action to raise yields
CrossASEAN Ground Zero – Campina Ice Cream, Mayapada Hospital’s Fundraise, and Xurya’s Solar Allure
- This week we look at the potential sale of Campina Ice Cream and the dairy space and the fundraising plans of Mayapada Hospital with M&A picking up in healthcare.
- We also take a look at the latest fundraising by Indonesia’s solar operator Xurya as investors are drawn towards sustainable power investments but see potential headwinds.
- CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
Actinver – Macro Daily: Domestic Demand: Investment and Consumption
- Fixed investment grew 0.9% MoM, driven by investment in both residential and infrastructure construction.
- Investment in imported machinery continued to outperform investment in domestic assets due to the strength of the Mexican peso.
- In April, gross fixed investment in the country reached its fourth consecutive month of expansion, supported in the first two months by investment in machinery and equipment, and in the following two by investment in construction.
Navigating Frothy US Equities with S&P Spreads
- Amid all-time highs, the S&P 500 faces recession risks with economic indicators like unemployment and housing starts signaling downturns, impacting broader market stability.
- The S&P 500’s growth, heavily reliant on mega-cap tech stocks, contrasts sharply with broader indices, driven by AI advancements and global revenue streams, suggesting market top-heaviness.
- Given recession precursors and market frothiness, a spread trade using CME’s Micro E-Mini futures (Long S&P 500 and Short Russell 2000) is proposed to balance potential gains with reduced risks.
Gen AI Unleashes Hyper Demand for Data Centers
- Singapore’s REITs, representing 12% of the equity market, face pressures from rising interest rates and economic downturns, which impact profitability and market performance.
- The data center REIT sector is propelled by increasing AI applications, data sovereignty laws, and the growth of cloud services, positioning it for significant expansion.
- Digital Core REIT benefits from its presence in key tech hubs and high-performance computing offerings, positioning them to outperform in a tight data center market.
Business Cycle Watch: Is the US in a recession already? Here are the pros and cons
- It’s not like we haven’t had this discussion a few times already this cycle, but the recession chatter is staring at us again after the weakest ISM report in years.
- The percentage of respondents reporting higher New Orders has weakened to levels only seen during the GFC.
- So, is it time to buy puts and canned food and head for the cellars?
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