In today’s briefing:
- Portfolio Watch – Adjusting equity and commodity risks as the reflation story stalls
- CrossASEAN Ground Zero – Shopee Express in the CrossHairs, Grab & OpenAI, Cinema XXI, Thai Tariffs
- EA Services Inflation Resurgent in May-24
- HEW: ECB Can Cut With Crossed Fingers
- Malaysia: Net Outflow of FDI and FPI Reflect Basic Haemorrhage of Trust
- CX Daily: The Extreme Graft Cases Dealt a Death Sentence Without Reprieve
Portfolio Watch – Adjusting equity and commodity risks as the reflation story stalls
- Hello everyone, and welcome back to our weekly portfolio watch, where we shed light on the most important factors driving our Macro and Crypto portfolio over the past week.
- Macro Portfolio – Reflation bets have lost momentumWe have been banging the drum on a combination of slightly higher prices and a continuation of the rebound in manufacturing on a more global scale, placing bets in broad commodities and cyclical equities like Materials.
- The recent rally in BCOM has however been put to a halt over the past week, and it looks like we are in for a smaller correction in industrial metals, where clustering risks have turned more profound in copper and silver especially, as right about everyone has placed longs in the copper July contract.
CrossASEAN Ground Zero – Shopee Express in the CrossHairs, Grab & OpenAI, Cinema XXI, Thai Tariffs
- This week we look at Shopee and Lazada as they are investigated for anti-competitive behaviour around logistics, Grab’s OpenAI collaboration, and Cinema XXI (CNMA IJ) as GIC looks to exit.
- We also look at the increasing focus by governments around Southeast Asia on cheap imports from China, as Thailand joins the through imposing VAT on low-value products previously exempt.
- CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
EA Services Inflation Resurgent in May-24
- EA inflation rebounded beyond expectations to 2.6% y-o-y in May, 5bps above our forecast. Services inflation surged to 4.1%, its highest since Oct-23.
- The upside news in services was broad-based across member states, albeit partly offset by a lesser rebound in energy prices. The consistency of these surprises raises concerns.
- Higher underlying inflation and wage settlements amid falling unemployment are unambiguously hawkish, but the ECB’s data dependence only applies beyond June’s cut.
HEW: ECB Can Cut With Crossed Fingers
- Resurgent services inflation surpassed expectations in the May flash, increasing the EA headline rate. Additionally, an unexpected drop in the EA unemployment rate and a wage settlement increase make it difficult for the ECB to reduce rates.
- The ECB has essentially pre-committed to a rate cut on 6 June, meaning recent developments will likely impact future decisions, potentially leading to a hawkish cut.
- The Bank of Canada is also expected to make a rate cut on 5 June, indicating that the ECB will not be the only bank making such a move this week.
Malaysia: Net Outflow of FDI and FPI Reflect Basic Haemorrhage of Trust
- PM Anwar’s effective abandonment of the multi-racial agenda he advocated during his quarter-century in Opposition has led to large net outflows of FPI and FDI, especially in Q1CY24.
- The trend weakening of the BoP current account was temporarily reprieved in Q1 by a sharp decline in the incomes deficit. Medium-term challenges still pressure MYR, as FX reserves stagnate.
- Cyclical recovery likely to peter out, with structural fiscal deficit at 5.5% of GDP, and scant scope for monetary stimulus. We recommend being Underweight Malaysia, with Penang-linked stocks the exception.
CX Daily: The Extreme Graft Cases Dealt a Death Sentence Without Reprieve
- Death sentence / Caixin Explains: The extreme graft cases dealt a death sentence without reprieve
- Insights /: Currency diversification can coexist with dollar dominance, vice finance minister says
- Corruption /: China investigates two more ex-financial overseers for corruption
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
