In today’s briefing:
- Positioning Watch – A Turn to Fund Flows
- February Market Thinking
- AFC Iraq Fund January 2023 Update: “Market Begins to Discount Currency Upheavals”
- The Week That Was in ASEAN@Smartkarma – SCBX Transformed, Ace Hardware Time, and Pertamina Geo IPO
- Asset Watch: From a Recession to a Soft Landing to a Raging Boom in Just One Week
- Major Commodity Fund Outflows Continue in January
Positioning Watch – A Turn to Fund Flows
- We stay net long equities but remain on high alert for a potential “crowdening” of the view
- Crowded EUR longs makes for decent risk/reward in JPY and AUD versus the USD
- Stay long copper, shy away from gold and ponder some risk in long palladium. Energy longs remain saturated.
February Market Thinking
- January started the year strong in markets as the mean reversion trades we suggested likely in our year ahead piece all seem to have happened, with markets in January producing pretty much the inverse of 2022, in other words a month in which almost everything went up, except for the $, as shown in the following chart, courtesy of Redburn.
- Last year, the traders beat the asset allocators hands down.
- So far this year, it’s the other way around, with some extremely painful moves for some of the short term traders and some welcome relief for the 60:40 crowd.
AFC Iraq Fund January 2023 Update: “Market Begins to Discount Currency Upheavals”
- The AFC Iraq Fund was down 0.5% in January, outperforming its benchmark, the Rabee Securities RSISX USD Index, which was down 5.0% for the month.
- For the third month in a row, the decline in the parallel market’s price of the Iraqi Dinar (IQD) versus the US Dollar (USD) negatively affected the market’s performance by reversing the index’s 5.5% increase in IQD terms to a decline of 5.0% in USD terms, and the fund’s 9.0% increase in IQD terms into a 0.5% decline in USD terms.
- However, unlike the prior two months, the market has started looking through and discounting the currency’s volatility as seen from the market action and, in particular, those of banks and industrial stocks – two groups that stand out as net beneficiaries of the depreciation of the market price of the IQD vs the USD.
The Week That Was in ASEAN@Smartkarma – SCBX Transformed, Ace Hardware Time, and Pertamina Geo IPO
- The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
- The past week saw insights on Siam Commercial Bank, Bank Mandiri, Ace Hardware Indonesia, Bukalapak (BUKA IJ) and GoTo, as well as significant coverage of Pertamina Geothermal pre-IPO.
- There were also macro pieces on the Philippines economy 6 months into the new regime plus Malaysian politics and insights on Q & M Dental, Halcyon Agri and Lippo Karawaci.
Asset Watch: From a Recession to a Soft Landing to a Raging Boom in Just One Week
- Economic data is currently all over the place, but the bottom-line is clear – no recession yet
- This is in sharp contrast to sentiment entering 2023 and not least positioning
- Will the market continue to rally due to the “postponed” recession fears?
Major Commodity Fund Outflows Continue in January
- Glencore said last week that its copper production fell 12% in 2022.
- The miner and trader said it produced 1.06 million tonnes of copper last year and kept its 2023 outlook unchanged at around 1.04 million tonnes.
- Many miners revise their copper output lower, as extreme weather, labor issues, or lower grades have caused companies to deal with problems and limit the output accordingly.
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