In today’s briefing:
- Real Interest Rate Plays a Key Role in Hong Kong Residential Property Market
- Overview #6 – Japanese Data Perks Up.
- Trading the Slow Motion Melt-Up
- A Roadmap for the Rest of 2024
- Actinver – Macro Daily: Industrial Activity
Real Interest Rate Plays a Key Role in Hong Kong Residential Property Market
- Negative real interest rate had been associated with booming residential property prices in Hong Kong from 2008 to 2021
- However the party is over as Hong Kong interest rate moves up following ups in Fed Fund Rate due to Linked Exchange Rate System.
- Residential prices rise 250% during the negative real interest rate period of 2008 to 2021, and are down 22.5% immediately during the real interest rate hike in 2022 to 2023.
Overview #6 – Japanese Data Perks Up.
- A review of recent events impacting our investment themes or outlook
- Japan perks up as machine tool orders rise y/y for the first time in nearly 19 months
- US Interest Rate cut expectations rise to a “sure thing” in September
Trading the Slow Motion Melt-Up
- Valuation and breadth indicators are flashing concerning signs of excesses. We believe this market bull has more room to run.
- If this is a market bubble, valuations are stretched but not bubbly.
- Price and fundamental momentum are strong, and we are not seeing signs of distribution.
A Roadmap for the Rest of 2024
- Our base-case scenario is based on an analysis of current market conditions and seasonal patterns of a near-term top in July and sideways consolidation for the remainder of the month.
- Expect a rally in August, which could be consistent with an anticipation of a September rate cut in the wake of the July 31 FOMC meeting and Jackson Hole speeches.
- Volatility and risk should rise into the November election, followed by a post-electoral rally into year-end.
Actinver – Macro Daily: Industrial Activity
- In May, industrial activity grew 0.7% MoM, driven by mining and construction.
- Unlike what happened at the beginning of the year, government projects are no longer the driving force of construction, but rather private sector construction.
- In May, industrial production reversed the decline seen in April (-0.4% MoM), growing 0.7% MoM.
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