In today’s briefing:
- Regional Geopolitics: The Middle East in Crisis and Its Implications for Asia
- Thailand Economics: “Fresh” Policy Agenda Leaves Much to Be Desired
- Risk Strikes When Least Expected. How Risk-Resistant Is Your Portfolio?
- Recession Playbook: Here is how we think the recession will pan out
- Macro Nugget: Fluctuations and the Perception of Gravity
- The Energy Cable #41: There is something rotten in the state of EIA
Regional Geopolitics: The Middle East in Crisis and Its Implications for Asia
- The ongoing Israel-Hamas conflict will be a critical turning point for the Middle East, but its economic impact on Asia is likely to be limited, unlike in 1973.
- The key consideration for Asia is how the events may alter the foreign policy calculus in Washington, including implications for the US’ security guarantees in the Asia Pacific.
- There may be domestic spillovers in regional politics. Inflamed religious sentiment may affect the political dynamics in countries such as Indonesia and Malaysia.
Thailand Economics: “Fresh” Policy Agenda Leaves Much to Be Desired
- Thai premier Srettha’s inaugural policy speech to parliament is heavy on short-term stimulus measures, including a vow to freeze VAT and digital cash handouts.
- Structural economic reforms are not forthcoming. While openness to free trade is welcome, there is little to address talent shortages and regulatory uncertainty.
- A toxic political economy is unlikely to be resolved given the configuration of the ruling coalition. There are economic consequences due to crony capitalism and monopolization.
Risk Strikes When Least Expected. How Risk-Resistant Is Your Portfolio?
- Optimism peaks before a downturn. Risk strikes when you least expect it. Human brains are tricked by non-linearity of recessions.
- Monetary policy transmission takes time, lulling many to falsely believe that consumers and corporates are resilient.
- Despite raft of risk narratives, a soft landing may still be possible. But with myriad risk vectors playing out in parallel makes the chance of soft landing slim.
Recession Playbook: Here is how we think the recession will pan out
- We have refrained from taking a decisive stance on the recession timing through the year and have generally had the view that recession risks (for the US economy) were overcooked by the economic consensus.
- We are now starting to see stars aligning in our framework and expect the US recession to arrive in Q1-2024 with the final confirmation arriving early in Q2-2024.
- Here is our recession playbook and how we see markets developing alongside it.
Macro Nugget: Fluctuations and the Perception of Gravity
- The central banks that accurately anticipated the post-inflation wave, or perhaps didn’t underestimate its magnitude, were those in commodity-intensive emerging markets.
- They promptly felt the impact of rising prices on their domestic products.
- We had also predicted that these same emerging markets would be the first to identify the subsequent disinflation wave we’ve observed in 2023.
The Energy Cable #41: There is something rotten in the state of EIA
- Welcome to this week’s energy cable.
- In this edition, we will delve into last week’s EIA report and provide insights into the natural gas market.
- In the near future, we will continue to closely monitor the developing situation in Israel and Gaza, with a keen focus on their potential impact on commodity prices in the days ahead.
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