In today’s briefing:
- The Overlooked Reason Why Stocks Are Strong
- US-China Tensions: Material Deterioration in Asia’s Risk Profile
- Singapore: In A Good Place Cyclically, But Daunting Structural Challenges Lie Ahead
- How to Position for a Rolling Recession
- The Philippines: Set For A Blockbuster 2Q22
The Overlooked Reason Why Stocks Are Strong
- Why is the stock market holding up so well? What happened to all the warnings from the Fed?
- All the talk of sentiment and momentum aside, the overlooked reason is the stock market may be sniffing out disinflation.
- Our base-case scenario continues to call for a re-test of the June lows, but we allow that there is about a one-third chance that market is undergoing a V-shaped bottom.
US-China Tensions: Material Deterioration in Asia’s Risk Profile
- Against our expectation, House Speaker Pelosi went ahead with her visit to Taiwan. China’s response in the form of massive military exercises around Taiwan crossed several lines not breached before.
- The result is that Taiwan’s sense of insecurity has likely deepened. China’s diplomatic reactions have also meant that US-China ties are at their most precarious in decades.
- China’s relations with Japan have also taken a hit. These moves are likely to push Japan even more firmly into working closely with the US to protect itself.
Singapore: In A Good Place Cyclically, But Daunting Structural Challenges Lie Ahead
- The latest GDP and labour market data confirm Singapore’s cyclical prospects remain strong. Although external demand is likely to slow, the rebound in sectors badly hit by covid is firming.
- But there are three structural challenges that need to be tackled. First, productivity growth has been persistently weak.
- Second, the large external surpluses reflect excessive savings in the economy. And, third, rising home prices show a disconnect from fundamentals.
How to Position for a Rolling Recession
- The world isn’t undergoing a single recession, but a rolling recession, which offers more opportunities for investors.
- The conventional recession trade is to buy long-dated Treasury assets as the safe-haven trade. A better way might be to buy JPY assets
- For equity investors, we make some suggestions on how approach rotation among the global regions.
The Philippines: Set For A Blockbuster 2Q22
- The Philippines is set for a blockbuster 2Q22, as our nowcast pegged 2Q22 GDP growth, due for release on 9 Aug 22, at 8.9%.
- Lagging indicators such as credit growth and lending standards, point to a buoyant recovery powered by domestic demand.
- Expect the BSP to stay the course with further rate hikes in September, albeit in increments of 25bps moving forward as sequential inflation shows signs of easing.
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