Daily Brief Macro: What China’s trajectory mean for commodities (Huw McKay) and more

• Hugh Mackay provides insights into the future of iron ore, copper, and steel dynamics
• China’s recent stimulus announcement and its impact on global commodity markets
• Challenges faced by Chinese authorities in addressing deflation and household sector confidence.

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• Discussion on the impact of elections on FX and various hedges
• Focus on trade and fiscal policies as key factors influencing FX
• Potential scenarios and dominant teams in different election outcomes, with Republican sweep seen as favorable for dollar strength

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• Hong Kong Dollar continues to trade at the strong end of its band  resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.
• HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.
• Xtep International (1368 HK) , Xiaomi Corp (1810 HK) and China Education Group (839 HK) all had breakouts to form uptrends.  All are part of the consumption sector in China

• The fiscal briefing in China tomorrow will be crucial, as inflows into the country have significantly diminished in recent days.
• This highlights the need for a constant stream of positive news to sustain the rally.
• Given the expectations building around the message from Chinese authorities, we don’t have high hopes that they will exceed market consensus.

• Happy Sunday from Copenhagen!I spent most of Saturday morning discussing the fiscal briefing with clients.
• Even though I’m admittedly not as actively involved in business with China as I was a few years ago, I still feel relatively comfortable assessing the ramifications of the briefing.
• It was exactly what I feared: a big nothing burger.

• Our most prominent theme this year has been to BUY HK/China markets.  We are still very bullish on these SECULAR BULL markets.
• We have been Bullish on gold and discussed the asymmetry of its price movements given the global tightening starting in 2021/22.  Gold will continues to benefit from negative real rates.
• We have been Bearish on Japan since publishing Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend on April 2nd.  Japan’s market is facing significant headwinds going forward.

• China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption.
• Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a structural headwind for China GDP.
• Though China corporate debt/GDP ratio is higher than Japan in 1990, China LGFV debt is 50% of GDP and will be swapped for local and central government debt.

• This week we look at Bukalapak, as Emtek increases its direct stake, Astra‘s latest healthcare push into cardiology, and Ohhaju (OKJ TB), Thailand’s latest organic food IPO. 
• We also look at Sea Ltd (SE US)‘s latest move to apply for a digital banking licence in Thailand, which will help to further increase the platform’s regional footprint.   
• CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.

• USTR clamping 50% duty on Chinese gloves from Jan comes in handy
• Over 35% Malaysian rubber glove exports directed to the US
• Malaysia’s rubber and products exports rise to RM15.5 bn in H1 2024

• Iron ore prices dropped below $105/ton on 8 Oct after China’s NDRC failed to announce new stimulus measures, tempering bullish sentiment from earlier liquidity injections.
• Chinese portside inventories grew by 590k tons, reaching 147.84 million tons by 11 Oct, driven by higher arrivals and slower post-holiday consumption.
• While RSI signals bullish momentum, MACD shows a fading rally. Prices approach the critical 200-day moving average at $110/ton, posing a potential resistance point.