In today’s briefing:
- The Crude Awakening – Oil’s Break Higher
- Can Southeast Asia Become the Pre-Eminent Destination for Foreign Investment?
- Oil Prices Are Poised For A Correction But Supply Remains The Wildcard
- The Week That Was in ASEAN@Smartkarma – Grab & Bank Fama, XL Axiata & Link Net, and Shopee in India
- Alpha Bites: A Local Rate Curve Steepening Trade in Chile
- How is the Federal Interest Rate hike going to affect the Stock Market?
The Crude Awakening – Oil’s Break Higher
- The rally in Oil has taken us through the key levels that were in focus up to $89.58
- The weekly close is particularly constructive as we posted a bullish outside week
- This should open the way for further gains to the tune of some 20%-25% over the coming weeks / months
Can Southeast Asia Become the Pre-Eminent Destination for Foreign Investment?
- Foreign direct investment and funding of start-ups in Southeast Asia surged in 2021. We see good reasons for such funds flows into the region to accelerate.
- Infrastructure development and reforms in major economies are improving the business eco-system, such as the Omnibus bill in Indonesia and a push for liberalisation in the Philippines.
- Once the pandemic eases, we believe that the reconfiguration of supply chains will resume and a material part of that will benefit Southeast Asia
Oil Prices Are Poised For A Correction But Supply Remains The Wildcard
- Global demand for oil is set to converge onto pre-pandemic levels in 2022.
- Supply is the wildcard here. Smaller members of the OPEC cartel have struggled to meet their production targets, while US shale is constrained by capital discipline.
- For the region, higher oil prices entail slower growth as real incomes weaken; greater price pressures at a time when negative output gaps are closing; and widening external imbalances.
The Week That Was in ASEAN@Smartkarma – Grab & Bank Fama, XL Axiata & Link Net, and Shopee in India
- 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 Grab (GRAB US) after a bank acquisition with Singtel (ST SP) in Indonesia plus on ASSA after the spin off of its auto business.
- We also look at XL Axiata (EXCL IJ) and Link Net (LINK IJ) plus the strong reception that Shopee (Sea Ltd (SE US)) is seeing in India and more.
Alpha Bites: A Local Rate Curve Steepening Trade in Chile
- Chile’s rate curve has bear-flattened driven by the short end with inflation running at a decade high on the heels of strong demand, leading to an aggressive monetary tightening cycle.
- Over the coming months, the monetary tightening cycle should end with inflation coming off the highs and growth slowing down sharply, which should lead to steepening of the curve.
- Additionally, with the still-high political uncertainty and the fiscal deterioration of recent years continuing to weigh on the long end, I recommend a beta-neutral 5s10s curve steepening trade.
How is the Federal Interest Rate hike going to affect the Stock Market?
- The U.S Federal Reserve has finally given a clear indication that it intends to increase the interest rate to combat inflation in 2022
- The borrowing rates had been left unchanged at near-zero since the start of the pandemic
- While the conventional wisdom is that rate hikes, in general, are not good for stock market returns, the data seems to tell a totally different story
Before it’s here, it’s on Smartkarma
