Macro: The Crude Reality and more

• Oil has posted clear weekly reversals and has a bullish setup that indicates significant gains
• Expect a rally to, and through, the highs seen in March this year
• This is likely to have negative implications for other financial markets including equities. Trade ideas included at the end

• Three factors argue for more monetary tightening in October. First, inflationary expectations need to be anchored.
• Second, gGlobal inflation will remain elevated because of continued supply chain disruptions and upward pressures on energy and food prices. 
• There will be less slack in the economy due to strong growth in the domestic sectors. 

• In this insight, we discuss the continued outperformance of the major Korean pref shares versus common shares in 2022.
• There has been a continued closing of the pricing gaps between the major Korean common and preferred shares this year.
• The 28 Korean preferred stocks experienced an average shares prices decline of 3.2% YTD, outperforming their common shares counterparts which were down 5.4% in the same period. 

• Recent inversion of the US Treasury yield curve indicates investors are nervous about a potential policy mistake by the Fed. Complacency about inflation resulted in overly-generous liquidity provisions requiring removal.
• Observers believe the Fed lacks courage to tighten aggressively due to recession risks.  Attention has shifted to the timing of the inflation peak, but housing sector strength complicates the task.
• The Fed should concentrate its efforts to cool housing inflation with higher long-term interest rates, because inflation in this sector is largely determined by domestic economic forces.   

• 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 Mitra Adiperkasa (MAPI IJ), Ace Hardware Indonesia (ACES IJ), and Bukalapak (BUKA IJ), as well as rapidly transforming Sido Muncul (SIDO IJ). 
• We also look at the IPO debut of GoTo (GOTO IJ), slower cement sales in Indonesia, and the end of an era for Singapore Press Holdings (SPH SP). 

• In the ‘80s, independent economist Yardeni coined the term ‘‘bond vigilantes’’ to refer to fixed income investors disciplining authorities for running inflationary fiscal and monetary policies and ultimately restoring order through the bond market.
• In 2022, we are witnessing the first preliminary signs of the return of the global macro vigilantes
• Amongst others, George Soros is an eminent member of this selected group of macro investors who challenge policymakers across countries and relentlessly chase regime-change narratives once they see a good opportunity

• Animal spirits are clearly in short supply in the Indian elephant, going by the rather lacklustre factory output figures.
• Consumption and investment demand remain tepid while monetary tightening and power shortages will exert a drag.
• Inflation remains a concern, and surging CPI/WPI inflation will force the RBI’s hands to move in June, with further tightening from August. 

• Shanghai / Cover Story: The disrupted lifelines of the Shanghai outbreak

• GDP / China’s first-quarter GDP growth beats expectations with 4.8% rise

• Banking / China Merchants Bank president removed from his position

• YoY OFWR growth slowed for the third month
• Caveat to OFWR outlook now is global economic outlook

Overseas Filipino Workers Remittances (OFWR) growth slowed for the third month in a row in Feb 2022 to +1.3% YoY (Jan 2022: +2.5% YoY). Currently, our 2002 OFWR growth forecast is +4.2% to USD32.75b (2M 2022: +1.9%; 2021: +5.1%) while BSP expects +4% growth. Caveat to OFWR outlook now is the global economic impact of Russia-Ukraine war, especially if the conflict drags Europe which accounts for 12% of 2021 OFWR vs a miniscule 0.008% share for Russia and Ukraine.