This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Ban on Short Selling Stocks in Korea Extended Until March 2025
- On 13 June, the Korean government announced that it will extend a ban on short selling stocks in Korea until end of March 2025.
- For now, the government has not given a 100% go-ahead on the end of the ban on short selling stocks starting 1 April 2025.
- However, in our view, the government is likely to allow short selling stocks in Korea once again, sometime in 2Q 2025.
2. Steno Signals #103: A blood-bath in metals in July!?
- Happy Sunday from a windy Copenhagen!We’ve been yammering about the copper buildup on Chinese exchanges for months.
- Was it a strategic decision to hoard copper reserves?
- Were the Chinese waiting to offload this copper until the CNY devalued, or a result of the physical demand in the Chinese economy nosedived off a cliff?
3. EM Watch: Is China making a fool out of Western metals speculants?
- Hot on the heels of watching Powell’s press conference, which pushed back slightly against renewed rate-cut optimism, it’s clear that the Fed is playing a cautious game.
- Despite the soft inflation data this morning, they significantly changed the dot plot.
- They likely believe the CPI report was noisy due to a sudden deflation in transportation.
4. Malaysia Economics: Is “Digital Tiger” Malaysia About to Roar Again?
- After a period of economic and political turbulence, Malaysia is now re-entering the spotlight, performing admirably in attracting technology-focused investments.
- The success in luring semiconductor and data centre investments is not down to pure luck; policymakers have worked hard to ensure that the country friendly to global tech business.
- If momentum on business investments and policy reform can be maintained, the country may be on the verge of a virtuous cycle that helps it escape the middle-income trap.
5. The Week at A Glance: Everything you need to know ahead of the FOMC and CPI
- Welcome to our concise weekly overview of key events, expectations, and positioning strategies.
- This week, we focus on the Federal Reserve meeting, US inflation data, and the crucial Bank of Japan meeting.
- As usual, the most crucial forward-looking inflation evidence is found in the NFIB report released ahead of the CPI report.
6. US CPI Review – Admittedly a soft report, but NOT the new normal
- The CPI report today was admittedly softer than our initial hawkish forecasts, with headline coming in unchanged at 0.0% MoM vs 0.1% expected while core came in to the soft side of 0.2% MoM vs 0.3% expected.
- Our anticipation of rising goods-flation didn’t play out fully, and while shelter re-accelerated as we forecasted, core services disinflated heavily in May due to auto insurance costs declining.
- The main culprit behind the dovish CPI report was the sudden drop in Motor Vehicle Insurance (chart 2.b), which has so far been printing at trend MoM levels around 1-1.5%, lifting headline inflation by 0.03-0.05% consecutively.
7. Portfolio Watch: Good news = no cuts = bad news (for metals)
- The latest job report just dropped, and it’s music to our ears—solidifying our thesis once again.
- A few highlights:Construction Hiring: Markedly up again.
- This is a strong cycle signal, indicating robust economic activity.
8. “Wham, Bam, Thank You Ma’am” – Commodities Get Slammed
- “Strong” non-farm payrolls number a catalyst for another hit to commodities
- Oil positioning is now very supportive for prices with non-commercial buying levels close to five-year lows.
- Copper may have more short-term downside with speculative interest still high
9. Macro Regime Indicator: Up, Up, Up still!
- In May we concluded that: “In May, our models hint of an “Up,Up,Up” environment in inflation, growth and liquidity, which is a decently positive indicator for risk assets, but also for broader reflationary trades returning through the month and into June.” The above conclusion has held true to a large extent and we went against the prevailing consensus driven by the “slowdonistas” when needed during the latter parts of April.
- For June/July, we see an increasing liquidity trend from right about now, while the growth- and inflation cycle cyclically heats up still, while some lagged effects pull in the opposite direction.
- From a market perspective, the overwhelming conclusion is that we will continue in an up, up, up macro regime referring to the liquidity cycle, growth cycle and cyclical price/inflation cycle.
10. Quant Signals: USDMXN
- The case for a stronger MXNMXN sold off massively following the Mexican election last week but we still view the MXN as a clear-cut ‘trade balance’ play.
- As long as the trade ties between China and the US increasingly necessitate a ‘value-add middleman,’ Mexico remains in an advantageous position, regardless of whether the president is Sheinbaum or Obrador.
- Our PCA model reveals that USDMXN is trading very rich compared to macro factors.
