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. Portfolio Watch: Are you paying attention to China?
- The Chinese equity trends have really been eye-catching over the past weeks and despite US efforts to flare-up the trade war via new tariffs, the trend has just continued.
- The new Chinese efforts to prop up the sentiment in the Real Estate space have so far been successful and it seems like an attempt that is a LOT more serious and sizy than what we have seen so far.
- We are no longer talking about trial balloons or minor twists.
2. EM Watch: Have Copper markets been hit by a bus full of tourists or by the Chinese economy?
- Copper markets have been on a tear in recent months and our assessment is that the positive sentiment started when Chinese copper stock data points started supporting the notion that China was “hoarding” Copper concentrate ahead of 1) a devaluation, 2) an overhaul of the electrical grid or 3) a power grab on supply chains for EVs, Solar Panels, Data centers and the likes.
- On top of this, we have seen how US officials have highlighted the option of creating a strategic reserve of Copper Cathode in the US, potentially in response to the stockpiling of refined copper seen in China (chart 1).
- Why is the Chinese copper stock not receding here? That is the question macro-managers and geopolitical pundits are asking themselves daily!
3. Positioning Watch – The real world strikes back
- Hello everyone, and welcome back to our weekly positioning watch.
- Markets have been enjoying the easier financial conditions imposed by a weaker than anticipated inflation print, although yields have found their way back to pre-CPI levels.
- The big ongoing theme in markets seems to be the renewed pressures in commodities, as real world demand for crucial metals like copper and nickel has spurred significant flows into broad commodities.
4. Steno Signals #100 – China’s MAJOR power grab on Copper supply chains
- Let me start by dwelling on the fact that Macro generalists such as myself and Thorsten Slok of Apollo suddenly spend countless hours watching Copper trends.
- It is probably a red flag in itself, but it just seems like these developments are so INCREDIBLY important for global macro- and geopolitics these months.
- We have been all over the Chinese copper story in recent months and also traded it with good luck, but we have admittedly been wrong in our call for a weaker CNY (so far).
5. Don’t Let the Bull Throw You Off!
- There is a chance for a correction in the HK markets as latecomers to the party get nervous
- All the signs are pointing to a continuation of this bull market as government support measures continue to roll out.
- Don’t get bucked off that bull by a short-term correction!
6. Technically Speaking: Hong Kong Strategy in the Secular Bull Market
- First major technical resistance for HSI and HSCEI has been met with force and a consolidation/correction begins
- Market breadth expands over last month presenting investment opportunities beyond tech and mega-cap
- Short and long term sentiment indicators going positive as most analysts continue to look in rear view mirror
7. Active GEM Funds: Top-Down Country Positioning Latest
- EMEA Momentum: EMEA is experiencing positive momentum across multiple countries, with record investments in the MENA region, strong momentum in Greece, Turkey reversing long-term declines, and Poland nearing new ownership highs.
- Asian Stall: Significant underweight in India suggests caution among investors, China weights remain depressed, Indonesia maintains a strong consensus overweight. Select ASEAN nations show signs of potential comeback.
- LATAM Overweights: Investor sentiment in LATAM remains bullish, with Brazil and Mexico seeing most funds positioned overweight. Argentina hits new highs in fund ownership driven by strong conviction in MercadoLibre.
8. Quant Signals: PCA model and Backtesting Features
- Steno Research PCA model Using a Principal Component Analysis (PCA) model to analyze assets across financial markets provides a powerful framework for investment decisions.
- By mapping out the macro anatomy of a given asset, PCA identifies key trends and underlying patterns that influence price fluctuations and market dynamics.
- In this process, we have defined what we see as the most important global macro factors, ensuring that our analysis is comprehensive and targeted.
9. Portfolio Watch: Trading the next of the rolling melt-ups
- Welcome to our weekly Portfolio Watch.
- We have had a decent week as our short bet on Utilities has started to deliver, while a continued long bet in technology (and ETH) has been the game in town in the risk asset space.
- The liquidity trajectory is slightly murky over the next 2-3 weeks before a major reversal from mid-June and onwards as the net issuance pace of T-bills will be ramped up again into July tapping liquidity from the ON RRP along the way.
10. Energy Cable: Commodities, Freight Rates and Goods Imports Are Rising…
- A soft CPI report was just what Commodities needed to take the next leg higher
- Inflation expectations fat tailed. Commodities on the move, but we still need oil. China to export inflation to Europe?
- Despite last week’s dovish inflation print, we are not sure that it is disinflation that we need to be worried about, both in the short- and long term.
- Let’s discuss three reasons for that.
