This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. CHINA: Why so Many Investors/Analysts Got It Wrong and What’s Really Happening
- HK/China stock markets are re-rating quickly sentiment became overly pessimistic.
- A stock market bottom precedes a property market bottom by years.
- China’s markets have languished due to the government’s focus on supply-side solutions. That focus has now shifted to include demand-side stimulus efforts as the PBOC Put accelerates.
2. Portfolio Watch: The outlook is brightening into October
- Everything is about the ongoing rally in Chinese equities at the moment, with China now being the best yielding country in the world in equity space after both the PBoC and the Politburo coming through with stimulus proposals, which has caught all China bears on the wrong side of the trade.
- We learned today that the PBoC is cutting the standing lending facility rates by 20 bps, a move not seen since the pandemic broke out.
- They have normally cut the interest rates in the lending facility by 10 bps at a time, so this is likely a sign that they’re truly willing to do something about the slump in growth / real estate.
3. Gap Trade Opportunities in Korean Prefs Vs Common Share Pairs in 4Q 2024
- In this insight, we discuss numerous gap trade opportunities involving Korean preferred and common shares in 4Q 2024.
- Among the 27 major pair trades (prefs vs. common shares), 16 of the pref stocks outperformed their common shares counterparts so far this year.
- The 27 Korean preferred stocks’ average prices increased by 8.3% from end of 2023 to 2 October 2024 (excluding dividends), outperforming their common counterparts which were up on average 5.4%.
4. EM Fixed Income Focus: The impact of geopolitics on EM
- Macro backdrop evolving with upcoming US elections and Middle East tensions impacting EM assets
- Mixed bag on macro side with softer inflation in EM, better revisions in US growth but soft manufacturing PMIs
- China as tiebreaker with further policy support, rally in equities, and implications for Fed and commodities prices; geopolitical risks and US election as wild cards to watch
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. China Liquidity Watch: USD easing allowed China to ease, but there is a caveat..
- The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy.
- However, there is one issue: CNY liquidity is tightening now.
- Welcome to our weekly China Watch, where we examine Chinese assets through the lens of Western investors and markets.
6. The Winners and Losers From Central Bank Stimulus
- Markets have taken on a risk-on tone on the news of global central bank stimulus. Gold has rallied the most as real rates fell, equities rose and bond prices fell.
- But the market’s risk-on psychology appears to be stretched and fragile.
- While the long-term bullish trend is quite real, the consensus is susceptible to reversals should growth disappoint in the near-term.
7. US Rates: Cash on the sidelines or just cash?
- Money fund balances have continued to grow despite Fed rate cuts due to attractive yields relative to other liquidity products
- Most of the cash in money funds is liquidity money, making them a compelling place to park cash
- Money funds tend to see inflows heading into an easing cycle and persist even as the yield curve begins to disinvert or steepen, with outflows only occurring once the curve stabilizes.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
8. Week at a Glance – Squuuuuuuuuueeeeeeze!
- Happy Monday, let’s dive into the most critical stuff we are on the look out for this week.
- Morning moves: It seems like physical commodities markets are catching up to the China stimulus story from last week, in tandem with the Hang Seng.
- Over the end of last, Japan’s elections pushed USD/JPY lower, leading investors to sell the Nikkei rather aggressively due to a clear hawkish expected lean from the new PM Ishiba.
9. China’s Serial Rate Cuts: What Are Them and Are They Effective in Reviving the Falling Economy (2)
- Our earlier articles state the natures and description of several monetary actions by PBOC last week, highlighting a possibility of stock rallly
- This article on the other hand dicussess the economic benefits of the monetary policies, which are more relevant from the authority’s point of view.
- For stock market still, we believe the RMB 800 billion fund, given a RMB 2-3 trillions daily transaction volume and 60% LTV leverage , has long been dumped into market.
10. Asia Economics: Despite Geopolitical Risks, Emerging Asia Is at an Upward Turning Point
- Economic policy in the US and China, the two most important economic partners for emerging Asia, is turning more supportive of global growth.
- Oil prices are also entering a period of “lower for longer”; Saudi Arabia’s signal of reversing its production cuts will exert downward pressure on oil prices, largely to Asia’s benefit.
- The overall result of these developments is to open up more scope for policy loosening, strengthen export demand and encourage more investments, to emerging Asia’s benefit.
