Daily Brief Macro: UK: De-Energised Ofgem Vol and more

• Household energy utility prices are not much higher than before the energy supply shock began, and are unsurprisingly announced to be rising by only 4% in October.
• The ongoing supply shortage is squeezing prices higher as winter approaches, with inventory levels perilously low in Europe, relying on a warm and wet El Niño season.
• Pass-Through to the CPI/RPI is dampened this time by the blending of fixed tariffs with a high weight. Except that policy and tax changes hit immediately in April and October.

• Why are all four people that are featured in the South Korean banknotes from the 15th/16th centuries? (Why is there no one from the past 300 years)?
• The real reason why no modern person is included in the South Korean banknote is due to concerns about fracturing the political divide of the country even further. 
• Lee Jae-Myung administration is expected to pass a huge 800+ trillion won budget next year which is likely to pressure the government bond yields even higher. 

• The Hong Kong market has regained momentum and strength since bottoming in June.  The materials and healthcare sectors have outperformed this month, with gold’s advance underpinning metals’ outperformance.
• Growth factor investing continues to lag, while large-cap stocks have had the highest Sharpe ratio over the last year.  Value and dividend yield factors have outperformed in the long-only space.
• GenScript Biotech (1548 HK) broke out to new highs in August, surpassing its 2022 high.  The company has seen a surge in its mainland revenue over the last year.

• In Depth: Shein Heads for Hong Kong IPO as Growth Slows, Regulatory Pressure Mounts In the sprawling industrial districts of Guangzhou, thousands of garment factories operate around the clock, churning out polyester dresses, denim jeans and other viral fashion items destined for consumers around the globe.
• Shein Seeks Up to $1.8 Billion in Hong Kong IPO at $27 Billion Valuation Chinese fast-fashion retailer Shein launched its Hong Kong initial public offering on Monday, seeking to raise as much as HK$13.9 billion ($1.8 billion) at a valuation of about $27 billion.
• China Signals No ‘Bazooka’ Stimulus in Key State Media Commentaries China’s flagship state newspaper has used a prominent pseudonymous commentary series to defend the country’s slowing economic growth and signal that Beijing will resist large-scale stimulus.

Highlights

• Physical premiums compressed as Asian grades lose ground against increasingly competitive African rubber

• Falling exchange stocks provides a cushion despite weak downstream demand and cautious procurement

• June rubber import and tire export rebound signal improved buying after May’s caution.

• Record high US yields could impact Asia through rising cost of capital dampening growth and valuations. Besides, foreign money could continue to move towards safe haven US treasuries.
• The Asian markets where central banks are forced to hike policy rates, and the markets that are steeply valued relative to earnings growth or ROEs could be particularly vulnerable.
• Korea, Indonesia and Philippines are hiking rates. Judging by inflation trajectories and real rates, India and Thailand could join later this year. India and Taiwan appear overvalued relative to ROEs.

• President Trump’s brief interview with Al Jazeera confirmed our long-standing view on U.S.-Iran negotiations, i.e. “we will believe it when we see it.”            
• NYMEX crude oil prices rallied in response, after the October contract achieved a “7 handle” and as such has returned to our “no-man’s land.”                          
• We were disappointed that the decline did not continue and provide the buying opportunity we have been discussing and looking forward to.