Smartkarma Daily Briefs

• Japan, a country big in ETFs, is discussed in the Trillions podcast with guest Jeremy Schwartz from WisdomTree
• DXJ, the WisdomTree Japan Hedged ETF, had a successful run in 2013 but later underperformed, potentially due to currency manipulation and changes in leadership
• Despite past fluctuations, Japan never left and DXJ has outperformed the S&P 500 since 2012, highlighting the potential for growth and investment opportunities in Japan

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• EM markets trading with strong global beta, lack of US key data due to government shutdown affecting market direction
• EM currencies look okay, EM rates may be less favorable, EM credit suffering from tight spreads
• Key takeaways from IMF conference in Washington include focus on impact of AI-related investments on global growth and employment, overall mood on growth is flat with risks but no panic or euphoria

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• Our strategy approach is to filter various information sources and apply our clear investment process on top of it.
• There are two reasons for us to enter a trade: …our quant system tells us to do so …or we make a discretionary manager decision based on market fundamentals that the quant system will only grasp with a time-lag
• While not only moving sideways, the oil complex is currently drastically underperforming other parts of the commodity complex.

• Donald Trump and Xi Jinping’s 30 October summit will likely stave off, for now, any further escalation of trade tensions between China and the US.
• However, thanks to its monopoly on strategic minerals and Xi Jinping’s willingness to play a long game — even beyond ‘mere’ trade — China holds the stronger hand.
• Irrespective of whatever Mr Trump concedes this week to secure a ‘headline grabber’, Xi Jinping will therefore come back for more, not least on Taiwan.

• FX and gold oil ratio have decoupled this year, leading to low volatility and focus on US data, exogenous shocks, and geopolitics in FX trading.
• Japanese Prime Minister Takaichi delivered a speech on economic policy, focusing on fiscal measures and debt reduction, without mentioning monetary or FX policy.
• Despite interventionist stance of Takaichi and Finance Minister Katayama, it is unlikely they will strongly intervene in BOJ policy, with expectations of a rate hike next week due to economic and market developments.

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• Funding pressures have been gradually increasing due to various factors such as a new easing cycle by the Fed, rebuilding of tga, and QT draining liquidity from the system.
• Money funds began extending duration and shifting balances, leading to evidence of funding pressures in September which intensified in October.
• Funding markets are becoming more sensitive to incremental collateral adds and repo markets are operating with more frictions, impacting the effectiveness of SRF operations in redistributing reserves and controlling repo rates.

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• Verizon Business offers a new My biz plan with customizable mobile options starting at $25 per line
• Odd Thoughts podcast discusses big market stories, including the fall of the dollar, rise in gold prices, and enthusiasm for AI in the stock market
• Hyun Sung Shin of the Bank for International Settlements discusses the unusual market trends of the year and their implications.

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• Crude prices were mixed Friday, but consolidated the sharp rally driven by new US sanctions on Russia’s top oil producers, as both benchmarks headed for their biggest weekly gain since June.
• Front-month December ICE Brent was up to $66.01/b at 2011 BST, while December NYMEX WTI dipped slightly to $61.58/b , after jumping more than 5% on Thursday.
• The pullback followed Washington’s sanctions on Rosneft and Lukoil, which together account for roughly half of Russia’s crude output and exports.

• Turbulent macro backdrop with concerns over US-China trade relations and credit quality affecting global economy and metals demand
• Mixed sentiments on copper market balances for next year, with varying views on supply from DRC and Chinese demand
• Aluminium narrative looking positive with China’s X supply growth and debate on market balances centered around capacity ramp up from Indonesia

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• Asia’s valuation rerating seems over. Future market performance would likely be driven by earnings growth. On current consensus forecasts, Taiwan, Korea, China and India lead the future earnings growth leaderboard.
• Growth adjusted relative valuations are similar to early 2025, but markets are more closely aligned along the trendline. India is relatively less expensive and Korea relatively less cheap than previously.
• Analysts are turning more bullish on 2026 than on 2025. For most large markets, especially Korea and Taiwan, 2026 consensus EPS estimates have moved up while 2025 estimates have declined.