Smartkarma Daily Briefs

• Recent tariff announcements reflect cautious optimism on the US Dollar and inflation risks
• Tariff rates of 16-17% could lead to gradual pass through to prices, impacting inflation in the coming months
• Q2 GDP growth rebounded, but domestic final demand slowed, suggesting a gradual economic slowdown in the US, while Canada faces economic challenges and BoC takes a dovish stance

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• Jung Chung-Rae, a four term lawmaker, has been appointed the new head of the ruling Democratic Party of Korea (DPK) in the past week.
• His appointment as the head of the DPK party signals that there could be some changes to the 2025 Tax Reform Plan announced by MOSF last week.
• The highest probability event is that the lower threshold for major shareholders for stock capital gains tax may NOT be lowered from 5 billion won to 1 billion won.

• BNM’s heavy reliance on FX forwards created $29 billion in off-balance sheet liabilities, masking true reserve strength and exposing future repayment risks if inflows weaken.
• This is further compounded by a narrowing current account surplus, while capital outflows and rising foreign currency deposits reflect persistent financial account weakness, undermining long-term support for the ringgit.
• While China is Malaysia’s largest trade partner, the U.S. is the main source of trade surpluses. Worryingly, the U.S. recently imposed a 19% tariff, threatening this critical surplus engine.

• July’s $17.28 bn inflow through Southbound was almost triple of that of the May low ($5.85bn). The flows are now on track to recovering to the March-April peak of $20-22bn.
• Investors continue buying dividend plays (CCB), sharp decliners (Meituan), policy beneficiaries (SMIC). Kuaishou and Alibaba were bought after being sold recently. Biotechnology (Innovent, Akeso) and insurance (ChinaLife) are new favorites.
• Expensive consumers and consumer proxies (Pop Mart, Tencent, Xiaomi) continue to be sold. Last three months selling in Xiaomi and Tencent have almost wiped out their cumulative 12 month’s buying.

• Market expected tariffs on cathode and other copper products, but final announcement only included tariffs on scrap
• Change in tariff decision led to collapse in premium of COMEX over LME
• Import influx of copper in US may now flow to LME warehouses, potentially affecting prices and supply security efforts

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• Dollar strengthening due to positioning cleanup and various events this week
• Powell’s statement more dovish, payrolls weaker than expected
• Political pressure and potential Fed chair change could impact future Fed policy and dollar strength

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• Despite the growing interest in the BRICS group as an alternative to Western-led forums, the group is likely to disappoint given its lack of substance and coherence. 
• The bloc is only held together by vague ambitions of shifting away from US hegemony, but members have fundamentally divergent economic ambitions and foreign policy stances.
• Even as major countries like China and India treat BRICS as a side project, the recent wave of expansion risks turning BRICS into an unwieldy, G77-style talking shop. 

• Fed Chairman Powell was more hawkish about the interest rate outlook after the latest policy meeting. Governor Waller’s concerns about weaker labour demand appear vindicated by July’s Employment Situation report.
• The Fed has three mandates that will impart conflicting policy implications in the current environment, particularly given the recent softening in labour demand and higher Treasury borrowing estimates.
• Issuance of coupon Treasury securities will remain unchanged until at least May 2026, which crucially coincides with Chairman Powell’s term expiration at the Fed.

• The story of the week was probably the 20% decline in COMEX copper futures during the week.
• A short recap: The gloating voices would perhaps claim that the Trump administration has realized that the high tariffs on copper would significantly harm its own country in the current situation.
• Copper prices collapsed by roughly 20% on Wednesday after President Trump announced that refined metals including copper cathodes will be exempt from the 50% tariff plans.

• We provide the details of the 11 most recent companies in KOSPI that have announced their Corporate Value Up plans (June and July 2025), including their shareholder returns. 
• These 11 companies experienced a sharp underperformance (from one day prior to their corporate value up announcement to current) versus KOSPI in the past two months.
• Among the 11 companies include Doosan Bobcat, Hana Financial, KCC Corp, Orion Corp, Hanmi Semiconductor, Hanwha Aerospace, Hanwha Systems, Kolmar Holdings, Mirae Asset Securities, and KDHC.