Smartkarma Daily Briefs

• The Epstein files row has intensified deep splits in the MAGA movement and triggered persistent demands for accountability.
• Trump’s recent pivot towards supporting Ukraine and critical foreign policy shifts have fuelled further rifts among his traditional base.
• Despite controversies, the key midterm factor remains Trump’s economic agenda, as tariffs and fiscal changes may hit his core supporters hardest.

• The capital gains tax on stock sale gains and securities transaction taxes could be raised in 2H 2025, which could negatively impact the Korean stock market, especially small caps.
• Combination of higher securities transaction tax and capital gains on stock sales could result in local retail investors selling their shares in 4Q 2025, before these changes come into effect. 
• Although many small caps in Korea have performed well this year, the potential changes on these two important taxes could put some damper on the recent excellent share price performances.

• Default markets are taking a breather and cleansing weak hands, with global fiscal concerns affecting G10 markets.
• Japan’s upcoming upper house elections could impact fiscal situation and yen value.
• Dollar strength has been driven by mixed US data and policy news, with potential for dollar Bears to get a reprieve.

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• Uncertainty surrounds the implementation of reciprocal tariffs and fentanyl-based tariffs under the IPA Act, with a federal court hearing scheduled for July 31st.
• The average tariff rate for ASEAN economies is currently around 9%, but could increase significantly if threatened tariffs are implemented, possibly exceeding 20%.
• The impact of these tariffs on EM economies and inflation remains uncertain, leading to a less stable macroeconomic landscape in the second half of the year.

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• Concerns for sugar cane yields and sugar content in major sugar market exporter
• China’s soybean import demand reached record seasonal high, following Brazilian crop
• Short covering seen in grain complex, USDA trimmed US corn availability expectations, driving force behind corn price recovery; tariff impacts on Brazilian products into US market, potential changes in sweetener mix for Coca Cola

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• David discusses US inflation outlook and sees signs of tariff-induced inflation, still maintains Fed cut only in December
• Market reacts to potential firing of Chair Powell by Trump, unlikely due to short remaining term
• Labor market and tariff-related inflation key factors in Fed decision-making, Fed cut pricing at only slightly higher than 50% for September

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• Despite the Upper House election result we are overweight Japanese equities and a buyer of the yen. 
• Business cycle indicators are positive; the profit and investment cycles in upswing. Companies are highly diversified – foreign sales account for 40% of  sales and 37% of production is abroad. 
• They are hedging their bets by expanding in the US and India while scaling back in China. These factors contribute to the resilience of corporate earnings growth.

• Anwar’s government has maintained political stability and public support in its two years thus far, but it will now have to shift gears to face voters in the next polls. 
• In the coming months, the state elections for Sabah and a looming cabinet reshuffle are key tests for whether the coalition government can maintain cohesion. 
• Economic policy missteps and a narrowly-averted judicial crisis risk distracting the government. Without remedial action, the path for the government’s re-election will narrow significantly.

• We reiterate positive momentum on iron ore pricing as mill spreads pass 100 RMB/ton and positive lending data from China increases optimism. Iron ore prices are now 103 USD/ton.
• Read: Iron Ore: Small Bounce From 96 to 100 USD/Ton As China Mill Margins Turn Positive and Iron Ore: Mill Spreads Continue to Improve, Bullish Ore To 110 USD/Ton. 
• We like Fenix Resources (FEX AU), which is about to commission the Beebyn-W11 mine and triple its production to 4.1 million tons (vs 1.4 million tons two quarters ago).

• Asia’s base oils demand shows signs of holding firmer than usual for time of year even as region’s lube demand faces seasonal slowdown in month of August.
• Lower end-user consumption and prospect of improving availability of supply curbs need to build stocks.
• Tighter-than-usual supply so far this year, lack of build-up of surplus volumes, and seasonal pick-up in demand in late-Q3 2025 could support steady demand.