Smartkarma Daily Briefs

• Not surprised by recent events in the equity market, as it aligns with forecasted growth trends in Asia
• Transitory factors such as front loading and transshipment contributing to expected decline in H2 growth
• Expectation for central banks in the region to potentially ease rates in response to current economic conditions

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• President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
• Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
• We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

• Plant closures signal Europe’s industrial competitiveness crisis  
• Regulatory burdens over Europe’s retreading sector future  
• Weak enforcement and oversight cloud UK ELT exports   

• We are introducing a new regular series called “Korea: Short Selling Data Analysis.” We will try to provide this insight on a quarterly basis.
• Net short balance ratio for top 20 stocks in KOSPI averaged about 1.7% three months ago, much lower than current levels (3%).
• The average short interest ratio of these top 20 stocks in KOSPI with the highest short balance ratio was 2.6x as of 10 July 2025. 

• Asian currencies bottomed out in early April. FII flows turned positive in May. Flows into Taiwan are recovering the fastest, followed by those into Korea. India’s recovery is relatively tepid. 
• Flows into ASEAN remain negative – the lack of recovery, we think, is due to lack of macroeconomic catalysts, declining EPS estimates and trade related worries. We remain underweight ASEAN.
• We are overweight Korea (recovering EPS, cheapest, flows accelerating). We like Taiwanese tech, key beneficiary of investors’ renewed AI enthusiasm. Overweight on India, despite its overvaluation, stems from bottom-up ideas.

• Discussion covers topics including dollar signals, $CNY fixes, tariffs, and observations on Swiss and sterling
• Dollar remains bearish despite some systematic signals turning less bearish or even bullish
• Client sentiment may be shifting tactically towards throwing in the towel on the bearish dollar trend due to technical patterns, but long-term view remains unchanged

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• Trump announced a 50% Section 232 base tariff on copper imports starting August 1st
• The details of the tariff, including which products it applies to and any exemptions, remain unknown
• The arbitrage between London LME prices and US Comex prices has widened following the tariff announcement, with implications for copper prices in both regions.

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• While it may seem as a logical step to compare the current cash price with the forward futures contract, that’s unfortunately way too easy to justify such a statement.
• In fact, it is even miss-information.
• What makes more sense is to look at the input cost factors and the forecasts for these components that the USDA is providing. 

• In Japan, disastrous showing of the LDP party in the Tokyo local elections, was its political Kamikaze. The true test will come with this month’s Upper House elections. 
• Voter frustration is mounting over the high cost of living. Real wages are contracting and retail sales volumes weakening.
• The Bank of Japan has changed tack and Trading Post is following suit, now forecasting that the policy interest rate will stay on hold for the rest of 2025.

• Asia’s base oils demand shows signs of facing weaker-than-usual pressure from expected seasonal slowdown in consumption coming weeks.
• Firmer prices for light grades relative to heavy grades, for Group I SN 500, and for prices in India point to ongoing pockets of buying interest even with seasonal slowdown in demand.
• Prices for Group II heavy grades by contrast weaken vs light grades and vs Group I base oils.