Macro

• An unsurprising achievement of the 2% target might urge a celebration at the ECB, but it does not demand policy action. Energy price declines can’t be relied upon to repeat.
• The early consensus forecast was surprised on the upside, but raised by last week’s releases in France and Spain. So, while reassuring, this outcome is not dovish.
• We expect inflation to stay close to the target, whereas the ECB forecasts a substantial drop below it, while calling policy well-positioned. We still see no more rate cuts.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 3Q 2025.
• A whopping 87% (33 out of 38) holdcos/quasi holdcos outperformed their opco counterparts in the past three months, which is one of the best ever in the past two decades.
• This appears to be one of the classic “buy the rumor, sell the news” trading opportunities.

• During the past two weeks we highlighted that the upside for oil is only minimal and that trading the “war event” may be the rational thing to do.
• So far, this turned out to be the right call.
• Investment banks seem to be a bit more emotional about the topic.

• Bankruptcy / Cover Story: The rise and fall of China’s ‘fentanyl king’ in corruption-fueled bankruptcy
• Hikvision /: Canada kicks out Chinese surveillance-gear maker
• Nike /: Nike to cut China footwear output to counter $1 billion tariff hit

• Global Group II heavy-grade base oils prices stay at elevated levels relative to feedstock and competing fuel prices.
• Group II heavy-grade prices maintain steep premium to Group I heavy-neutrals prices in Asia and especially in Europe.
• Group II heavy-grade price-strength extends to markets like India, even with recent strength in Group I prices in that market.

• Global base oils prices recover versus feedstock/competing fuel prices after crude prices fall.
• Firmer base oils price-differentials curb pressure on refiners to adjust output in response to squeezed margins.
• Firmer margins, and easing pressure to adjust output, coincide with prospect of easing supply-demand fundamentals in coming weeks.

• WTI futures dropped by 11.3% for the week ending 27/Jun, marking its steepest weekly fall since March 2023. The decline was due to the ceasefire between Israel and Iran.
• The U.S. rig count fell by seven to 547. The oil rig count fell by six to 432, while gas rigs dropped by two to 109.
• WTI OI PCR rose to 0.93 on 27/Jun compared to 0.87 on 20/Jun. Call OI rose by 8.3% WoW, while put OI increased by 15.4%.

• The timing of Israel’s unprovoked strike had all to do with self-preservation – specifically for Netanyahu rather than the Israeli people – and scuppering the US-Iran nuclear deal.
• Whether the Israel-Iran truce will hold is left to be seen, but the world has dodged a Kamikaze for now and all involved parties are claiming victory.
• Iran is not as fragile as you think; by Q1 2024, its economy was 21% larger than it was pre-pandemic, compared to 14% growth for Israel.

• For the week ending 27/Jun, U.S. natural gas prices fell by 2.8% due to cooler weather forecasts, Israel-Iran ceasefire, and U.S. natural gas storage builds.
• For the week ending 20/Jun, the EIA reported that U.S. natural gas inventories rose by 96 Bcf, higher than analyst expectations of an 88 Bcf build.
• Henry Hub OI PCR remained unchanged at 0.85 on 27/Jun compared to 20/Jun. Call OI decreased by 14.4% WoW, while put OI fell by 14.2%.

• Oil supply is projected to outpace demand growth through 2026, leading to rising inventories and sustained downward pressure on Brent crude to below USD60pb.
• Opec+ output increases, quota disputes (especially with the UAE), and the potential unwinding of voluntary cuts could further flood the market.
• US shale producers and international oil companies are reducing investment due to lower prices, but current Brent levels are not yet low enough to force significant cuts.

• Price edge and stable grades help Indonesia stage a good show  
• US demand strengthens despite Trump tariffs  
• China demand softens, Japan slides as tariffs take effect  

• In this insight, we discuss the increasing popularity of EB issues with treasury shares as the base assets in Korea. There were seven EB issue announcements in Korea in June.
• Going forward, more Korean companies are likely to issue EBs in the next several months, prior to the actual official changes in regulations of treasury shares in Korea.
• These companies that issue EBs using treasury shares as underlying assets are prime targets of short selling/underperformance.

• Dollar decoupled from US rates and equities, investors expected to chase dollar lower
• Dollar positioning not as crowded as perceived, global holdings of US equities still large
• Unlikely for significant repatriation of Japanese foreign bond investments, focus on rebalancing rather than one-way repatriation; implications of upcoming election on Yen uncertain

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• How did our major investment themes do so far in 2025?
• Review of the performance of the major markets and asset classes we focus on
• We revisit our outlook for each of those asset classes for H2 25

• Regional rotation places DM Europe as clear consensus overweight among active Global equity funds.
• Seventy-Five percent of funds are overweight UK stocks, with 69.6% overweight France and 70.2% overweight the Netherlands
• Novo Nordisk, ASML, Schneider Electric, and AstraZeneca remain key holdings, while a resurgence from European banks and select names like Spotify and LSEG is also starting to stand out.

• UK active funds are buying back in to the UK Homebuilding sector, with ownership showing consistent increases from the lows of early 2024.
• Over the past six months, Homebuilding recorded the third-largest increase in fund participation, trailing only Agricultural Commodities and Pharmaceuticals.
• At the stock level, the sector remains highly concentrated. Four companies — Taylor Wimpey, Bellway, Barratt Redrow, and Persimmon — account for 81% of the total allocation.

• After a slow start in Q1, ASEAN has benefitted from front-loading of exports and favourable tariff differentials with China in Q2. But the momentum is likely to falter in H2.
• With the 9 July deadline for reciprocal tariffs approaching and limited progress in trade talks with the US, tariffs could increase for the region within days.
• Even if tariffs remain unchanged, exports and growth will likely slow as businesses and consumers adjust to higher costs and inventory restocking in the US gives way to declining demand.

• DM swap spreads exhibit correlation but also have idiosyncratic drivers
• Central bank balance sheet evolution and money market rates are identified as top drivers of DM swap spreads
• Fed expected to continue QT, ECB and BoJ expected to normalize balance sheets, impacting swap spreads

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• Overweight, Indian equities with a bias towards industrials, property and consumer stocks.
• But investing in India is  ultimately about the domestic story
• While its progress in AI, the green transition, and advanced manufacturing lags far behind China—disappointingly so—business cycle indicators are improving, and the multi-year structural growth narrative remains compelling.

• European central banks have embraced a more preemptive approach compared to the Fed in responding to the looming arrival of tariffs under the Trump administration.
• The Bank of Japan refuses to raise interest rates, despite rising core consumer price inflation, due to uncertainty about tariff negotiations with the US. Quantitative tightening will pared in 2026. 
• The People’s Bank of China (PBoC) has only modestly lowered policy rates.  The Fed’s future policy rate cuts could determine the timing and scope of future PBoC policy easing.

• The market’s animal spirits have taken control of the tape and U.S. equity prices appear to be headed for further highs.
• Medium- and long-term indicators have improved sufficiently that we are upgrading our Trend Asset Allocation Model from neutral to bullish.
• However, investors should monitor non-confirmation patterns from commodity prices that may be signs of signal reverse in the coming weeks.

• The surprise victor in the Israel-Iran conflict may be the bond market, which will exact a cost by imposing a fiscal discipline on the combatants.
• Foreign policy objectives are likely to lead to a protracted and simmering conflict that raises an uncertainty premium on asset prices.
• The markets experienced elevated levels of uncertainty and volatility under Trump 1.0, and we expect a similar environment under Trump 2.0.

• LATAM remains a core and consensus overweight among active EM managers, with 85% of funds positioned ahead of the MSCI EM benchmark
• LATAM exposure is concentrated in Brazil, Mexico, and Argentina, which together make up 90% of the region’s allocation.
• Banorte remains the most widely held stock in the region, with Embraer SA and Gentera staging notable recoveries from the low positioning levels seen in 2021 and 2022.

• Inventory depletion across the LME and SHFE continued as copper prices breached the 10k USD level to end the week 3.7% higher.  
• The COMEX-LME spread breached $1,000/ton again, leading us to be confident that there will be a further rally in the short term. 
• We see an easy journey to 11,000 USD/ton on a weaker dollar, stronger COMEX premiums, depleted inventory levels, and lower-than-expected global production. 

• Iron ore prices rose 2.3% WoW from oversold levels since our last report, Iron Ore Tracker (23-June-2025): Iron Ore Due for A Small Bounce? to $95/ton
• In the short term, prices could reach $100/ton, but persistent medium-term supply overhang from the Simandou project may pressure prices down to $85/ton.
• We like Fenix Resources (FEX AU) for its massive ramp-up from 1.5 to 4.1 million tons. read: Fenix Resources (FEX AU): Q3 FY25 Concall Update + CZR News 

• The U.S. Dollar Index (DXY) has fallen sharply to 97.33, down over 10% year-to-date and hitting a fresh 1-year low.
• This decline is being driven by rising expectations of Fed rate cuts, political uncertainty around central bank independence, and a broader shift in global risk appetite.
• Over the past two years, gold miners, aluminum, copper, and diversified metal stocks have shown the strongest inverse correlation with DXY.

• Rates were repriced lower without new data to justify it. Trump incentivises doves with a possible early Fed Chair decision, and the two FOMC outliers revealed themselves.
• PMIs extended their recovery in the June flash. Mexico and Thailand matched market calls, but the former signalled slower easing and US trade policy risks reduced further.
• Next week lacks central bank decisions, but US payrolls and EA inflation data are critical to perceptions of the outlook, including our contrarian calls for no more cuts.

• Iron ore prices weakened due to rising Australian and Brazilian exports and subdued Chinese demand, while the UK prepares tighter steel import restrictions. 
• Rio Tinto and Hancock Prospecting have secured approvals for a $1.6bn joint initiative in Western Australia, expected to produce 31 million tonnes of iron ore annually.
• Prices are still trading beneath critical moving averages, suggesting ongoing downside momentum, while the MACD below its signal line confirms the prevailing bearish trend.

• CATL / In Depth: CATL’s bet on Europe shows challenges of recreating supply chains abroad
• Summer Davos /: Increasing incomes key to boosting domestic demand, professor says
• Gold /: China opens first offshore gold vault to attract global investors

• For the week ending 20/Jun, U.S. crude inventories fell by 5.8m barrels (vs. expectations of a 1.2m barrel decline). Meanwhile, gasoline stockpiles fell more than expected.
• The EIA reported a 96 Bcf storage build, while analysts forecasted an 88 Bcf increase. Storage levels are 6.6% above the five-year average but 6.3% below year-ago levels.
• Shell denied reports of merger talks with BP. TD Cowen raised its price target on Exxon to USD 128, citing its technological edge in resource recovery and strategic deal-making capacity.

• Responding to clients’ queries, we backtest our hypothesis of EPS estimate upgrades driving share prices. We measure price index movements in the sectors with EPS upgrades during the upgrade period.
• Out of 32 market-sectors with EPS upgrades, share prices of 6 declined, that of 1 stayed flat and those of 25 appreciated. Our indicator has a roughly 80% strike rate.
• The cheaper market-sectors appreciated much more than the quantum of EPS upgrades. The Korean sectors and few in Taiwan and ASEAN, notably. For cheap sectors, EPS upgrades are rerating catalysts.

• Thailand’s rubber export value dips 18.58% MoM in April 2025   
• Staggering 43.6% fall in Thai rubber imports value to China  
• Rubber producers can now use trees as collateral for loans  

• Introduction of David as a special guest and first client of Harmonic Insights
• Discussion on market dynamics, including non-US equities, Bitcoin, and gold
• Focus on oil’s volatility, with a 9% drop in the last five days and recent events impacting Bitcoin

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• Property / In Depth: China shifts toward completed home sales to curb risks
• China-EU /China, EU willing to talk after Brussels bars Chinese firms from medical device tenders
• Law /In Depth: China’s shift toward splitting criminal cases has scholars worried about judicial impartiality

• Iron ore prices continue to inch lower as import options for China increase. China accounts for 72% of the seaborne market. 
• For China, imports from Brazil and Australia account for 82% of its overall number.  South Africa and India are 5% but the other category (13%) is now growing. 
• Can Imports from other regions, such as Canada, Ukraine, Africa, Iran, and Peru, increase? Data shows that it is happening. 

• Oil markets remain volatile, with no end in sight.
• As part of a forthcoming update to our commodity charts, we will soon introduce trader-based sentiment scores. This week’s WTI Directional Sentiment Index remains negative, while the Non-Directional Sentiment measure (chart below), which evaluates market sentiment based on who is putting on spreading trades as opposed to directional trades, continued its slow upward trend.
• This suggests that market participants continue to favor playing the shape of the oil curve, rather than engaging in outright directional trades. We suspect that as long as our non-directional sentiment index continues to trend upward, the price of oil will remain capped, barring any dramatic geopolitical events. 

• NATO raised its target for defence spending to 5% of GDP, with Spain opting out. This increases pressure for tighter monetary conditions than were otherwise appropriate.
• Defence spending offers weak growth multipliers, so the policy is more likely to stoke deficits than productivity. Central banks may respond with a more hawkish stance.
• With debt levels already high, the move risks crowding out other spending and lifting sovereign risk premiums. Bond yields suffer from higher deficits and future rates.

• We take a detailed look at forward PE multiples, absolute and relative to Asia, of all Asia ex Japan markets.  North Asia is in line with average valuations, India expensive.
• Juxtaposing valuations in comparison to history with the earnings environment of each market, we arrive at conclusions about which market should rerate and which should derate.
• We posit continued rerating for Korea and Philippines. India should derate. HK, Taiwan, Indonesia and Singapore could rerate modestly. Malaysia and Thailand are cheap but seem destined to remain so.

• The Bank of Thailand maintained its policy rate at 1.75% by a 6-1 vote, in line with expectations, citing robust first-half growth but heightened risks from US trade policy and global uncertainties.
• Despite raising its 2025 growth forecast to 2.3%, the MPC flagged a likely economic slowdown in the second half of the year, subdued inflation well below target, and negative credit growth as key factors influencing future rate decisions.
• The Committee signalled a data-dependent approach, preserving limited policy space and indicating that further rate cuts would require a significant deterioration in growth or inflation outlook.

• Export earnings fall 8.16% YoY to US$61.15 million in April 2025  
•  Latex harvesting starts in drier North-Central Province areas  
• Bid to scale up global market share in rubber products from 0.25%

• Recent events have highlighted the difficulty in predicting the progression of the Iran/Israel conflict.
• Despite this, the volatility caused by these headlines has not significantly impacted market perspectives.
• The supply/demand equation remains the primary influence on market thinking regarding oil.

• Overweight, Indian equities with a bias towards industrials, property and consumer stocks.
• Trading Post hopes  you took advantage of last year’s correction to buy into India,  as recommended. If not, there is time.
• Investing in India is  ultimately about the domestic story. Business cycle indicators are improving, and the multi-year structural growth narrative remains compelling.

• AI / Cover Story: Alibaba fights Tencent for dominance over AI in China
• Flights /Iranian carrier resumes flights to China
• Batteries /Korean, Japanese battery-makers launch legal offensive against Chinese rivals’ global ambitions

• In our note Post Results FY24: Mine-By-Mine Plan Production + Commentary on Copper From Global Listed Companies, we noted a mid-point guidance of 575,000 tons for Ivanhoe Mines (IVN CN).
• The company revised this midpoint guidance down substantially to 400,000 tons following the discovery of Seismic activity in the Kakula mines (a 0.7% downward revision of global refined production). 
• The Kamoa-Kakula mine is the 4th largest mine in the world, and the mid-point guidance post 2027 was to ramp it beyond 700,000 tons. 

• China’s Nasdaq-style STAR Market will reopen its doors to unprofitable companies as part of a broader set of measures announced Wednesday that aim to strengthen the stock market’s role in supporting high-tech and strategic emerging industries.
• The measures include setting up a special sector for sci-tech growth companies on the Shanghai-based market, launching a pre-IPO review mechanism, and refining refinancing and strategic investor criteria, Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), said in a speech at the annual Lujiazui Forum in Shanghai.
• “Establishing a sci-tech growth sector on the STAR Market and reinstating the fifth listing standard for unprofitable companies will provide more precise services to high-quality technology enterprises with major technological breakthroughs, promising commercial prospects, and a commitment to continuous investment in research and development,” Wu said.

• Global base oils price differentials fall sharply relative to feedstock/competing fuel prices in June 2025 following surge in crude oil prices.
• Speed and size of fall in base oils margins reflects more the surge in crude oil prices rather than sudden, unexpected change in base oils supply-demand fundamentals.
• Lack of any sudden, unexpected change in supply-demand fundamentals could support reversion of base oils margins closer to their higher levels in early-June 2025 before their slump in recent weeks.

• Asia’s base oils price-premium to competing/feedstock prices extends fall to five-month low.
• Lower margins coincide with improving supply in Asia as more plant-maintenance draws to a close.
• Improving supply and seasonal slowdown in demand could curb refiners’ leverage to target higher prices to reverse recent drop in margins.

• For the week ending 20/Jun, U.S. natural gas prices rose by 7.4% on the back of rising LNG exports, warmer weather forecasts, and Israel-Iran tensions.
• For the week ending 13/Jun, the EIA reported that U.S. natural gas inventories rose by 95 Bcf, lower than analyst expectations of a 96 Bcf build.
• Henry Hub OI PCR inched down by 0.85 on 20/Jun compared to 0.86 on 13/Jun. Call OI increased by 2% WoW, while put OI grew by 1.5%.

• US base oils prices fall relative to feedstock/competing fuel prices following recent surge in crude oil prices.
• Dip in US export price-premium to vacuum gasoil in June 2025 contrasts with sustained surge of price-premium in Q2-Q3 2024.
• Weaker price-premium points to softer supply-demand fundamentals at end-Q2 2025 compared with year earlier.

• Asia’s base oils demand could be firmer than usual for the time of year as higher crude oil prices and growing concern about supply disruptions counter weaker supply-demand fundamentals.
• Demand for Group I heavy neutrals and Group III base oils especially could get support from concern that any supply disruptions would have more direct impact on those products.
• Concern about tighter supply of Group I heavy neutrals could support stronger demand for Group II heavy grades as an alternative.

• Despite the pressure on the regime and escalating hostilities between Israel and Iran, oil prices have remained relatively contained, up only $10 since last Tuesday
• The risks of the Strait of Hormuz being closed are considered low due to US presence in the region and historical trends of short-lived oil shocks from conflicts
• Regime changes in oil-producing countries have historically led to significant spikes in oil prices, with supply disruptions lasting up to six months and causing prices to stabilize at levels 30% or higher than pre-conflict levels

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• PMI recoveries extended in June, taking averages above 50 as manufacturing is its strongest since Sep-22, and services almost align with its averages of recent years.
• The UK survey balances suffered from bad vibes, so they are the primary beneficiary of sentiment improving. Their recovery can extend further as vibes improve.
• Broad expansion helps labour demand to keep pace with supply, denying doves proof of a disinflationary demand shock. Without that, cuts roll later and may not resume.

• In our view, the sharp increase in the lending balance is one of the signs of many investors preparing for a pull-back in the Korean stock market.
• The lending balance of the Korean stock market surged from 47.3 trillion won on 2 January 2025 to 90.4 trillion won as of 20 June 2025.
• The rising lending balance in the Korean stock market could be construed as a bearish sign. 

• U.S. inflation expected to accelerate over the next few months, with core inflation forecasted to rise to 3.8% by December
• Trade policy and geopolitical risks, such as the potential for oil prices to spike, are factors supporting front end tips breakevens
• Euro area inflation data shows softening trend, with core inflation falling to 2.3% in May, impacted by factors like timing of Easter holidays

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• Over the weekend, oil traders dusted off their Strait of Hormuz crisis playbooks—and once again, they overplayed their hand.
• Saturday’s U.S. strike inside Iran sparked a sharp wave of geopolitical anxiety, turbocharged by Iran’s retaliatory missile barrage and the familiar threat from Tehran’s Parliament to shut down the Strait.
• Add a few “Hormuz closed?” headlines and prediction markets went into meltdown, briefly treating a full blockade as the base case.

• Despite ongoing military conflicts and a trade war, Asia ex Japan headline valuations are remarkably stable and robust. North Asia’s and India’s valuations and growth forecasts are healthier than ASEAN’s
• North Asia’s and India’s EPS growth and ROE profile are sturdier. Korea’s, Taiwan’s, China’s and India’s forecast EPS growth (2026E) are 15-17%. Conversely, Singapore’s, Thailand’s, Malaysia’s and Philippines’ are 4.5-8.5%.
• Taiwan and India (15-15.5%) have highest forecast ROEs. Indonesia (13.9%), Philippines (12.6%), HK/China (10-11%) follows. All others have single digit forecast ROE. Our overweights on Korea, HK/CN, India seem justified.

• Sprott Physical Uranium Trust (Spot) raised $200 million, causing a surge in uranium stocks.
• Spot’s ability to add more pounds of uranium depends on trading above NAV, which it achieved with recent raises.
• The market dynamics in uranium are unique, with financial players influencing the market in unexpected ways.

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• Price discovery and risk management tools in commodities markets through futures contracts
• Discussion with industry leaders at the 2025 Asia Pacific Precious Metals Conference in Singapore
• Focus on creating a kilo bar contract and improving price discovery in Asia, with a growing interest in connecting Asia to the world

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•  April NR production plunges 37.3% month-on-month  
•  Exports fall sharply; glove shipments dip 19.2% to US$258.9 mn  
• Imports too decline despite tapering NR production

• Norges Bank expected to cut rates later in the second half of the year, with further cuts expected in September and December
• Riksbank cut rates as predicted, with markets pricing in additional cuts by December
• Bank of England kept rates on hold, with no major surprises in their delivery

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• In this insight, we provide the top 10 stocks picks and key catalysts in the Korean stock market for the two weeks (20 June to 4 July 2025).
• Kakaopay was the best performing stock in KOSPI in the past two weeks. It could be a key potential beneficiary of the increased use of stablecoin based system in Korea.
• The top 10 picks in this bi-weekly include S&T Holdings, Samsung Life Insurance, Samsung SDS, Samsung Securities, Hyundai Elevator, SK Hynix, Paradise, Hanwha System, Hanwha Aerospace, and Korea Kolmar. 

• The Fed left its policy rate unchanged last week but embraced a stagflationary outlook for the US economy by lowering growth and raising inflation and unemployment rate forecasts.
• The policy goals within the Fed’s dual mandate have not been equally pursued.  Data-dependent conduct by the Fed runs the risk of policy becoming too reactionary and less forward-looking.  
• Recent inflation trends should not prevent the Fed from reducing its policy rate.  Some survey-based measures of consumers’ inflationary expectations appear to have rolled over, following tariff-induced spikes in April.

• Is this a time to embrace the contrarian adage of “buy on the cannons, sell on the trumpets”?
• While our base case still calls for a S&P 500 trading range, we are open to the possibility that stock prices could break out to all-time highs.
• We have outlined the bullish factors that should put a floor on stock prices should they weaken. Investors should monitor our bullish triggers that the bulls have taken control.

• Iron ore continued to slip into negative territory and has now breached the lower end of the range of 95-130 USD/ton, which it has maintained over the last four years. 
• Data from CISA (China Iron and Steel Association) showed a decline in daily steel production YoY for May and June (tracking -4% YoY), after a lacklustre April (flat steel production). 
• The bright spot is that China continues to maintain strong net exports with May numbers at 10.1 million tons (121 million tons annualized), and mill margins are improving. 

• Copper prices on the spot market are set to breach 10,000 USD/ton again as inventory levels tighten on the LME, driven by a rush to ship metal to the US. 
• Current KPIs in China, such as weak steel production (-2-3% YoY est.) and thermal power production (-19% YoY) for May temper our bullishness.  
• We are bullish on copper in the short term, expecting it to break above $10,000 USD easily. However, we will closely monitor China data for potential impacts on the outlook.

• The Fed is on hold and waiting the data to guide its monetary policy. Preliminary data shows that the economy is slowing, but not in an alarming recessionary fashion.
• Early indications from apparel CPI point to modest tariff pass-through effects on inflation, which is positive news.
• The key risk is that a prolonged Middle East conflict could boost commodity prices and raise the odds of a stagflation scenario of weak growth and rising inflation.

• We look at certain investor positioning in the commodity sector
• A bear market rally in the USD is the biggest risk and opportunity.
• We add some soft commodities to the inflation beneficiaries’ basket