Macro

• Korea Exchange disclosed the new KRX TMI (Total Market Index) on 13 January. This is a market index that consists of eligible stocks in the entire KOSPI and KOSDAQ markets.
• The KRX TMI index is similar to Japan’s TOPIX index. The KRX TMI index is calculated by adopting a free-float market capitalization weighting method.
• We provide a list of 20 companies in KOSDAQ that could benefit from the launch of the KRX TMI index. 

• Internet / Cover Story: Tightening the rule book to make China’s internet platforms fairer China’s internet platform economy is coming under closer scrutiny as a new wave of regulatory action gets underway.
• Unlike previous rounds, which focused on curbing platform expansion and monopolistic behavior, this phase is putting the emphasis on setting rules, increasing algorithm transparency and balancing the power dynamics among suppliers, users and platforms.
• Law / In Depth: China embarks on reform of 30-year-old arbitration law China established its civil and commercial arbitration system back in 1995, when its Arbitration Law which took effect.

• Ongoing economic resilience strengthens the conviction in our long-held view that neutral policy rates are high. Rate cuts outside of a recession are usually reversed.
• Market pricing aligns with our previously contrarian rate view. As the end of the cutting cycle approaches, pricing should embed the possibility of hikes like in 1998-99.
• We expect at least the Fed and BoE to hike their policy rates in 2026, with the debate beginning in 2025 and potentially crystalising in a move later this year.

• Highlights ·       Auto non-tire and tire sectors stage better show from Dec ·       Indian SR consumption goes up by 10.5% YoY in FY 2024-25 H1 ·       Atma Nirbhar Bharat making cushioning effect on imports   The Indian Synthetic Rubber (SR) sector is reviving in the New Year after the lull until early December, with downstream tire and auto sector demand picking up, leading to a markup in the prices of certain variants.
• The players in the sector are optimistic about the momentum persisting until the end of the financial year in March 2025.
•   The SBR prices, which were INR 190/kg on November 1, sharply fell to INR 175/kg by December but are picking up in the new year and have crossed INR 180/kg in early January.

• We are optimistic about the outlook for global growth and markets in 2025, despite anticipating turbulence driven by Trump’s policies. Stay overweight US markets, US dollar and Bitcoin. Underweight China. 
• Our differentiated business cycle framework investing worked. Of the 43 calls made, on global markets and eleven countries/regions,  69.8% were accurate+ in 2024.
• We predicted  the US soft landing , Trump’s re-election, a strong dollar, the US & bitcoin rallies, the European slowdown and TAIX outperformance.

• For the week ending 10/Jan, U.S. natural gas prices surged by 18.9% led by cold weather forecasts, rising LNG exports, supply disruptions, and declining inventories.
• Henry Hub Put/Call volume ratio fell to 1.29 from 1.37 (03/Jan) the previous week as call volumes rose by 40.3% WoW, while put volumes grew by 32.7%. 
• Henry Hub OI PCR rose to 0.92 from 0.87 compared to last week. Call OI inched up by 5.4% WoW, while put OI increased by 10.5%.

• The labour market is tight, and ISM’s manufacturing and services new orders suggest more economic strength in H1CY25. Consequently, the bond yield curve is likely to steepen further. 
• Trump’s massive spending (and bureaucratic) cuts will eat into the fiscal deficit (Oct’25 onwards), and deregulation plus early end to Ukraine war will sharply reduce oil prices, pushing inflation down.
• QT, and absence of rate cuts in Q1CY25, will reduce core inflation by Q2CY25, allowing three 25bp rate cuts (Jun-Dec’25). Overweight bonds in Q1CY25, equities after mid-Mar’25. 

• WTI futures rose 3.5% for the week ending 10/Jan, driven by tightening U.S. sanctions on Russian crude oil and bullish U.S. economic data.   
• WTI options Put/Call volume ratio dropped to 0.83 from 1.03 (03/Jan) last week, as call volume surged by 128.3% WoW while put volume increased by 82.9%.  
• WTI OI PCR rose to 0.94 from 0.93 last week. Call OI climbed up by 7.1% WoW, while put OI rose by 8.5%.

• SGX TSI Iron Ore CFR China (62% Fe Fines) Index Futures (“SGX IO Futures”) rose last week, closing $0.4/ton higher by 10/Jan (Fri).
• Based on seasonality, SGX IO Futures Feb contract trades 24.6% below its last 5-year average ($128.93/ton). 
• IO prices gained 3% in the 10 trading days leading to CNY. IO prices rises 4.4% over the next 5 days before shedding 5% over the following five.

• Equity markets have performed well in the past two years, with 2024 being another strong year
• Looking ahead to 2025, we explore the impact of inflation, interest rates, and artificial intelligence on the market
• BlackRock’s global CIO discusses the rarity of three years of 20%+ returns, opportunities in AI, and challenges facing investors in the new year.

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• Highlights ·       VFCS/PEFC certification covers 123,927 ha of rubber plantations ·       PEFC EUDR Due Diligence System shows the way for Vietnam ·       Experts point to offer of premium as new opportunity   In its efforts to align with the European Union Deforestation Regulation (EUDR), Vietnam has made significant strides through the Vietnam Forest Certification System (VFCS) and its partnership with the Programme for the Endorsement of Forest Certification (PEFC).
•   Giving Vietnam Forest Certification Office’s (VFCO’s) insights on navigating EUDR, Dr. Nguyen Hoang Tiep, Deputy Director, VFCO, said at the Vietnam Rubber Dinner 2024 Seminar held at White Palace Convention Centre in Ho Chi Minh City on December 12 that the VFCO-PEFC efforts aim to ensure sustainable forestry practices and facilitate compliance with stringent international requirements for deforestation-free commodities.
•   Vietnam became the 50th member of the PEFC in 2019, marking an important step in integrating international standards into its forestry sector.

• Happy Sunday, and welcome to my weekly editorial on all things Macro after a tumultuous week! I must admit, I’ve been surprised by the resilience of inflation and the growth momentum in the U.S. economy.
• Both indicators continue to deliver results above median/trend values, suggesting that the U.S. economy is growing in both nominal and real terms at levels typically exceeding historical norms.
• This is precisely why we’ve developed incredibly robust nowcasting models.

• Everything in markets seems to revolve around inflation, inflation expectations, and rising bond yields.
• This makes it the perfect time to revisit our outlook on inflation.
• Inflation is a critical topic because the Fed has become sensitive to prices again, as indicated in both the meeting minutes and the December economic projections.

• Term premium is a key concept in measuring bond yields and interest rates
• The global economy is experiencing fiscal pressures and political noise, impacting bond markets
• Central bank asset purchases and sell-offs, along with regulatory reforms, are influencing the bond market and interest rates

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• Trump plans to put serious tariffs on Mexico and Canada due to immigration and drug issues, impacting Asian currencies
• US and UK CPI data in focus for the week ahead, with expectations of higher inflation
• Currency depreciation pressures in Asia expected to continue, with China and Korea most vulnerable to depreciation pressures

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• The Mahakumbh Mela 2025, hailed as the largest gathering of the Hindu faith, is set to host an estimated 400-450 million devotees from India and around the world.
• The event’s estimated budget is INR 6,382 crore (USD 800 Mn) for event management and infrastructure development, 72% higher than the budget allocated in 2019 Kumbh.
• Kumbh Mela could generate financial transactions totaling INR 2–2.5 lakh crore (USD 25–30 billion) over 45 days. This accounts for an estimated 0.5–0.8% of the country’s GDP.

• Repo markets over year end were more subdued than expected, with balances reaching $473 billion in the afternoon on December 31st.
• The Fed’s balance sheet runoff, or QT, is expected to end by the first quarter of the year, with reserves holding above $3 trillion for most of last year.
• Potential delays in ending QT could be influenced by the resolution of the debt ceiling and the desired amount of reserves banks want to hold.

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• China implementing stimulus measures to boost growth
• Cold weather leading to increased demand for heating fuel oil
• Global oil inventories at record lows, with improving sentiment on China leading to potential increase in domestic demand.

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• Resilience is showing up in survey data, impacting yields and strategies in Oregon and beyond
• Rising term premium and fiscal spending expectations affecting markets, especially the dollar
• Sterling facing challenges with lower quality carry, fiscal issues, and potential growth slowdown, while Dollar remains bullish with strong US employment report and Fed outlook

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• An economically weakened China is preparing for Trump’s tariff war with an array of assertive measures in the intelligence, military and trade dimensions.
• We continue to believe Chinese equities are an uninvestable asset class, though traders could profit from swings in that market.
• Investors should consider gold as a de-dollarization play, and possible commitments into tail-risk volatility.

• Markets have taken on a risk-off tone with few satisfactory bearish explanations.
• It’s possible that the combination of rising inflation fears and concerns about the lack of clarity over Trump’s policies is sparking the market’s cautious tone.
• We remain tactically constructive, as technical models with strong historical track records whose study periods include major catastrophic episodes argue that risk and reward are bullishly skewed.

• The continuation of large budget deficits under the second Trump administration is causing concerns amongst investors about interest rate implications, but Treasury yields are determined by a multitude of factors.  
• High government borrowing will typically impart greater stress on financial markets if private sector borrowing is also strong. Long-end yield curve steepening may reflect funding issues due to buyer shortages.
• Current expected returns on Treasuries (both nominal and real) are highly elevated compared to recent history and should offer decent protection for investors. 

• Risk reward favours this shift in allocation between these markets
• Weakness in HK/China markets in Q1 as President Trump takes office will provide an opportunity
• China continues to incrementally promote consumption as the new lever of growth

• For the week ending 03/Jan, U.S. crude inventories fell by 1m barrels, missing expectations of a 1.8m barrel decrease. Gasoline and distillate stockpiles rose more than expected.
• U.S. natural gas inventories fell by 40 Bcf for the week ending 03/Jan, moderately beating analyst expectations of a 39 Bcf drawdown. Inventories are 6.5% above the 5-year seasonal average.
• Analysts lowered 12-month PTs on Exxon, BP, Halliburton, TotalEnergies, and SLB. Morgan Stanley upgraded rating on Shell to Overweight and raised PT to USD 79.8 from USD 66.5.

• China’s economic strategy should focus on market-driven consolidation, high-quality investments, and expanding its services sector for sustainable growth.
• Most Asian economies report positive growth, with India and Vietnam leading, while Korea and Malaysia show signs of contraction.
• The Philippines faces weakening momentum, with declining trade balances and potential currency pressures.

• Batteries / In Depth: As risks mount, China races to regulate battery recycling 
• China-U.S. /In Depth: Decades-old research pact survives China-U.S. tensions
• Corruption /State-backed documentary exposes minister’s corruption

• Markets began arguably as they will continue in 2025, with little beta and many quirks to source alpha. US payrolls boomed while EA inflation unsurprisingly rose.
• More releases return next week, with UK inflation our highlight, as low airfares may disappoint many forecasts. US CPI and final EA HICP also matter. It’s still quiet for monetary policy decisions, with Indonesia and Korea the only exceptions.
• Note: Smartkarma becomes our research portal in January, so clients should set their login details to maintain smooth access (send queries to [email protected]).

• Highlights ·       Set to finish 2024 with a 30% rise in rubber sale values YoY ·       Exports tires worth US$772.5 million during Jan-Nov 2024 ·       Minister charts course of action for 2025   Cambodia has made impressive strides in 2024, fueled by higher global rubber prices and exceptional progress in its burgeoning tire production and export industry, marking a pivotal step in its transformation into a key player in the global rubber value chain.
•   The Southeast Asian kingdom earned US$472 million from exports of NR latex during January-October 2024, up 22.5% over the same period the previous year.
• On the other hand, it gained US$568 million from exports of the product during January-November 2024, up 26.7% over the same period in 2023.

• Market conditions have shifted with increased rates against reduced liquidity, leading to recent sell-offs.
• Despite market noise and uncertainty, the outlook remains constructive on intra-EMU spreads and Euro Area government bond supply for 2025.
• The UK market has seen significant sell-offs in 10-year gilt yields, influenced by fiscal policies and US market dynamics, with expectations of further easing by the Bank of England.

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• Lawsuits / In Depth: Why more Chinese companies are getting sued by aggrieved investors
• China-Southeast Asia /Analysis: Why Southeast Asia is becoming a manufacturing hub for Chinese investments
• Travel /: Surge in Chinese overseas tourism set for Lunar New Year

• The Vietnam Rubber Seminar held on December 12, 2024, saw experts presenting their assessment of challenges facing the Vietnamese rubber sector in complying with the European Union Deforestation Regulation (EUDR).
• While rubber industry expert Dr. Tran Thi Thuy Hoa, during her holistic survey, offered actionable tips for Vietnamese operators to tackle EUDR, FSC Vietnam Country Manager Vu Thi Que Anh highlighted the role of FSC Certification in meeting the EU Regulation.
• Challenges in EUDR compliance Dr. Tran Thi Thuy Hoa said Vietnam’s rubber supply chain remains both complex and fragmented, which poses substantial challenges for EUDR compliance.

• In this insight, we discuss the details of the share price performances of the Korea Value Up Index (especially among the index constituents) this year.
• It appears that many traders are buying beaten up, higher beta stocks in Korea that were excessively pushed to much lower levels last year. 
• Among the top 20 best performing stocks in the Korea Value Up Index this year, 15 of them (75% of the top 20 stocks) are listed on KOSDAQ. 

• On 8 January, the Financial Services Commission (FSC) announced 5 major potential policy changes in the Korean stocks market which could get implemented in 2025.
• The mandatory lock-up periods for the institutional investors could result in the institutional investors that are active in Korean IPOs to reassess their trading strategies on newly offered issues. 
• Choi Sang-Mok was the most important government official spearheading the numerous financial reforms in Korea. Now that he is the acting President, he is likely to accelerate these financial reforms. 

• Yesterday was a crazy day in FX and commodities as seen in chart 1.a. Within the span of 6 hours we had markets trading WaPo the rumour, then reacting to the pushback on the rumour from Trump and then markets calling Trump’s push back a bluff.
• We conclude a couple of things from this.
• Firstly, what we have been saying the last month ever since Trump’s first comments on Canadian tariffs, namely that this is a negotiation tactic to get what he really wants.

• Tire production volumes are declining
• Major tire manufacturers are closing/withdrawing from the Chinese truck tire market
• Emerging competitors are expanding capacity, challenging established suppliers 

• After a strong showing in 2024, a deteriorating external environment poses challenges for Malaysia in 2025.  We argue that the economy’s domestic resilience will hold up well.
• In addition to recovering tourism and domestic spending, consumption will benefit from wage-uplifting policy measures that will benefit a significant portion of the labour force.
• The investment upswing may also gain further momentum as previous investment pledges and catalytic initiatives start translating into shovels in the ground.

• Overseas warehouses / In Depth: Chinese traders plow cash into overseas warehouses amid global e-commerce boom
• Aerospace /Geovis Insighter’s IPO lifts off in style after Chang Guang Satellite’s listing crash
• Energy Insider /China to restrict export of lithium battery tech, Tesla opens new Shanghai battery plant

• We expect inflation for the second half of December to be -0.02%, due to an extraordinary reduction in agricultural prices.
• Inflation for this fortnight is typically at 0.18% bw.
• The -0.02% bw forecast is explained by the reduction in agricultural products of -0.74% bw, versus the historical print of +1.03% bw.

• AI / Cover Story: Chinese AI startups make gains in challenge to U.S.-based OpenAI 
• PMI /China’s services sector buoyed by stronger demand, Caixin PMI shows
• Batteries /China to restrict exports of lithium battery technologies

• SGX IO Futures closed USD 0.35/ton lower for the week ending on 03/Jan. It traded in a range of USD 4.35/ton, which was smaller than the prior week.
• For the week ending 03/Jan, China’s port iron ore stockpiles rose 0.2% WoW to 145.22 million tons, while daily imported ore pick-up volume fell 47k tons to 3.08 million tons.
• FIIs hold a net long position of 130.6k lots across all futures and options expiries. Managed Money and Physical market participants are net short by 19.6k and 82.1k lots, respectively.

• We look at the major themes and challenges for listed tech stocks in Southeast Asia including Sea Ltd, GoTo Gojek Tokopedia, Grab Holdings, Global Digital Niaga (BELI), and Bukalapak.
• Profitability remains the key quest all in 2025, with only Sea Ltd achieving this in a true and sustainable manner, with Grab moving closer ahead of GoTo, BELI, and BUKA. 
• Increasing take rates through seizing more of the value chain in logistics and advertising is another trend, with Fintech a core focus in shifting the needle on profitability and cross-selling

• Fenix Resources (FEX AU) will increase production from 1.4 to 4.1 million tons annually in early CY25, placing it at 2.5x PE/0.3x EV-EBITDA FY26e (~100 USD/ton iron ore px assumption). 
• On our estimates, if the company pays no dividend and capex is 60 mn AUD in both FY25 and FY26, net cash>market capitalization. (Conclusion: Board Pays Dividend)
• We will look for the next quarterly production update for more color this month. Read our last update Fenix Resources (FEX AU): Positive Developments At Iron Ridge And Other Catalysts 

• I thought we’d start by looking at what moved the markets in 2024.
• The table below, in the form of a heat map, looks at returns (sorted by 2024 YTD returns) for a bunch of major indices and asset classes.
• The stand-out number for me is that of Bitcoin, up an astonishing 111%, with the NASDAQ Composite a long way behind on a price return (not including dividends) of ‘just’ 32%. 

• The FAO Food Price Index stood at 127.0 points in December 2024, down 0.6 points (0.5%) from its November level.

• The index stood 8.0 points (6.7%) above its corresponding level one year ago, yet remained 33.2 points (20.7%) below the peak reached in March 2022.

• While the news is dominated by sky-high cocoa and coffee prices, you can clearly see from the data that on the one hand, vegetable oil prices were a primary driver of higher food prices throughout the year. 

• Happy Sunday, and welcome to our weekly editorial on all things macro markets.
• In full transparency, we’ve been a few weeks early on our bet for lower bond yields, which slightly wrongfooted our risk asset view heading into Christmas—after being on a remarkable roll for several months.
• We remain puzzled by the resilience of bond yields (and the USD) despite softer economic surprises and flattening inflation expectations.

• Central banks in the US, Europe, and Asia have made policy rate announcements, with the Fed in the US easing rates and the ECB expected to continue cutting rates.
• The US economy is expected to see slowing growth momentum in the coming year, with concerns about policy risks from the incoming Trump administration.
• In Asia, Japan is forecasted to experience above potential growth with rate hikes, while China continues to struggle with low inflation and credit growth.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

• The Indonesian stock market was down 2% over the last year despite a flurry of inflows in the summer but this year looks interesting with a new government in place. 
• GDP growth forecasts are more optimistic for 2025 and government stimulus should help to drive higher consumption, with FDI driven by more value-added investments in the EV-related projects. 
• Increasing digitalisation of the economy and greater use of AI will drive profitability and data centre growth. Interest rates are expected to fall -50-100bps which should also be supportive.

• The U.S. oil and gas rig count remained unchanged for the fourth straight week at 589 for the week ending on 03/Jan.
• For the week ending 27/Dec, U.S. oil production moderately fell to 13.57m bpd from 13.59m bpd the week prior.
• The U.S. oil rig count declined by one to 482, while active gas rigs increased by one to 103. Producers added one rig in Texas and cut one in Louisiana.

• Farmer body asks farmers not to go for ‘summer tapping’
• Rubber Board exhorts farmers to up tapping to discourage imports
• Farmers allege Rubber Board catering to interests of tire-makers

• The past week was a short one but we saw market strategy insights on Indonesia from CrossASEAN Research plus an insight on Philippine Stock Exchange.
• There was also an insight on Indo Tambangraya Megah (ITMG IJ) and a sector piece on Thai Tourism, flagging Central Plaza Hotel (CENTEL TB) as the top pick. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated substantive, and actionable insights, macro and equity bottom, from across Southeast Asia.

• WTI futures rose 4.8% for the week ending 03/Jan, led by improving outlook on China and declining U.S. crude oil stockpiles.   
• WTI options Put/Call volume ratio rose to 1.03 from 0.97 (27/Dec) last week, as call volume grew by 57.9% WoW while put volume increased by 68.1%.   
• WTI OI PCR rose to 0.93 from 0.89 last week. Call OI inched up by 4.1% WoW, while put OI rose by 8.9%. 

• U.S. natural gas prices dipped 0.9% for the week ending 03/Jan, as robust early-week gains were eroded by volatile weather forecasts.
• Henry Hub Put/Call volume ratio jumped to 1.37 from 1.05 (27/Dec) the previous week as call volumes increased by 86.4% WoW, while put volumes surged by 141.6%. 
• Henry Hub OI PCR rose to 0.87 from 0.85 compared to last week. Call OI inched up by 4.9% WoW, while put OI increased by 8.5%.

• Although data interpolation has a long history, the various linear and nonlinear techniques have pros and cons         
• I introduce a hybrid technique to interpolate monthly US inflation-adjusted GDP going back to 1947
• My monthly GDP nowcast through November seems consistent with some growth moderation on a three-month and six-month basis   

• Surprises in the global economy were limited in 2024.  The second Trump administration aims to enact significant economic transformation, increasing the chances of major divergence between the US and Europe.
• President-Elect Trump promised higher oil output to lower energy prices, although US production is already at an all-time high.  Restrictions on technology exports to China are likely to remain intact. 
• The prospect of significant US economic disruption raises the chances of the Fed having to reduce its policy rate more aggressively in 2025 than currently discounted in financial markets.

• We reiterate our belief that in the absence of a recession the S&P 500 should register low single-digit gains for 2025.
• However, the emergence of policy implementation risk by the incoming Trump Administration makes us believe the market will experience several volatility shocks during the year.
• Be prepared for a choppy but mildly positive year for stock prices in 2025.

• The first day of the Santa rally window was December 24 and the last day was January 3, and Santa Claus didn’t appear this year.
• We believe investors need to consider short- and intermediate-term market conditions separately. Current market weakness has left the market poised for a reflex rally.
• The key to the intermediate term outlook is the market’s behaviour during the anticipated rebound. Can breadth broaden out and more stocks participate on the upside?

• We expect copper demand to have ended FY24 at around 27.1 million tons (up 4% year over year). FY25 could be an interesting year in which copper demand outstrips supply. 
• We expect China to have about 15.3 million tons of demand (flattish year over year) in FY24. The stimulus will be crucial for growth in overall copper FY25 demand.
• We continue to expand our coverage of pure copper play names, with our favorites being Southern Copper (SCCO US) and Antofagasta PLC (ANTO LN) 

• We expect iron ore to remain rangebound between 90 and 110 USD/ton in FY25, which is in line with the band it has maintained over the past six months. 
• Iron ore players like Vale (VALE US) and Fortescue Metals (FMG AU) can maintain high single-digit dividend yields at USD 100/ton. We see short-term opportunities in these names.
• For small-cap specialists, check out our research on Fenix Resources (FEX AU): Positive Developments At Iron Ridge And Other Catalysts. The company (trailing 5x PE) is poised to triple its production.