Macro

• The bear market rally in the US stock market continues as investors try to justify the tariffication of global trade and ignore its economic consequences. A FREE LUNCH.
• Soft and hard economic indicators in the US are falling, with some alarming numbers in the travel industry.
• US companies face potential blowback from Chinese consumers that provide 7% of S&P revenue. 

• The shockingly divided MPC’s offsetting votes weren’t the most hawkish signal alongside its 25bp rate cut. Most of the five backing it were only recently convinced.
• Maintained guidance for a gradual and careful approach not only disappoints dovish hopes, but signals a 5:2:2 bias between a slower, constant and faster pace of cuts.
• We still expect this gradualism to help the BoE resist cutting in August (and June) while waiting for dovish evidence that never emerges, making this the last cut.

• Greetings from Copenhagen.
• There’s plenty of geopolitical tension to unpack this week, with three major developments over just the past few days: 1) an Indian attack on Pakistan, 2) new events in the Middle East, and 3) the launch of U.S.–China trade talks.
• India attacked Pakistan in the Kashmir region overnight, and Pakistan swiftly retaliated.

• Geopolitical fragmentation accelerates, replacing global integration with regional blocs and bilateral arrangements.
• Resilience supplants efficiency as the organising principle for economic planning, supply chains and governance.
• Complexity and discontinuity are here to stay. Success may belong not to those who predict the future, but to those who prepare for a range of plausible futures.

• Autos /In Depth: U.S. tariffs rattle global auto industry
• China-U.S. /: China, U.S. to hold trade talks in Switzerland this week
• Law /: China revises infectious disease law to better protect individual rights

• Bank Negara Malaysia held its official policy rate at 3%, in line with consensus, maintaining a supportive stance amid resilient domestic demand and heightened global trade tensions. The decision reflects concern over downside risks from external uncertainties and weaker global sentiment.
• Headline and core inflation remained subdued in Q1 2025, at 1.5% and 1.9% respectively, with the outlook deemed manageable due to easing global cost pressures and limited domestic demand-pull inflation. Inflation risks remain externally driven, linked to commodity markets and trade policies.
• The ringgit continues to be influenced by external volatility, though Malaysia’s structural reforms and narrowing interest rate differentials lend support. Future rate decisions will depend on the trajectory of inflation and the balance of risks to growth amid an uncertain global environment.

• The Riksbank held the policy rate at 2.25%, in line with expectations, citing a well-balanced monetary stance amid elevated inflation and softening growth prospects.
• Although inflation remains somewhat high, the Riksbank views this as temporary and now considers downside risks to inflation more likely than upside ones, suggesting a potential easing bias.
• External uncertainty, driven by US trade policy and geopolitical tensions, plus falling household confidence domestically, are key factors likely to influence the interest rate path.

• China’s shift to consumption-led growth would boost domestic services, not global imports, challenging Western expectations.

• Most Asian economies showed contracting manufacturing activity in April, reflecting broader global slowdown signals.

• Trade data is distorted by pre-tariff stockpiling; focus should remain on fixed asset investment trends for clarity.

• Chinese officials unveiled a broad set of economic support actions, including rate reductions and substantial liquidity infusions, as part of intensified efforts to cushion the economy from U.S. trade tensions. 
• Top U.S. and Chinese officials will meet in Switzerland from May 9–12 to ease trade tensions, boosting investor sentiment and driving iron ore futures to a near two-week high. 
• China’s factory output contracted in April, with both the official NBS and Caixin PMI reports showing a decline in manufacturing activity amid weakening foreign demand.

• The Norges Bank held its policy rate at 4.5% in May, consistent with consensus and March guidance, citing persistent inflation and heightened global uncertainty as reasons to maintain a restrictive stance.
• Although inflation has eased, underlying pressures remain strong, with CPI-ATE stable at 3.4% and a weaker krone raising imported goods prices, complicating the timing of future easing.
• The Committee continues to signal a likely rate cut in 2025 but flagged increased trade barriers and divergent global developments as factors that could shift the policy trajectory in either direction.

• Large companies can reuse existing DDS for reimported goods  
• Companies can submit due diligence statements annually  
• ANRPC S-G asks firms to join initiatives to empower smallholders  

• Market volatility is closely tied to US politics, where unfriendly measures can cap equity prices, while reversals limit potential falls, creating a political floor and ceiling.
• Attempts to avoid all losses lose relevance if they can reverse swiftly. Hedging against falls in the SP500 beyond recent lows better matches the risk of a recessionary crash.
• Selling year-end upside above 5750 covers the insurance cost and nets a 3.8% return, with price losses and gains capped at 7% and 6.4% by this “Trump Collar” strategy.

• Land / In Depth: Record land prices return as developers bet on prime plots
• Holiday /Foreign travelers to China jump in wake of visa waivers, bigger tax refunds
• PMI /Tariffs smother China’s services sector expansion, Caixin PMI shows

• Despite concerns, activity continues to be robust with stable manufacturing and tight labour markets.
• There is a persistent issue of high underlying price and wage inflation.
• The Bank of England’s rate cut ahead of the Federal Reserve is seen as highly irrational, as rates do not reflect the rebounding risk sentiment.

• Morning from a sunny Copenhagen! Many pundits have (rightfully) struggled to find a coherent logic behind the Trump administration’s trade policy.
• However, quietly—but increasingly noticeably—the administration is beginning to make progress on a few of the core objectives outlined in the so-called “Mar-a-Lago Accord.” This accord seeks to leverage the U.S. defense umbrella to compel major trade partners to accept:a weaker USD, and increased purchases of U.S. Treasuries (USTs) in exchange for continued security guarantees—  with tariffs serving as the primary tool in this negotiation strategy.
• While this approach has clearly sparked outrage globally—and while one can certainly question the strategic coherence and execution—the first signs are emerging that suggest it might be achieving some of its intended effects.

• April 2025 saw extreme market volatility after President Trump announced sweeping reciprocal tariffs, mainly aimed at China.
• Subsequent delays and complex exemptions fueled market swings, sparking fears of recession and inflation. First quarter 2025 US GDP contraction is not a trend.
• Despite headline risks, deeper analysis suggests a more balanced global economy over the longer term. Both China and the US will do whatever it takes to avoid a recession

• Since the start of its operations on 4 March, Nextrade (NXT) has rapidly gained its market share to nearly 25% of the total equity trading value in Korea.
• Although retail investors account for about 95% of total trading value at NXT, there is a growing interest in more institutional investors trading through the Nextrade exchange.
• High frequency traders as well those trying to capitalize on lower trading transaction fees and alpha generating trading events/news flow in after hour markets are increasingly trading on the NXT.  

• A review of recent events/data impacting our investment themes and outlook
• Regime change comes to Asia, making sector selection key to performance
• Some key recession watch indicators  continue to ring alarm bells

• Asia’s base oils prices extend rise vs feedstock/gasoil prices.
• Sustained strength of base oils margins points to limited surplus supply even as firm prices incentivize refiners to boost output.
• Limited surplus supply at end-Q1/early-Q2 2025 follows seasonal rise in demand and heavy round of plant maintenance.

• Hold onto Vietnam positions – the economy has held up and the country will negotiate a trade deal with the US. It has no choice but to buckle. 
• Vietnam’s trade deficit with the US is the fourth largest and the US accounts for 30% of exports.  Trump will force it to lower tariff rates, tighten rules of origin. 
• But Vietnamese companies aren’t re-locating to the US, there are no critical industries for Trump to target and the US cannot wean itself of Vietnam’s cheap low value-added consumer goods.

• Europe Group III base oils price trends higher vs prices in US and Asia over past two months.
• Europe Group III price trends higher vs domestic Group I price and VGO, holds firm vs domestic Group II price.
• Europe’s firmer Group III price differentials could reflect correction following sustained weakness.

• Global base oils prices extend rise vs feedstock/competing fuel prices.
• Outright prices mostly hold firm or rise even in face of ongoing dip in crude oil/diesel prices.
• Contrasting trends point to stronger base oils fundamentals relative to crude/diesel.

We will be publishing our 1st Quarter 2025 Letter to Investors next week, the following is an excerpt from that letter:

As we noted earlier this year, we believe, along with many others, that we are now in a period in which investing from the position of political and geopolitical naivety has ended. As such, what has worked in markets is unlikely to work in the future.

This transition has been years in the making. Still, a confluence of events in recent years, starting with COVID and ending most recently with a rollout of an effort by the US government to reshape global trade, has sharply accelerated the transition.

• February marks 18.7% NR yield growth MoM, 21.3% growth YoY  
• Exports of NR too go up by an impressive 23.7% MoM  
• Malaysian gloves set to upend China’s competition in US market  

• Asia’s base oils demand likely to face more downward pressure as slowing industrial activity in key regional markets start to reflect impact of US tariffs.
• Demand already slowed amid uncertainty about impact of tariffs.
• Slowdown in demand highlights widespread repercussion of tariffs, even for products that are not directly impacted.

• The Hong Kong Alpha portfolio underperformed its benchmark index during April by 1.1%.  Since its inception last year, the portfolio has outperformed its benchmark by 18%.
• Although the tech sector was hit after April 2nd, the portfolio made 2% in its tech exposure for the month.  We reduced the portfolio’s volatility & increased its Sharpe ratio.
• At the end of April, sold positions that are at risk from the tariff uncertainty and increased our exposure to China domestic consumption.

• Asian countries are very uncertain about how reciprocal tariffs with the US will eventually play out. Exporters need to find new markets. Governments will have to engineer new growth drivers.
• China has built closer direct investment ties with Vietnam since the first Trump administration in order to avoid US protectionist measures. Local content requirements could be toughened by the US.
• China’s economy still relies heavily on net exports, while consumers currently remain cautious about discretionary spending. Monetary policy in China has not been successful in reviving private credit demand.

• WTI futures fell 7.5% for the week ending 02/May, weighed by OPEC supply hike and uncertainty over U.S.-China trade negotiations.
• The U.S. rig count fell by three to 584. The oil rig count fell by four to 479, while gas rigs grew by two to 101.
• WTI OI PCR inched up to 0.84 on 02/May from 0.82 on 25/Apr. Call OI rose by 7.1% WoW, while put OI increased by 8.9%.

• The FAO Food Price Index rose to 128.3 points in April 2025, up 1.2 points from March.
• Increases in the cereal, dairy and meat price indices outweighed decreases in those of sugar and vegetable oils.
• Overall, the FFPI was 9.0 points (7.6%) higher than its level a year ago but remained 31.9 points (19.9%) below its peak reached in March 2022.

• For the week ending 02/May, U.S. natural gas prices rose by 23.6% on the back of lower output, higher LNG exports, and improved demand outlook.
• For the week ending 25/Apr, the EIA reported that U.S. natural gas inventories rose by 107 Bcf, lower than analyst expectations of a 111 Bcf build.
• Henry Hub OI PCR fell to 0.94 on 02/May compared to 0.96 on 25/Apr. Call OI increased by 4.9% WoW, while put OI grew by 3%.

• Our Trend Asset Allocation Model is a market timing model with a record from 2013. A model portfolio using its out-of-sample signals achieved 85/15 like returns with 60/40 like risk.
• Our review shows that the main components of the global economy are either weak or neutral. 
• This calls for a risk-off defensive posture to portfolio construction. Trump’s trade wars have only just begun and recession risk is rising.

• We are seeing a resurgence of buy signals, or at least constructive signs for stock prices. 
• Against that, the stock market is also facing a number of bearish headwinds, such as the “Sell in May” negative seasonality influence.
• We believe the intermediate path of equity prices is down. However, the reflex rally is a much-hated one and the short-term pain trade may be up.

• PM Lawrence Wong led the PAP to a bigger victory than in 2020, winning 87 of the 97 seats, and 65.6% of votes in contested seats (vs 61.2% in 2020). 
• Since one 5-member seat (Marine Parade-Braddell Heights GRC) was won uncontested (while all seats were contested in 2020) the vote share figures aren’t strictly comparable between 2020 and 2025. 
• Nonetheless, the larger proportion of votes and seats won by PAP give the PM a freer hand in making and implementing policy with a seemingly stronger mandate. Positive for Singapore. 

• Economic data and Trump’s declarations do not support dovish fears, with the economy showing resilience despite the initial US tariff shock and the UK stamp duty rise. EA inflation pressure remains unbroken.
• The Federal Reserve is expected to maintain steady rates next week due to lack of hard evidence for a cut. Similarly, the Bank of England is likely to continue its course with a quarterly 25bp rate cut, influenced by the strength of sterling and falling commodity prices.
• Any future rate cuts by both the Federal Reserve and the Bank of England would require more substantial evidence.

• Resurgent services offset falling energy prices in April to deliver a surprisingly stable 2.2% rate, breaking the usual correlation between energy price moves and surprises.
• Surprises skewed positively across the Euro area, compounding the underlying signal from core inflation, which has reversed its weakness from the previous two months.
• The headline news is modest, and the composition won’t derail the ECB’s June cut, but it demonstrates the ongoing inflation problem that should truncate the easing cycle.

• Central Bank Rate Decisions, including from the Bank of Japan, the Fed, the Reserve Bank of Australia, and the Bank of Korea.
• Elections: Australia is holding national elections on 3 May while South Korea has presidential elections in early June.
• Various exchange holidays in several countries at the beginning of the month, and in the last week of May.

• SGX Iron Ore Futures fell 4.3% WoW to $95.85/ton, closing just above S2 support as bearish momentum strengthened
• Prices are trading below all key moving averages, with a recent death cross and RSI at 38.17, indicating continued downside risk
• Managed Money and Physicals turned net short, while total futures and options open interest rose 4.2% WoW, reflecting rising bearish positioning

• For the week ending 25/Apr, U.S. crude inventories fell by 2.7m barrels (vs. expectations of a 0.4m barrel build). Gasoline stockpiles fell more than expected.
• Henry Hub headed for its first weekly gain in five weeks. The EIA reported a 107 Bcf storage build, below the expected 111 Bcf increase.
• BP, TotalEnergies, Shell, Exxon, and Chevron saw YoY profit declines, but Shell, Exxon, and Chevron beat EPS estimates, while TotalEnergies and BP fell short of analyst expectations.

• Domestic tax hikes are more substantial than US tariffs in April, so the impact should not be forgotten, even if the UK government wants to blame any damage on Trump.
• Frontrunning April’s stamp duty increases stoked transactions and lending, and may take at least a few months to recover afterwards. Resilient approvals are reassuring.
• Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.

• April customs numbers report that tariff collections may double in April; however, at an annualized rate, it would fall well short of the Administration’s promises.
• The Administration has adjusted its narrative to focus on bringing high-tech manufacturing to the U.S. with more robots than blue-collar line workers.
• GDP surprisingly declined in the first quarter, indicating a coming recession.  Media focus is on the drag from net exports, but ignores the inventory build and poor consumption numbers.

• The Finance Minister Choi Sang-Mok resigned as the National Assembly was trying to vote to impeach him just before Choi resuming role as South Korea’s acting President once again. 
• The Supreme Court “reversed and remanded” the case of Lee Jae-Myung, the leading candidate of the Democratic Party of Korea, for being guilty of violating the Public Official Election Act. 
• All in all, given the uncertain political landscape, this could result in more overseas institutional investors in the Korean stock market to sit out longer on the sidelines. 

• For many coming here in the Gulf and UAE in particular, security is an important part of the discussion. Much has been said about the climate in UK and London, where even in the best neighbourhoods, walking while chatting on the phone or taking a picture is taking a big risk.
• Recently, the police raided a flat in the city where they discovered over 50 000 phones in various stages of dismantling, hacking and all.
• I also discovered recently bicycle hijacking ! Two guys on a scooter stop a cyclist, threaten him with a hammer and speed away with the bicycle.

• At the current time, we find the rebound in US equity markets increasingly difficult to rationalize.
• With trade war uncertainty still high, limited new stimulus from tax policy (especially given the high likelihood that no progress on meaningful spending cuts will be achieved), and a patient Fed, there’s little clarity on how growth or earnings can improve enough to justify what were already high valuation levels.
• Cross-asset signals, such as tighter credit spreads and a falling dollar, highlight a disconnect between market optimism and the administration’s ongoing efforts to address trade imbalances.

• The BoJ held the policy rate steady at 0.5%, in line with expectations, while market sentiment shifted more dovishly, reducing the perceived likelihood of further rate hikes.
• Growth and inflation forecasts for 2025–26 have been revised down, with underlying inflation expected to remain weak and only gradually return to target levels as wage pressures intensify.
• Despite maintaining a tightening bias, the BoJ’s emphasis on downside risks and its data-dependent approach suggests a slow and cautious path toward further policy normalisation.

• Thailand cuts rates again amid weak domestic growth and deteriorating external outlook, diverging from global central bank caution.

• Japan maintains ultra-loose policy; any rate hikes likely delayed until year-end despite persistent inflation.

• Strong U.S. investment offsets weak trade balance, but volatility masks real economic trends; concerns grow over fiscal sustainability and reindustrialization feasibility.

• The HSI has pulled back below its long term averages however market breadth remains high with strong RSI and MACD technical indicators.
• Mainland buying through the Southbound Connect platform reached a historical high after the tariff announcement on April 2nd. 
• Healthcare and Telecom sector have been able to maintain strength as the market pulled back.

• Activity growth in Q1 shouldn’t be dismissed as it helps signal the economy’s momentum and effective monetary conditions that trade shocks will fall on top of in the euro area.
• GDP growth exceeded expectations again by increasing to 0.35% q-o-q. Productivity’s poor post-pandemic performance helps GDP drive the ongoing fall in unemployment.
• Supply’s trend seems to have softened despite demand’s improving, raising excesses and the risk that ECB monetary policy was already stimulative before the trade shock.

• Bimbo reported sales growth of 10.8% YoY, in line with our estimates.
• Sales were supported by FX tailwinds –as sales in local currency contracted 0.3% YoY–, positive volumes and recent acquisitions.
• Excluding FX tailwinds, sales in North America underperformed with an almost 5% YoY contraction, offsetting positive figures of other regions but slightly positive vs our more cautious estimates.

• TOP STORY EVs / In Depth: Chinese EV-makers lured by Thai perks face reality check
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• Banco de la República unanimously cut its benchmark rate by 25bps to 9.25%, surprising consensus expectations for no change and breaking a recent streak of unexpected holds.
• Inflation resumed its downward path, with core and headline figures easing and market-based expectations declining, supporting a measured policy loosening stance.
• While domestic demand remains resilient and growth forecasts have been upgraded, external financing conditions and fiscal uncertainty continue to pose constraints on the pace of further easing.

• The Bank of Thailand cut the policy rate by 25bps to 1.75%, in line with market expectations, in response to increasing downside risks from global trade tensions and weaker domestic growth prospects.
• The central bank projects that Thai GDP growth could slow to between 1.3% and 2.0% in 2025, depending on tariff scenarios, while headline inflation falls below the target range, reflecting persistent disinflationary pressures.
• Future rate decisions will depend on global trade developments, domestic credit conditions, and the inflation trajectory, with monetary policy likely to remain accommodative amid heightened external uncertainty.

• Hard economic data must match gloomy sentiment to justify ECB rate cuts reaching a stimulative setting. The little evidence available so far doesn’t show much of a shock.
• Bank lending growth kept rising for companies and households in March as monetary conditions appear to be loosening, not tightening, due to the initial tariff shock.
• Activity surveys only softened slightly in services, while inflation expectations are broadly high. Failure to see much more stagflation eases the likelihood that it occurs.

• It is the calm before the storm as US markets move up in a bear market rally. 
• China/US container ship sailings are at a standstill. Tariff effects will start to be felt in US retailers within weeks.  Temu and Shein pass tariffs costs to the US consumer.
• According to a Deutsche Bank report, foreign buyers of US assets are pulling back quickly.  The virtuous cycle turns into a vicious spiral.

• The past weeks have seen multiple geopolitical flashpoints emerge in Asia as various state and non-state actors take increasingly brazen steps to pursue their respective agendas.
• The aftermath of the Kashmir terrorist attack has seen New Delhi and Islamabad ramp up retaliatory measures. Meanwhile, Beijing is seizing Sandy Clay and intensifying coercive tactics against Taiwan.
• An inward-looking Washington and an unready China mean that there are no “adults in the room” who can moderate geopolitical risks, making such flashpoints more dangerous. 

• This chart from Sentiment Trader highlights that also gold stocks are quite stretched – which isn’t a sell signal, as a stretched market can always become more stretched.
• Note: We’re long the June contract of Gold since mid of March
• Another interesting thought regarding gold demand going forward: if AI models really become more efficient and less data center usage is needed, demand for gold in tech could be affected as well.

• US domestic Group I brightstock price outperforms lighter grades and Group II prices.
• US export brightstock prices significantly lag brightstock prices in Europe and Asia.
• Widening price-discount reflects signs of increasingly diverging supply-demand fundamentals between US and Europe and Asia.

• A limited conflict in Kashmir would have minimal economic impact, as the region is a small part of both economies.
• India’s suspension of the Indus Water Treaty poses a bigger threat to Pakistan’s agriculture and water supply.
• India may seek to isolate Pakistan internationally, possibly affecting Pakistan’s IMF bailout and global support.

• Global base oils price premium to feedstock/competing fuel prices stays higher at end-April 2025 than a month earlier.
• Higher margins coincide with seasonal rise in demand and plant maintenance work.
• Higher margins follow sharp fall in crude oil prices.

• PBoC holds the 1-year loan prime rate (LPR) at 3.1% and the 5-year LPR at 3.6%; both historic lows as trade tensions persist. 
• China’s Politburo vows faster bond issuance, lose monetary policy, and job protection measures to counter persistent economic challenges.
• Iron ore inventories at Chinese ports increased in late April, ending a three-week decline, signaling softening near-term demand.

• Rotation is underway in the EM Financial sector, with selling in Brazil Financials funding rotation in to Greece, UAE and Argentinian financials.
• Brazil Financials remain an overweight for the majority of EM funds, but conviction is falling, with selling in key names Banco Bradesco and Banco BTG Pactual.
• Itau Unibanco Holding remains the flagship holding, owned by 43.7% of funds, though remains well below its 2010 ownership peak.

• For the week ending 25/Apr, U.S. natural gas prices fell by 9.5% on the back of warmer weather forecasts and rising production.
• For the week ending 18/Apr, the EIA reported that U.S. natural gas inventories rose by 88 Bcf, higher than analyst expectations of a 69 Bcf build.
• Henry Hub OI PCR rose to 0.96 on 28/Apr compared to 0.93 on 17/Apr. Call OI decreased by 18.5%, while put OI dropped by 16.1%.