Macro

• A review of recent events/data impacting our investment themes or outlook
• The weak USD, as US growth peaks and yields decline, is helping  international markets
• Can Hong Kong and China stock markets decouple from a US bear market?

• Shot from Trump’s blunderbuss is hitting sentiment and risk appetite yet the hard data remain resilient. Europe waking up on defence punched markets more in hope than reality, but hawkish inflation and ECB news helped create room to close our bullish call.
• Next week’s US inflation data are the scheduled global highlight, along with the Bank of Canada likely pausing its cutting cycle. We also await UK GDP data confirming resilience inconsistent with the dovish panic at February’s BoE meeting.
• Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to [email protected]).

• In Depth: How BYD lowered the bar for buying a smart car in China
• Two Sessions /Two Sessions: Beijing to curb private company shakedowns
• AICs /China expands AIC equity investment pilot, letting more banks and insurers join

• For the week ending 28/Feb, US crude inventories increased by 3.6m barrels, contradicting expectations of a 0.6m barrel decline. Meanwhile, gasoline and distillate stockpiles unexpectedly dropped.
• US natural gas inventories fell by 80 Bcf for the week ending 28/Feb, lower than analyst expectations of a 96 Bcf drawdown. Inventories are 11.3% below the 5-year seasonal average.
• Aramco’s 2024 net profit fell 12.4% YoY on lower crude prices and weak margins. The Trump administration gives Chevron 30 days to end Venezuelan oil operations.

• Vietnam rakes in US$3.4 billion from rubber exports in 2024  
• Impressive surge in exports to Malaysia and Europe  
• Chinese tire firm undertakes third phase of expansion in Vietnam

• Episode 10 of New Barbarians podcast covers recent events and discusses Gene Hackman’s passing
• Mark Connors shares insights on investors seeking certainty and compares them to characters in Gene Hackman’s movies
• Trump’s statements on Truth social and implications for the crypto market are analyzed, drawing parallels to themes of integrity and leadership in Hoosiers.

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• The ECB’s sixth 25bp deposit rate cut to 2.5% was unsurprising, and its characterisation of policy as meaningfully less restrictive leaned towards our relatively hawkish view.
• Policy rates may already be close to neutral. Looser fiscal policy plans also pressure monetary policy to follow a tighter path than would otherwise have been necessary.
• We still expect the ECB to hold rates in April, which is no longer a controversial call. A final 25bp ECB cut in June remains in our outlook (BoE cuts in May and Fed on hold).

•  One in five companies in rubber industry mulling shifting in 2025  
• Regulatory burdens and high energy costs among major concerns  
•  Place ‘first-touch principle’ in EUDR, erase reverse burden of proof  

• Sticky spending pressures and the property slump’s drag on public revenues mean that the region’s return to pre-pandemic surpluses remains elusive. 
• The deficits, however, are symptoms of the region relying on a growth playbook that may no longer be viable, given the changing nature of Hong Kong’s economic position
• With the rest of the world becoming less inclined to treat Hong Kong differently from mainland China, the government’s failure to uphold its “second system” may prove costly.

• Global economic uncertainty is rising, leading to reduced investment and potential recession risks in the U.S. and Europe.
• China’s property sector stabilizes, with investment expected to drive future economic growth despite trade tensions.
• Japan’s GDP growth may be overstated due to miscalculated capital spending data, with revisions expected in the next release.

• Despite global uncertainties, Bank Negara Malaysia maintained the policy rate at 3%, citing sustained economic resilience, robust domestic demand, and investment activity. The 5.1% GDP growth in 2024 supports the decision, although external risks remain.
• Inflationary pressures remain contained, with headline inflation at 1.7% in early 2025, supported by easing global cost conditions and lower commodity prices. However, upside risks persist from domestic policy spillovers and external factors, including financial market volatility and trade policy shifts.
• The ringgit remains influenced by external factors, with narrowing interest rate differentials providing support amid global uncertainty. The MPC’s data-dependent approach ensures monetary policy remains conducive to growth while preserving price stability.

• Two Sessions /Two Sessions: China’s GDP target unchanged as deficit projection hits record high
• Metro /In Depth: Investigators find city’s metro system is riddled with graft
• Huawei /: With an eye on AI, Huawei plans deeper expansion in Qatar

• Ray Dalio, founder of Bridgewater and author, discusses big numbers and debt cycles in a social and political context
• Tracy and Joe host a podcast episode with Ray Dalio, known for his insights on finance and the invention of the chicken nugget

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• After several months of a technical top-consolidation, the US market is entering a bear market.  The piercing of the Magnificent-7 bubble will continue to drive selling pressure in the market.
• Inflation pressures will tie the Fed’s hands to bail out the market with another Fed Put.  Another market bailout would cost much more than the $5 trillion COVID bailout.
• The administration’s policy sequencing is pushing inflation expectations higher as the immediate tariff implementation supersedes other anti-inflationary policies, which will take longer to implement.

• Hello everyone, and welcome back to our weekly editorial on geopolitics, commodities, and macro.
• While there hasn’t been much news on the commodity front since last week, we have a bunch of moving parts on the geopolitical scene—last Friday’s heated (and unplanned) Zelensky/Trump debate, the subsequent removal of all military aid targeting Ukraine, and now Trump trying his best to get all counterparts and allies to block any partnerships with China.
• While this was already evident earlier this week, when the administration urged Mexico to impose tariffs on China to avoid US tariffs, today’s reports of Putin acting as the middleman in the Iran nuclear deal were not something anyone had on their bingo cards.

• There was a significant transatlantic dispute over Russia and Ukraine last week.
• Donald Trump threatened on 27 February to impose a 25 percent tariff on all European imports, which could impact markets significantly.
• Despite Keir Starmer’s ‘king’s gambit’, the UK should not assume it will be unaffected by these potential tariffs.

• The first thing that investors need to recognise in Team Trump is that, like the markets, they don’t really care what we think.
• They do not respond to worthy editorials in the Economist or the Financial Times or the Wall Street Journal.
• They don’t care what ‘experts’ think on trade or tariffs or fiscal policy, they tell us what they are going to do, rather than ask for our opinion.

• Ne Zha 2 / In Depth: ‘Ne Zha 2’ heralds new era for Chinese animation
• Xiaomi /: Xiaomi aims to take its EV sales overseas by 2027
• Tariff counter: China hit back at the U.S.’ 10% tariff hike that took effect Tuesday with a package of countermeasures.

• Few surprises from the Government Work Report, but investor fatigue has set in.
• Groundwork continues to be laid for a boost in consumption as a share of GDP
• HK/China bull market to broaden out from the technology sector?

• WTI futures fell by 0.9% for the week ending 28/Feb, marking its sixth consecutive weekly drop. Prices fell due to trade tensions, geopolitical uncertainties, and demand concerns.
• WTI fell 3.8% in February, its largest monthly drop since September 2024, as economic uncertainty, trade tensions, and bearish economic indicators pressured prices.
• WTI OI PCR rose to 0.98 on 28/Feb from 0.95 on 21/Feb. Call OI increased by 7.4% WoW, while put OI rose by 10.5%.

• Sri Trang posts US$48.8 mn profit, reversing loss of US$12.7 mn in 2023  
• Sri Trang sells 133,163 tons of EUDR rubber in 2024  
• North East Rubber setting up plant in Ivory Coast  

• For the week ending 28/Feb, U.S. natural gas prices fell by 9.5% on the back of milder weather forecasts and expectations of weakening demand.
• Henry Hub OI PCR fell to 1.00 on 28/Feb from 1.04 on 21/Feb. Call OI fell by 9.5% WoW, while put OI decreased by 13.3%.
• Put OI was notable at the 2, 2.5, and 3 strikes, while call OI was concentrated at 4, 5, and 6.

• Gold miners’ revenue grew 4% QoQ in Q1 2025, the highest in 15+ years, driven by rising gold prices and demand.
• Gold markets face volatility with rising COMEX inventories and widening futures-spot spreads, but signs of stabilization are emerging.
• GLD ETF is bearish, breaking key support, while options data show bullish sentiment with strong call interest above $3000.

• On European equities be discerning. While there are some green shoots the European economy is fragile. Value and quality stocks are recommended. 
• Sector bias is towards consumer staples, tech hardware and defence before moving into consumer discretionary and industrials later in the year. .
• Japan – overweight equites – industrials, banks and consumer discretions –  unhedged and underweight government bonds.  

• Iron ore futures fell 6% last week, closing at USD 102.00/ton on Feb 28, below key support levels, with bearish momentum confirmed by technical indicators.
• Global trade tariffs pressured sentiment, as U.S., Vietnam, and South Korea imposed levies on Chinese steel, impacting an estimated USD 7 billion market and dampening demand.
• China’s Two Sessions could drive volatility, with historical patterns showing pre-meeting gains followed by post-policy declines, potentially influencing iron ore price recovery.

• Central banks are advised to slow, pause, or stop reducing rates due to rising inflation and labour costs.
• Inflation is unexpectedly increasing, and labour costs are exceeding target-consistent levels.
• Monetary policy is almost neutral according to activity trends, but rate hikes in 2026 could counteract unnecessary easing.

• Conservative (CDU/CSU) chancellor-elect Merz should be able to form a stable coalition with SPD, but his “independence from America” requires massive constitutional amendments by 25Mar’25 allowing huge defense/infrastructure spending boosts. 
• This is a self-goal: the time for independence from America was 3 years ago, when instead Germany followed Biden’s command to self-harm itself with a ban on Russian energy imports. 
• If Germany successfully leads an EU defense/infrastructure spending boom, Trump would still achieve his goal. But Germany would have missed the easier route to recovery via liberalized Russian energy imports. 

• Friday’s bizarre scenes in the Oval Office will take some time to digest for all involved counterparties.
• I don’t feel in a position to judge either side, but I will use this analysis to assess the ramifications of the event.
• As a disclaimer, remember that I am European!Trump’s argument that the U.S. pays too much to the rest of the world is, in many ways, entirely correct—but also quite banal.

• Base metals, particularly copper, are sensitive to China specific tariffs, leading to a rise in copper prices in early 2025
• Near term market outlook is cautious due to supply and demand dynamics, with prices potentially pulling back towards $9,000 per ton
• Long term outlook for copper market tightening in 2025 due to slowing mine supply growth and modest deceleration in global demand growth, with potential risks in X Chinese demand.

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• Euro area inflation exceeded consensus expectations again in February, despite an ongoing drift up in forecasts, although the 2.4% outcome precisely matched our call.
• ECB easing anticipated a drop below target by now, so its disappointment should exceed any relief at the 0.1pp slowing, driven by French energy bills, after four straight rises.
• Wage inflation remains too fast to sustainably achieve the target, which should urge the ECB to slow its easing after cutting on 6 March. We still see June as the last rate cut.

• How We Traded Wheat Short Wheat prices saw a small revival over the last month.
• From the rect bottom the forward futures contract recovered almost 15%.
• During last week new selling pressure started to effect the market and led prices down again. 

• U.S. oil and gas rig count rose by one for the week ending 28/Feb, marking the fifth straight weekly gain and bringing the total to 593.
• For the week ending 21/Feb, U.S. oil production slightly rose to 13.50 million bpd from 13.49 million bpd last week.
• The number of active U.S. oil rigs fell by 2 to 486, while gas rigs rose by 3 to 102. Rig count in the Permian rose by one to 305. 

• Term premium in US macro picture and interest rates has fallen significantly over the past month
• Treasury Secretary’s comments indicating no changes in coupon auction sizes or debt profile have impacted term premium
• Recent concerns about weakening growth have led to market pricing in more Fed rate cuts, despite strong labor market and potential upside risks to inflation forecast

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• Chinese buying concentrated on warehouse cargoes
• Arbitrage narrows for international cargoes on wintering 
• Gradual return of the tire makers expected 

• Last year 70% of the calls made money. This year we make another 43 investment recommendations, global, US, Europe, Japan and 8 Asian countries. 
• Our prediction that Bitcoin will become a US reserve asset under Trump is already playing out. 
• Stock market volatility will persist, with diverging performance and subdued  gains compared with 2024. Our top picks are the US, Japan, Taiwan, Korea and India and selectively China. 

• The past week saw insights on Arwana Citramulia (ARNA IJ), BFI Finance Indonesia (BFIN IJ), Raffles Medical Group (RFMD SP) and Yangzijiang Shipbuilding (YZJSGD SP).
• Brian Freitas published on Grab Holdings and Sea Ltd (SE US) and increasing foreign holdings, whilst Daniel Tabbush revisits Singapore Banks, with a further insight on the tech sector in Singapore.
• 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.

• HK Alpha Portfolio returned 13.58% in February and outperformed the benchmark by 7.68%. The portfolio has outperformed Hong Kong indexes by 5.16% to 11.48% since its inception on 10/01/24.
• About 50% of the portfolio’s excess returns have been from alpha generation. The portfolio had no exposure to Real Estate, Energy, or Utilities.
• At month-end we sold AAC Technologies Holdings (2018 HK) , Trip.com Group (9961 HK) , MINISO Group Holding (9896 HK) , and trimmed Xiaomi Corp (1810 HK) .

• Treasury Secretary Scott Bessent recently declared that the Trump Administration was mainly focused on lower the 10-year Treasury yield. He seems to be accomplishing his goals, but at a price.
• The U.S. economy is increasingly dependent on the high-end consumer, whose wealth is reliant on continuing increases in stock and property prices. But cracks are appearing in both markets.
• We expect a reset in growth expectations will lead to a short and sharp correction, but no prolonged recession-induced bear market.

• A global rotation analysis reveals a rotation away from U.S. equities. Europe is poised to sustain leadership, and our favourite sector is European financials.
• China has shown signs of relative strength, but doesn’t appear to be sustainable.
• The most vulnerable countries appear to be the resource exporters such as Australia, Canada, Brazil, Indonesia and South Africa.

• Copper prices remained tepid last week, owing to a weak global market sentiment with Trump’s tariffs. Funds cut their bullish Comex positions as premiums crashed by 40% from the peak.  
• China’s Manufacturing PMI rose to 50.2 in February, surpassing the expected 49.9, while the record Total Social Financing in January also contributed significantly to this positive outlook.
• The NPC 2025, taking place on March 5, will be closely watched for China’s fiscal policy roadmap, which is expected to influence commodity consumption.

• The Bank of Japan (BoJ) has embraced the Fed’s practice of gradualism in normalising policy settings. Private securities holdings make it difficult for the BoJ’s balance sheet to fall rapidly.   
• The BoJ’s inflation gauge has been rising again since July 2024, suggesting gradually tighter policy will not reintroduce deflation.  Rising wages are the inflation game changer after years of stagnation.
• Monetary policy settings in Japan will remain accommodative in 2025, albeit less so.  The attraction of the yen carry trade could fall, but the demand for dollars will remain elevated.

• The Trump administration’s announcement of a 60% tariff on Chinese steel imports affected the market sentiment, leading to a 3% decline in iron ore prices last week.
• China’s Manufacturing PMI rose to 50.2 in February, surpassing the expected 49.9, while the record Total Social Financing in January also contributed significantly to this positive outlook.
• Iron ore prices can remain rangebound (95-110 USD/ton), with the positive demand-side catalysts from China outweighing the long-term supply fears from Rio’s Simandou project. 

• While America’s restrictions threaten the global trading order, China’s outdated, export-reliant model is culpable, too. In exporting its overcapacity, China behaves like a small, open economy, but it is not.
• Given its size, China’s export surges produce outsized effects, triggering protectionist responses. China’s friends in the Global South are scrambling to defend their domestic industries, and not just the  West.
• Until China finds a way to recycle its surpluses into investments in other countries, trading partners will suffer the downsides of import competition without any offsets, thus worsening trade tensions.

• Fiscal / In Depth: Chinese local governments foresee heightened fiscal pressure
• Stocks /: As Hong Kong stocks surge, foreign investors stay on sidelines
• Hong Kong /: Hong Kong considers regulating basketball betting to boost revenue

• Production up 3.18% YoY and imports up 19.42% in 2024  
• Production-Consumption gap 526,000 tons  
• Commerce Minister dodges floor price plea by smallholders

• Resilience in Euro area price and wage inflation, ESI surveys, and hawkish comments in the latest meeting accounts were trumped by US events. Renewed tariff threats and soft US surveys led a dovish repricing for the Fed that also dominated for the ECB.
• Next week has more top tier releases, starting with flash EA inflation for February where we are still a tenth above consensus at 2.4%. That won’t stop the ECB cutting, but should encourage restraint for April. US payrolls and tariffs are the other highlights.
• Note: Smartkarma is now the sole distributor of our research, so clients will only receive all other research from Smartkarma (queries to [email protected]).

• For the week ending 21/Feb, U.S. crude inventories dropped by 2.3m barrels, contradicting expectations of a 2.5m barrel build. Gasoline stockpiles unexpectedly rose, while distillate stocks surged more than expected.
• U.S. natural gas inventories fell by 261 Bcf for the week ending 21/Feb, lower than analyst expectations of a 276 Bcf drawdown. Inventories are 11.5% below the 5-year seasonal average.
• BP pivots back to fossil fuels, cutting renewables and reducing its quarterly buyback to USD 0.75 billion from USD 1.75 billion. President Trump revoked Chevron’s license to operate in Venezuela.

• Crashing US surveys in 2025 have looked idiosyncratic, as spurious exaggeration of exceptionalism ends. The ESI corroborates the PMI’s resilience in the euro area.
• Price expectations have been trending further above long-run averages without a one-off shock, suggesting European policy is too loose for this stage of the economic cycle.
• EA unemployment remains lower than a year ago, inconsistent with tight monetary conditions. We still see the ECB’s last cut in June, much sooner than the market prices.

• On 27 February, the Financial Supervisory Service (FSC) announced that it plans to give greater scrutiny on rights offerings and IPOs in Korea that could potentially destroy shareholder value.
• Overall, these attempts to improve the rights offerings and IPOs in Korea appear to be a step in the right direction. 
• However, these measures are likely to negatively impact new rights offerings and IPOs in 2025. Various trading strategies involving rights offerings and new IPOs may need to be revised.

• Cryptocurrencies / In Depth: How cryptocurrency gets used to move billions of yuan in and out of China
• Corruption /: New probe into former Hubei leader brought down by Covid pandemic
• Trade /: Washington wants to seal new trade deal with Beijing, ex-U.S. Treasury Secretary says

• Europe is outperforming the US in terms of stock market performance this year
• Valuations in the US are high, while Europe is trading at a historic discount
• Expectations for US companies are high, while Europe’s expectations are low, leading to potential momentum shifts between the two regions

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• The ECB emphasised a cautious and data-dependent approach in the account of its January rate cut decision. Market expectations were noted to price in a slower rate-cutting cycle, with the end-2025 rate projected at 2.08%.
• While inflation continues to decline, services inflation remains elevated due to persistent wage growth. The ECB expects wage pressures to moderate, but upside risks, including geopolitical uncertainty and trade disruptions, could delay further easing.
• Some Governing Council members noted that rates are approaching neutral territory, suggesting limited room for additional cuts. The ECB will assess future moves each meeting, with flexibility to slow or accelerate easing.

• China injects $55 billion into banks, boosting lending and infrastructure investments.

• Korea and Thailand cut interest rates to stimulate struggling business sectors.

• Hong Kong reduces government expenditure while India aims for higher economic growth with necessary reforms.

• In this insight, we discuss how Buffett’s increased stakes in Japanese trading companies could positively impact Korean trading companies.
• In addition, we look back at the past five years and compare how the major Korean trading companies have performed relative to their Japanese counterparts. 
• In Korea, we believe that the following 5 major Korean trading companies (POSCO International, Hanwha Corp, LX International, Samsung Corp, and Hyundai Corp) could continue to outperform the market.

• Discussing the potential for Argentina to become investable again, starting with macroeconomic factors
• Macro overview provided by senior macroeconomist Diego Barrera, highlighting positive outcomes of fiscal restraint and disinflation
• Necessary conditions for gradual removal of capital controls include continued disinflation, IMF agreement and disbursement, leading to potential increase in reserves and real investment opportunities

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• Hello everyone, and welcome back to our weekly editorial on geopolitics, energy, and metals.
• As always, there is plenty to dig into amid tariff headlines, fresh sanctions, and souring sentiment in both U.S. equities and broad cyclical commodities.
• We have visited this argument before, but it’s important to address the reasons behind the ongoing selloff in oil (and to some extent natural gas) despite somewhat positive headlines from OPEC+, fresh sanctions targeting Iran, Putin pushing back on a deal, and more tariff headlines on Canada and Mexico, increasing the likelihood of short-term supply squeezes in crude markets.

• Due to conflicting signals from the US Administration, investors and extractors are becoming more cautious about the hydrocarbons market in the US and Canada.
• Political aspirations are causing uncertainty in the hydrocarbons market.
• This situation could potentially provide some small consolation for Opec.

• Are the recent announcements blocking Chinese investment a sea change in US/China relations?
• Are we wrong about Trump’s willingness to do a deal with China?
• Is it wrong to maintain a bullish stance on HK-listed China stocks?

• Rubber latex exports value goes up to US$666.25 million in 2024  
• Average yearly rubber price marks a 47% YoY surge to US$1,971/mt  
• Domestic tire firms consume 58,000 tons of rubber in 2024

• Episode nine of the Barbarians podcast covers updates on Trump’s presidency and economic investing outlooks
• Discussion on the impact of demographics on GDP growth and the innovation in sports like hockey
• Analysis of returns in relation to policy changes and the rise in gold prices, with a reference to a scene from Animal House for perspective.

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• Formation of a two-party coalition is seen as good news, as it eliminates the need to bring in additional parties with conflicting views
• Despite differences in specific tools, major parties align on broad objectives such as reducing energy prices and supporting key sectors
• The sense of responsibility to keep far-right parties out of power may drive centrist parties to work together effectively, potentially boosting business sentiment

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• Malaysian ownership continues its upward trend after a 10-year bear market in positioning from 2014 to 2023
• Longer-Term ownership declines in Malaysian Financials and Industrials are starting to reverse.
• Only 3 companies are owned by more than 10% of funds, with CIMB Group Holdings (CIMB MK)  the clear leader.

• Consumption / In Depth: Holiday spending gives Chinese consumption a needed boost 
• E-commerce /In Depth: Trump ends an era for Shein and Temu
• Alibaba /: Alibaba’s $53 billion bet on an AI and cloud expansion windfall