Macro

• For the week ending 17/Jan, U.S. crude inventories fell by 1m barrels, missing expectations of a 2.1m barrel decrease. Gasoline stockpiles rose less than expected.
• U.S. natural gas inventories fell by 223 Bcf for the week ending 17/Jan, missing analyst expectations of a 270 Bcf drawdown. Inventories are 0.7% above the 5-year seasonal average.
• J.P. Morgan, HSBC, TD Cowen, Barclays, and Citigroup raised their 12-month PTs on SLB post its Q4 earnings. Halliburton reported a YoY decline in Q4 revenue and EPS.

• Tighter financial conditions, energy market shocks, and China’s shaky recovery raise the risk that multiple downside factors may converge and amplify each other in 2025.   
• Emerging Asia’s economic growth and currency stability are at risk as heightened uncertainty hurts export demand, portfolio capital flows and foreign investment.  
• The region does have the policy space to respond to these risks but this will come at the price of tolerating weaker currencies and slower fiscal consolidation.

• Funds / In Depth: Venture Capital in China flounders as state takes over (Part 2)
• Davos /China will treat foreign and domestic firms equally, Vice Premier tells Davos
• Insurance /China to pump $13.7 billion of insurance funds into stock markets

• The BoJ raised its policy rate by 25 basis points to 0.5%, consistent with market expectations and reflecting a gradual recalibration of monetary policy as inflationary pressures stabilise near 2.5–3.0% in the medium term.
• Persistent wage growth, yen depreciation, and improving labour market conditions underpin inflation forecasts. However, due to commodity price volatility and exchange rate sensitivity, inflation risks are tilted to the upside.
• While financial conditions remain accommodative, future rate hikes are likely if inflation expectations and wage-price dynamics sustain alignment with the BoJ’s medium-term stability target of 2%.

• Transaction valued at around US$701 million in cash proceeds
• Goodyear to hold ground in Europe until the end of 2025
• Goodyear joins Dutch research body TNO for crash mitigation

• The chasm between the US and European PMIs compressed, removing this justification for the massive Fed-ECB policy divergence in the price. Ironically, their policies are set to start diverging next week with the ECB cutting while the Fed holds rates.
• The BOJ hiked while the Norges Bank approached its first cut in March. Meanwhile, UK pay awkwardly surged, but rising unemployment will help justify a cut on 6 February. Sweden, Canada, Chile, Brazil, and Colombia will also announce policy before then.
• Note: Smartkarma will become the sole distributor of our research in February, so clients should prepare their access now (send queries to [email protected]).

• Donald Trump’s economic policies are changing the way we think about the US economy and shaping the global economy
• The Trumponomics podcast, hosted by Bloomberg’s head of government and economics, discusses Trump’s economic agenda and its implications
• Trump’s policies may be inflationary and there are concerns about what will happen next without any guardrails in place

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• Solar / In Depth: China’s ‘EV battery capital’ turns to solar In the span of four years
• Davos /: Beijing’s influence could end Ukraine war, Finnish President says
• Canal /: Panama starts audit of China-linked port operator amid Trump takeover threat

• UK government spending and deficits have attracted unwelcome attention amid falling sterling and bond prices. Yet long-term rate moves match US and short-rate shifts.
• Sterling weakness defies relative rate moves, suggesting a risk premium worth about 4%. About 1.5pp of that premium is probably US trade policy, with the rest UK-specific.
• Donald Trump should sustain his threats against the EU but could be softer with the UK. Fiscal risk will likely extend beyond the 26 March Budget amid tough talk, not action.

• The Norges Bank kept the policy rate unchanged at 4.5%, in line with expectations, and reiterated its guidance for a potential reduction in March as inflation moderates further.
• Inflation has decelerated faster than anticipated, with headline CPI at 2.2% in December, though core inflation remains above target due to persistent wage growth and high business costs.
• External factors, including rising policy rate expectations among trading partners and potential trade barriers, alongside domestic economic resilience, will influence the timing and magnitude of future rate adjustments.

• Trump has signaled his intention to stop oil imports from Venezuela.
• While these imports are relatively insignificant to the U.S., they are hugely significant to Venezuela.
• Growing demand in China might help offset the impact, but if not, Venezuela could be facing more years of political turbulence.

• Stay underweight Chinese equities, sell the renminbi. The Chinese corporate profit cycle is worsening , signalling that the  economy Is yet to bottom.
• Loss making companies were up 11% YoY in the first 11 months  of 2024 and accounted for 25% of manufacturing. 
• Operating revenues have held-up, but operating costs are rising fast as are inventories and liabilities. Corporate debt to GDP had already hit 295% in 3Q24.

• Bill and Chris use LLMs like ChatGPT, Claude, and Google Gemini to gather and synthesize investment outlooks from experts.
• They create an alpha capture portfolio based on sentiment, risk premia, and expected returns across assets, regions, sectors, and ETFs.
• Using their methodology, they design a portfolio of 10-12 ETFs for long and short positions, ensuring a balance of exposures and avoiding overlap in stock constituents.

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• Drugmakers / In Depth: Chinese drugmakers find fertile, but challenging market in Indonesia 
• GDP /Chart of the Day: Over a dozen Chinese provinces set lower GDP targets
• Metals /: LME approves Hong Kong as delivery hub in boost for China’s metal trade

• Malaysia’s rubber imports clock 103,650 tons in Nov
• SMR 20 secures lion’s share in rubber exports at 60.4%
• Signs MoU with Thailand for sustainable rubber production  

• Trump has already entered negotiations with President Xi which may result in a temporary refrain from imposing tariffs.
• Trump has indicated that TikTok will now be part of a broader deal with China which he outlined as a potential 50/50 joint venture with China. 
• China has more leverage in trade negotiations with the US than it had during Trump’s first term.

• On 21 January, the FSC announced the full details of the major changes in the delisting rules in Korea, which should help to reduce the “Korea Discount.”
• This is one of the biggest ever changes to delisting rules in Korea in the past 30 years.
• These changes will be especially important among investors that are interested in small caps in Korea. 

• For the week ending 17/Jan, U.S. natural gas prices declined 1% amid volatility driven by shifting weather forecasts, increasing LNG exports, and falling inventories.
• Henry Hub Put/Call volume ratio fell to 1.18 from 1.29 (10/Jan) the previous week as call volumes dropped by 5.1% WoW, while put volumes declined by 13.5%. 
• Henry Hub OI PCR stayed put at 0.92 from last week. Call OI inched up by 6.9% WoW, while put OI increased by 7.4%.

• Interest rate / Cover Story: Where best to invest in China’s low-interest-rate era
• Citadel /: Citadel files application for foreign-owned China brokerage after short delay
• Telecom scams: More than 60 university students in Hong Kong, mostly first-year Chinese mainland newcomers, have fallen victim to telecom scams in recent months, losing HK$60 million ($7.7 million) between them

• WTI futures rose 1.7% for the week ending 17/Jan, driven by healthy U.S. economic data, falling crude inventories, and supply concerns.
• WTI options Put/Call volume ratio surged to 1.28 from 0.83 (10/Jan) last week, as call volume fell by 70.7% WoW while put volume decreased by 54.7%.  
• WTI OI PCR rose to 1.00 from 0.94 last week. Call OI fell by 11.7% WoW, while put OI declined by 6.4%.

• A renewed rise in the UK unemployment rate took it to 4.4% despite employment hitting record highs. Participation among older people has reversed much of its pandemic fall.
• The underlying UR trend also increased, making this change look genuine. Nonetheless, the past two similar occasions proved extremes, with the UR falling a few months later.
• Rapid pay growth might have encouraged labour force participation. The direct inflation effect should dominate the second-order slack story, but the BoE will probably cut.

• Happy Sunday, and welcome to my weekly editorial on everything macro and markets.
• It’s been an incredibly eventful weekend in Trump-land, and those who expected him to save all the fireworks for the inauguration speech have already been left behind.
• To recap, Trump has either officially or via leaks/sources hinted at the following:The launch of the official meme-Trump-coin, which has gone absolutely through the roof, taking SOL to new highs alongside it.

• Discussion on potential tariffs and their impact on global markets, with a focus on Canada, China, and Mexico
• Analysis of the upcoming BOJ meeting and its potential impact on the Japanese yen
• Update on UK’s economic challenges, including concerns about fiscal math and potential trade war implications

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• A Q1 2025 tactical ETF Portfolio, on four themes: Technology & AI Leadership (30% exposure), Cryptocurrency Ecosystem (15% exposure), Quality Factor (35% exposure), and Strategic Regional Opportunities (12% net exposure).
• Investment approach includes sophisticated risk management framework with position-level controls, crypto-specific risk management, stop-loss strategy, and a three-phase implementation process designed to balance risk and capitalize on emerging market trends.
• Targets 130% Gross, net long exposure of 45%, information ratio above 0.85, 12% maximum drawdown, seeks risk-adjusted return of +15%, ETF positions in AI, Crypto, Cash Flow, and regional hedges.

• US natural gas market experiencing significant weather-related demand in January, with colder than 10-year normal temperatures
• Europe facing tight gas market balances and lower storage levels, requiring increased LNG imports to reach storage targets
• Uncertainty around Russian pipeline gas increases to Europe and potential impact of US sanctions on Russian energy sectors present bearish risk factors for gas prices

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• Respectable labour market data and strong service sector activity have forced US Treasury investors to soberly revise their expectations of Fed policy rate reductions in 2025 to one cut. 
• Recoveries in corporate sector sentiment since the presidential election suggest a robust economic growth outlook, making it tough to justify meaningful Fed policy easing.
• Strong capital inflows will boost the dollar exchange rate. Deflation risks in China have risen, raising the attraction of weakening the yuan and risking the ire of the Trump administration.

• Underweight Korean equities and the won, not because of the political crisis but because of what business cycle indicators are signalling. 
• The Korean corporate profit cycle is deteriorating, capex slowing, inventories rising and exports to key markets weakening which does not bode well for earnings growth.
• A recession is not forecast though. Mortgage borrowing is strengthening, inflation easing and we expect another 75bps of policy rate cuts in 2025.

• 2024 was a great year for risk assets, with the S&P up 23% and Bitcoin up 150%
• The year started with concerns about a recession and aggressive Fed rate cuts, but ended with market consensus aligning and a strong performance
• The narrative heading into 2025 includes concerns about Trump’s impact on deregulation and tariffs, as well as potential inflation from immigration policies

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• Global government issuance trends are bearish, with widening deficits and increasing net issuance in major economies
• Euro area, UK, and US are all facing significant supply pressures, leading to concerns about term premium and yield curve steepening
• Japan is expected to see a slowdown in net issuance, but QT policies will still impact the JGB curve, potentially leading to a flattening bias in 2025.

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• The US infrastructure is in need of billions of dollars in investments to bring it up to speed, highlighted by the $1.1 trillion Infrastructure Investment Economy and Jobs act.
• There is a focus on reshoring and revitalizing the US economy through infrastructure investments, with private companies playing a significant role in funding major projects.
• Demographic trends, such as the rise of the millennial generation, are driving demand for housing and impacting the housing market, with lower interest rates potentially helping to alleviate some of the pressures.

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

• The Investmentcase for Gold Some time has passed since I wrote the last time about gold.
• Currently, a situation is developing that could become interesting for investors in the shiny metal.
• While till this day many market experts have the opinion that the gold price is highly correlated to the US-Dollar as well as the relative trajectory of where yields are headed, I think that gold is primarily driven by liquidity conditions.

• We are starting a new series of insights called “Top 10 Korean Stock Picks Bi-Weekly.”
• The main purpose of these insights is to pick top 10 stocks in Korea that could outperform KOSPI in the following two week period.
• The top 10 stock picks include Kia Corp, Kangwon Land, OCI Holdings, HD Hyundai, Doosan Bobcat, BNK Financial, Hyundai Mobis, HMM, Hyundai Glovis, and Korean Reinsurance.

• History doesn’t repeat itself but rhymes. The current market pattern is eerily similar to the 1980–1981 period when Ronald Reagan first won when the market made an intermediate-term top. 
• Reagan entered the White House amidst a wave of partisan enthusiasm but the stock market ran into technical and economic headwinds.
• In 1980, the market faced the challenge of a highly hawkish Federal Reserve. In 2025, the market faces the challenge of elevated valuation and expectations.

• Much of the gains from the relief rally that we called for are likely in the rear-view mirror. 
• The lack of extreme fear during this latest oversold episode makes us question the longevity of the rally. 
• In light of the uncertainties posed by the changing of the political guard in the U.S., the prudent course of action is to step aside and wait for greater clarity.

• Copper prices finished up over 9000 USD/ton again this week after hovering around 3-5% of that level for close to a month. 
• The COMEX spread has reached a 10-week high, while the Yangshan premium shows signs of investor bullishness as it closes in on the 80 USD/ton. 
• With better TSF numbers from China and a slightly more optimistic picture of demand, we head into 2025 feeling better about copper pricing. 

• Iron ore bounced back 7.7% last week to finish at 104 USD/ton. The short-term bullishness was due to temporary port closures for Hedland and Dampier due to cyclone warnings. 
• China TSF exceeded expectations for December, coming in at 2.85 trillion RMB, up 47% year over year (compared to street expectations of 2.15 trillion RMB). 
• We like the small-cap Fenix Resources (FEX AU). Read our research Fenix Resources (FEX AU): Deep Value, >35% of Mkt Cap in Cash, 2.5x PE/0.3 EV-EBITDA on Ramp Up. 

• Asian equities are at record valuation discount to that of US. Slightly lower earnings growth and ROE forecasts for Asia don’t justify the steep discounts, we believe.
• However, EPS estimates are a concern. Asia’s consensus EPS estimate for 2025 has declined 9% over past 10 months, dragged down by China and Korea. USA’s has remained virtually flat.
• Based on our themes of continued AI spending, China’s consumption recovery and “unloved India”, our top picks remain TSMC, Tencent, Yum China, HDFC Bank and SK Hynix.

• We identify five key themes that will shape Asia’s economic outlook this year. The first theme is Trump 2.0, global tariffs and supply chain diversification.
• Trump 2.0 will be a drag on Asia’s growth, even with targeted tariffs. Outside of China, tariff risks are highest for Vietnam, Japan and South Korea.
• Lower inflation will allow central banks to shift their focus to growth and trigger a deeper rate cut cycle, provided FX weakness is within reasonable limits.

• For the week ending 10/Jan, US crude inventories fell by 2m barrels, missing expectations of a 3.5m barrel decrease. Gasoline and distillate stockpiles rose more than expected.
• US natural gas inventories fell by 258 Bcf for the week ending 10/Jan, slightly missing analyst expectations of a 260 Bcf drawdown. Inventories are 2.5% above the 5-year seasonal average.
• BP forecasts tepid Q4 earnings on low refining margins and upstream output, while TotalEnergies expects higher production and gas prices to offset lower oil prices.

• The final Euro area inflation print for December confirmed the headline rise to 2.4%, albeit with energy contributing a bit more, offset by even less from food prices.
• Germany drove the rise amid much higher package holiday prices this year. Its median increase also remained too high, almost matching the UK’s above 3% annualised.
• December still looks set to be the peak. Falls in the following two months may not be enough to regain the target as services inflation persists at uncomfortable heights.

• Robotaxis / In Depth: China clears more obstacles for robotaxis
• Xiaohongshu /: TikTok refugees send Xiaohongshu to top of U.S. app store charts
• Smartphones /Chart of the Day: Huawei’s smartphone comeback in China

• Data releases skewed slightly softer this week, with UK inflation and GDP disappointing on statistical effects. US CPI news was marginal, yet the failure to exceed expectations drove dovish moves. Korea and Indonesia surprised by holding and cutting, respectively.
• Next week’s policy focus is the BOJ, where expectations for a hike were raised by recent guidance. The flash PMIs and UK labour market data are our highlights on the economic data calendar.
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• RRII’s new clone RRII 417 to give yield of 2080 kg/ha a year
• INROAD project covers 1,25,272 hectares in four years in NE
• Northeast share of national production to go up to 32% 

• The Bank of Korea maintained its base interest rate at 3.00%, defying market expectations of a 25bp cut, citing stabilising inflation and heightened risks from domestic political instability and exchange rate volatility.
• Domestic economic recovery remains fragile, with weak consumption and investment trends, while external challenges, including US protectionist policies and strong dollar dynamics, further constrain growth prospects, projected at 1.9% for 2025.
• Future rate cuts will depend on balancing inflationary stability, financial risks, and economic uncertainties, with the Bank signalling a cautious approach to monetary easing amid volatile domestic and international conditions.

• UK GDP disappointed the consensus again by only rebounding 0.1% m-o-m in November, continuing the stagnation since the election was called and risking a Q4 contraction.
• The services PMI’s December upturn suggests the recovery could extend. That would also be consistent with residual seasonality, which has been closely followed in 2024.
• Recent weakness will help the BoE cut again in February. Reversing this dynamic could make it the last, but we expect another in May before hikes return in 2026.

• The Euro area economy is approaching the end of the year on a subdued note and facing weakened momentum.
• Surveys indicate modest economic activity with recent Purchasing Managers’ Indexes (PMIs) providing limited optimism through only slight improvements in the composite index.
• Both Germany and France continue to face significant challenges, primarily driven by persistent weaknesses in the manufacturing sector. 

• It has been another wild day in South Korea as Yoon Suk-Yeol became the first sitting South Korean President to be arrested. 
• A recent local poll released on 14 January showed that President Yoon’s approval rating surged to 46.6%.
• President Yoon released a letter to the Korean people. The heart of the letter is about the rampant election fraud in Korea and the desperate need to restore election integrity.

• This year overweight US dollar, underweight European, Malaysian, Korean and Indonesian sovereign bonds. In 2024 68.9% of  our  43 investment recommendation and forecasts made money.
• The key headwinds are dollar strength , Trump’s trade war, the slower monetary policy easing, China, Europe and US valuations.
• Tailwinds include, the strength of the  US economy, Trump’s pro-business domestic policy agenda, tame energy prices,  India, conflict resolutions and a lighter global election cycle.

• Before we begin, let’s discuss the Trump tariffs, as he increasingly sounds serious about them.
• His recent message on Truth Social suggests he is ready to roll out a series of initiatives next week, including those on trade, cryptocurrency, and a range of other topics.
• Every counterpart we speak to expects Trump to take action over the course of his presidency but also anticipates him backing down if the market pushes back against tariffs with a stronger USD, higher bond yields, and weaker risk sentiment.

• Malaysia and Singapore have formally agreed to establish the Johor-Singapore Special Economic Zone (JS-SEZ). 
• Still, compared with Shenzhen, the exemplar SEZ, the JS-SEZ lacks key ingredients such as preferential policies and market integration for firms in the Zone. 
• This agreement is thus just a beginning. We expect subsequent talks to produce more concrete commitments that will make the JS-SEZ more of the game-changer it can be.

• Bank Indonesia lowered the BI-Rate to 5.75%, surprising consensus expectations. It cited low inflation and the need to support growth amid subdued domestic demand and stable external conditions.
• The Rupiah remains relatively stable due to robust reserves and proactive interventions, although global pressures from US fiscal policies and limited FFR cuts pose risks to external stability.
• Future policy adjustments will hinge on domestic growth performance and global financial developments, with continued emphasis on macroprudential measures, financial digitalisation, and fiscal coordination to strengthen economic resilience.

• The real policy rate is +1.28% (using CPI; +4.13% using WPI). High real rates are a hindrance to the real economy, especially with core inflation below 4%YoY for 13 months.
• F&B inflation moderated to 7.69%YoY in Dec’24 (from 9.69%YoY in Oct’24), as vegetable inflation eased to 26.6%YoY (from 42.2%YoY). All other key food and non-food inflation categories abated. 
• Bountiful winter and spring crops should dampen inflation further, allowing the first rate cut in 2 years (Feb’25), and 25bp rate cuts at each of the next 2 MPC meetings. 

• Consumption remains defensive, yet less than before.
• As explored in our food & bev initiation (10/14/24), consumers are expected to continue picky —not panicky—, and thus companies will be forced to remain price and cost competitive.
• Compared to other sectors within Consumer, we see our covered Consumer Discretionary companies as more sensitive to headwinds such as higher labor costs, and to tailwinds such as higher disposable income amid social welfare programs and higher minimum wages.

• Headline US inflation aligned with the consensus for December, although the core rate was marginally weaker, challenging the prevailing hawkish Fed narrative.
• Expectations have been repeatedly marked higher in recent months, with the outcome exceeding most previous vintages, except those made during Q2 2024.
• Persistently excessive inflation data threatens the Fed’s cutting cycle, although the US economy is not the hawkish outlier often assumed and embedded in market pricing.

• Private consumption registered a -0.74% MoM drop in October, due to a contraction in the consumption of both domestic and imported goods.
• Despite this, in 2024, private consumption is projected to grow close to 2.9%.
• The -0.74% monthly contraction was accompanied by a -1.52% MoM decline in the consumption of domestic goods, -0.30% MoM in services and -0.53% MoM in imported goods.

• In the context of President Sheinbaum first 100 days in office and the upcoming start of Trump second administration, the Federal Government unveils an ambitious plan to promote regional development and reduce imports from Asia.
• The Federal Government released the first draft of the “Plan México,” a long-term strategy aimed at encouraging business relocation, increasing national and regional content, and equipping the country with the necessary infrastructure and human capital to strengthen its development.
• Plan México is envisioned as a measure to enhance Mexico’s cooperation with its USMCA partners.