Daily Briefs

• I spent last week in Asia and even though I admittedly like to see my research as edgy and contrarian, I quickly realized that most PMs in the region agreed on my take on the imminent risk of a devaluation of the CNY.
• USD/CNH call options are popular/consensus in the Asian Macro PM space, but interestingly there is no consensus around the contagion from a devaluation of the USDCNY.
• The discussions I had pointed in all directions, meaning that a CNY devaluation holds the potential to turn into a macro earthquake, despite it already being a consensus position.

• Welcome to our weekly Portfolio Watch! We have had a strong week in our portfolio with a USD-reflationary lean, but we are starting to contemplate how to deal with contagion from a continued rise in USD versus Asian FX pairs, especially if the increasing latent risk of a major devaluation of the CNY comes into fruition.
• There is currently no respite for the Asian FX pairs as all major forward looking models point to a reacceleration of US inflation trends from the current plateau around 3.5% YoY.
• We will look at the devaluation risks in detail tomorrow in our weekly “Steno Signals”, but will pinpoint value pockets in markets already today in our Portfolio Watch.

• Copper market may be running ahead of a fundamental story, with extreme tightening in the copper concentrate market
• Chinese demand has stepped back due to surging copper prices, but expected to acclimatize to higher price levels
• Supply side challenges may take a couple more quarters to resolve, leading towards a tighter refined market in the future and potential supply shortfalls by 2030.

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• Failure to remove policy accommodation after household balance sheets had been repaired after the global financial crisis simply prolonged the secular stagnation thesis that had been embraced by bond investors.
• The current estimate of the real neutral federal funds rate is too low relative to potential GDP growth, presenting an opportunity for bond investors to jettison their secular stagnation thesis.
• A structurally higher neutral Fed policy rate will impact short-term funding markets, while equity investors will need to place greater focus on long-term corporate profit growth for their returns. 

• Bilal, CEO and head of research at Macro Hive, shares his background and career journey in finance
• Raised in a working-class immigrant family in Oxford, excelled academically and went to Cambridge to study economics
• Started career in finance at JP Morgan in FX research, later moved to Deutsche bank where he specialized in building models and smart beta strategies in currency markets

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

• The past week saw insights on Bank Central Asia (BBCA IJ), BFI Finance Indonesia (BFIN IJ),Elite Commercial REIT (ELITE SP) and OceanaGold IPO in the Philippines. 
• There were also macro insights on Indonesia and Singapore plus a sector insight on Thai banks and an index rebalancing from Brian Freitas on the LQ45 in Indonesia. 
• The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia

• The short term is suddenly looking bullish for iron ore, as rumors abound that tier-1 cities in China may remove home-buying restrictions in May, and auto stimulus measures were announced. 
• Cities like Chengdu and Nanjing have already announced measures to make home-buying more attractive, such as removing purchase qualifications and pilot programs for old-for-new home housing. 
• We like 62% Fe and see it trade up to its upper limit of 130 USD/ton (vs. current 117 USD/ton). On equities, we like Vale (VALE US) .

• The overall outcome of this week’s local elections and by-election may not be as bad for the Conservatives as expected.
• Rishi Sunak may be increasingly considering a snap general election.
• This consideration comes as challenges continue to mount for the Conservatives.

• Going forward, Energy could face some selling flows from CTAs according to the latest CTA flow update by UBSS

• UBS ‘Contrarian’ trades: bullish Agriculturals and LME Lead, bearish Energy, Cocoa, Lean Hogs and Platinum

• UBS ‘Go with momentum’ trades: bullish Zinc, Aluminium, bearish Cotton, Sugar and Palladium

• Vietnam’s CPI inflation increased by 0.4pp, reaching 4.4% in April 2024, the highest since January 2023.
• The inflation rate is 1.11 percentage points above the one-year average.
• This indicates a renewed acceleration of inflationary pressures.