Daily Brief Macro: Asian Equities: Preserving Capital in 2025 – Parallels and Contrasts from 2018 and more

• As the trade war unfolds, more market volatility seems likely. In the 2018 episode China and Korea drove Asian drawdown. But today, China exports far less to America than earlier.
• The 2025 trade war is more expansive, with larger tariffs being imposed. In 2018, the defensives and non-tradables outperformed. Similar sectors, but not the same markets could do well now.
• Our Capital Preservation Basket presents eight cheap stocks with domestic revenue exposure and earnings estimate increases over past six months. They are from HK/China (5), Philippines (2) and Korea (1).

• German fiscal announcement leads to increase in bond yields and euro rally
• US implements 25% tariffs on Canada and Mexico, additional tariffs on China
• China retaliates with tariffs on US energy products and adding American firms to unreliable entity list

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• Brent oil price is currently 7% below fair value with short-term technical indicators in oversold territory
• Forecast predicts Brent oil to average $73 in 2025, with a surplus in global oil market of 1.3 million barrels per day
• Market consensus diverges from forecast, with disagreements on oil balances and optimism towards non-OPEC supply growth

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• US equities have struggled to maintain the strong gains from 2024 due to bearish retail sentiment and poor performance of market leaders. Softer US economic data has also undermined sentiment.
• US tariffs will be disruptive to the global economy.  Their impact on Europe is amplified by geopolitical tensions, while US core inflation trends will impact Fed policy conduct.
• Foreign central banks will ease their respective policy rates due to the imposition of US tariffs, while the exact magnitude of easing will be determined by their severity and timing.

• Recent news of a fiscal U turn in Germany has been a game changer, with a proposal for a large infrastructure fund and increased defense spending
• This shift in European fiscal policy has led to a more constructive view on the Euro dollar, with potential for it to reach 112 to 114 area
• Regional investment focus on cheap high beta candidates within the euro bloc, with potential for the broad dollar to be biased to the downside due to US exceptionalism fading and European growth stepping up

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

• Resilient data led to hawkish monetary policy guidance, consistent with our bullish Euro view. Fiscal announcements have super-charged that move, so we dropped our call.
• European Commission statements are an upper bound on loosening while Germany’s plans are not yet legislated. Extra defence spending on imports will also damp the Euro.
• Sentiment has flown too high. US trade policy seems set to hit Europe soon, potentially melting sentiment and sending the Euro plummeting back to Earth like Icarus.

• Output hits 2.04 million tons and exports 1.6 million tons in 2024  
• ANRPC anticipates Indo rubber production to slip by 9.8% in 2025  
• Chinese tire firms pitching tent in Indo may benefit from trade war

• Breakout Time in Oil and FX During the last week there occurred many breakout patterns as the volatility in financial markets has risen significantly after president Trump introduced tariffs on Mexico and Canada.
• The Ukraine-drama also doesn’t really help to calm market participants at the moment either.
• We just highlight the technical pattern and add a few words about our current framework and how we view these markets at the moment. 

• From a business cycle perspective, Trading Post is overweight global equities, and underweight sovereign bonds. Within global equities the bias is towards growth and momentum stocks.
• In favour are industrials, energy, European & US defence, tech hardware companies and consumer discretionary in the second half of the year, along with export cyclicals.
• Expect the Fed to cut interest rates once this year and the ECB by 125bp in total and for the BoJ to raise by 75bp. 

• The past week saw insights on Sea Ltd (SE US), Astra International (ASII IJ), Cisarua Mountain Dairy (CMRY IJ), Central Pattana Pub (CPN TB), and CapitaLand Ascendas REIT (CLAR SP) 
• There were also insights on Indo Tambangraya Megah (ITMG IJ), Bumrungrad Hospital Pub Co, Philippine Stock Exchange (PSE PM), IHH Healthcare (IHH MK), and Sheng Siong (SSG SP).
• 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.