In today’s briefing:
- Asian Equities: Relative Valuation Divergence Opens up Index Trade Opportunities
- Trump Doctrine: All Talk And No Trousers
- Gold About To Lose Its Shine?
- Vicuna Mines: Shaping Up to Big, But Production Far Out
- Global base oils arb outlook: Week of 19 May
- Global base oils margins outlook: Week of 19 May
- [IO Fundamentals 2025/20] US Tariffs Weigh on China’s April Economic Performance
- Reducing China-US Trade Tensions Requires Better Alignment of Economic Interests
- Steno Signals #197 – The Mood(Y)’s Is Bad in the Fiat
- Indian Economy – May 2, 2025
Asian Equities: Relative Valuation Divergence Opens up Index Trade Opportunities
- A glance at the growth-adjusted valuations of the Asian markets reveals that Korea and China are undervalued and India, Thailand, Singapore and Malaysia are overvalued.
- We take a granular look at long histories of each market’s relative valuations, and their medium-term trends relative to long term averages. We combine the conclusions with growth-adjusted valuation outlook.
- We conclude that HK/China, Korea, Indonesia and Philippines could be in for rerating in the near term. Derating could be on the cards for India, Singapore and Thailand.
Trump Doctrine: All Talk And No Trousers
- The US has been extremely active in the international arena in recent weeks, particularly in trade and diplomacy.
- Showmanship is currently taking precedence over substance in these activities.
- This approach poses significant risks for both policymakers and investors.
Gold About To Lose Its Shine?
- The latest BofA survey showed that the consensus trade continues to be “long gold” with 58% of participants surveyed, followed by only 22% “long mag 7”.
- According to the analysis, gold is now more overvalued than ever before (since data was recorded in 2008). At the same time, positioning in the US dollar fell to a 19-year low.
- The positioning in gold is even that extreme that it pulled the entire commodity basket up with it – relative to equities.
Vicuna Mines: Shaping Up to Big, But Production Far Out
- Lundin Mining (LUN CN) provided future guidance for up to 500,000 tons/year of production from the current levels of 300,000-330,000 tons/year.
- Near-Term guidance has the company maintaining the 300,000-ton production level until at least 2027, with the technical report on Vicuna mines expected to be completed by Q1 2026.
- Post Results FY24: Mine-By-Mine Plan Production + Commentary on Copper From Global Listed Companies highlights a 3% supply growth and the market moving into a deficit.
Global base oils arb outlook: Week of 19 May
- US Group II base oils price-premium to vacuum gasoil trends higher in recent weeks compared with Q1 2025, even with dip in premium in mid-May.
- Group II domestic/export price premium trends higher after holding in relatively narrow range from mid-Nov 2024 to end-Q1 2025.
- Narrow range contrasts with steeper fall in Group II export price-premium to VGO in Q4 2023 and Q1 2024, followed by sharper recovery from end-Q1 2024.
Global base oils margins outlook: Week of 19 May
- Global base oils prices hold firm vs feedstock/competing fuel prices even as they edge lower.
- Firm base oils values point to tight supply-demand fundamentals, incentivize refiners to maintain high output.
- Base oils values hold firm ahead of typical seasonal slowdown in demand in coming weeks in Asia, and from start of Q3 in Europe/US.
[IO Fundamentals 2025/20] US Tariffs Weigh on China’s April Economic Performance
- China’s industrial output grew 6.1% YoY in April 2025, surpassing expectations but slowing from March’s 7.7% surge, as the economy sustained steady growth amid complex domestic and external challenges.
- Retail sales growth slowed to 5.1% in April, missing expectations despite government stimulus. Cautious consumer sentiment persists amid economic challenges, subdued income growth, and concerns over U.S. tariffs.
- Easing U.S.-China tensions are boosting Chinese market confidence, driving up steel production and iron ore demand. With inventories thinning, spot buyers may bid aggressively, lifting prices in the near term.
Reducing China-US Trade Tensions Requires Better Alignment of Economic Interests
- China’s exporters do not share the same optimism as financial markets with respect to recent tariff truce with the US. Exporters expect more turbulence as the tariff truce nears expiration.
- Higher direct investment by Chinese companies into the US via joint ventures and technology transfers could be a win-win outcome for both sides, given China’s low level of direct investment.
- Alignment of economic interests could soften the blow to the global economy due to a smaller US trade deficit, involving China boosting consumption and the US boosting investment to export.
Steno Signals #197 – The Mood(Y)’s Is Bad in the Fiat
- Morning from Copenhagen ahead of a big week.
- I was coincidentally sitting in front of the screens when Moody’s announced its downgrade of the US late in the Friday session, and the timing was admittedly peculiar—with just 5–10 minutes left of futures trading before the closing bell.
- Back in August 2023, when Fitch downgraded the US, it did spark a mild risk-off environment, with the long end of the yield curve continuing its upward trend.
Indian Economy – May 2, 2025
- India’s economy is projected to continue the growing trends of past years, according to the IMF, with growth rates of real GDP of 6.20%, 6.27% and 6.47% in years 2025, 2026 and 2027 respectively, resulting to an all-time- high real GDP level of 225.778 trillion Indian Rupees.
- Except for this, the country’s GDP per capita is also to reach all-time highs, from 130,336 Indian Rupees in 2024 all the way to 152,596 Indian Rupees in 2027.
- The inflation rate in the last quarter of 2024 stood at 1.47% (QoQ), a lot higher than the same quarter of the previous year (0.13%- Q4 of 2023), but still lower than Q3 of 2025 which was 2.76%.
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