Daily BriefsMacro

Daily Brief Macro: Defence Spending Is Not Stimulative and more

In today’s briefing:

  • Defence Spending Is Not Stimulative
  • Asian Equities: Absolute and Relative Valuations – Spotting Mean Reversion Opportunities
  • Thailand: Policy Rate Held At 1.75% (Consensus 1.75%) in Jun-25
  • Exports Nosedive, But Sri Lanka’s Rubber Industry Aims High


Defence Spending Is Not Stimulative

By Phil Rush

  • NATO raised its target for defence spending to 5% of GDP, with Spain opting out. This increases pressure for tighter monetary conditions than were otherwise appropriate.
  • Defence spending offers weak growth multipliers, so the policy is more likely to stoke deficits than productivity. Central banks may respond with a more hawkish stance.
  • With debt levels already high, the move risks crowding out other spending and lifting sovereign risk premiums. Bond yields suffer from higher deficits and future rates.

Asian Equities: Absolute and Relative Valuations – Spotting Mean Reversion Opportunities

By Manishi Raychaudhuri

  • We take a detailed look at forward PE multiples, absolute and relative to Asia, of all Asia ex Japan markets.  North Asia is in line with average valuations, India expensive.
  • Juxtaposing valuations in comparison to history with the earnings environment of each market, we arrive at conclusions about which market should rerate and which should derate.
  • We posit continued rerating for Korea and Philippines. India should derate. HK, Taiwan, Indonesia and Singapore could rerate modestly. Malaysia and Thailand are cheap but seem destined to remain so.

Thailand: Policy Rate Held At 1.75% (Consensus 1.75%) in Jun-25

By Heteronomics AI

  • The Bank of Thailand maintained its policy rate at 1.75% by a 6-1 vote, in line with expectations, citing robust first-half growth but heightened risks from US trade policy and global uncertainties.
  • Despite raising its 2025 growth forecast to 2.3%, the MPC flagged a likely economic slowdown in the second half of the year, subdued inflation well below target, and negative credit growth as key factors influencing future rate decisions.
  • The Committee signalled a data-dependent approach, preserving limited policy space and indicating that further rate cuts would require a significant deterioration in growth or inflation outlook.
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Exports Nosedive, But Sri Lanka’s Rubber Industry Aims High

By Vinod Nedumudy

  • Export earnings fall 8.16% YoY to US$61.15 million in April 2025  
  •  Latex harvesting starts in drier North-Central Province areas  
  • Bid to scale up global market share in rubber products from 0.25%

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