In today’s briefing:
- President Yoon’s Approval Ratings Surges to 47%, Gets Arrested, and Declares Rampant Election Fraud
- Headwinds, Tailwinds in 2025
- The Drill: What if Trump is not bluffing ahead of next week?
- Regional Economics: Despite the Fanfare, Hold the Applause for JS-SEZ
- Indonesia: 25bp Rate Cut to 5.75% (Consensus 6.0%) in Jan-25
- India: Still on Track for Rate Cuts to Begin in Feb’25; Continue at Next 2 MPC Meetings
- Actinver Research – Consumer Discretionary: Eat More, Shop Less (Coverage Initiation)
- US CPI Excess No Worse Than Peers
- Actinver Research – Macro Daily: Domestic Demand Begins to Show Signs of Further Deceleration
- Actinver Research – Macro Daily: Plan Mexico
President Yoon’s Approval Ratings Surges to 47%, Gets Arrested, and Declares Rampant Election Fraud
- 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.
Headwinds, Tailwinds in 2025
- 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.
The Drill: What if Trump is not bluffing ahead of next week?
- 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.
Regional Economics: Despite the Fanfare, Hold the Applause for JS-SEZ
- 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.
Indonesia: 25bp Rate Cut to 5.75% (Consensus 6.0%) in Jan-25
- 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.
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India: Still on Track for Rate Cuts to Begin in Feb’25; Continue at Next 2 MPC Meetings
- 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.
Actinver Research – Consumer Discretionary: Eat More, Shop Less (Coverage Initiation)
- 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.
US CPI Excess No Worse Than Peers
- 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.
Actinver Research – Macro Daily: Domestic Demand Begins to Show Signs of Further Deceleration
- 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.
Actinver Research – Macro Daily: Plan Mexico
- 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.
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