This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. HEM: Apr-26 Views & Challenges
- War with Iran has upended market pricing. An end should provide relief, but downside risks darken benign hopes.
- Damaged energy infrastructure would warrant hikes to partly reverse past easing, like in 2003, not 2022.
- The BoE suffers a dovish bias in its assumptions that lead it to over-inflate, which remains likely for any outlook.
2. EA: Soft Goods Ease Hawkish Pressure
- EA inflation jumped to 2.52% in March, far above earlier expectations, but below the latest views. Soft goods prices caused the downside news here and in the 2.26% core.
- Services inflation is sticky at 3.23%, 22bp less than a year ago. Further energy price rises are set to drive the headline rate above 3% over the next two months.
- Downside news to the ECB’s forecast eases hawkish pressure in the short term, raising the likelihood of no change in April. We still expect it to hike rates in June.
3. Asian Equities: Getting into Oversold Territory, After Heaviest Ever Monthly FII Selling in March
- In March till date, FIIs have sold an enormous US$58.6bn of Asian equities – the highest ever monthly sale – US$26bn in Taiwan, US$20.25bn in Korea and US$12.3bn in India.
- On 6-monthly cumulative buying/selling as proportion of market cap, Asia is near its “most-sold” level. The ongoing Middle-East conflict could drive more selling, but Asia is rapidly entering oversold territory.
- Korea is oversold, Taiwan is nearly there and India is not quite in oversold territory. ASEAN markets are far from oversold, implying that they could see lot more FII selling.
4. Asia’s Growth Risks Are Compounding
- The Middle East war is tightening energy supplies, worsening terms of trade, and narrowing the policy space to cushion the blow simultaneously.
- In the short-term, the downside risks are highest for the Philippines, Vietnam, India and Thailand.
- A prolonged supply interruption extending beyond four to five months will likely amplify recessions risks for Singapore, Thailand, S Korea, Japan and Taiwan.
5. South Korea’s National Assembly Ready to Finally Approve the Cornerstone System for IPOs
- On 2 April, South Korea’s National Assembly Political Affairs Committee held a Bill Review Subcommittee meeting and passed the amendment to the Capital Markets Act for the cornerstone system introduction.
- The main purpose of the cornerstone system is encourage institutional investors to pledge to hold the shares for at least six months after listing.
- The Korean National Assembly is likely to finally pass the allowance of the cornerstone system for IPOs in Korea.
6. Donald-In-Wonderland: SEPARATING NOISE FROM SIGNAL
- Sorting out the noise from true market signals is challenging in the current environment, with conflicting media accounts on the war in Iran.
- Peace negotiations and daily oil price fluctuations are noise, while Hormuz crossings, treasury yields, long-term oil prices, and stock market technical indicators are investment signals.
- Global markets remain hopeful of a quick resolution to the war and return to normal oil and gas shipments from the Gulf; however, investment signals are diverging from that view.
7. Asian Alpha Hedge Portfolio (March, 2026)
- The Asian Alpha Hedge Portfolio performance in 1Q26 was +17.83% versus its benchmark performance of +1.79% for an outperformance of 16.04%.
- Over the last year, AAHP’s Sharpe ratio is 4.39 with a mean excess annualized return of 69%. The portfolio has a gross and net exposure of 132% and +30%, respectively.
- The war has changed outlooks for economies and markets in the region. Accordingly, we reduced risk in the portfolio and adjusted our long/short exposures to reflect this new reality.
8. OIL: When a Short-Term Spike Becomes Long-Term Reality
- So far, global markets remain optimistic that the damage from the war in Iran will be repaired relatively soon; however, that will change as the war enters its second month.
- Asian countries are highly dependent on oil and gas shipments from the Middle East, with airlines, petrochemical companies, and gas distribution companies all negatively affected.
- Iran now controls when the flow of energy from the Middle East starts and thereby when the war stops. Gulf countries will not allow Iran to be the Straits gatekeeper.
9. HONG KONG ALPHA PORTFOLIO: (March 2026)
- The Hong Kong Alpha portfolio’s March performance was -11.25%, compared with -7.75% for the benchmark index. The Hang Seng Index lost 6.92% for the month.
- Performance was hurt by its exposure to the oil equipment and fertilizer sectors, which normally benefit from higher energy prices. China imposed price and export restrictions in the energy sector.
- At the end of March, we positioned the portfolio to better cope with the difficulties in China’s economy and in the global market due to persistently high energy prices.
10. Some Final Words on the Market Outlook
- Our base-case intermediate outlook for equities is bullish, based on our base-case scenario of an orderly wind-up of the war.
- Focus on a barbell portfolio of U.S. large-cap growth and non-U.S. value for equity portfolios, and make a greater allocation to commodities in the normal bond part of the portfolio.
- The key risk is that the Gulf conflict spirals out of control and raises the risk of a global recession.
