Macro and Cross Asset Strategy

Weekly Top Ten Macro and Cross Asset Strategy – Jan 21, 2024

By January 21, 2024 No Comments
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. 44% of Korean Stocks Are Trading Below Book Value – FSC Wants to Improve This (Following Japan)

By Douglas Kim

  • FSC Chairman Kim Joo-hyun mentioned that too many companies in Korea are trading below book value and the FSC plans to implement changes to improve upon this issue. 
  • According to Korea Exchange, 1,111 companies out of total listed in KOSPI and KOSDAQ in Korea (2,538) are trading at below 1x book value (PBR) (liquidation value). 
  • According to the Capital Group, about 39% of companies in the TOPIX trade below book value, compared to just 5% for companies in the S&P 500 Index. 

2. Global Liquidity And The US Fed Pivot

By Michael J. Howell, CrossBorder Capital

  • Global Liquidity Cycle bottomed in October 2022.  Cycle set to expand further to a peak in late-2025
  • Federal Reserve liquidity already rising and driven over medium-term by need to monetize mandatory fiscal spending
  • Global Liquidity set to rise by US$12-15 trillion in 2024

3. 2024 High Conviction Idea: The Case for a Rotation Out of Japan into Hong Kong – Part 4

By Rikki Malik

  • A shift in composition needed in a Japanese portfolio this year
  • A weaker US and Japanese economy together with a stronger Yen will  make sector allocation key.
  • Some sectors to avoid or invest in during this next phase.

4. Positioning Watch – Where to Find Value Currently

By Andreas Steno, Steno Research

  • Hello everyone, and welcome back to our weekly positioning overview.
  • We’ve been working on some new ways to look at positioning data across asset classes, and we’ll share some of the inaugural charts in today’s piece and will extend them, week by week.
  • Markets have more or less traded sideways since the start of the year, as the risk-on party has taken a bit of a breather it seems, despite rate cut expectations becoming even more embedded after the hawkish US CPI surprise last Thursday – strange move, and we’ll be surprised if probabilities don’t reverse within the next couple of price data points.

5. Steno Signals #82 – Inflation strikes back and no one is prepared for it

By Andreas Steno, Steno Research

  • Happy Sunday and welcome to our flagship editorial on the Coronation day of King Frederik in Copenhagen.
  • I guess it is somewhat telling for my lack of enthusiasm around the event that I am sitting here spitting out research instead of watching the Crowning.
  • The US CPI report printed a tad hotter than expected last week, but smack dab at our expectations of a 3.9% YoY level in core terms.

6. US Interest Rates and the Dollar and Impact on Markets

By Rikki Malik

  • Recent US economic data has been mixed on the inflation/growth front. 
  • Fed dot plot and messaging at odds with market expectations.
  • The extent of rate cuts is correct, but timing is likely not.

7. Don’t Fight the Fed (Or the Macro Trend)

By Cam Hui, Pennock Idea Hub

  • The global disinflation trend is continuing in an uneven manner and both the macro trend and Fed speakers are pointing toward a dovish Fed pivot.
  • This argues for a bull steepening of the yield curve and a bullish backdrop for stock prices.
  • However, investors should be aware that the lurking risk is the re-emergence of the transitory disinflation narrative, which could derail the bullish scenario.

8. Energy Cable: 4 Charts that Should Keep Largarde up at Night

By Ulrik Simmelholt, Steno Research

  • Takeaways: Price increases in goods likely to show up in Europe after the Summer
  • Watch out for energy prices once we start to fill up for next heating season
  • The recent turmoil in freight rates will likely exacerbate the divergence between US and the Eurozone

9. Taiwan Politics: New President Enters the Job with a Daunting In-Tray

By Manu Bhaskaran, Centennial Asia Advisors

  • The DPP’s William Lai prevailed after a competitive three-way race for the presidency, but his party’s loss of a legislative majority has produced a divided government.    
  • China will likely maintain a hawkish stance given the results, but we expect no drastic moves given Beijing’s other domestic and foreign policy challenges. 
  • Lai enters office with a full in-tray, having to bolster Taiwan’s security relationships with Washington and other allies, in addition to domestic issues on energy and demographics.

10. Japan Taking a Trip Down Tightening Lane? Sure!

By Jeroen Blokland, True Insights

  • Many economists expect the Bank of Japan, after systematically refusing to adjust its extremely loose monetary policy will be the only country to raise interest rates in 2024.
  • If the Bank of Japan decides to raise interest rates, at the same time, global tightening momentum wanes, betting on a stronger yen is a sure thing.
  • But with inflation dropping, the Manufacturing PMI below 50, consumer spending and real wages declining, the window for tighter monetary policy is closing rapidly, and hence a long yen position.