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. Market Intel from a Commodity Trader & China Analyst
- Discussion shifts towards the market consensus on China, highlighting a cyclical stabilization within a structural slowdown.
- China’s credit cycle, green shoots in the economy, and property market are discussed.
- Speaker shares insights on the Chinese real estate sector, mentioning a contraction and the need for new areas of investment.
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2. UK Inflation Flies Hawkish Pressures
- Our above-consensus forecast was exceeded by UK inflation flying higher in April amid administered price rises and postponed price increases due to the late Easter in 2025.
- Airfares still soared 10pp more than the norm for a late Easter, and 20pp above the April average. This stoked service and core inflation, although the median was steadier.
- We expect inflation to grind up until October, whereas the consensus assumes stability until then. Persistently excessive inflation should discourage the BoE from cutting again.
3. Top 100 Korean Firms with Highest Treasury Shares as % of Market Cap (Tender Offer and M&A Targets)
- We provide an analysis of the top 100 companies with the highest percentage of treasury shares as a percentage of market cap.
- These 100 companies are prime targets of tender offers and M&As. Many of these companies have low PBR ratios.
- Number five in this list is Telcoware (078000 KS) which just announced a tender offer by the CEO who is trying to take the company private.
4. 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.
5. “What-Ifs”
- What if the proportion of core CPI categories experiencing upward inflation momentum is on the rise?
- What if the improvement in the more persistent categories of CPI inflation has more-or-less stalled?
- What if longer-term inflation expectations are no longer wiggling sideways or actually creeping higher?
6. 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.
7. 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.
8. HEW: Fiscal Anxiety As Rates Rise
- Jitters over the sustainability of US fiscal easing knocked equities and the dollar over the past week. Dovish BoE pricing was pared back further towards our contrarian call.
- UK inflation exceeded our already elevated forecast, while the manufacturing PMIs were broadly resilient again in May. UK retail data were also sensationally strong.
- Next week is relatively quiet and shortened by a bank holiday. Flash inflation for some euro member states, updated US GDP data, and the RBNZ decision are our highlights.
9. Asian Equities: Taking Stock After the Result Season: Where Are EPS Estimates Rising and Falling?
- As the earnings season draws to a close, we look at Asian markets’/sectors’ EPS estimate progression during the reporting season and earlier. Specifically, we search for upward or downward inflections.
- Korea and Taiwan had the strongest EPS upgrades during this reporting season, despite the trade uncertainties. Philippines, Indonesia, Malaysia also had decent upgrades. HK/China and India continue to be downgraded.
- Korean and Taiwanese technology, Korean industrials, HK Technology Services had strong upgrades. So did Singapore and Philippines financials, and Thailand Communications – the latter two with a long upgrade history.
10. Korea Value Up Index Rebalance Announcement Next Week
- Korea Exchange plans to announce the first rebalance of the “Korea Value Up Index” next week on 27 May. The actual rebalance is expected to take place on 13 June.
- Korea Exchange plans to reduce the constituents to 100 (from 105 currently) and change 30% of the included stocks in this index to better reflect the Value Up program incentives.
- In this insight, we provide a list of 20 potential exclusion candidates and 20 inclusion candidates in the Value Up index rebalance.
