This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. UK: Tax Hikes Disrupt Housing Market
- Domestic tax hikes are more substantial than US tariffs in April, so the impact should not be forgotten, even if the UK government wants to blame any damage on Trump.
- Frontrunning April’s stamp duty increases stoked transactions and lending, and may take at least a few months to recover afterwards. Resilient approvals are reassuring.
- Higher transaction costs probably won’t break expectations into a downwards spiral, but are now widely cited as a major hurdle, contributing to slower UK activity growth.
2. Top 80 Companies in Korea by Short Interest and Days to Cover (Potential Short Squeeze Candidates)
- In this insight, we discuss potential short squeeze opportunities in the Korean stock market, using short interest and days to cover as main screening tools.
- In KOSPI, the top three stocks with highest combination of short interest and days to cover include Doosan Fuel Cell, Posco Future M, and Hotel Shilla.
- In this insight, we provided 80 companies (40 companies in KOSPI and KOSDAQ, respectively) that have high combination of short interest and days to cover ratios.
3. EA: Easing Stagflationary Noise
- Hard economic data must match gloomy sentiment to justify ECB rate cuts reaching a stimulative setting. The little evidence available so far doesn’t show much of a shock.
- Bank lending growth kept rising for companies and households in March as monetary conditions appear to be loosening, not tightening, due to the initial tariff shock.
- Activity surveys only softened slightly in services, while inflation expectations are broadly high. Failure to see much more stagflation eases the likelihood that it occurs.
4. HEW: Good News From Less News
- Economic data and Trump’s declarations do not support dovish fears, with the economy showing resilience despite the initial US tariff shock and the UK stamp duty rise. EA inflation pressure remains unbroken.
- The Federal Reserve is expected to maintain steady rates next week due to lack of hard evidence for a cut. Similarly, the Bank of England is likely to continue its course with a quarterly 25bp rate cut, influenced by the strength of sterling and falling commodity prices.
- Any future rate cuts by both the Federal Reserve and the Bank of England would require more substantial evidence.
5. Asian Equities: The Overvalued, Low Growth, Over-Leveraged Stocks
- We use quantamental screens to identify overvalued stocks in Asia, with weak fundamentals – consistently low earnings growth, forecast return ratios less than cost of capital, and over-leveraged balance sheets.
- We screen Asia-listed stocks above US$1bn market cap on declining EPS CAGR over next 2 years, less than 10% ROE, higher than 1x PEG and P/BV, more than 80% D/E.
- We identify 30 stocks: 11 from HK/China, 9 from Japan, 4 from Taiwan, 3 from India, and one each from Korea, Malaysia and Singapore. Financials, property, industrials dominate the list.
6. Steno Signals #194 — The March 2020 Parallel Intensifies
- Happy Monday from a sunny Copenhagen! We have been banging the drum on the similarities between the tariffs-cycle and the Covid-cycle over the past month, and we are increasingly confident that the playbook holds true.
- The kind of stop/go dynamics look clearly similar as a policy shock nukes the cycle, while the “solution” is to roll back the shock gradually.
- A lockdown before a reopening essentially.
7. US Bear Market: THE TIDE GOES OUT BEFORE THE TSUNAMI HITS THE SHORE!
- It is the calm before the storm as US markets move up in a bear market rally.
- China/US container ship sailings are at a standstill. Tariff effects will start to be felt in US retailers within weeks. Temu and Shein pass tariffs costs to the US consumer.
- According to a Deutsche Bank report, foreign buyers of US assets are pulling back quickly. The virtuous cycle turns into a vicious spiral.
8. UK Politics: Labour Day, Not Labour’s Day
- The balance of seats Labour loses to Reform UK, compared to the LibDems and Greens, could be crucial in internal party disputes.
- The outcomes of the local elections on 1 May could significantly influence this balance.
- A concurrent by-election also stands to have a significant impact on government policy.
9. MAGA Will It Work?: A REALITY CHECK
- April customs numbers report that tariff collections may double in April; however, at an annualized rate, it would fall well short of the Administration’s promises.
- The Administration has adjusted its narrative to focus on bringing high-tech manufacturing to the U.S. with more robots than blue-collar line workers.
- GDP surprisingly declined in the first quarter, indicating a coming recession. Media focus is on the drag from net exports, but ignores the inventory build and poor consumption numbers.
10. Finance Minister Choi Quits and Lee Jae-Myung’s Fate Remains Uncertain Post Supreme Court Ruling
- The Finance Minister Choi Sang-Mok resigned as the National Assembly was trying to vote to impeach him just before Choi resuming role as South Korea’s acting President once again.
- The Supreme Court “reversed and remanded” the case of Lee Jae-Myung, the leading candidate of the Democratic Party of Korea, for being guilty of violating the Public Official Election Act.
- All in all, given the uncertain political landscape, this could result in more overseas institutional investors in the Korean stock market to sit out longer on the sidelines.
