CoreMacro

US TMT stocks have been delivering miraculous profit performance. Yet, outside US large tech, global equity fundamentals and technicals are troublesome. A near-term USD rebound should be faded.

A deflationary shock from shrinking exports will ripple throughout the Korean economy. We are downgrading the KOSPI from overweight to neutral and reiterating a long position in 10-year domestic bonds, currency unhedged.

A high US tariff and the lingering uncertainties on the US-India trade deal will hurt investors sentiment. This and contracting corporate profits will push share prices lower. Stay underweight Indian stocks.

Special Report

Investors often ask us which industries the Chinese government is prioritizing for expansion. The assumption is that investing in sectors hand-picked authorities will produce solid investment returns. Yet, this assumption has not held over the past decade.

Thanks to the tight monetary and fiscal policies so far, inflation and growth are heading lower in Turkey. Buy 2-year local currency bonds, currency unhedged. Also, upgrade Turkey's domestic bonds from neutral to overweight and stocks from underweight to neutral within their respective EM portfolios.

US equity investors should heed warning signals from US corporate bond yields. There are early red flags for EM share prices. Global trade will shrink in H2 2025. China’s economic tailwinds from H1 2025 – fiscal and export frontloading – are coming to an end.

A potential right-wing government in 2027 will not stabilize the trajectory of the public debt-to-GDP ratio. Unsustainable public debt, a large current account deficit, and a sharp growth slowdown will lead Brazilian markets to underperform EM. Yet, to benefit from a quickly decelerating economy, we recommend receiving 2-year swap rates.

Special Report

Economic growth and rapid expansions do not always translate into higher EPS and shareholder returns. One of the key reasons is dilution. We offer a typology of dilution: (1) “offensive”, (2) “defensive”, (3) corporate governance-linked, and (4) idiosyncratic cases.

Downward pressure on the pound will rise in the coming months. Inflation will go up, so will bond yields. It’s time to book profits on Egyptian domestic bonds.

Special Report

Dilution is one of the two main reasons why EM EPS has been much weaker than EM GDP and EM non-diluted profits. We calculate “pure” dilution – adjusted for companies’ inclusion and exclusion from the stock index – for various bourses around the world. To our knowledge, this is the first time this analysis has been conducted.