Something for your Espresso: USD liquidity back in the driver’s seat
Morning from Europe!
Finally a bit of a respite from the USD wrecking ball as the energy momentum has faded a bit. Both Kospi and Hang Seng have made a rebound and the net investment numbers from Japan released overnight also made for a pro-cyclical flow reading still.
The net inflows into Japanese equities seen from foreign soil have soared to levels rarely seen and we are talking about the second-hottest ever net flow outside of an observation in 2023.
It rhymes well with our indicators starting to flag that the sell-off in equities (also in most Asian indices) is overdone relative to macro fundamentals.
Chart 1: Net foreign flows to Japanese stocks
Our quant PCA tool flags USD liquidity as the most important macro driver so far in April, which is interesting given the ongoing tax season. The worst is probably already behind us even if the tax season runs for another 10-12 days.
0 Comments