EM ASIA CREDIT: BOC Aviation: 3Q operational data out

The Russell 2000 Friday night range was 2370.209 - 2393.554, closing -0.55%. The Russell 2000 continues to consolidate its recent break back above 2300, the cooling labour market pointing to a rate cutting cycle potentially coming. This scenario could see some further rotation back into small caps which will benefit the most from a cutting cycle, though this premise does ignore the risks to growth. The market will be laser focused on the all-time highs just above 2450, a break of which could trigger another wave of short covering. 

• Julian Brigden on X: “If I hear another so-called expert suggest buying the Russell I'm going to vomit! The $ was a key component of US Exceptionalism, and it's peaking. In that scenario, the RTY might rally on money illusion, but vs tangible assets like Silver it will underperform.” See Graph Below.
• Daily Chartbook on X: “The Russell 2000 has now gone a record 960 days without reaching a new all-time high, surpassing the streak that followed the GFC.” - via @granthawkridge
• Seth Golden on X: “Fed cutting should be good for Small Caps, but… Only good when it satisfies 2 conditions: 1. Lower rates or consistent easing cycle, 2.Stronger economic growth. If it doesn't satisfy THE 2 conditions, it's a mean reverting trade.”
• CFTC data shows leveraged funds only slightly pared back their shorts last week to -76948( previously -78059). 
• There are some large shorts still being held by hedge funds in the Russell which CFTC data shows has already started to be reduced in recent weeks.

Fig 1: Russell vs Silver Ratio

Source: MNI - Market News/Bloomberg Finance L.P

China’s bull market shows few signs of speculation, with A-share market gains largely driven by institutional capital while retail participation remains subdued, according to Hong Hao, managing partner and chief economist at Lotus Asset Management. Hong expects the Shanghai Composite Index to climb beyond 4,000 points by year-end, noting that institutional inflows continue to build while retail investors remain cautious. “We haven’t seen large-scale shifts of funds from bank deposits into brokerage accounts, traditional hallmarks of market exuberance,” he said. Instead, capital has flowed heavily into ETFs and similar vehicles, largely managed by institutions and supplemented by foreign participation. (Source: Yicai)

The People’s Bank of China Governor Pan Gongsheng has signed bilateral local currency swap agreements with European counterparts, aiming to facilitate trade and investment, and safeguard financial market stability, the bank said. Under the renewed arrangements, the swap line between China and the Eurozone is set at CNY350 billion for three years. The agreement with Switzerland is valued at CNY150 billion with a five-year term, while the swap with Hungary is set at CNY40 billion, also for five years. (Source: PBOC)