Synopsis of MAP report published on 21 March 2025,regularly updated to include extracts from published Cross Asset research(latest update 03/04/25)
SOCIETE GENERALE Societe Generale("SG")does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that SG may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE ANALYST(S)CERTIFICATION(S),IMPORTANT DISCLOSURES AND DISCLAIMERS. ALTERNATIVELY,VISIT OUR GLOBAL RESEARCH DISCLOSURE WEBSITE.
- Short Taiwan Equities (TWSE) vs.Long India (NIFTY)
- Short Russell-2000 vs.Long SG US Small Caps Valueex-Junk (SGEPSVUT)
- Long SG US Strong Balance sheethedged (SGEPSBSH Index)
- Short Taiwan Equities (TWSE) vs.Long India (NIFTY)
- Short Russell-2000 vs.Long SG US Small Caps Valueex-Junk (SGEPSVUT)
- Long SG US Strong Balance sheethedged (SGEPSBSH Index)| - Short Taiwan Equities (TWSE) vs.Long India (NIFTY) |
| :--- |
| - Short Russell-2000 vs.Long SG US Small Caps Valueex-Junk (SGEPSVUT) |
| - Long SG US Strong Balance sheethedged (SGEPSBSH Index) |
#2 Policy reaction: Ukraine ceasefire
- Long SG Rebuild Ukraine Basket (SGUAREB)
- Long Asia Defense (SGASDEFE)
- Curve steepeners in Central and Eastern Europe (CEE)
- Long SG Rebuild Ukraine Basket (SGUAREB)
- Long Asia Defense (SGASDEFE)
- Curve steepeners in Central and Eastern Europe (CEE)| - Long SG Rebuild Ukraine Basket (SGUAREB) |
| :--- |
| - Long Asia Defense (SGASDEFE) |
| - Curve steepeners in Central and Eastern Europe (CEE) |
- Short European Gas (TTF)
- Short CHF/EUR
- Short European Gas (TTF)
- Short CHF/EUR| - Short European Gas (TTF) |
| :--- |
| - Short CHF/EUR |
#3 Policy reaction: New monetary policy impetus
- Short USD/JPY
- Long JGB 2s5s steepeners
- Long SG Japan negative FX beta value Basket (SGJPFXNV)
- Long Topix Banks vs. short Topix
- Short USD/JPY
- Long JGB 2s5s steepeners
- Long SG Japan negative FX beta value Basket (SGJPFXNV)
- Long Topix Banks vs. short Topix| - Short USD/JPY |
| :--- |
| - Long JGB 2s5s steepeners |
| - Long SG Japan negative FX beta value Basket (SGJPFXNV) |
| - Long Topix Banks vs. short Topix |
- Long Euro Banks (SX7E)
- Long Euro Financials credit
- Long UK bonds (Gilts)
- Long Brazil Steepener (BRL DI Jan 27-Jan 33)
- Long Euro Banks (SX7E)
- Long Euro Financials credit
- Long UK bonds (Gilts)
- Long Brazil Steepener (BRL DI Jan 27-Jan 33)| - Long Euro Banks (SX7E) |
| :--- |
| - Long Euro Financials credit |
| - Long UK bonds (Gilts) |
| - Long Brazil Steepener (BRL DI Jan 27-Jan 33) |
#4 Policy reaction: Fiscal shift, whatever it takes
Long 2-10y Bund steepeners vs.USTs.
OverweightSpain (SPGB), Italy (BTP) vs Germany (Bund),France (OAT)
Long 10y BTP vs Bund, Long 30y SPGB and BTP vs OAT
Long Peripheryvs.Core European Equities (Total ReturnIndex)
Long 2-10y Bund steepeners vs.USTs.
OverweightSpain (SPGB), Italy (BTP) vs Germany (Bund),France (OAT)
Long 10y BTP vs Bund, Long 30y SPGB and BTP vs OAT
Long Peripheryvs.Core European Equities (Total ReturnIndex)| Long 2-10y Bund steepeners vs.USTs. |
| :--- |
| OverweightSpain (SPGB), Italy (BTP) vs Germany (Bund),France (OAT) |
| Long 10y BTP vs Bund, Long 30y SPGB and BTP vs OAT |
| Long Peripheryvs.Core European Equities (Total ReturnIndex) |
Long(50%FTSEMIB+50%IBEX35) vs.Short Core(50%CAC40+50%DAX)
Long German Mid Cap (MDAX)
- Long FTSE 250 (MCX)
- Short USD/SEK
- Longltraxx Main CDS| Long(50%FTSEMIB+50%IBEX35) vs.Short Core(50%CAC40+50%DAX) |
| :--- |
| Long German Mid Cap (MDAX) |
| - Long FTSE 250 (MCX) |
| - Short USD/SEK |
| - Longltraxx Main CDS |
#5 Policy reaction: President Xi put
- Long MSCI China
- SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE
- Long MSCI China
- SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE| - Long MSCI China |
| :--- |
| - SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE |
- Short CNH/EUR
- Long SG China 2.0 Basket (SGCHM20)
- Long 10y India Bonds (IGB)
- Short CNH/EUR
- Long SG China 2.0 Basket (SGCHM20)
- Long 10y India Bonds (IGB)| - Short CNH/EUR |
| :--- |
| - Long SG China 2.0 Basket (SGCHM20) |
| - Long 10y India Bonds (IGB) |
#6 Commodities: Still shy of oil
- Long Gold
- Long Silver
- Long Gold
- Long Silver| - Long Gold |
| :--- |
| - Long Silver |
- Long SG Global Nuclear(SGIXNCRU)
- Long SG Global Rise of Robots (SGIXROBO)
- Long SG Global Cybersecurity(SGWLDCYB)| - Long SG Global Nuclear(SGIXNCRU) |
| :--- |
| - Long SG Global Rise of Robots (SGIXROBO) |
| - Long SG Global Cybersecurity(SGWLDCYB) |
- LongSG German Bundesbasket(SGGERMAN)
- LongSG European Sovereignty Basket(SGEURSOV)
- Long SG USDomestic Supply-Chain (SGUSDSC)
- LongSG German Bundesbasket(SGGERMAN)
- LongSG European Sovereignty Basket(SGEURSOV)
- Long SG USDomestic Supply-Chain (SGUSDSC)| - LongSG German Bundesbasket(SGGERMAN) |
| :--- |
| - LongSG European Sovereignty Basket(SGEURSOV) |
| - Long SG USDomestic Supply-Chain (SGUSDSC) |
#1 Great Rotation out of US Assets "- LongUSTreasuries (hedgedin JPY)
- ShortUSHigh Yield vs.Long USInvestment Grade
- Long Fwd S&P 500 Variance Swap vs. Eurostoxx 50
- ShortNasdaq- 100 (NDX) vs.Long S&P 500 EqualWeight (SPW)
- Short USMag-7 vs.Long SG China-7 Titans Basket(SGCHTTAN)" "- Short Taiwan Equities (TWSE) vs.Long India (NIFTY)
- Short Russell-2000 vs.Long SG US Small Caps Valueex-Junk (SGEPSVUT)
- Long SG US Strong Balance sheethedged (SGEPSBSH Index)"
#2 Policy reaction: Ukraine ceasefire "- Long SG Rebuild Ukraine Basket (SGUAREB)
- Long Asia Defense (SGASDEFE)
- Curve steepeners in Central and Eastern Europe (CEE)" "- Short European Gas (TTF)
- Short CHF/EUR"
#3 Policy reaction: New monetary policy impetus "- Short USD/JPY
- Long JGB 2s5s steepeners
- Long SG Japan negative FX beta value Basket (SGJPFXNV)
- Long Topix Banks vs. short Topix" "- Long Euro Banks (SX7E)
- Long Euro Financials credit
- Long UK bonds (Gilts)
- Long Brazil Steepener (BRL DI Jan 27-Jan 33)"
#4 Policy reaction: Fiscal shift, whatever it takes "Long 2-10y Bund steepeners vs.USTs.
OverweightSpain (SPGB), Italy (BTP) vs Germany (Bund),France (OAT)
Long 10y BTP vs Bund, Long 30y SPGB and BTP vs OAT
Long Peripheryvs.Core European Equities (Total ReturnIndex)" "Long(50%FTSEMIB+50%IBEX35) vs.Short Core(50%CAC40+50%DAX)
Long German Mid Cap (MDAX)
- Long FTSE 250 (MCX)
- Short USD/SEK
- Longltraxx Main CDS"
#5 Policy reaction: President Xi put "- Long MSCI China
- SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE" "- Short CNH/EUR
- Long SG China 2.0 Basket (SGCHM20)
- Long 10y India Bonds (IGB)"
#6 Commodities: Still shy of oil "- Long Gold
- Long Silver" "- LongCoppervs. Oil
- LongUS Stagflation Basket(SGSTAG)"
#7 Invest with Baskets "- Long SG Global Nuclear(SGIXNCRU)
- Long SG Global Rise of Robots (SGIXROBO)
- Long SG Global Cybersecurity(SGWLDCYB)" "- LongSG German Bundesbasket(SGGERMAN)
- LongSG European Sovereignty Basket(SGEURSOV)
- Long SG USDomestic Supply-Chain (SGUSDSC)"| #1 Great Rotation out of US Assets | - LongUSTreasuries (hedgedin JPY) <br> - ShortUSHigh Yield vs.Long USInvestment Grade <br> - Long Fwd S&P 500 Variance Swap vs. Eurostoxx 50 <br> - ShortNasdaq- $\mathbf{1 0 0}$ (NDX) vs.Long S&P 500 EqualWeight (SPW) <br> - Short USMag-7 vs.Long SG China-7 Titans Basket(SGCHTTAN) | - Short Taiwan Equities (TWSE) vs.Long India (NIFTY) <br> - Short Russell-2000 vs.Long SG US Small Caps Valueex-Junk (SGEPSVUT) <br> - Long SG US Strong Balance sheethedged (SGEPSBSH Index) |
| :---: | :---: | :---: |
| #2 Policy reaction: Ukraine ceasefire | - Long SG Rebuild Ukraine Basket (SGUAREB) <br> - Long Asia Defense (SGASDEFE) <br> - Curve steepeners in Central and Eastern Europe (CEE) | - Short European Gas (TTF) <br> - Short CHF/EUR |
| #3 Policy reaction: New monetary policy impetus | - Short USD/JPY <br> - Long JGB 2s5s steepeners <br> - Long SG Japan negative FX beta value Basket (SGJPFXNV) <br> - Long Topix Banks vs. short Topix | - Long Euro Banks (SX7E) <br> - Long Euro Financials credit <br> - Long UK bonds (Gilts) <br> - Long Brazil Steepener (BRL DI Jan 27-Jan 33) |
| #4 Policy reaction: Fiscal shift, whatever it takes | Long 2-10y Bund steepeners vs.USTs. <br> OverweightSpain (SPGB), Italy (BTP) vs Germany (Bund),France (OAT) <br> Long 10y BTP vs Bund, Long 30y SPGB and BTP vs OAT <br> Long Peripheryvs.Core European Equities (Total ReturnIndex) | Long(50%FTSEMIB+50%IBEX35) vs.Short Core(50%CAC40+50%DAX) <br> Long German Mid Cap (MDAX) <br> - Long FTSE 250 (MCX) <br> - Short USD/SEK <br> - Longltraxx Main CDS |
| #5 Policy reaction: President Xi put | - Long MSCI China <br> - SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE | - Short CNH/EUR <br> - Long SG China 2.0 Basket (SGCHM20) <br> - Long 10y India Bonds (IGB) |
| #6 Commodities: Still shy of oil | - Long Gold <br> - Long Silver | - LongCoppervs. Oil <br> - LongUS Stagflation Basket(SGSTAG) |
| #7 Invest with Baskets | - Long SG Global Nuclear(SGIXNCRU) <br> - Long SG Global Rise of Robots (SGIXROBO) <br> - Long SG Global Cybersecurity(SGWLDCYB) | - LongSG German Bundesbasket(SGGERMAN) <br> - LongSG European Sovereignty Basket(SGEURSOV) <br> - Long SG USDomestic Supply-Chain (SGUSDSC) |
关键呼叫1
做多美国国债(对冲日元)
做空美国高收益债 vs 做多美国投资级债
长期做多标普500指数波动率掉期对比欧洲斯托克50指数
做空纳斯达克 100 指数(NDX)对比做多标普 500 等权重指数(SPW)
美国大型科技股(Mag-7)空头 vs. 长期新加坡中国 7 大巨头指数
(SGCHTTAN)
做空台湾股市(TWSE)对比做多印度(NIFTY)
做空罗素 2000 指数 vs. 做多 SG 美国小型股价值股除垃圾股(SGEPSVUT)
Long SG US Strong Balance sheet hedged (SGEPSBSH Index)
Source: Eurostat, exports in 2024, SG Cross Asset Research/Economics
nt disclaimer and disclosure information. Please refer to the back inside cover of this research report.
uarr\uparrow 净多头
Data as of 21/03/2025 (Z 分数) currencies (FXPI) and commodities (COPI). Hedge fund positioning refers to non-commercial positioning reported to the CFTC.
该图表显示所有基础序列的 z 分数定位。截至 2025 年 03 月 21 日的最新数据。
对冲基金观察——七大关键图表——为市场调整做好准备——信号不容忽视
Source: CFTC, Hedge Fund Watch in Pictures, SG Cross Asset Research/Global Asset Allocation
大轮换也是风险溢价收敛交易(1)
股权风险溢价
数据截至 2025 年 03 月 24 日
来源:彭博社;新加坡跨资产研究/全球资产配置
跨资产研究
大轮换也是风险溢价收敛交易(2)
财政政策的分化趋势 - 美国与欧洲
10 年期美国国债与美国名义增长率(10 年平均)
Bund 10y and German nominal growth (10y average)
资产配置的影响:美国和欧洲股市的分化趋势
Ytd change in ERP
Ytd change in 10y bond yield
% return in 2025
Equity risk premium = cost of equity - risk-free rate
Data as of 24/03/2025. Source: Datastream, SG Cross Asset Research/Global Asset Allocation
Cross Asset Research
LONG US TREASURIES HEDGED IN JPY
Correlation between US equity return in EUR and US bond return
in EUR can be reduced by JPY-hedged US bonds
Red line: US equity (in EUR) and JPY- hedged US treasury (in EUR)
Grey line: US equity (in EUR) and US treasury (in EUR)
Gold line: US equity (in EUR) and EUR-hedged US treasury (in EUR)
We have calculated correlation using the S&P500, the FTSE US GBI in USD (SBUSL), the FTSE US GBI hedged in yen (SBUSJYC), and the FTSE US GBI hedged in EUR (SBUSEC)
JPY-hedged US treasury provides higher return than EUR-hedged When US economy is slowing down
CONTINUE TO AVOID US MAG7, SWITCH FROM HARDWARE TO SOFTWARE
Big-4 tech capex = USD200bn, 1.4tn in sales
2,5 qquad\qquad US: Software and services relative to Semiconductors
Defense is cheaper than Mag-7 and benchmark on the Price Earnings to Growth (PEG) Ratio
PEG ratio is computed using IBES forecasts.
We use 12 Trailing P/E ratio and for the growth rate we use a 2024-‘27 CAGR of the EPS.
*The Seven Titans comprise Alibaba (e-commerce), BYD (electric vehicles), JD.com(e-commerce), NetEase(TMT), SMIC(Semiconductor), Tencent(TMT), Xiaomi (Smart phones)
REBALANCING FROM CREDIT (1)
Risk to credit: confidence and corporate margins at risk
Source: SG Cross Asset Research/Credit, Markit
Cross Asset Research
REBALANCING FROM CREDIT (2)
Part of US credit risk related to risk premium near 25-year lows but at odds with equity volatility
Gilchrist & Zakrajsek (GZ) US credit spread: monthly data to 28/02/2025.
VIX = implied equity volatility on S&P500. Arrows point at gaps between equity volatility and credit spreads, indicating right tail volatility: upside distribution of returns of equities related to an outperformance of equities compared to credit
Source: Bloomberg, Fed, SG Cross Asset Research/Global Asset Allocation & Derivatives
SOCIETE GENERALE
Cross Asset Research
KEY CALL 2
Long SG Rebuild Ukraine Basket (SGUAREB)
Long Asia Defense (SGASDEFE)
Curve steepeners in Central and Eastern Europe
(CEE)
Short European Gas (TTF)
Short CHF/EUR
RUSSIA/UKRAINE WAR SCENARIOS
Variable
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe| Scenario 1: |
| :--- |
| US-led Ceasefire Prevails, US Steps Back from Europe |
Scenario 2:
War Continues, Europe Helps Ukraine
Scenario 2:
War Continues, Europe Helps Ukraine| Scenario 2: |
| :--- |
| War Continues, Europe Helps Ukraine |
Increased, but varies by country; pressure to fund peacekeeping and military build-up.
Significantly increased; Europe invests heavily in defence to support Ukraine.
Dramatically increased; Europe must address regional insecurity and military threats.
US position
US takes a backseat, coordinates with Russia and reduces support for Ukraine.
US is less involved; Europe takes the lead in supporting Ukraine.
US aligns with Russia, withdrawing support for Ukraine.
Ukraine economic prospects
Deteriorates due to loss of territory and limited military support; reliance on EU for future recovery.
Remains challenging but supported by European funding; potential for recovery if war continues.
Severely declines; loss of territory and resources leads to economic collapse.
Europe economic prospects
EU GDP growth running well above potential, with a boost to GDP growth of 0.5-2pp range over next three years, compared to current conditions.
Potentially stable if Europe can manage costs; economic growth possible if Ukraine stabilises.
Declines due to instability, increased defence spending and potential refugee influx.
Geopolitical landscape
Shift towards a more fragmented Europe; reduced US influence; potential for increased Russian assertiveness.
Strengthened European unity in defence; potential for a more assertive EU role in global affairs.
Increased Russian dominance in Eastern Europe; weakened NATO cohesion; potential for further conflicts.
Timeframe for resolution
Medium-term resolution; peacekeeping may stabilise situation, but underlying tensions remain.
Prolonged conflict; resolution depends on military outcomes and European support.
Short-term collapse of Ukraine; long-term instability in the region.
Russian energy
US lifts oil sanctions on Russia. Gas flows from Russia via Ukraine into Europe, back to levels seen a year ago (15bcm/y in Europe).
No Russian gas flows to Europe. US and European oil sanctions remain in place.
No Russian gas flows to Europe. US and European oil sanctions remain in place.
Variable "Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe" "Scenario 2:
War Continues, Europe Helps Ukraine" "Scenario 3:
Ukraine Falls"
Defence spending by Europe Increased, but varies by country; pressure to fund peacekeeping and military build-up. Significantly increased; Europe invests heavily in defence to support Ukraine. Dramatically increased; Europe must address regional insecurity and military threats.
US position US takes a backseat, coordinates with Russia and reduces support for Ukraine. US is less involved; Europe takes the lead in supporting Ukraine. US aligns with Russia, withdrawing support for Ukraine.
Ukraine economic prospects Deteriorates due to loss of territory and limited military support; reliance on EU for future recovery. Remains challenging but supported by European funding; potential for recovery if war continues. Severely declines; loss of territory and resources leads to economic collapse.
Europe economic prospects EU GDP growth running well above potential, with a boost to GDP growth of 0.5-2pp range over next three years, compared to current conditions. Potentially stable if Europe can manage costs; economic growth possible if Ukraine stabilises. Declines due to instability, increased defence spending and potential refugee influx.
Geopolitical landscape Shift towards a more fragmented Europe; reduced US influence; potential for increased Russian assertiveness. Strengthened European unity in defence; potential for a more assertive EU role in global affairs. Increased Russian dominance in Eastern Europe; weakened NATO cohesion; potential for further conflicts.
Timeframe for resolution Medium-term resolution; peacekeeping may stabilise situation, but underlying tensions remain. Prolonged conflict; resolution depends on military outcomes and European support. Short-term collapse of Ukraine; long-term instability in the region.
Russian energy US lifts oil sanctions on Russia. Gas flows from Russia via Ukraine into Europe, back to levels seen a year ago (15bcm/y in Europe). No Russian gas flows to Europe. US and European oil sanctions remain in place. No Russian gas flows to Europe. US and European oil sanctions remain in place.| Variable | Scenario 1: <br> US-led Ceasefire Prevails, US Steps Back from Europe | Scenario 2: <br> War Continues, Europe Helps Ukraine | Scenario 3: <br> Ukraine Falls |
| :---: | :---: | :---: | :---: |
| Defence spending by Europe | Increased, but varies by country; pressure to fund peacekeeping and military build-up. | Significantly increased; Europe invests heavily in defence to support Ukraine. | Dramatically increased; Europe must address regional insecurity and military threats. |
| US position | US takes a backseat, coordinates with Russia and reduces support for Ukraine. | US is less involved; Europe takes the lead in supporting Ukraine. | US aligns with Russia, withdrawing support for Ukraine. |
| Ukraine economic prospects | Deteriorates due to loss of territory and limited military support; reliance on EU for future recovery. | Remains challenging but supported by European funding; potential for recovery if war continues. | Severely declines; loss of territory and resources leads to economic collapse. |
| Europe economic prospects | EU GDP growth running well above potential, with a boost to GDP growth of 0.5-2pp range over next three years, compared to current conditions. | Potentially stable if Europe can manage costs; economic growth possible if Ukraine stabilises. | Declines due to instability, increased defence spending and potential refugee influx. |
| Geopolitical landscape | Shift towards a more fragmented Europe; reduced US influence; potential for increased Russian assertiveness. | Strengthened European unity in defence; potential for a more assertive EU role in global affairs. | Increased Russian dominance in Eastern Europe; weakened NATO cohesion; potential for further conflicts. |
| Timeframe for resolution | Medium-term resolution; peacekeeping may stabilise situation, but underlying tensions remain. | Prolonged conflict; resolution depends on military outcomes and European support. | Short-term collapse of Ukraine; long-term instability in the region. |
| Russian energy | US lifts oil sanctions on Russia. Gas flows from Russia via Ukraine into Europe, back to levels seen a year ago (15bcm/y in Europe). | No Russian gas flows to Europe. US and European oil sanctions remain in place. | No Russian gas flows to Europe. US and European oil sanctions remain in place. |
KEY ASSET CLASS VIEWS AND SCENARIO TRADE IDEAS (1)
Asset Class
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe| Scenario 1: |
| :--- |
| US-led Ceasefire Prevails, US Steps Back from Europe |
Scenario 2:
War Continues, Europe Helps Ukraine
Scenario 2:
War Continues, Europe Helps Ukraine| Scenario 2: |
| :--- |
| War Continues, Europe Helps Ukraine |
Crude oil price rises to $75//bbl\$ 75 / \mathrm{bbl} by end-2025. European gas price drops toward €30//MWh€ 30 / \mathrm{MWh}. Gold prices increase amid managed money, ETF and central bank buying.
Crude oil price rises to $75//bbl\$ 75 / \mathrm{bbl} by end-2025. European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh€ 35 / \mathrm{Mwh} by 2026.
Gold prices rise slightly more than in Scenario 1 amid greater uncertainty.
Crude oil price rises to $75//bbl by end-2025. European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh by 2026.
Gold prices rise slightly more than in Scenario 1 amid greater uncertainty.| Crude oil price rises to $\$ 75 / \mathrm{bbl}$ by end-2025. European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward $€ 35 / \mathrm{Mwh}$ by 2026. |
| :--- |
| Gold prices rise slightly more than in Scenario 1 amid greater uncertainty. |
Crude oil price rises to $75//bbl\$ 75 / \mathrm{bbl} by the end of the year.
European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh€ 35 / \mathrm{Mwh} by 2026.
Gold prices rise slightly more than in Scenario 2 amid even greater uncertainty.
Crude oil price rises to $75//bbl by the end of the year.
European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh by 2026.
Gold prices rise slightly more than in Scenario 2 amid even greater uncertainty.| Crude oil price rises to $\$ 75 / \mathrm{bbl}$ by the end of the year. |
| :--- |
| European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward $€ 35 / \mathrm{Mwh}$ by 2026. |
| Gold prices rise slightly more than in Scenario 2 amid even greater uncertainty. |
Emerging Market FX
After the initial positive reaction in CEE, buy EUR/CEE FX crosses. Post the initial move, we expect underperformance in CEE FX against Latam FX and Asia FX.
Long Latam FX vs other EM FX.
Long CEE FX vol.
Buy EUR/HUF
Buy PLN/HUF
Long Latam FX vs other EM FX.
Long CEE FX vol.
Buy EUR/HUF
Buy PLN/HUF| Long Latam FX vs other EM FX. |
| :--- |
| Long CEE FX vol. |
| Buy EUR/HUF |
| Buy PLN/HUF |
Long Latam FX vs other EM FX Long USD/CEE FX Long CEE FX vol.
Emerging Market FI
Rate cuts by National Bank of Hungary to follow. Buy 10 yHGBs10 y \mathrm{HGBs}.
Rates curve steepeners in CEE.
Long Latam FI and rates curve steepeners.
Long Asia FI.
Rate cuts by National Bank of Hungary to follow. Buy 10 yHGBs.
Rates curve steepeners in CEE.
Long Latam FI and rates curve steepeners.
Long Asia FI.| Rate cuts by National Bank of Hungary to follow. Buy $10 y \mathrm{HGBs}$. |
| :--- |
| Rates curve steepeners in CEE. |
| Long Latam FI and rates curve steepeners. |
| Long Asia FI. |
Rates curve steepeners in CEE.
Long Latam Fl and rates curve steepeners. Long Asia FI.
Rates curve steepeners in CEE.
Long Latam Fl and rates curve steepeners. Long Asia FI.| Rates curve steepeners in CEE. |
| :--- |
| Long Latam Fl and rates curve steepeners. Long Asia FI. |
Risk premia sharply increase for Romania, Poland. Sell POLGBs.
Long Latam FI and rates curve steepeners. Long Asia FI.
Risk premia sharply increase for Romania, Poland. Sell POLGBs.
Long Latam FI and rates curve steepeners. Long Asia FI.| Risk premia sharply increase for Romania, Poland. Sell POLGBs. |
| :--- |
| Long Latam FI and rates curve steepeners. Long Asia FI. |
Foreign Exchange
EUR/USD trades in a 1.05-1.13 range for the rest of 2025, breaking above that if the US economy slows significantly.
CHF depreciation.
SEK and NOK outperformance.
GBP depreciation vs Scandis.
EUR/USD trades in a 1.05-1.13 range for the rest of 2025, breaking above that if the US economy slows significantly.
CHF depreciation.
SEK and NOK outperformance.
GBP depreciation vs Scandis.| EUR/USD trades in a 1.05-1.13 range for the rest of 2025, breaking above that if the US economy slows significantly. |
| :--- |
| CHF depreciation. |
| SEK and NOK outperformance. |
| GBP depreciation vs Scandis. |
Range-bound EUR/USD between 1-1.10.
Little change in EUR/GBP.
SEK and NOK outperformance.
Mild CHF appreciation on safe-haven status.
Range-bound EUR/USD between 1-1.10.
Little change in EUR/GBP.
SEK and NOK outperformance.
Mild CHF appreciation on safe-haven status.| Range-bound EUR/USD between 1-1.10. |
| :--- |
| Little change in EUR/GBP. |
| SEK and NOK outperformance. |
| Mild CHF appreciation on safe-haven status. |
EUR/USD falls below parity.
Little to no outperformance from GBP, NOK or SEK.
CHF outperformance on safe-haven status.
EUR/USD falls below parity.
Little to no outperformance from GBP, NOK or SEK.
CHF outperformance on safe-haven status.| EUR/USD falls below parity. |
| :--- |
| Little to no outperformance from GBP, NOK or SEK. |
| CHF outperformance on safe-haven status. |
Asset Class "Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe" "Scenario 2:
War Continues, Europe Helps Ukraine" "Scenario 3:
Ukraine Falls"
Commodities Crude oil price rises to $75//bbl by end-2025. European gas price drops toward €30//MWh. Gold prices increase amid managed money, ETF and central bank buying. "Crude oil price rises to $75//bbl by end-2025. European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh by 2026.
Gold prices rise slightly more than in Scenario 1 amid greater uncertainty." "Crude oil price rises to $75//bbl by the end of the year.
European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward €35//Mwh by 2026.
Gold prices rise slightly more than in Scenario 2 amid even greater uncertainty."
Emerging Market FX After the initial positive reaction in CEE, buy EUR/CEE FX crosses. Post the initial move, we expect underperformance in CEE FX against Latam FX and Asia FX. "Long Latam FX vs other EM FX.
Long CEE FX vol.
Buy EUR/HUF
Buy PLN/HUF" Long Latam FX vs other EM FX Long USD/CEE FX Long CEE FX vol.
Emerging Market FI "Rate cuts by National Bank of Hungary to follow. Buy 10 yHGBs.
Rates curve steepeners in CEE.
Long Latam FI and rates curve steepeners.
Long Asia FI." "Rates curve steepeners in CEE.
Long Latam Fl and rates curve steepeners. Long Asia FI." "Risk premia sharply increase for Romania, Poland. Sell POLGBs.
Long Latam FI and rates curve steepeners. Long Asia FI."
Foreign Exchange "EUR/USD trades in a 1.05-1.13 range for the rest of 2025, breaking above that if the US economy slows significantly.
CHF depreciation.
SEK and NOK outperformance.
GBP depreciation vs Scandis." "Range-bound EUR/USD between 1-1.10.
Little change in EUR/GBP.
SEK and NOK outperformance.
Mild CHF appreciation on safe-haven status." "EUR/USD falls below parity.
Little to no outperformance from GBP, NOK or SEK.
CHF outperformance on safe-haven status."| Asset Class | Scenario 1: <br> US-led Ceasefire Prevails, US Steps Back from Europe | Scenario 2: <br> War Continues, Europe Helps Ukraine | Scenario 3: <br> Ukraine Falls |
| :---: | :---: | :---: | :---: |
| Commodities | Crude oil price rises to $\$ 75 / \mathrm{bbl}$ by end-2025. European gas price drops toward $€ 30 / \mathrm{MWh}$. Gold prices increase amid managed money, ETF and central bank buying. | Crude oil price rises to $\$ 75 / \mathrm{bbl}$ by end-2025. European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward $€ 35 / \mathrm{Mwh}$ by 2026. <br> Gold prices rise slightly more than in Scenario 1 amid greater uncertainty. | Crude oil price rises to $\$ 75 / \mathrm{bbl}$ by the end of the year. <br> European natural gas price remains elevated (in high 40s), but as the global LNG market grows, prices gradually fall toward $€ 35 / \mathrm{Mwh}$ by 2026. <br> Gold prices rise slightly more than in Scenario 2 amid even greater uncertainty. |
| Emerging Market FX | After the initial positive reaction in CEE, buy EUR/CEE FX crosses. Post the initial move, we expect underperformance in CEE FX against Latam FX and Asia FX. | Long Latam FX vs other EM FX. <br> Long CEE FX vol. <br> Buy EUR/HUF <br> Buy PLN/HUF | Long Latam FX vs other EM FX Long USD/CEE FX Long CEE FX vol. |
| Emerging Market FI | Rate cuts by National Bank of Hungary to follow. Buy $10 y \mathrm{HGBs}$. <br> Rates curve steepeners in CEE. <br> Long Latam FI and rates curve steepeners. <br> Long Asia FI. | Rates curve steepeners in CEE. <br> Long Latam Fl and rates curve steepeners. Long Asia FI. | Risk premia sharply increase for Romania, Poland. Sell POLGBs. <br> Long Latam FI and rates curve steepeners. Long Asia FI. |
| Foreign Exchange | EUR/USD trades in a 1.05-1.13 range for the rest of 2025, breaking above that if the US economy slows significantly. <br> CHF depreciation. <br> SEK and NOK outperformance. <br> GBP depreciation vs Scandis. | Range-bound EUR/USD between 1-1.10. <br> Little change in EUR/GBP. <br> SEK and NOK outperformance. <br> Mild CHF appreciation on safe-haven status. | EUR/USD falls below parity. <br> Little to no outperformance from GBP, NOK or SEK. <br> CHF outperformance on safe-haven status. |
KEY ASSET CLASS VIEWS AND SCENARIO TRADE IDEAS (2)
Asset Class
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe
Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe| Scenario 1: |
| :--- |
| US-led Ceasefire Prevails, US Steps Back from Europe |
Scenario 2:
War Continues, Europe Helps Ukraine
Scenario 2:
War Continues, Europe Helps Ukraine| Scenario 2: |
| :--- |
| War Continues, Europe Helps Ukraine |
Bund 10 y10 y yield in the 2.60-3.10% range. Yield could go higher if the market prices ECB rate hikes of more than 2.50%2.50 \% in the next two years.
Bund 10 y at 15//18bp15 / 18 \mathrm{bp} above the EUR swap rate 10 y , and EGBs generally cheaper vs swaps.
German repo at ESTR + 10bp or higher.
10 y Bund term premium at 120-130bp (currently 110bp), consistent with Bund at c.3%.
Bias for narrower country spreads: BTP-Bund likely to narrow below 100bp, hovering in 85-110bp range, while OAT-Bund likely above 70bp, hovering in 65-80bp range.
Bund 10 y yield in the 2.60-3.10% range. Yield could go higher if the market prices ECB rate hikes of more than 2.50% in the next two years.
Bund 10 y at 15//18bp above the EUR swap rate 10 y , and EGBs generally cheaper vs swaps.
German repo at ESTR + 10bp or higher.
10 y Bund term premium at 120-130bp (currently 110bp), consistent with Bund at c.3%.
Bias for narrower country spreads: BTP-Bund likely to narrow below 100bp, hovering in 85-110bp range, while OAT-Bund likely above 70bp, hovering in 65-80bp range.| Bund $10 y$ yield in the 2.60-3.10% range. Yield could go higher if the market prices ECB rate hikes of more than $2.50 \%$ in the next two years. |
| :--- |
| Bund 10 y at $15 / 18 \mathrm{bp}$ above the EUR swap rate 10 y , and EGBs generally cheaper vs swaps. |
| German repo at ESTR + 10bp or higher. |
| 10 y Bund term premium at 120-130bp (currently 110bp), consistent with Bund at c.3%. |
| Bias for narrower country spreads: BTP-Bund likely to narrow below 100bp, hovering in 85-110bp range, while OAT-Bund likely above 70bp, hovering in 65-80bp range. |
Similar to Scenario 1 in terms of trends.
More upside to Bund term premium (+20-30bp).
More downside to ECB rates, with the market pricing the terminal rate at 2%2 \% and no hikes in sight.
Overall, this means a steeper EUR curve.
Higher threat of joint funding effort (EU or consortium of countries).
More unstable scenario with potential for risk-off sentiment to drive country spreads moderately wider.
Similar to Scenario 1 in terms of trends.
More upside to Bund term premium (+20-30bp).
More downside to ECB rates, with the market pricing the terminal rate at 2% and no hikes in sight.
Overall, this means a steeper EUR curve.
Higher threat of joint funding effort (EU or consortium of countries).
More unstable scenario with potential for risk-off sentiment to drive country spreads moderately wider.| Similar to Scenario 1 in terms of trends. |
| :--- |
| More upside to Bund term premium (+20-30bp). |
| More downside to ECB rates, with the market pricing the terminal rate at $2 \%$ and no hikes in sight. |
| Overall, this means a steeper EUR curve. |
| Higher threat of joint funding effort (EU or consortium of countries). |
| More unstable scenario with potential for risk-off sentiment to drive country spreads moderately wider. |
A more unstable and volatile scenario.
Bund yield could rise initially but has potential to test sub 2.50%.
Greater degree of economic instability.
Greater need for joint EU decisions in crisis mode.
This requires lower ECB rates (sub 1.50%) and possibly non-conventional monetary policy.
EUR curve steepens more than in Scenario 2.
Risk-off, with spikes in market vol and non-linearities likely.
A more unstable and volatile scenario.
Bund yield could rise initially but has potential to test sub 2.50%.
Greater degree of economic instability.
Greater need for joint EU decisions in crisis mode.
This requires lower ECB rates (sub 1.50%) and possibly non-conventional monetary policy.
EUR curve steepens more than in Scenario 2.
Risk-off, with spikes in market vol and non-linearities likely.| A more unstable and volatile scenario. |
| :--- |
| Bund yield could rise initially but has potential to test sub 2.50%. |
| Greater degree of economic instability. |
| Greater need for joint EU decisions in crisis mode. |
| This requires lower ECB rates (sub 1.50%) and possibly non-conventional monetary policy. |
| EUR curve steepens more than in Scenario 2. |
| Risk-off, with spikes in market vol and non-linearities likely. |
Credit
Deterioration in debt metrics as companies re-leverage. Wider credit spreads across the board.
iBoxx Corporates index to widen by 50bp (to 150bp of spread over benchmarks).
iTraxx Main to widen by 25bp (to around 75bp over benchmarks).
Deterioration in debt metrics as companies re-leverage. Wider credit spreads across the board.
iBoxx Corporates index to widen by 50bp (to 150bp of spread over benchmarks).
iTraxx Main to widen by 25bp (to around 75bp over benchmarks).| Deterioration in debt metrics as companies re-leverage. Wider credit spreads across the board. |
| :--- |
| iBoxx Corporates index to widen by 50bp (to 150bp of spread over benchmarks). |
| iTraxx Main to widen by 25bp (to around 75bp over benchmarks). |
Overall environment supportive of credit.
Companies do not re-leverage early.
Stable spreads and low volatility.
Sharpe ratios in credit more attractive than those of sovereign bonds.
iBoxx Corporates index widens by some 10bp (to 110bp in spread over benchmarks).
iTraxx Main widens by 5-10bp to around 55-60bp range.
Overall environment supportive of credit.
Companies do not re-leverage early.
Stable spreads and low volatility.
Sharpe ratios in credit more attractive than those of sovereign bonds.
iBoxx Corporates index widens by some 10bp (to 110bp in spread over benchmarks).
iTraxx Main widens by 5-10bp to around 55-60bp range.| Overall environment supportive of credit. |
| :--- |
| Companies do not re-leverage early. |
| Stable spreads and low volatility. |
| Sharpe ratios in credit more attractive than those of sovereign bonds. |
| iBoxx Corporates index widens by some 10bp (to 110bp in spread over benchmarks). |
| iTraxx Main widens by 5-10bp to around 55-60bp range. |
Credit spreads, initially well supported, would see HY companies come under pressure, then IG companies. iBoxx Corporates index widens up to 100bp (to 200bp of spread over benchmark).
iTraxx Main to test 100bp of spread over benchmark.
Credit spreads, initially well supported, would see HY companies come under pressure, then IG companies. iBoxx Corporates index widens up to 100bp (to 200bp of spread over benchmark).
iTraxx Main to test 100bp of spread over benchmark.| Credit spreads, initially well supported, would see HY companies come under pressure, then IG companies. iBoxx Corporates index widens up to 100bp (to 200bp of spread over benchmark). |
| :--- |
| iTraxx Main to test 100bp of spread over benchmark. |
Equities
We anticipate a rally due to lower energy prices and foreign investor inflows, particularly in eurozone indices and cyclical sectors like our SG German BundesBasket and SG Rebuild Ukraine Basket. However, with valuations above pre-war levels, we foresee limited upside given persistent challenges like weak EPS growth. Maintain long positions in Financials and SG European Defence Basket but seek entry points into defensive sectors after the initial rally into cyclicals.
European equities may see a slight initial retreat, reversing some recent gains from rising hopes of a ceasefire. But we don't expect a bear market, as higher fiscal spending should be supportive. Favour defensive sectors over cyclicals, which are already pricing in a strong EPS rebound. Look for entry points in Financials, which are likely to benefit from a rising yield curve, and anticipate further re-rating for the SG European Defence Basket.
Negative for European equities due to potential outflows, especially if the currency weakens. Favour defensive sectors over cyclicals, which are pricing in a strong EPS rebound. Consider taking profit on rallies in Oil & Gas, as European governments may impose windfall taxes on high-profit sectors to fund the war. While rising defence spending may support the SG European Defence Basket, the risk of government intervention could increase. A weakening euro may benefit US dollar earners such as companies in the SG Yankee Basket.
Asset Class "Scenario 1:
US-led Ceasefire Prevails, US Steps Back from Europe" "Scenario 2:
War Continues, Europe Helps Ukraine" "Scenario 3:
Ukraine Falls"
Rates "Bund 10 y yield in the 2.60-3.10% range. Yield could go higher if the market prices ECB rate hikes of more than 2.50% in the next two years.
Bund 10 y at 15//18bp above the EUR swap rate 10 y , and EGBs generally cheaper vs swaps.
German repo at ESTR + 10bp or higher.
10 y Bund term premium at 120-130bp (currently 110bp), consistent with Bund at c.3%.
Bias for narrower country spreads: BTP-Bund likely to narrow below 100bp, hovering in 85-110bp range, while OAT-Bund likely above 70bp, hovering in 65-80bp range." "Similar to Scenario 1 in terms of trends.
More upside to Bund term premium (+20-30bp).
More downside to ECB rates, with the market pricing the terminal rate at 2% and no hikes in sight.
Overall, this means a steeper EUR curve.
Higher threat of joint funding effort (EU or consortium of countries).
More unstable scenario with potential for risk-off sentiment to drive country spreads moderately wider." "A more unstable and volatile scenario.
Bund yield could rise initially but has potential to test sub 2.50%.
Greater degree of economic instability.
Greater need for joint EU decisions in crisis mode.
This requires lower ECB rates (sub 1.50%) and possibly non-conventional monetary policy.
EUR curve steepens more than in Scenario 2.
Risk-off, with spikes in market vol and non-linearities likely."
Credit "Deterioration in debt metrics as companies re-leverage. Wider credit spreads across the board.
iBoxx Corporates index to widen by 50bp (to 150bp of spread over benchmarks).
iTraxx Main to widen by 25bp (to around 75bp over benchmarks)." "Overall environment supportive of credit.
Companies do not re-leverage early.
Stable spreads and low volatility.
Sharpe ratios in credit more attractive than those of sovereign bonds.
iBoxx Corporates index widens by some 10bp (to 110bp in spread over benchmarks).
iTraxx Main widens by 5-10bp to around 55-60bp range." "Credit spreads, initially well supported, would see HY companies come under pressure, then IG companies. iBoxx Corporates index widens up to 100bp (to 200bp of spread over benchmark).
iTraxx Main to test 100bp of spread over benchmark."
Equities We anticipate a rally due to lower energy prices and foreign investor inflows, particularly in eurozone indices and cyclical sectors like our SG German BundesBasket and SG Rebuild Ukraine Basket. However, with valuations above pre-war levels, we foresee limited upside given persistent challenges like weak EPS growth. Maintain long positions in Financials and SG European Defence Basket but seek entry points into defensive sectors after the initial rally into cyclicals. European equities may see a slight initial retreat, reversing some recent gains from rising hopes of a ceasefire. But we don't expect a bear market, as higher fiscal spending should be supportive. Favour defensive sectors over cyclicals, which are already pricing in a strong EPS rebound. Look for entry points in Financials, which are likely to benefit from a rising yield curve, and anticipate further re-rating for the SG European Defence Basket. Negative for European equities due to potential outflows, especially if the currency weakens. Favour defensive sectors over cyclicals, which are pricing in a strong EPS rebound. Consider taking profit on rallies in Oil & Gas, as European governments may impose windfall taxes on high-profit sectors to fund the war. While rising defence spending may support the SG European Defence Basket, the risk of government intervention could increase. A weakening euro may benefit US dollar earners such as companies in the SG Yankee Basket.| Asset Class | Scenario 1: <br> US-led Ceasefire Prevails, US Steps Back from Europe | Scenario 2: <br> War Continues, Europe Helps Ukraine | Scenario 3: <br> Ukraine Falls |
| :---: | :---: | :---: | :---: |
| Rates | Bund $10 y$ yield in the 2.60-3.10% range. Yield could go higher if the market prices ECB rate hikes of more than $2.50 \%$ in the next two years. <br> Bund 10 y at $15 / 18 \mathrm{bp}$ above the EUR swap rate 10 y , and EGBs generally cheaper vs swaps. <br> German repo at ESTR + 10bp or higher. <br> 10 y Bund term premium at 120-130bp (currently 110bp), consistent with Bund at c.3%. <br> Bias for narrower country spreads: BTP-Bund likely to narrow below 100bp, hovering in 85-110bp range, while OAT-Bund likely above 70bp, hovering in 65-80bp range. | Similar to Scenario 1 in terms of trends. <br> More upside to Bund term premium (+20-30bp). <br> More downside to ECB rates, with the market pricing the terminal rate at $2 \%$ and no hikes in sight. <br> Overall, this means a steeper EUR curve. <br> Higher threat of joint funding effort (EU or consortium of countries). <br> More unstable scenario with potential for risk-off sentiment to drive country spreads moderately wider. | A more unstable and volatile scenario. <br> Bund yield could rise initially but has potential to test sub 2.50%. <br> Greater degree of economic instability. <br> Greater need for joint EU decisions in crisis mode. <br> This requires lower ECB rates (sub 1.50%) and possibly non-conventional monetary policy. <br> EUR curve steepens more than in Scenario 2. <br> Risk-off, with spikes in market vol and non-linearities likely. |
| Credit | Deterioration in debt metrics as companies re-leverage. Wider credit spreads across the board. <br> iBoxx Corporates index to widen by 50bp (to 150bp of spread over benchmarks). <br> iTraxx Main to widen by 25bp (to around 75bp over benchmarks). | Overall environment supportive of credit. <br> Companies do not re-leverage early. <br> Stable spreads and low volatility. <br> Sharpe ratios in credit more attractive than those of sovereign bonds. <br> iBoxx Corporates index widens by some 10bp (to 110bp in spread over benchmarks). <br> iTraxx Main widens by 5-10bp to around 55-60bp range. | Credit spreads, initially well supported, would see HY companies come under pressure, then IG companies. iBoxx Corporates index widens up to 100bp (to 200bp of spread over benchmark). <br> iTraxx Main to test 100bp of spread over benchmark. |
| Equities | We anticipate a rally due to lower energy prices and foreign investor inflows, particularly in eurozone indices and cyclical sectors like our SG German BundesBasket and SG Rebuild Ukraine Basket. However, with valuations above pre-war levels, we foresee limited upside given persistent challenges like weak EPS growth. Maintain long positions in Financials and SG European Defence Basket but seek entry points into defensive sectors after the initial rally into cyclicals. | European equities may see a slight initial retreat, reversing some recent gains from rising hopes of a ceasefire. But we don't expect a bear market, as higher fiscal spending should be supportive. Favour defensive sectors over cyclicals, which are already pricing in a strong EPS rebound. Look for entry points in Financials, which are likely to benefit from a rising yield curve, and anticipate further re-rating for the SG European Defence Basket. | Negative for European equities due to potential outflows, especially if the currency weakens. Favour defensive sectors over cyclicals, which are pricing in a strong EPS rebound. Consider taking profit on rallies in Oil & Gas, as European governments may impose windfall taxes on high-profit sectors to fund the war. While rising defence spending may support the SG European Defence Basket, the risk of government intervention could increase. A weakening euro may benefit US dollar earners such as companies in the SG Yankee Basket. |
Source: SG Cross Asset Research / EM Strategy, Bloomberg
SOCIETE
GENERALE
HOW MUCH IS NEEDED TO REBUILD UKRAINE?
Total recovery and reconstruction needs = EUR400bn
Source: World Bank. Note: As of end March 2023. Needs relate to total estimated needs covering the period 2023-33.
SOCIETE
GENERALE
LONG REBUILD UKRAINE BASKET
Since inception on 12 July 2023, the rebuild Ukraine basket is up 29.8%29.8 \%, versus MSCI AC World up 25.9%25.9 \%, and STOXX 600 up 25.4%25.4 \% (in local currency).
Base 100 & basket inception: 12/07/2023, performance in total return in local currency, Past performance is not indicative of future performance
Source: SG Cross Asset Research/Equity Strategy
SHORT EUROPEAN NATURAL GAS - LONG MDAX
Source: Deutsche Boerse, ICE Endex, NYMEX Exchange, US Energy Information Administration, Federal Energy Regulatory Commission (FERC), Department of Energy (DOE) Office of Fossil Energy and Carbon
Management (FECM), company websites, and trade press, SG Cross Asset Research/Global Asset Allocation
*'Theoretical export capacity’refers to quantities authorized by the Federal Energy Regulatory Commission for free trade agreement countries. Actual capacity may be lower due to maintenance or technical issues *Outperformance is determined by subtracting the daily difference in the returns of the two indices and compounding these daily differences over time
Cross Asset Research
DEFENCE SPENDING RISES FAST OUTSIDE THE US
US defense spending % share in GDP
*Data as of 31/12/2023
MILITARY SPENDING RISING & MARKET PRICING IN A NEW ERA
Defence stocks across global markets
Defense is cheaper than Mag-7 and benchmark on the PEG Ratio
Source: SG Cross Asset Research/Global Asset Allocation, Refinitiv, Bloomberg; Past performance is not indicative of future performance (left chart). Performance before inception is back-tested and equal weighted (Launch date: SG Asia Defence Basket: 02 August 2024, SG European Defence Basket: 22 March 2022).
BIGGER IMBALANCES LEAD TO HIGHER GOVERNMENT BOND YIELDS - OR AVOIDS TRIGGERING ANOTHER 'TRUSS MOMENT’
Twin deficits (current account and budget balance)
Twin deficits versus government bond yields
AN OLD FIGHT REVISITED: KHAKI VERSUS GREEN
If the German Green party gets their decarbon funding, green will rebound
Long SG Japan negative FX beta value Basket (SGJPFXNV)
Long Topix Banks vs. short Topix
Long Euro Banks (SX7E)
Long Euro Financials credit
Long UK bonds (Gilts)
Long Brazil Steepener (BRL DI Jan 27-Jan 33)
WHAT TO WATCH IN 2025? THE BOJ ON THE PATH TO TIGHTENING
A 25bp hike expected this month, A path to a 1% policy rate by January 2026 if base pay during wages negotiation rises above 3%, and US tariff policy is clarified
Base pay rise in spring wage negotiations
Medium- to long-term inflation expectation
BoJ’s nominal neutral rate estimates
WHAT'S NEXT FROM BOJ? QT APPROACHING IN STEALTH MODE
Large redemptions to start to shrink BoJ's JGB holdings.
Quantitative tightening will likely begin in silence
WHAT TO WATCH IN 2025? THE GPIF: RAISE EQUITY, REDUCE FOREIGN BONDS ALLOCATION
The need to increase target return, and the rising correlation between foreign bonds and equities rarr\rightarrow expect higher equity allocation and lower foreign bonds allocation at the strategy review in April
GPIF has increased foreign asset allocations since the beginning of Abenomics
Correlation between foreign bonds and equities in JPY terms has increased since 2022
INSIGHTS FROM EQUITY RISK PREMIUM (ERP) - JAPAN
Key stats for Japan
Latest ERP
3.9%3.9 \%
Average ERP
3.1%3.1 \%
Earnings growth
8%8 \%
2025 e
9%9 \%
2026 e
10%10 \%
2027 e
7.2%7.2 \%
Medium Term growth
1.7%1.7 \%
Long Term growth
33.0%33.0 \%
Payout Ratio
8%8 \%
1OY Bond Yield
Latest ERP 3.9%
Average ERP 3.1%
Earnings growth 8%
2025 e 9%
2026 e 10%
2027 e 7.2%
Medium Term growth 1.7%
Long Term growth 33.0%
Payout Ratio 8%
1OY Bond Yield | Latest ERP | $3.9 \%$ |
| :--- | :---: |
| Average ERP | $3.1 \%$ |
| Earnings growth | $8 \%$ |
| 2025 e | $9 \%$ |
| 2026 e | $10 \%$ |
| 2027 e | $7.2 \%$ |
| Medium Term growth | $1.7 \%$ |
| Long Term growth | $33.0 \%$ |
| Payout Ratio | $8 \%$ |
| 1OY Bond Yield | |
Equity risk premium (ERP)
10y government bond yield and longterm growth rate “g”
Japan equity - sensitivity for (1) different levels of ERP and “g”
The yen depreciates, but Japanese equities (hedged in dollar) do not outperform
summer
FOREIGN INVESTORS HAVE SOLD JAPANESE EQUITY SINCE LAST SUMMER
Net purchases of Japanese equity by category of investors
Increased FX volatility keeps foreign investors away
GOOD EARNINGS WOULD ENCOURAGE FOREIGN INVESTORS TO COM BACK
Net profit consensus beat ratio recorded high, indicating future earnings forecast upward revision
Foreign investors might come back when earnings forecast revised up
Earnings forecast upward revision ratio is the percentage of stocks whose earnings forecasts have been revised upwards among stocks whose earnings forecasts have been revised. Source: SG Cross Asset Research/Equity Strategy, QUICK
STAY LONG DOMESTIC DEMAND
Nominal wages continue growing, real wage growth no more negative
Earnings forecasts are resilient compared to foreign demand stocks
SG JAPAN DOMESTIC CONSUMPTION BASKET (SGJPDCON)
SG Japan Domestic Consumption basket (SGJPDCON) outperformed last summer, when yen appreciated and the volatility spiked
Earnings forecast continue to be revised upward, while valuation remain low indicating room for revaluation
CORPORATE GOVERNANCE REMAINS SUPPORTIVE
Operating margins make new high, profitability remains subdued
Share buybacks skyrocketed especially when the stock prices fell
LONG VALUE NOT EXPOSED TO THE CURRENCY FLUCTUATIONS
Yen appreciation threatens the performance of value stocks
The SG Negative FX Beta Japan Value continue to outperform, despite the yen appreciation
Higher lending interest rate and increasing number of new loans
Higher 10y JGB yield leads the bank stocks’ outperformance (End of 2019=1002019=100 )
SOCIETE
GENERALE
75% USD-HEDGED JAPANESE EQUITY CAN MITIGATE THE RISK
Let’s assume that:
(i) the USDJPY varies by around +//-10%+/-10 \% from our forecast (145 at 2025Q4); and (ii) the annual return from the USDJPY-hedge is 3.8%_^(3.8)\underline{3.8 \%}^{\mathbf{3 . 8}}. Based on the past 12 -months, we observe that for a 1%1 \% yen depreciation: the Nikkei in JPY and the USD-dollar hedged Nikkei 225 rises by 0.24%\mathbf{0 . 2 4 \%}
-If in 12 months, the Nikkei rises to 40,000(+4.6%)40,000(+4.6 \%) and the yen appreciates to 145 ( 2.9%2.9 \% ), the USD-hedged return will be 9.3%\mathbf{9 . 3 \%} ( 4.6%+3.8%)4.6 \%+3.8 \%), and the non-hedged return in USD will be 7.5%(4.6%+2.9%)\mathbf{7 . 5 \%}(4.6 \%+2.9 \%).
-However, if the yen weakens by 10%10 \% with the USDJPY at 159.5 , the returns will be 10.6%\mathbf{1 0 . 6 \%} for the USD-hedged and 0.4%\mathbf{0 . 4 \%} for the non-hedged.
-Conversely, if the yen appreciates by 10%10 \% with the USDJPY at 130.5\mathbf{1 3 0 . 5}, the returns will be 5.6%\mathbf{5 . 6 \%} for the USD-hedged and 16.1_\underline{\mathbf{1 6 . 1}} \mathbf{~} \mathbf{~} for the non-hedged. rarr\rightarrow Based on these calculations, we estimate that a 75%75 \% USD-hedge can reduce the risk of yen volatility.
SOCIETE
GENERALE
KEY CALL 4
Long 2-10y Bund steepeners vs. USTs.
#4 Policy reaction: Fiscal shift, whatever it takes
Overweight Spain (SPGB), Italy (BTP) vs Germany (Bund), France (OAT) Long 10 y10 y BTP vs Bund, Long 30 y30 y SPGB and BTP vs OAT • Long FTSE 250 (MCX)
Long Periphery vs. Core European Equities (Total Return - Short USD/SEK Index)
Long Itraxx Main CDS
GERMANY: THE END OF THE DEBT BRAKE RULE
The golden rule was voted in 2009 and implemented first in 2011
Equity risk premium = cost of equity - risk-free rate, "* refers to latest ERP and bond yield respectively and ** refers to long-term average ERP in the sensitivity analysis, we assume ERP remains the same
Drop in credit spreads - faster in financials than in non-financials
Credit spreads - French Financials underperform
Iboxx credit spread to benchmark in basis points over benchmark
Source: iBoxx, SG Cross Asset Research/Credit research
EUROPEAN COUNTRY CREDIT RATING TRENDS
Rating trends in 2024\mathbf{2 0 2 4} reflected the movement in fundamentals
Source: SG Cross Asset Research/Rates, Bloomberg
SOCIETE GENERALE
EUROPE PERIPHERY: OUTSTANDING EXPECTED RETURNS ON NORMALISED ANALYSIS OF RISK PREMIUM
Equity Risk Premium*
Cost of Equity
Equity market upside should the equity premium relative to Germany - normalised by 50%
*Equity Risk Premium = Expected return from equities - Bond yield
Source: Datastream, SG Cross Asset Research/Global Asset Allocation/Risk Premium in Pictures
Source: Datastream, IBES, SG Cross Asset Research / Equity Strategy
Source: SG Cross Asset Research/ Equity Strategy, MSCI, IBES, Datastream
SOCIETE GENERALE
Cross Asset Research
Discount/premium - European sectors vs US peers
Source: Datastream, IBES, SG Cross Asset Research / Equity Strategy
Eurozone banks (SX7E): net share buybacks yield (%)
Adjusted for capital increases, -16.7%-16.7 \% in 2008. Source: Bloomberg, SG Cross Asset Research/Equity Strategy
WE LIKE BANKS - US VERSUS EUROPEAN STOCKS
A significant valuation gap: US versus European stocks*
*All data from the third-party provider (MSCI), and not forward-looking. US Banks (Red) and European Banks (Grey): Price to Book Value (P/BV) and Return on Equity (ROE)
**Data as of 28/02/2025
Foreign private holdings of general government debt
YET FRANCE IS NOT GREECE
Current account balances
(% of GDP)
Savings rate of households
(% of disposable income)
Cross Asset Research
POLLS DO NOT POINT TO THAT MUCH CHANGE IN VOTING INTENTIONS
Recent Presidential poll
(September 2024, 2022 results in light bar)
Recent poll on next legislative elections
(Jan. 2025)
Source: National Assembly, SG Cross Asset Research/Economics
PENSIONS STILL A TENSION POINT BUT A FUDGE IS POSSIBLE
Planned increases in the pension age
Source: National Assembly, SG Cross Asset Research/Economics
SOCIETE
GENERALE
KEY CALL 5
Long MSCI China
SG China-7 Titans (SGCHTTAN) vs. short CSI Shanghai State-owned SOE
Short CNH/EUR
Long SG China 2.0 Basket (SGCHM20)
Long 10y India Bonds (IGB)
CHINA - LOOKING FOR NEW GROWTH ENGINES
By the end of 2025, the added value of strategic emerging industries defined in the 14^("th ")14^{\text {th }} Five-Year Plan is expected to account for about 17% of GDP
(1) Including Internet of Things (IoT) telecommunication equipment, Intelligent Connected
(2) Vehicle (ICV), 5G/6G, semiconductors, electronic components, cloud computing, AI, big data, VR/AR
(3) Including aviation equipment, aerospace, marine equipment, agricultural, food and healthcare equipment
(4) Including renewable energy, new energy vehicles, and environmental industries
(5) Including treatment technology and medicine, traditional Chinese medicine, and other healthcare-related areas
(6) Including polymer and composite materials, rare earths, new energy and energy saving materials
Bank loans are flowing back to Industrials and more effort is being put into R&D
Data as of01/09/2024; Summarised from Policies-National Development and Reform Commission (NDRC) People’s Republic of China
Source: National Development and Reform Commission (NDRC), SG Cross Asset Research/Equity Strategy
CHINA: NEW ECONOMIC POLICY
What is the course’s correction
Housing destocking
PBoC funding ratio of up to 100%100 \%, announced.
LGBs as funding
Estimate: 1-2tn needed to make a difference Project completion:
White list expanded and more forceful central government pushes, but nothing new otherwise.
LGFV debt swap:
If focusing on the non-performing segment, >10tn
needed
12tn offered in line with market expectations Bank recap
1tn to begin with to make a difference, but likely more needed down the
road
CHINA: SHIFTING TOWARDS MORE FISCAL EASING
Broad fiscal balance, % GDP (excl. bank recap.)
The policy put is on
CHINA 2.0 AND AI
12m forward P/E of China Seven Titans
the re-rating has just started
Private firm returns relative to state-owned enterprises
a reversal under way
The Seven Titans comprise Alibaba (e-commerce), BYD (electric vehicles), JD.com(e-commerce), NetEase(TMT), SMIC(Semiconductor), Tencent(TMT), Xiaomi (Smart phones)
CHINA - ATTRACTIVE CONVEXITY
Attractive convexity even in modest growth scenario
The SG China 2.0 basket tracks the performance of stocks exposed to industrial automation in China. The basket is split across four main clusters: Semis, Green Tech, Health and Robotics, with weight per cluster capped at 40%.
The basket was launched on 26 November 2024 and components were equally weighted at inception.
Rationale
Made in China 2025 and the 14th Five-year Plan identify key industries for the next phase of advanced manufacturing in China that should receive policy priority over the next few years.
Performance
^((**)){ }^{(*)} Min ADV is calculated as the average daily traded value of the three least liquid stocks over three months
Source: IBES, DataStream, Bloomberg, SG Cross Asset Research/Equity Strategy. Performance before inception is back tested and equal weighted
Cross Asset Research
INDIA- VALUATION AT RICH LEVELS COMPARED TO BONDS
Relative to bonds - Equity risk premium (ERP)
INDIA EQUITY VALUATIONS HAVE ROOM TO MODERATE
Valuations higher than the 2007 peak level, 12m forward P/E
Shale oil production represents represent half of US production and is still gradually growing
Permian Basin shale
Eagle Ford shale
Bakken shale
Niobara shale
Other US shale
Total US crude*
Permian Basin shale Eagle Ford shale
Bakken shale Niobara shale
Other US shale Total US crude*| Permian Basin shale | Eagle Ford shale |
| :--- | :--- |
| Bakken shale | Niobara shale |
| Other US shale | Total US crude* |
Large OPEC spare capacity highlights the group’s revenue optimisation strategy
*total US oil production numbers include crude oil, condensates and NGLs
GOLD AND GEOPOLITICS: CENTRAL BANK DEMAND KEEPS RISING IN USD
Central banks demand versus gold production
*Data updated on 19/03/2025
Share of payments via SWIFT in EUR, GBP, CNY, JPY, and USD (%)
*SWIFT: Society of Worldwide Interbank Financial Telecommunication
Source: Bloomberg, SG Cross Asset Research/Global Asset Allocation
DE-DOLLARISATION (2/2): FROM US TREASURIES TO GOLD
Gold as a percentage of total central bank reserves for DM
Gold as a percentage of total central bank reserves for EM
*Data as of 31/08/2024
The SG Global Nuclear (SGGLNUC) basket tracks the performance of global stocks exposed to nuclear power development, from uranium extraction to equipment makers and utilities.
The basket was launched on 19-August-2022 and components were equally weighted at inception
Current view
Reshoring, the energy transition, and the rise of Al are driving secular electricity demand in the US. The energy intensity of AI data centre servers is four to eight times that of typical data servers as per Bernstein analysts (AI Data Centers vs. The Electric Grid: Presentation 16 July 2024 - link), and big Tech is increasingly securing the power supply with a focus on Nuclear Energy. The basket has performed well over the past two years - supported by EPS momentum. The attractive PEG ratio (P/E adjusted for growth) and our preference for equity “broadening” themes should continue to favour the momentum of this theme.
The SG Global Cyber Security Basket is composed of global stocks that are likely to benefit from the rise in cyber risk management. In our methodology, we aim to select the most liquid ‘pure players’ within the industry.
The basket was launched on 26-February-2019 and components were equally weighted at inception.
Current view
As Al adoption rises, so does the risk of security breaches - Cyber activities are becoming more sophisticated and frequent, with generative AI enabling the creation of personalised emails by analysing social media activity and thus lowering the entry barrier for malicious actors (link). Recent research by Wiz has highlighted security issues involving DeepSeek and Nvidia, underscoring the risks associated with a rapidly changing environment (link). Cisco’s survey indicates that 70%70 \% of leaders are more concerned about their network security in the AI era (link)
The SGI Rise of the Robots Index tracks the performance of companies that are positively impacted by the increasing development of artificial intelligence, automation and robotics. The stocks are ranked on the following ratios: R&D to sales, Return On Invested Capital (ROIC) and Sales growth.
The basket was launched on 29-March-2018 and components were equally weighted at inception.
Current view
In recent years, developments in this field have grown exponentially, and it is now widely acknowledged that these breakthroughs are likely to completely reshape the business models for a large set of economic activities. Corporate adoption continues to roar ahead: world industrial robot installations rose +31%+31 \% in 2021 and +22%+22 \% in 2022, and corporates’ AI adoption rose to 56%56 \% in the 2021 from 50%50 \% in 2020 (McKinsey survey). ChatGPT is the latest AI innovation and a dramatic disruptor for individuals and corporates alike.
SG Domestic German basket is composed of 30 liquid German stocks (equally weighted) that have shown sensitivity to the economic cycle (correlation with the ifo index) and the energy story (correlation with electricity prices). Our selection takes into account sector and geographical exposure
The basket was launched on 26 February 2025 and components were equally weighted at inception.
Current view
The basket is geared towards to the recovery in German economy driven by fiscal stimulus, higher defence spending and plans for infrastructure investment.
The SG European Sovereignty Basket is composed of 50 pan-European stocks that are expected to benefit from or contribute to European sovereignty. These companies have been selected from ten strategic sectors that are essential for European autonomy and resilience.
The basket was launched on 12 March 2025 and components were equally weighted at inception.
Current view
European sovereignty focuses on the continent’s ability to independently make decisions and safeguard its interests across defence, energy, technology, industry, food, and health, without excessive reliance on external powers. It aims to protect Europe from geopolitical shocks, supply chain disruptions, and economic coercion, emphasising resilience and strategic independence. This concept has gained urgency due to geopolitical pressures such as the war in Ukraine, which highlighted Europe’s energy reliance on Russia, and the COVID19 pandemic, which exposed supply chain vulnerabilities.
‘America first’ policies have the potential to drive a higher domestic-growth impulse. And, in light of potential tariffs on imports and tax cuts for domestic manufacturers, stocks with significant domestic exposure and a high proportion of local supply chains stand to benefit.
Performance
Description
The SG US Domestic Supply Chain Basket is composed of US stocks that have high domestic sales ( > 80%>80 \% ), and a high portion of local suppliers ( > 70%>70 \% ). We exclude the Financials and Commodity sectors, in order to focus on manufacturing-based sectors.
The basket was launched on 09 December 2024 and components were equally weighted at inception.
HOW TO SURVIVE THE GREAT ROTATION
Source: SG Cross Asset Research/Global Asset Allocation/Multi-Asset Portfolio
SOCIETE GENERALE
Cross Asset Research
hoenix Kalen's historical MAD2MAR recommendations over the past 12 months.Adam Kurpiel's historical MAD2MAR recommendations over the past 12 months.Charles de Boissezon's historical MAD2MAR recommendations over the past 12 months.Jitesh Kumar's historical MAD2MAR recommendations over the past 12 months.Vincent Cassot's historical MAD2MAR recommendations over the past 12 months.Tsutomu Saito's historical MAD2MAR recommendations over the past 12 months.Manish Kabra's historical MAD2MAR recommendations over the past 12 months.Vincent Cassot's historical MAD2MAR recommendations over the past 12 months.Frank Benzimra's historical MAD2MAR recommendations over the past 12 months.Alain Bokobza's historical MAD2MAR recommendations over the past 12 months.
Geneva, Seoul, Warsaw and Casablanca and the MSCl indexes are service marks of MSCl and its affiliates or such similar language as may be provided by or approved in advance by MSCl . of which are generated by investment banking activities. Arthur van Slooten Societe Generale Paris, Vincent Cassot Socié London, Kokou Agbo-Bloua Societe Générale London dealing ahead of investment research.
of which are generated by investment banking activities. London, Kokou Agbo-Bloua Société Générale London dealing ahead of investment research. providers from which we do not receive compensation, or from which we receive less compensation, for recommending them. Connection with Investment Research which is available at: https://insight-public.sgmarkets.com/compliance/equity.
APPENDIX
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SOCIETE GENERALE
Cross Asset Research
CROSS ASSET RESEARCH CREDENTIALS
EnergyPisk Commodity Rankings 2024 Ranked #1
Cross-commodity research
Research in oil
Research in base metals
Climate and transition research
N CXEC
Individual Rankings - All-Europe Research Team
#2 Andrew Lapthorne (Quant)
#2 Alain Bokobza (Multi-Asset) #2 Yohan Le Jalle (Index)
#2 Juan Valencia (Investment Grade Strategy)* #4 Sandrine Ungari (Quant)
#4 Sebastien Lemaire (Index)
#6 Laure Genet (Index), Vincent Cassot (Derivatives)
#7 Jitesh Kumar (Derivatives), Yii Yih Luu (Index)
#8 Laura Tossan (Index)
#9 Manish Kabra (Multi-Asset)
#10 Arthur Van Slooten (Multi-Asset)
From Institutional Investor Global Fixed Income Survey 2023
*SG MAP Index. Data as of 28/03/2025. Performance in euro and total return. 100=01//01//13100=01 / 01 / 13.
Data as of 28/02/2025
Source: Bloomberg; SG Cross Asset Research/Global Asset Allocation
Source: US Department of Commerce, Bureau of the Census, Historical Statistics of the United States 1789-1945, U.S. International Trade Commission, SG Cross Asset Research/Global Asset Allocation
Source: SG Cross Asset Research / EM Strategy, Bloomberg
Note: Consensus beat ratio shows the percentage of stocks whose sales or net profit exceeded QUICK consensus.