Mission Grey Daily Brief - November 22, 2024

Summary of the Global Situation for Businesses and Investors

The election of Donald Trump as President of the United States has caused uncertainty in Europe and China, with European officials expressing concern about the potential impact on the war in Ukraine and relations with China. In Ukraine, the injury of a North Korean general and the use of an intercontinental missile by Russia have raised tensions, while North Korea and Russia have strengthened their relationship with a tourism drive and missile exchange. Meanwhile, Türkiye's comms chief has called for global cooperation on energy geopolitics, and Vietnam's new digital regulations have raised concerns about the country's business environment.

Donald Trump's Election and its Impact on Europe and China

The election of Donald Trump as President of the United States has caused uncertainty in Europe and China. European officials have expressed concern about the potential impact on the war in Ukraine and relations with China. Trump has repeatedly stated that he could end the conflict in Ukraine in one day, which has prompted fears that he will push for concessions that favour Russian President Vladimir Putin. European leaders are divided on how to respond to the situation, with some criticising German Chancellor Olaf Scholz for calling Putin to negotiate and others suggesting that Europe should move closer to China. However, European officials have stated that they do not want to be dragged into the foreign policy towards China that the new American administration will be engaged in.

Ukraine

In Ukraine, the injury of a North Korean general and the use of an intercontinental missile by Russia have raised tensions in the Russia-Ukraine conflict. The North Korean general, Col Gen Kim Yong Bok, was injured in a Ukrainian strike in Russia's Kursk region, marking the first casualty of a senior North Korean military officer in the escalating conflict. The attack may have targeted a command post used by Russian and North Korean forces, and North Korean troops fighting in Ukraine have been declared fair game and targets by the Ukrainian military. The use of an intercontinental missile by Russia has raised concerns about the potential for a global war, with Poland warning that Russia may be trying to send a message to Ukraine's Western backers.

North Korea and Russia's Strengthened Relationship

North Korea and Russia have strengthened their relationship with a tourism drive and missile exchange. High-level talks in Pyongyang have resulted in an agreement to increase the number of charter flights between the two countries to promote tourism. Additionally, South Korea has stated that Russia supplied air defence missiles to North Korea in exchange for its troops, with North Korea potentially receiving between $320 million to $1.3 billion annually from Russia for sending its troops to Ukraine. This exchange of troops and missiles has raised concerns about the potential impact on the war in Ukraine and the broader geopolitical situation in the region.

Türkiye's Call for Global Cooperation on Energy Geopolitics

Türkiye's comms chief has called for global cooperation on energy geopolitics, highlighting the pivotal role of energy in global geopolitics and the need for international collaboration to tackle growing challenges. The communications director has emphasised the importance of energy in the struggle for global power and the need to address geopolitical crises, regional conflicts, climate change-induced natural disasters, and supply chain disruptions. He has stressed that energy should serve as a tool for regional and global cooperation, not conflict. This call for global cooperation has implications for businesses and investors in the energy sector, as well as those operating in regions affected by geopolitical tensions and energy-related challenges.

Vietnam's New Digital Regulations and their Impact on Business

Vietnam's new digital regulations, which require companies to verify the identities of users and share this information with authorities, have raised concerns about the country's business environment. The regulations echo a cyber identification scheme unveiled by Beijing earlier this year, which was met with international backlash over fears of government overreach, further surveillance, and the erosion of free speech. The regulations come at a precarious time for Vietnam's economy, as the country was seen as a major winner from former US president Donald Trump's trade war with China in his first term. However, success during Trump 2.0 is far from certain, as the president-elect has threatened much wider tariffs on goods from China and elsewhere. The tariffs could cut Vietnam's economic growth by up to 4 percentage points, dealing a devastating blow to the country's growth and potentially threatening business at an especially precarious time.

Themes around the World:

US Government Shutdown Economic Impact

The 2025 US federal government shutdown, the longest in history at 43 days, furloughed 900,000 workers and disrupted economic activity. While direct GDP impact is moderate relative to global scale, shutdowns create uncertainty affecting markets, data flow, and investor sentiment, influencing global asset prices, currency valuations, and risk appetite.

Digital Transformation and Emerging Market Opportunities

India's rapid digital adoption, especially in payments and fintech, coupled with favorable demographics, fuels domestic consumption and corporate earnings growth. Recognized as a leader in AI and semiconductor innovation within emerging markets, India attracts global investors seeking high-quality growth exposure, benefiting from technological advancements and expanding formalization of the economy.

Currency Volatility and Rand Strength

Despite volatility, the South African rand has strengthened significantly, reaching a two-year high against the US dollar. This is driven by improved fiscal discipline, a lowered inflation target to 3%, and credit rating upgrades. A stronger rand reduces import costs and supports investor sentiment but remains vulnerable to global liquidity shifts and US monetary policy.

Geopolitical Tensions Affecting Commodities

Rising geopolitical risks, including Middle East conflicts and US-China trade tensions, have introduced significant volatility in commodity markets. Energy prices, especially crude oil, carry geopolitical risk premiums, impacting global supply chains and inflation. Safe-haven assets like gold have surged amid uncertainty, reshaping investment flows and affecting commodity-dependent economies and industries worldwide.

US Domestic Cybersecurity Threats

Cyberattacks targeting key US institutions, such as the Congressional Budget Office, highlight vulnerabilities in critical infrastructure. These threats pose risks to data integrity, operational continuity, and investor confidence, emphasizing the need for robust cybersecurity measures in business operations.

U.S. Debt and Financial System Vulnerabilities

The U.S. faces unprecedented public debt levels exceeding 125% of GDP, coupled with risky financial practices such as shadow banking and high-risk asset allocations. These vulnerabilities raise concerns about financial stability, creditworthiness, and the dollar’s reserve currency status, influencing global investor confidence and capital flows.

Deepening Economic Recession

The German economy is entrenched in a deep recession, with widespread job cuts and declining investments across industries. Major firms like Volkswagen and Bosch plan significant workforce reductions. The recession undermines industrial competitiveness and triggers a chain reaction affecting suppliers and services, while government stimulus fails to revive private-sector investment.

Rising Cybersecurity Market and Digital Risks

South Korea's cybersecurity market is rapidly expanding, projected to grow from $5.7 billion in 2024 to $12.5 billion by 2033, driven by increasing cyber threats, digital transformation, and regulatory emphasis on data protection. Adoption of AI-powered security solutions, cloud-based defenses, and zero-trust architectures are key trends, reflecting the critical need to safeguard digital infrastructure amid growing IoT and cloud adoption.

Conglomerate Investment in Infrastructure and Renewables

Vietnamese conglomerates, notably Vingroup and Hoa Phat Group, plan to invest heavily—up to $185 billion over the next decade—in infrastructure and renewable energy projects. These investments align with national development goals to upgrade connectivity and energy capacity, potentially transforming Vietnam's economic landscape. Successful execution will be critical to realizing growth and addressing infrastructure bottlenecks.

Economic Stimulus and Tax Reform Initiatives

Prime Minister Takaichi's administration is pursuing tax reforms aimed at stimulating investment and consumption while addressing fiscal deficits. Proposed measures include targeted tax cuts and elimination of certain breaks, designed to offset economic contraction and support growth, though concerns remain about the timing and effectiveness amid geopolitical and market volatility.

Economic Growth Outlook and Labor Market Pressures

Despite recent economic challenges, Germany's Bundesbank forecasts slight growth in Q4 2025, supported by stabilizing exports and industry. However, competitiveness remains weak, and private consumption is subdued due to labor market pressures. Wage growth is moderating, reflecting a cautious outlook amid ongoing structural and external economic headwinds.

Geopolitical Multipolarity Impact

Australia is navigating a new multipolar world where no single power dominates, increasing geopolitical volatility. This shift compels Australia to leverage its resource wealth and institutional stability to attract global capital, diversify supply chains, and maintain pragmatic relations with multiple powers, enhancing its strategic economic positioning amid global tensions.

EU and Germany's Tougher Trade Stance on China

Germany is pivoting towards a firmer EU trade policy against China, supporting measures to counter unfair competition and reduce strategic dependencies. This includes export controls, investment screening, and potential use of the Anti-Coercion Instrument. Germany's shift enables stronger EU unity on trade defense amid rising geopolitical and economic challenges posed by China.

Political Uncertainty and Market Volatility

Prime Minister Netanyahu's unexpected pardon request has heightened political uncertainty, causing volatility in the Tel Aviv stock market. This instability may delay critical economic decisions, including the 2026 state budget approval, potentially increasing risk premiums demanded by investors and complicating capital raising for state-dependent firms.

Declining Russian Oil Demand from Key Buyers

India and China, Russia’s largest oil customers, have reduced purchases ahead of US sanctions enforcement. This buyer pullback has widened the Urals crude discount to Brent to historic levels, increasing Russian crude inventories and pressuring export revenues, signaling a shift in global energy trade flows and complicating Russia’s market access.

Political Instability and Economic Uncertainty

France faces significant political instability with frequent government changes and a fragmented parliament, causing legislative gridlock. This uncertainty dampens business confidence, delays investment decisions, and complicates fiscal policy, impacting international trade and investment strategies. The ongoing budget debates and tax policy unpredictability exacerbate economic uncertainty, posing risks to supply chains and business operations.

Transport Corridors as Geopolitical Tools

Transport corridors in Eurasia, combining infrastructure and services, serve as strategic geopolitical instruments. Russia leverages control over land transit routes to influence trade flows and regional economies. Diversification demands amid geopolitical tensions enhance the importance of multimodal corridors, affecting logistics, investment, and regional economic integration.

China-Japan Diplomatic Tensions Impact

China’s travel warnings against Japan amid Taiwan-related geopolitical tensions have triggered sharp declines in Japanese tourism and retail stocks. The diplomatic rift threatens cross-border economic ties, with potential revenue losses in key sectors and increased uncertainty for businesses reliant on Chinese consumer flows and educational exchanges.

Taiwan's Green Energy Policy Challenges

Recent amendments to environmental and tourism laws have severely disrupted Taiwan's solar energy projects, threatening the island's renewable energy expansion. This setback complicates the semiconductor sector's RE100 commitments and raises strategic dilemmas about balancing industrial growth with sustainable energy goals.

Policy Uncertainty and Economic Stagnation

The UK's economic growth is hindered by policy drift and unclear government strategies, leading to weakened business investment and consumer confidence. This uncertainty creates a challenging environment for long-term planning, deterring investment and slowing economic momentum, which poses risks for international investors and trade partners seeking stability.

China’s Geoeconomic Strategy

China is actively deploying diplomatic, investment, and technological tools to consolidate global influence and challenge US dominance. Renouncing WTO developing country status and leveraging rare earth market dominance, Beijing aims to reshape global trade rules and assert regional leadership, intensifying geopolitical competition and altering global economic alignments.

Media Freedom Constraints

Turkey's media landscape faces significant government control through takeovers, regulatory pressure, and criminal prosecutions, limiting press freedom. This environment creates operational risks for businesses reliant on transparent information flows and may affect Turkey's international reputation, investor confidence, and the broader socio-political stability critical for economic activity.

Foreign Direct Investment and Regulatory Reforms

Saudi Arabia has overhauled its investment laws to simplify foreign business entry, remove sector-specific licenses, and open real estate markets to foreign ownership. These reforms have boosted foreign direct investment, particularly from the UAE, US, and India, enhancing Saudi Arabia's attractiveness as a destination for capital and business expansion.

E-commerce Market Boom

Turkey’s e-commerce sector is experiencing explosive growth, expected to reach $1.77 trillion by 2033 (CAGR 25.18%). Rising smartphone penetration, social media influence, and digital payment adoption are enabling SMEs to access global markets, transforming retail and supply chain dynamics.

Geopolitical Risks and Supply Chain Vulnerabilities

German policymakers and businesses grapple with the geopolitical risks of overreliance on China, especially amid export controls on rare earths and semiconductors. Supply chain disruptions threaten production continuity in key sectors like automotive and green technology. The government’s cautious 'de-risking' approach faces resistance from firms prioritizing market access, highlighting tensions between economic interests and national security concerns.

Robust FDI Growth and Quality Shift

Vietnam's foreign direct investment (FDI) surged to $31.5 billion in the first 10 months of 2025, up 15.6% YoY, driven by manufacturing, high-tech, and clean energy sectors. The focus is shifting from volume to quality, with investments from Intel, NVIDIA, and Meta emphasizing semiconductors, AI, and renewable energy, enhancing Vietnam's role in global value chains.

Record Foreign Direct Investment Growth

Despite economic headwinds, Mexico has achieved a record US$40.9 billion in FDI in the first nine months of 2025, a 14.5% increase over 2024. This surge, driven by new investments in manufacturing, financial services, and infrastructure, reflects growing global investor confidence, bolstered by nearshoring trends and Mexico's strategic position within North American trade frameworks.

Water Crisis and Infrastructure Challenges

Iran is grappling with a severe multi-year drought compounded by mismanagement and over-extraction of groundwater. This water scarcity threatens urban centers like Tehran with potential evacuations, undermining economic productivity, agricultural output, and social stability, thereby increasing country risk for investors and businesses.

Thailand Economic Growth Slowdown

Thailand's Q3 2025 economic growth slowed sharply to 1.6% year-on-year, weighed down by weak private consumption amid high household debt and fragile confidence. Despite robust export growth driven by electronics and AI-related sectors, domestic uncertainty and political instability dampen overall economic momentum, prompting government loan buyback schemes and cautious monetary policy outlooks.

Trade Deficit and Export Dynamics

Turkey's exports increased modestly by 2% to $23.9 billion in October 2025, while imports rose 7.2%, widening the trade deficit by 27.6%. Key export markets include Germany, the UK, and the US, with China and Russia as major import sources. The persistent trade deficit poses challenges for external balances and currency stability.

Rising Corporate and State Capital Expenditure

Strong capital expenditure by central and state governments, alongside revived corporate investments in sectors like roads, railways, oil, power, and telecom, signals optimism in India's infrastructure and industrial growth. This investment momentum supports job creation, supply chain development, and long-term economic expansion despite external headwinds.

Oil Export Resilience Amid Sanctions

Despite renewed UN sanctions, Iran's crude oil exports have reached their highest levels since 2018, averaging around 2 million barrels per day. This resilience underscores Iran's ability to circumvent sanctions through alternative channels, sustaining vital revenue streams and influencing global oil supply dynamics.

Structural Export Challenges

The World Bank highlights Pakistan's export crisis as rooted in deep structural flaws, including inconsistent policies, high energy costs, and outdated trade agreements. Export share of GDP has declined significantly, causing Pakistan to lose nearly $60 billion in potential exports. Without reforms in exchange rate policy and trade negotiations, export competitiveness and foreign investment will remain constrained.

Robust Economic Growth Post-Conflict

Israel's economy rebounded strongly in Q3 2025 with a 12.4% annualized GDP growth, driven by surges in private consumption, exports, and investments following wartime contractions. This rapid recovery signals resilience, attracting investor confidence and supporting expansion in supply chains and business operations despite ongoing regional uncertainties.

Rupiah Redenomination Challenges

Indonesia's plan to redenominate the rupiah by removing three zeros faces headwinds due to a weak currency and capital outflows. Economists warn premature implementation could increase volatility and impose high costs on businesses. While aiming to improve transaction efficiency and currency credibility, the initiative requires stable macroeconomic fundamentals and strengthened investor confidence to succeed.

China’s Covert Investment in U.S. Industries

China has funneled over $200 billion in hidden loans to U.S. companies via offshore shell companies, targeting strategic sectors such as robotics, semiconductors, and biotech. This covert financing raises national security concerns and complicates U.S.-China economic relations, impacting foreign investment scrutiny and cross-border trade policies.