Mission Grey Daily Brief - January 02, 2025
Summary of the Global Situation for Businesses and Investors
The Russia-Ukraine war continues to rage on, with Putin launching a New Year's Day drone attack on Kyiv, North Korean troops joining the fight, and Western countries lifting their ban on Ukraine using long-range missiles to attack targets inside Russia. Meanwhile, Israel is wary of deepening ties between Russia and Iran, which could involve a nuclear program. In Montenegro, several people were killed in a shooting after a bar brawl, and the shooter is still on the run. Thailand's aviation sector is expected to improve in 2025, but the country will need to manage its power supply as the data centre industry grows.
Russia-Ukraine War
The Russia-Ukraine war has been internationalised, with North Korean troops joining the fight and Western countries lifting their ban on Ukraine using long-range missiles to attack targets inside Russia. Russia has been receiving military assistance from Iran and North Korea, while Ukraine has been receiving financial and military assistance from the US, NATO, and the EU. Ukraine has ended a five-year deal that allowed Russian gas to flow to EU states through its pipeline networks, significantly reducing Russian gas imports to the EU. This move will cost Russia billions and impact countries like Moldova, which rely on Russian gas via Ukraine.
Israel-Russia-Iran Relations
Israel is wary of deepening ties between Russia and Iran, which could involve a nuclear program. Russia and Iran have been working together on a nuclear program, and Israel is concerned about the potential implications of this collaboration. Israel has been working to neutralise its enemies, and the deepening ties between Russia and Iran could pose a threat to Israel's security.
Montenegro Shooting
In Montenegro, several people were killed in a shooting after a bar brawl, and the shooter is still on the run. The shooter, identified only by his initials AM, fled the scene armed, and police have dispatched special troops to search for him. The shooting has caused concern among residents, and police have urged them to remain calm and stay indoors.
Thailand's Aviation Sector and Power Supply
Thailand's aviation sector is expected to improve in 2025, but the country will need to manage its power supply as the data centre industry grows. Thailand is seeing a significant increase in power demand as the government pushes the growth of data centres and the cloud service industry. The Board of Investment is supporting investment projects in data centres and cloud services, and Thailand is becoming a regional digital innovation hub. However, data centres are crucial infrastructure for artificial intelligence (AI) technology, and if AI-based tasks continue to grow in Thailand, a huge amount of electricity will be needed to keep the facilities running. One AI-embedded data centre requires between 300 and 1,000 megawatts of electricity, and Thailand will need to find a way to meet this demand while reducing its carbon footprint and ensuring a stable supply.
Further Reading:
Breaking News: Several killed as man opens fire in Montenegro bar - Telangana Today
Consulting the oracles - Bangkok Post
How the wars of 2024 brought together rivals and created enemies - BBC.com
Israel wary as Russia-Iran ties deepen, possibly involving nuclear program - Al-Monitor
Ukraine ends Russian gas pipeline to Europe – but how much will it cost Moscow? - The Independent
Themes around the World:
US-Thailand Trade Negotiations Amid Border Disputes
Ongoing border conflicts with Cambodia risk derailing critical US-Thailand trade talks, as the US pressures Thailand to recommit to ceasefire agreements. The dispute threatens to stall trade negotiations, impacting Thailand's largest export market and creating geopolitical risks that could undermine economic stability and investor sentiment.
Economic Activity and Monetary Policy Outlook
Brazil's economic activity shows signs of mild contraction with potential for rebound, influencing Central Bank rate-cut expectations in early 2026. The Selic rate trajectory will affect currency stability, equity market rotation, and foreign capital flows. External factors such as US labor data and commodity prices further shape monetary policy decisions and market sentiment toward Brazil.
US-China Financial Interdependence Risks
Chinese state banks have funneled billions in hidden loans to US companies, including strategic sectors like robotics and semiconductors. This covert financial interdependence raises national security concerns and complicates US-China trade relations, potentially impacting investment strategies and regulatory scrutiny in sensitive industries.
Internationalization of Brazilian Companies
Brazilian firms are accelerating international expansion to diversify markets beyond domestic consumption. Strategies include establishing physical presence, local partnerships, and regulatory adaptation in South America, Asia, and the U.S. Effective currency risk management and compliance are critical amid global trade fragmentation and geopolitical tensions.
Water Scarcity and Environmental Challenges
A multi-year drought and mismanagement have led to critical water shortages threatening urban and agricultural sectors. Water scarcity risks disrupting supply chains, agricultural output, and urban livelihoods, potentially triggering mass displacement and social unrest. This environmental crisis compounds Iran’s economic vulnerabilities and challenges sustainable development and investment prospects.
Political Instability and Leadership Speculation
Growing political tensions within the UK Labour Party and speculation over Prime Minister Keir Starmer’s leadership are heightening market anxiety. This political noise exacerbates economic uncertainty, influencing currency volatility and investor confidence, which in turn affects trade negotiations and foreign direct investment flows.
China’s Strategic Balancing Act
China maintains a pragmatic approach toward Iran amid UN sanctions, balancing adherence to international norms with strategic economic and diplomatic support. Utilizing alternative financial mechanisms and local currency trade, China sustains critical ties with Iran, shaping regional geopolitics and offering Iran avenues to mitigate sanction impacts.
Large-Scale Electrolyzer Deployments for Green Hydrogen
Plug Power secured contracts to supply 55 MW of GenEco PEM electrolyzers for three UK green hydrogen projects backed by government funding. These projects, located in Cumbria, Greater Manchester, and Plymouth, aim to decarbonize industrial operations and transport sectors. Operational by 2027, they represent the UK's largest electrolyzer installations, advancing regional hydrogen infrastructure and supporting multi-sector adoption aligned with net-zero strategies.
M&A Activity Driven by Rising FDI
Robust FDI inflows have catalyzed a surge in mergers and acquisitions, particularly in Ho Chi Minh City, which attracted $7.3 billion in FDI. Administrative reforms reducing procedural delays have accelerated deal-making, with significant transactions in renewable energy and strategic sectors. Foreign investors from Japan, Korea, and Europe remain active, signaling confidence in Vietnam's investment climate.
Corruption and Governance Challenges
Corruption has risen as a significant business risk in Ukraine, now ranked second after the war. Weak judicial and law enforcement institutions exacerbate investor concerns, undermining the investment climate and complicating efforts to attract foreign capital and sustain economic growth.
Thailand Stock Market Revival
Analysts forecast a significant rebound in Thailand's equity market in Q4 2025, driven by stronger corporate earnings, easing US-China tensions, and potential US Federal Reserve interest rate cuts. Government stimulus programs, particularly the 'Khon La Khrueng Plus' co-payment scheme, bolster consumption-linked sectors like banking, tourism, and retail, enhancing investment appeal amid undervaluation.
Taiwan's Energy Vulnerabilities
Taiwan's heavy reliance on imported energy, particularly LNG and coal, creates a critical vulnerability. Chinese gray-zone tactics may target Taiwan's energy imports and infrastructure, risking prolonged power outages that could cripple semiconductor production and global supply chains. Taiwan is planning energy capacity expansions to meet rising demands from tech sector growth.
Rupiah Redenomination Debate
The Indonesian government's plan to redenominate the rupiah faces criticism from economists who question its economic benefits and highlight potential costs. Concerns include lack of impact on productivity or growth, risks of resource misallocation, and the need to prioritize fundamental economic reforms over symbolic currency changes.
Thailand's Geopolitical Balancing Act
Thailand maintains a strategic balance between China and the US, leveraging trade agreements with China and rare-earth mineral cooperation with the US. This pragmatic approach avoids over-commitment to either power, preserving economic and security interests amid regional tensions. However, unresolved trade technicalities and shifting alliances require careful management to sustain benefits and regional influence.
Construction Sector Growth and Urbanization
Brazil's construction market is expanding robustly, driven by urbanization, public-private partnerships, and sustainable development initiatives. The sector is forecasted to grow at a CAGR of 3.8%-5.1% through 2029-2034, with rising demand in residential, commercial, industrial, and infrastructure projects. This growth supports job creation, urban development, and investment opportunities but faces challenges from inflation, material costs, and regulatory inefficiencies.
Cryptocurrency Regulatory Crackdown
Turkish authorities seized a major crypto asset platform and related companies on money laundering charges involving nearly $770 million. This crackdown reflects increasing regulatory scrutiny in Turkey's large cryptocurrency market, aiming to mitigate financial crime risks. Such regulatory actions may affect investor sentiment and the development of digital asset markets and fintech innovation.
Trade Deficit Narrowing and Export Expansion
Egypt's trade deficit narrowed by 16% to $26.3 billion in the first 10 months of 2025, driven by a 19% surge in non-oil exports to $40.6 billion. Key export markets include UAE, Turkey, Saudi Arabia, Italy, and the US. Growth in building materials, chemicals, food, and engineering sectors underscores Egypt's improving global trade competitiveness.
Rising Protectionism Against China
Mexico is adopting a more protectionist stance towards China, imposing tariffs on key imports like auto parts and electronics. This shift aims to preserve free trade with North America but risks retaliatory measures from China, potentially disrupting supply chains, increasing production costs, and inflating consumer prices, thereby affecting Mexico's export competitiveness and investor confidence.
Currency Market Stabilization Efforts
Amid won depreciation nearing 1,500 per dollar, South Korean authorities, including the National Pension Service, are mobilizing to stabilize the currency. Structural factors like overseas equity investments and exporters' slow forex conversion sustain pressure on the won. Policy measures focus on reducing volatility without targeting specific exchange rates, balancing inflation risks and long-term fund sustainability.
German Automotive Industry's Strategic Shift
German automakers are deepening their presence in China through substantial investments and localized production, adopting an 'in China, for China' approach. This strategy aims to maintain competitiveness amid fierce Chinese EV market growth and geopolitical tensions but increases exposure to Chinese market risks and regulatory uncertainties.
Dynamic Logistics Sector Growth and Modernization
Vietnam's logistics market, valued at USD 80.65 billion in 2024, is projected to grow at a 6.4% CAGR through 2034. Growth is driven by expanding manufacturing, e-commerce, and trade activities, supported by government investments in transport infrastructure. Trends include green logistics, digital technology integration, and cold chain expansion, vital for supply chain efficiency and competitiveness in global markets.
Political and Regulatory Uncertainty
Political risk has risen to the second most pressing concern, with new regulatory red tape impacting offshore investors and complicating foreign capital flows. Political instability and policy uncertainty undermine investor confidence, disrupt supply chains, and increase compliance costs, necessitating coordinated government-business efforts to stabilize the environment.
Thailand-Cambodia Border Conflict Impact
Renewed clashes along the Thailand-Cambodia border threaten economic stability, risking a 130 billion baht loss in exports and disrupting labor supply with up to 500,000 Cambodian workers previously employed in Thailand. Tourism and border trade suffer, potentially reducing GDP by 100 billion baht. However, ongoing US-Thailand trade negotiations remain unaffected, underscoring resilience in bilateral economic ties.
Expanding Trade with Iraq
Iran aims to strengthen its commercial foothold in Iraq, targeting a $20 billion bilateral trade volume within three years. With Iraq's large population and cultural ties, Iran's exports span consumer goods, food, and industrial materials. However, bureaucratic and regulatory hurdles remain, necessitating modernization of trade infrastructure to capitalize on this strategic market opportunity.
Record-Breaking Foreign Reserves and Debt Reduction
Egypt's net international reserves surpassed $50 billion in October 2025, marking 38 consecutive months of growth. This milestone enhances economic stability, exchange rate management, and import security. Concurrently, public debt declined by 10% of GDP over two years, driven by strategic investments and fiscal discipline, reinforcing Egypt's creditworthiness and capacity to attract sustainable foreign direct investment.
China-Japan Diplomatic Tensions
Prime Minister Takaichi's remarks on Taiwan have escalated diplomatic tensions with China, leading to retaliatory measures such as travel advisories and import bans. These actions have disrupted trade, tourism, and investment flows, significantly impacting Japan's economy and business confidence, especially in sectors reliant on Chinese demand and cooperation.
Geopolitical and Political Risks
Ongoing geopolitical tensions and domestic political volatility remain significant risks, impacting market stability and investor sentiment. Turkey’s strategic military engagements and regional policies, including complex relations with South Asia, add layers of uncertainty that could affect trade partnerships, foreign investment flows, and supply chain reliability.
Financial Market Volatility and Currency Weakness
Japan is experiencing a sharp market shock characterized by plunging stocks, record-high government bond yields, and a weakening yen. These dynamics reflect investor anxiety amid geopolitical tensions and economic uncertainty, complicating monetary policy decisions and increasing volatility in global financial markets due to Japan's systemic importance.
China's Investment Slowdown Impact
China's fixed asset investment declined by 1.7% year-on-year as of October 2025, marking a rare negative growth driven by Xi Jinping's 'anti-involution' policy targeting excessive industrial competition. This slowdown, compounded by real estate weakness and reduced infrastructure spending, pressures local governments and signals challenges for China's GDP growth and global supply chains.
Foreign Investment Liberalization
Saudi Arabia is structurally transforming its financial markets by raising foreign ownership limits, attracting global investors to equities and bonds. This shift facilitates two-way capital flows, reduces currency risk through the riyal-dollar peg, and supports diversification away from oil dependence, enhancing the Kingdom's appeal as a global investment destination.
Domestic Regulatory Challenges in Energy Sector
Recent tightening of solar power regulations and local opposition to gas power projects threaten Taiwan's green energy development. These regulatory hurdles may delay renewable energy investments and impact Taiwan's energy security and sustainability goals, relevant for investors in energy and infrastructure sectors.
Monetary Policy and Financial Conditions
The Central Bank of Turkey maintains a tight monetary stance with gradual interest rate cuts, balancing disinflation and economic growth. Tight financial conditions have moderated loan growth and strengthened monetary transmission, supporting macro-financial stability and improving external financing conditions for banks and corporates.
Trade Deficit Reduction and Export Diversification
Egypt's trade deficit narrowed by 16% to $26.3 billion in the first 10 months of 2025, aided by a 19% surge in non-oil exports to $40.6 billion. Key export markets include UAE, Turkey, Saudi Arabia, Italy, and the US. Export growth in building materials, chemicals, food, and engineering products reflects successful diversification, improving Egypt's global trade competitiveness.
Frozen Russian Assets and Investor Challenges
Global investors, including major Australian super funds, hold over 30 million frozen Russian shares due to sanctions. Potential peace deals could unlock trading, but repatriation of profits remains complex. This asset freeze creates liquidity challenges and uncertainty for international portfolios exposed to Russian equities, affecting investment strategies and risk assessments.
Global Economic Shifts and Monetary Policy Impact
Global shifts, including US Federal Reserve tightening and a firmer dollar, tighten liquidity for emerging markets like South Africa. These dynamics influence capital flows, inflation, and interest rates, requiring strategic positioning by investors and policymakers to navigate external shocks.
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.