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Mission Grey Daily Brief - February 15, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently dominated by geopolitical tensions and economic challenges. The United States, under the leadership of President Donald Trump, is engaging in a series of diplomatic initiatives that are shaping the global landscape. Talks with Russia over the war in Ukraine and Iran are underway, while China and the European Union are facing challenges in their relations with the US. Economic policies, such as tariffs and aid cuts, are being implemented to address domestic concerns and counter China's influence. These developments have significant implications for global stability and businesses, especially in the context of the ongoing Ukraine war.

US-Russia Talks on Ukraine War

The United States and Russia are engaging in talks to end the war in Ukraine, with President Donald Trump and Russian President Vladimir Putin leading the negotiations. The talks are expected to focus on a ceasefire and potential territorial concessions by Ukraine, raising concerns among European allies about their exclusion from the process. The US has signaled a shift in its foreign policy, prioritizing its own interests and reconsidering its support for Ukraine and European security. This development has significant implications for the future of the region and global stability.

US-China Relations and Economic Policies

The United States is facing challenges in its relations with China, with America's biggest long-term challenge remaining China. The US has imposed tariffs and cut international aid budgets, aiming to counter China's influence. These policies have significant implications for global trade and businesses, especially those with operations in China. The US is also engaging in talks with Russia over the war in Ukraine, further complicating the geopolitical landscape.

European Union's Response to US Policies

The European Union is responding to the US's policies by reaffirming its commitment to democratic values and stepping up its defense and competitiveness. The EU is also engaging in talks with the US to address trade and security challenges, seeking to find common ground and avoid a potential trade war. The EU's response has significant implications for the future of the transatlantic relationship and global stability.

US-Iran Relations and the Palestinian Issue

The United States and Iran are engaging in talks to address the ongoing tensions and potential for conflict. The US has imposed tough sanctions on Iran, aiming to pressure the country to negotiate a deal. The US is also facing criticism for its inconsistent policies and support for the Zionist regime in the Palestinian-Israeli conflict. The US's policies have significant implications for the future of the region and global stability.


Further Reading:

Access to Ukraine's rare earths may help keep U.S. aid flowing - NPR

Countering China’s diplomatic coup - The Economist

Donald Trump says he’ll meet Vladimir Putin in Saudi Arabia for Ukraine war negotiations - Financial Times

Palestine biggest victim of US breach of deals - Mehr News Agency - English Version

Russia’s war on Ukraine at critical moment as Trump and Putin push to end conflict - CNN

The EU says its major foe is Russia, but US Vice President disagrees - Euronews

Trump and Putin Talk Ukraine Ceasefire, M23 Continues the DRC Advance, Sudan’s Military Makes Gains - The Nation

Trump signs order on Covid vaccine mandates; Vance, Rubio meet with Ukraine's Zelenskyy - NBC News

Trump threatens reciprocal tariffs against other countries - NPR

Vance Threatens Sanctions, U.S. Troops in Ukraine if Putin Rejects Peace Deal - The Moscow Times

Vance will meet Zelenskyy amid concerns about Trump-Putin talks to end the war in Ukraine

Viktor Orbán Discusses State of Geopolitical Affairs With Tucker Carlson - Hungarian Conservative

Viktor Orbán: ‘We stand to gain a great deal from peace’ - Hungarian Conservative

Themes around the World:

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Strong Consumer Confidence and Spending Growth

Vietnam leads ASEAN in consumer optimism with a sentiment index score of 67, driven by robust economic growth and political stability. Consumers are increasingly focused on sustainability, willing to pay premiums for eco-friendly products, and are boosting expenditures in education, health, and lifestyle sectors, supporting domestic demand amid global uncertainties.

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Saudi Financial Market Development

Saudi Arabia's financial sector has expanded to over $3 trillion, with US institutions holding nearly 30% of foreign investments. Reforms have improved governance, liquidity, and market infrastructure, including fintech and derivatives trading, attracting global investors and supporting the kingdom's ambition to become a regional financial hub aligned with Vision 2030.

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Geopolitical Developments Affecting US Trade

US diplomatic efforts to resolve the Ukraine conflict and ongoing tensions with China influence global trade patterns and risk sentiment. Military visits and secret peace plans underscore geopolitical fluidity, impacting supply chains and investor confidence. Businesses must monitor these developments closely, as they affect trade policies, sanctions, and cross-border investment environments.

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Pound Sterling Volatility and Currency Risks

The British pound is experiencing significant volatility due to economic weakness and political instability, including leadership speculation and fiscal uncertainty. This volatility increases currency risk for international trade and investment, affecting pricing, hedging costs, and capital flows, thereby complicating financial planning for multinational businesses.

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Vietnam's Economic Transformation and Growth

Vietnam's transition from a centrally planned economy to a vibrant market-oriented system has fueled sustained GDP growth of 6-7% annually. The economy expanded from $346 billion in 2020 to $510 billion in 2025, with rising per capita income and diversification into manufacturing, agriculture, and services. Infrastructure development and trade liberalization underpin Vietnam's enhanced global economic standing.

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Political Uncertainty and Economic Fragility

Thailand faces significant political uncertainty with potential government caretaker periods post-election, leading to policy inertia. This uncertainty, coupled with economic fragility, dampens business confidence, investment, and long-term planning, risking slower GDP growth and subdued market dynamics in 2026.

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Economic Recovery Amid Market Volatility

Pakistan's stock market has surged approximately 40% in 2025, driven by retail investor enthusiasm and improved macroeconomic indicators, including IMF-backed reforms and credit rating upgrades. However, this rally coexists with significant volatility, foreign investor pullback, and political instability, underscoring a fragile recovery that poses risks to sustained investor confidence and market stability.

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Resilience to US Tariffs and Trade Tensions

Despite US-imposed tariffs, Vietnam's economy demonstrated resilience with continued robust growth and expanding trade surplus. The country's strategic positioning as a 'mini-China' alternative, low labor costs, and diversified export base have mitigated tariff impacts. However, ongoing US trade policies pose risks, with potential to reduce shipments, underscoring the need for vigilance in trade strategy and diversification.

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Infrastructure Development Challenges

While Uruguay invests in port and transport infrastructure, limitations remain in logistics capacity and connectivity. These constraints can increase operational costs and affect supply chain efficiency for exporters and importers.

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Egypt-Saudi Arabia Trade and Investment Expansion

Egyptian businesses prioritize increased trade and investment with Saudi Arabia, with 86% planning significant growth over five years. Key sectors include technology and energy/renewables, aligned with Saudi Vision 2030. Bilateral agreements enhance legal safeguards and capital mobility, fostering a strategic regional corridor that supports diversification and economic integration.

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Political Divisions Impacting China Policy

Internal discord within Germany's coalition government hampers coherent China strategy. Security-focused Greens and pragmatic Social Democrats diverge on engagement approaches, leading to inconsistent policies. This political fragmentation complicates efforts to address trade imbalances, supply chain risks, and geopolitical tensions with China effectively.

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Sustained but Cautious Investment Climate

Despite political turmoil, France continues to attract substantial investments, with over €30 billion announced, including €9.2 billion in new projects. However, investor caution prevails due to tax hikes and regulatory uncertainties, leading to postponed industrial investments and restrained hiring, which could slow economic growth and innovation momentum.

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Ukraine's Defence Industry Expansion

Despite Russian attacks, Ukraine's defence sector has significantly increased production, doubling output in key military sub-sectors since 2023. This wartime industrial boom supports national security and creates opportunities for defence-related investments, while civilian industries face challenges due to energy shortages and infrastructure damage, highlighting a dual economy under conflict conditions.

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Supply Chain Disruptions and Inflationary Pressures

Global inflation trends, exacerbated by supply chain disruptions post-pandemic, geopolitical tensions, and energy price shocks, have significantly impacted Pakistan. Rising costs in food, energy, and manufacturing inputs elevate production costs and consumer prices, challenging policymakers and affecting trade competitiveness and supply chain resilience.

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Economic Impact of Martial Law Attempt

The failed martial law declaration in late 2024 caused severe economic shocks, including currency depreciation and stock market declines. While recovery signs are emerging, lingering political instability and structural challenges continue to weigh on investor confidence and economic growth prospects.

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Restrictions on Dollar Access and Currency Controls

The State Bank of Pakistan imposed stringent controls on US dollar cash withdrawals to curb outflows and stabilize the rupee. Cash dollar purchases are capped at $500 without documentation and biometric verification, promoting cashless transactions. These measures reflect mounting external vulnerabilities and aim to preserve foreign reserves amid rising public debt and fiscal pressures.

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Monetary Policy Dilemma in Russia

The Central Bank of Russia faces a policy conundrum: easing monetary conditions could stimulate a weakening economy but risks fueling inflation and credit expansion. High interest rates strain corporate borrowers, while inflation expectations remain elevated. This balancing act affects credit availability, investment climate, and overall economic stability, influencing business planning and foreign investor confidence.

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Investment Climate and Choose France Summit

Despite political challenges, France maintains a strong investment climate, highlighted by the 'Choose France' summit focusing on domestic and foreign investments. Announcements include over €30 billion in French investments across strategic sectors like energy, AI, and manufacturing. However, investment growth is slowing due to fiscal concerns and political risks, affecting long-term industrial renewal and competitiveness.

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Post-Brexit Trade Adjustments

The United Kingdom continues to navigate complex trade realignments post-Brexit, affecting customs procedures and regulatory standards. These changes introduce new compliance costs and delays, impacting supply chains and investment decisions, especially for firms reliant on EU markets.

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Strategic Economic Integration with Eastern Blocs

Iran's active participation in BRICS, SCO, and EAEU creates new economic opportunities by expanding markets and strengthening regional ties. These alliances offer pathways to circumvent Western sanctions, attract investment, and diversify trade partnerships, potentially reshaping Iran's economic trajectory.

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Challenges in Russian Asset Management

Major global investors, including Australian superannuation funds, hold over 30 million frozen Russian shares with uncertain prospects for divestment due to sanctions and capital repatriation restrictions. The potential US-backed peace deal could unlock these assets, but significant legal and market hurdles remain, complicating portfolio management and risk exposure.

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Defense Industry Growth Amid Global Demand

Israel's defense firms, including Elbit Systems and Rafael, rank among the world's top arms suppliers, benefiting from rising global military expenditures. Despite geopolitical controversies, demand for Israeli defense technology remains robust, supporting export revenues and technological innovation in the sector.

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Trade Deficit and Import Surge

Thailand posted its largest trade deficit since 2023 due to a sharp rise in imports of capital goods and raw materials from China, while export growth slowed amid US tariff pressures. The trade imbalance risks undermining economic growth, pressuring the baht, and complicating monetary policy, highlighting vulnerabilities in Thailand's trade-dependent economy and the impact of global tariff regimes on competitiveness.

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Deepening India-Israel Economic Partnership

India emerges as a strategic growth partner for Israel, with expanding trade, investment, and collaboration in manufacturing, cybersecurity, water technology, and infrastructure. Initiatives like the India-Middle East-Europe Economic Corridor (IMEC) enhance connectivity and trade opportunities, positioning Israel to leverage India's economic scale and demographic dividend for mutual benefit.

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Foreign Direct Investment (FDI) Inflows and High-Quality Projects

FDI inflows increased 15.6% year-on-year to US$31.52 billion in 2025, concentrated in manufacturing, high-tech, and export sectors. The Southern key economic region, including Ho Chi Minh City and Dong Nai, is a focal point for attracting high-quality FDI, supported by policy reforms, investment incentives, and development of industrial parks and free-trade zones, fostering innovation and regional economic integration.

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Monetary Policy and Yen Depreciation Risks

The Bank of Japan faces complex policy decisions amid inflation and market pressures, with debates over interest rate hikes complicated by fiscal stimulus plans. Yen depreciation to historic lows against major currencies raises concerns about currency volatility, import costs, and investor confidence, influencing foreign exchange strategies and international trade competitiveness.

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Stock Market Surge Driven by Retail Investors

Pakistan's KSE-100 index surged 40% in 2025, fueled by retail investors seeking alternatives amid stagnant property prices and low deposit rates. Improved economic indicators, fiscal reforms, and political stability under Prime Minister Shehbaz Sharif and Field Marshal Asim Munir have boosted confidence. However, inflation and geopolitical tensions remain risks, and foreign investors have been net sellers.

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Financial Sector Resilience and Reform

India's financial sector demonstrates robustness through recapitalisation, improved NPA recovery, and increased inclusivity. Structural shifts include rising mutual fund assets, reduced bank credit dominance, and higher equity market participation. Initiatives like GIFT City pilot reforms to deepen market liquidity and attract global capital, crucial for financing India's growth amid geopolitical capital flow shifts.

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Credit Rating Upgrades and Investor Sentiment

Upgrades by S&P Global and removal from the FATF grey list have boosted investor confidence, leading to increased foreign investment and improved market performance. Positive fiscal consolidation and inflation targeting underpin this optimism, potentially attracting further capital inflows and supporting economic growth.

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Foreign Capital Outflows from Government Bonds

Despite record FDI inflows, foreign investors have sold off over US $7 billion in Mexican government bonds in 2025, driven by global financial volatility, US trade policies, and declining interest rates. This capital flight may increase volatility in financial markets and the peso, impacting Mexico's debt financing environment.

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Foreign Investment and Economic Security

Foreign-invested companies, though only 6.4% of exporters, contribute 15.2% of South Korea's exports, highlighting their critical role. However, rising economic security concerns prompt calls for enhanced screening of foreign investments, including indirect ones, to safeguard national interests while maximizing economic benefits. This balance is crucial for sustaining trade performance and supply chain resilience.

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Robust Economic Growth and Infrastructure Expansion

Vietnam's economy surged with an 8.23% GDP growth in Q3 2025, surpassing targets and driven by manufacturing, exports, and infrastructure investments. The government increased infrastructure spending by nearly 40%, focusing on mega-projects like high-speed rail and port expansions, positioning Vietnam as a competitive global manufacturing and financial hub, attracting investors and boosting trade.

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Stock Market Volatility and Valuation Concerns

Australian equity markets have experienced sharp declines amid global tech sector jitters, inflation concerns, and interest rate uncertainties. Overvaluations, particularly in technology and resource stocks, coupled with global economic headwinds, have triggered significant sell-offs, affecting investor confidence and capital flows.

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Russia's Rebounding Influence in Asia

Russia's comprehensive power in Asia is improving, driven by defense and economic partnerships with China and North Korea. Trade with China surged to $244 billion in 2024, representing 35% of Russia's global trade. This resurgence enhances Russia's geopolitical leverage in Asia, influencing regional economic and security dynamics relevant to investors and policymakers.

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Divergent Trade Policy Towards China

Mexico is adopting a more protectionist stance toward China while seeking to preserve free trade within North America. This divergence reflects geopolitical shifts and efforts to balance economic interests amid global policy changes. The approach may affect supply chain configurations, trade partnerships, and Mexico's role in broader regional and global trade dynamics.

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Financial Market Reactions and Investor Sentiment

London's stock market, particularly financial and industrial sectors, has faced declines amid global caution and domestic uncertainties. Investor sentiment is sensitive to fiscal policy signals and economic data, affecting equity valuations and capital market conditions, which in turn influence corporate financing and investment decisions.