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Mission Grey Daily Brief - July 17, 2024

Summary of the Global Situation for Businesses and Investors

The world is witnessing a confluence of critical events, from the attempted assassination of former US President Trump to the ongoing war in Ukraine and the political turmoil in Bangladesh. In Cyprus, tensions are escalating between Turkish and Greek Cypriots, while North Korea faces another blow as a senior diplomat defects to South Korea.

US-China Relations

The attempted assassination of former US President Trump has sparked discussions in China about the weaknesses of the US political system. This incident, along with the US-China trade tensions and the Taiwan conflict, has experts worried about a potential US-China cold war turning hot. The US has maintained and strengthened tariffs on Chinese imports, and both political parties are pushing to get tougher on China and its companies. The US must balance its approach to China, leveraging its technological advantage while also utilizing soft power to attract international talent and maintain its influence.

Ukraine-Russia War

The war in Ukraine continues to rage on, with both sides clashing over foreign policy and Russia's invasion. Ukraine is facing a war of attrition, relying heavily on international aid that may decrease over time. To sustain its economy, Ukraine is raising taxes and switching to internal resources. The recovery and reconstruction of Ukraine will be challenging due to population decline and refugee displacement. Sanctions on Russia's energy sector are necessary to stop its war efforts, and a total energy embargo could be effective.

Political Turmoil in Bangladesh

Bangladesh is facing violent political turmoil over the government's job quota system, resulting in the deaths of at least five people and injuries to over a hundred. The protests have disrupted traffic and halted railways and highways across the country. The situation highlights the need for businesses to monitor political risks and assess the stability of the operating environment.

Cyprus Conflict

Tensions are escalating in Cyprus as Turkish Cypriots and Greek Cypriots engage in a series of escalations along the buffer zone, including the deployment of large-caliber weapons and the installation of high-tech cameras. This situation could have broader implications for the region, and the international community must act to prevent open hostilities from breaking out.

North Korean Diplomat Defection

A senior North Korean diplomat based in Cuba, Ri Il Kyu, defected to South Korea with his family in November 2023. This is a significant blow to North Korean leader Kim Jong Un as Ri played a crucial role in representing Pyongyang's interests in Havana and blocking Cuba from opening diplomatic ties with South Korea. The defection underscores the challenges faced by the Kim regime in maintaining control and the potential for further defections.

Recommendations for Businesses and Investors

  • US-China Relations: Businesses with operations or supply chains in the US and China should closely monitor the evolving relationship between the two countries and prepare for potential disruptions due to escalating tensions.
  • Ukraine-Russia War: Companies with investments or operations in Ukraine should be aware of the ongoing war's impact on the country's economy and consider the potential benefits of relocating to Poland or the Czech Republic, which have experienced economic growth due to their EU membership prospects.
  • Political Turmoil in Bangladesh: Businesses operating in Bangladesh should assess the impact of the political turmoil on their operations and consider the potential risks of civil unrest and supply chain disruptions.
  • Cyprus Conflict: Companies with interests in Cyprus should monitor the situation and evaluate the potential impact on their operations. While the conflict is currently localized, there is a risk of escalation that could affect the wider region.
  • North Korean Diplomat Defection: The defection highlights the instability within the North Korean regime and the potential for further elite defections. Businesses should consider the implications of a potential shift in North Korea's political landscape and the impact on their operations or investments in the region.

Further Reading:

3 killed and dozens injured in Bangladesh in violent clashes over government jobs quota system - CHAT News Today

40 Dead, Hundreds Injured After Heavy Rain, Storms In Eastern Afghanistan - Radio Free Europe / Radio Liberty

5 killed and dozens injured in Bangladesh in violent clashes over government jobs quota - Toronto Star

A North Korean diplomat in Cuba defected to South Korea in November, a possible blow to leader Kim - CTV News

A senior N. Korean diplomat defected to S. Korea from Cuba, Chosun Ilbo says - 朝日新聞デジタル

As Press Freedoms Erode in Bangladesh, Political Cartoonists Are Being Targeted by An Increasingly Authoritarian Regime - Nieman Reports

As the US reels from Trump shooting, China sees weakness - Business Insider

At least 5 killed, more than 100 hurt in Bangladesh job quota protests - McDuffie Progress

Canada pleads for political calming in wake of Trump shooting - Maple Ridge News

Canada reflects on its history of political violence in wake of attack on Trump - CBC.ca

Cocked rifles and infrared cameras along Cyprus buffer zone stoke tensions that could spread farther - Hindustan Times

Economist Says Total Energy Embargo Will Make Russia Stop Its War on Ukraine - Kyiv Post

European Parliament re-elects Roberta Metsola of Malta to lead 720 member EU body - UPI News

Experts worry that a U.S.-China cold war could turn hot: ‘Everyone’s waiting for the shoe to drop in Asia’ - Fortune

Themes around the World:

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Economic Growth Outlook

Turkey's economic growth is projected at 4.1% for Q2 2025 and 2.9% for the full year, below government forecasts. Monetary tightening and global trade uncertainties are dampening growth prospects, signaling cautious investment and operational planning for businesses reliant on domestic demand.

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Financial Market Volatility and Foreign Portfolio Flows

Indian financial markets have experienced volatility due to US tariff hikes, foreign portfolio investor (FPI) outflows, and currency depreciation. Equity markets declined amid tariff concerns, while debt markets saw inflows. The rupee hit record lows, and credit growth moderated. Market sentiment remains sensitive to global monetary policy, trade negotiations, and domestic reforms, influencing investment strategies.

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Vietnam's Economic Reform Legacy

Vietnam's Đổi Mới reforms transformed it from a poor, agrarian economy into a dynamic manufacturing and export hub. Key reforms included agricultural de-collectivization, foreign investment liberalization, and inflation control. This historical trajectory underpins Vietnam's rapid growth, rising middle class, and integration into global trade, shaping investor confidence and long-term economic prospects.

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Economic Performance and Growth Prospects

Brazil's economy grew 0.4% in Q2 2025, driven by services and extractive industries, despite slowing from Q1. Household consumption remains resilient, supported by government measures, while investments face headwinds from high borrowing costs. The medium-term outlook is cautious, with growth projections around 2.2-2.5%, amid domestic fiscal challenges and external trade tensions.

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Energy Sector Exploration and Investment

Egypt signed four major exploration deals worth over $340 million with international firms including Shell and Eni to drill new wells in the Mediterranean and Nile Delta. This strategic push aims to reverse declining natural gas production, attract foreign capital, and reinforce Egypt's position as a regional energy hub, critical for energy security and export potential.

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Geopolitical Tensions Influence Global Markets

U.S. political developments, including Trump's return and complex policies, alongside China's military posturing, create geopolitical tensions that ripple through global markets. Bond yields and gold prices reflect investor caution, while economic indicators and central bank decisions remain critical for market direction.

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Foreign Direct Investment Surge

FDI inflows into Saudi Arabia jumped 24% in 2024 to SAR 119 billion ($31.7 billion), with cumulative FDI stock nearly doubling since 2017. The National Investment Strategy and Vision 2030 reforms have fostered a competitive environment, attracting over 50,000 foreign investment licenses and 660 regional headquarters, signaling strong investor confidence and economic diversification.

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Tourism Sector Recovery and Challenges

Tourism remains a vital pillar, contributing approximately 11.5% to pre-pandemic GDP, with rising per-visitor spending offsetting lower visitor numbers. Political unrest and border conflicts pose risks to sustained recovery, potentially affecting foreign exchange earnings and related service industries. Strategic initiatives to boost tourism resilience are critical for economic stability.

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China's Covert Oil Imports

China remains the dominant buyer of Iranian oil, accounting for approximately 90% of exports through covert channels, including disguised shipments. This clandestine trade provides China with discounted crude but faces significant risk if sanctions snapback halts these flows, threatening China's energy security and increasing costs for its refining sector.

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Export Decline and US Tariffs Impact

German exports to the US have fallen to their lowest since 2021, affected by ongoing trade uncertainties and tariffs. Despite the EU-US trade deal capping tariffs at 15%, German firms struggle to maintain competitiveness, impacting key sectors like automotive and chemicals, and dampening growth prospects.

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Climate Change Impact and Disaster Risks

Severe climate-induced floods have devastated key agricultural regions, damaging crops and infrastructure, exacerbating fiscal pressures, and disrupting food supplies. These disasters threaten economic growth, elevate inflation, and increase unemployment, highlighting Pakistan's acute vulnerability to climate change and the urgent need for enhanced climate finance, adaptive infrastructure, and policy reforms to mitigate long-term socio-economic risks.

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Vietnam's Financial Sector Resilience

S&P Global Ratings upgraded credit ratings for major Vietnamese banks, reflecting enhanced financial system resilience and strong economic growth projected at 5.9% in 2025 and 6.0% in 2026. Improved asset quality, reduced non-performing loans, and supportive government policies bolster banking stability, positively impacting investor confidence and credit availability for businesses.

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Inflation and Monetary Policy Challenges

Inflation remains elevated at around 33%, complicating Turkey's monetary policy. The central bank has cautiously cut interest rates, balancing growth support and inflation control. Persistent inflation pressures and inflation expectations pose risks to economic stability and investor confidence.

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National Security and Supply Chain Resilience

Taiwan prioritizes national security through enhancing supply chain resilience, digital communications, and economic stability amid geopolitical tensions. President Lai emphasizes strengthening semiconductor capabilities and overseas industrial expansion to mitigate risks from concentrated industrial clusters. These measures aim to safeguard Taiwan's critical role in global technology supply chains and ensure continuity under potential disruptions.

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Grain Market Disruptions and Price Trends

The war-induced reduction in Ukraine’s agricultural output and export capacity has caused persistent upward shifts in global grain prices, affecting food security in developing countries heavily reliant on Ukrainian wheat and corn. These disruptions contribute to inflationary pressures and necessitate adaptive policy responses to manage supply risks in global commodity markets.

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US Tariffs and Trade Barriers

The imposition and threat of US tariffs, including a looming 36% tariff deadline, weigh heavily on Thailand's export-driven manufacturing sector. These trade barriers reduce competitiveness, contract manufacturing output, and compel firms to diversify markets and supply chains. The tariffs also contribute to global trade uncertainties, affecting Thailand's growth prospects and export performance.

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Technological Disruption and AI Adoption

Rapid advancements in AI, blockchain, and related technologies are transforming business models and competitive landscapes. AI-driven efficiencies threaten traditional sectors while creating new investment avenues. Firms with proprietary data and agile leadership gain advantage, necessitating strategic adaptation to maintain resilience and capitalize on innovation-driven growth.

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Foreign Exchange Fluctuations and Trade Implications

Volatility in the Pakistani Rupee against major currencies affects import costs, export competitiveness, and remittance flows. A weaker rupee raises import expenses, particularly for essential goods and energy, while potentially boosting exports. Exchange rate dynamics significantly influence trade balances, inflation, and corporate risk management strategies in an import-dependent economy.

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Foreign Investment Volatility and Project Cancellations

Tariff uncertainties and geopolitical tensions have led to a record ₹2 lakh crore worth of foreign projects being halted or dropped in Q1 FY26, a 1200% increase year-on-year. Investor pessimism is reflected in a high ratio of dropped to new projects, signaling caution among foreign investors. Clarity on trade policies is critical to restoring investment confidence and sustaining economic growth.

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Investor Sentiment and Equity Market Performance

French equities have underperformed relative to broader European benchmarks due to political risk premiums and economic uncertainty. Despite this, sectors with global exposure, such as luxury goods and energy, remain attractive. Investor caution may delay hiring and capital expenditures, influencing corporate strategies and M&A activity within France.

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Political Instability Disrupting Supply Chains

Ukraine’s conflict and political volatility have caused significant supply chain disruptions globally, including energy shortages and grain export restrictions. Rapid policy shifts, sanctions, and regulatory changes from multiple governments, including the US, have increased unpredictability. Businesses must adopt proactive legal and operational strategies to mitigate risks from sudden government changes and evolving trade policies.

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Technological Sector Expansion and Digital Economy Leadership

Saudi Arabia is rapidly advancing its technology sector, aiming for over 150% growth and positioning itself as a regional hub for future technologies. Investments in 5G, cloud infrastructure, and talent development, alongside regulatory reforms, are driving the digital economy to contribute approximately 15% of GDP, supporting sustainable diversification.

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US Tariffs Impact on Indian Economy

The US has imposed a 50% tariff on Indian exports, targeting labor-intensive sectors like textiles, gems, and footwear. This move threatens a $55-60 billion hit to India's economy, risking job losses and reduced export competitiveness. The tariffs exacerbate trade tensions, potentially slowing growth and disrupting supply chains reliant on US markets.

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Industrial Policy and Supply Chain Development

Thailand faces urgent need to revitalize its industrial policy to preserve export markets and develop global supply chain linkages, especially in electric vehicles and semiconductors. Consistent, long-term policies are essential to position Thailand as a competitive manufacturing hub, enhance technology transfer, and increase local content amid evolving global trade environments.

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Foreign Reserves and Financial Market Stability

Improved foreign reserves, rising to $65.9 billion, alongside positive stock market and bond performance, reflect enhanced liquidity and investor confidence. However, political uncertainties and global economic volatility continue to pose risks to financial market stability and capital inflows.

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Monetary Policy and Interest Rate Outlook

Market indicators show diminishing expectations for monetary easing in Taiwan, reflecting confidence in sustained economic growth despite tariff headwinds. Rising interest-rate swaps and government plans for increased military and clean energy spending suggest a tightening monetary environment, influencing investment strategies and financial market dynamics.

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EU and Western Financial Sanctions Expansion

The EU is preparing new sanctions targeting Russian financial institutions and energy companies, including payment systems and crypto exchanges. These measures aim to tighten economic pressure on Moscow, potentially disrupting cross-border transactions and complicating Russia's access to international finance, further isolating its economy.

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Credit Rating Downgrades and Market Risk

Credit rating agencies have downgraded France's sovereign debt, reflecting concerns over fiscal sustainability amid political turmoil. Although the risk of a financial crisis remains low, elevated bond yields and risk spreads signal chronic structural problems. Downgrades could trigger institutional sell-offs, increase borrowing costs, and heighten market volatility, influencing investment strategies and capital flows.

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Structural Economic Reforms Needed

Pakistan's economic recovery is fragile due to lack of bold structural reforms in tax broadening, privatisation, and energy sector restructuring. Circular debt remains unresolved, threatening long-term fiscal sustainability despite short-term gains like inflation reduction and current account surplus. Without reforms, economic growth and investor confidence face significant risks in FY26 and beyond.

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US Tariffs Impact on Exports

The imposition of a 30% US tariff on South African exports, the highest in Sub-Saharan Africa, is significantly squeezing exporters. This tariff affects key sectors like agriculture, automotive, and mining, leading to earnings declines and manufacturing contraction. It risks tens of thousands of job losses and threatens to reduce GDP growth by 0.2 percentage points in 2025, forcing businesses to seek alternative markets.

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U.S. Tariffs and Trade Policy Volatility

The U.S. government's aggressive use of tariffs, export controls, and sanctions as foreign policy tools has introduced significant unpredictability in global trade. Recent tariff announcements, including those under the Trump administration, have broad implications for international supply chains, investment decisions, and market access, compelling businesses to reassess sourcing and partnership strategies.

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Economic Growth and Business Investment Risks

France's fragile economic growth, with GDP growth below 1%, is threatened by political deadlock and fiscal austerity. Uncertainty leads to postponed corporate investments, hiring freezes, and reduced consumer confidence. Key sectors such as construction, chemicals, hospitality, and retail face immediate risks, which could exacerbate unemployment and slow recovery prospects.

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South Korean Investment in the US

South Korean conglomerates have committed approximately $150 billion in US investments, creating nearly 1.66 million American jobs. This strategic shift responds to US tariff pressures by localizing production, but raises questions about the impact on domestic employment and industrial capacity within South Korea.

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Energy Infrastructure Reconstruction

Ukraine's energy sector has suffered extensive damage due to over 2,900 Russian attacks on infrastructure, reducing power generation capacity from 12.5 GW to 1.5 GW. Massive investments, including Polish-led projects in biogas, bioethanol, and renewables, are underway to restore and modernize energy supply, critical for civilian life and economic recovery. This sector's rehabilitation is pivotal for stabilizing Ukraine's economy and attracting foreign investment.

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Stock Market Recovery and Investment Opportunities

The Pakistan Stock Exchange has shown strong performance with the KSE-100 index surging nearly 90% over 12 months, driven by corporate earnings growth and stabilizing macroeconomic conditions. Undervalued equities present potential for a generational bull run, supported by easing monetary policy and improved investor sentiment, though political and economic risks remain significant.

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India's Economic Growth Resilience

Despite tariff pressures, India’s economy showed unexpected acceleration with 7.8% GDP growth in Q2 2025, supported by strong private consumption and government spending. This resilience sustains investor confidence and positions India as a leading emerging market, though export challenges may temper future growth.