BYD continues to gain sales momentum in overseas markets, but the Chinese auto maker has announced production cuts amongst rising inventory levels.

Should investors cheer the international expansion, or worry about over capacity & weaker demand ahead? 

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> the strong performance in BYD between Feb & May came from idiosyncratic returns
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> macro wasn't influential over Q1 but became a big headwind in April courtesy of President Trump's tariff shock
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> more recently there are signs the tailwind from specific returns is falling, while the macro drag is abating

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> macro's increasing importance is evident above - the rolling 3mth correlation of macro returns to total returns is up near 4y highs

> BYD's current macro exposures suggest the stock is geared to global reflation

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> it needs rising metal prices, stronger economic growth & is comfortable with rising bond yields reflecting that healthy growth environment. 

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> the exposure to metals is a well-established & rising trend. This is copper acting as a proxy for Chinese (& global) industrial demand

> not new news but exposure is at the highs & more than 2x the next biggest macro factor exposure 

> increased exposure to now-casting tracking GDP is more recent but again near local highs.

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June’s record deliveries will grab headlines. But price action increasingly tracks the global cycle, not company news.

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Macro is the new alpha.

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