• Current Reports  

    Published on April 21st, 2015

    International investors, otherwise disposed to embrace Japan’s re-rating story, face a real dilemma. Almost 30 months after Shinzo Abe launched his bold reflationary experiment, Japan’s equity market has more than doubled in value and the yen (on a trade-weighted basis) has devalued by -30%. And yet, throughout this period, economic growth has continued to disappoint. With two significant reforms in the offing, we reckon that could be about to change...
    Published on April 20th, 2015

    As if the flames under Chinese equities weren’t hot enough already, Beijing is busy throwing fuel on the fire. Yesterday the People's Bank of China said it would cut the reserve requirement ratio for banks by 100bp, with an extra 100bp cut for small rural institutions. This is the greatest reduction in RRRs since November 2008 in the depths of the global financial crisis, and unlike the previous cut in February it is not intended merely to offset capital outflows. With cross-border flows mixed over the last couple of months, Sunday’s RRR cut represents a clear net easing in monetary conditions, with roughly RMB1.5trn injected into China’s financial system. The central bank’s move will not only free up bank capital and depress short term rates, assisting local government debt restructuring and offsetting any negative impact from the launch of deposit insurance. It will also strengthen investor perceptions that the authorities have no intention of standing in the way of the run-up in Chinese stocks, strengthening the ongoing bull market...
    Published on April 20th, 2015

    As if the flames under Chinese equities weren’t hot enough already, Beijing is busy throwing fuel on the fire. Yesterday the People's Bank of China said it would cut the reserve requirement ratio for banks by 100bp, with an extra 100bp cut for small rural institutions. This is the greatest reduction in RRRs since November 2008 in the depths of the global financial crisis, and unlike the previous cut in February it is not intended merely to offset capital outflows. With cross-border flows mixed over the last couple of months, Sunday’s RRR cut represents a clear net easing in monetary conditions, with roughly RMB1.5trn injected into China’s financial system. The central bank’s move will not only free up bank capital and depress short term rates, assisting local government debt restructuring and offsetting any negative impact from the launch of deposit insurance. It will also strengthen investor perceptions that the authorities have no intention of standing in the way of the run-up in Chinese stocks, strengthening the ongoing bull market...
    Published on April 17th, 2015

    A revealing experiment involved monkeys being placed in a cage with a pile of nuts stashed on an upper level. Their efforts to snaffle the food caused them to be doused in water, blasted with a siren and startled by an electric shock. After a number of attempts the monkeys gave up. Later, a second group of monkeys were introduced—the new entrants made a beeline for the goodies, but were quickly beaten back by the chastened first group of monkeys. Finally, this first group were removed from the cage and replaced by a fresh contingent. The new monkeys immediately made a dash for the nuts, but were beaten back by the second group; i.e., those who had never experienced the cold water, siren or shocks...
    Published on April 17th, 2015

    At the end of the 1980s the world changed, with the collapse of the Soviet Union and the start of China’s renaissance. The next two and a half decades were marked by a mass movement towards globalization. We now have a long enough history to determine who were the winners over those 25 years. The answer is very simple: small countries...