• Current Reports  

    Published on July 7th, 2015

    Amid all the talk of contagion and demonstration effects emanating from Athens, there is a straight forward question that concerns investors whose domain spreads beyond the lapping shores of the Mediterranean: is the Greek crisis, at its root, inflationary or deflationary? Given talk of new currencies being launched, the obvious fear concerns inflation. I would demur and suggest that a deflationary shock is unfolding. This matters especially for investors who are running large fixed income positions...
    Published on July 7th, 2015

    After more than two years of talks, the six-power negotiations on Iran’s nuclear program seem finally to be inching towards a deal. If international sanctions are lifted, the implications for China’s relationship with Iran will be enormous. Iranian oil shipments to China could increase to more than 600,000 barrels per day, equivalent to more than 10% of China’s total imports—a prospect which has helped push crude prices down 10% so far this month. At the same time Chinese oil and gas companies will be freed to pursue Iranian investment projects long stalled under the sanctions regime. Yet although strengthening ties with Iran is an important facet of Chinese president Xi Jinping’s “Belt and Road” strategy, the relationship between Beijing and Tehran will not be easy. Now that sanctions may be lifted, Iran is already hoping to re-engage western investors and to weaken China’s stranglehold on its economy. Unless Beijing can successfully transcend the bilateral tensions of recent years to consolidate its first-mover advantage, Chinese energy interests and—more importantly—Beijing’s broader strategic goals in Iran could gradually come undone...
    Published on July 6th, 2015

    Over the weekend the Chinese government rushed out an unprecedented grab-bag of measures intended to support the free-falling A-share market, which by Friday’s close had tumbled 29% from its mid-June high. By deploying almost every weapon in their armory, the authorities managed to arrest the market’s slide, at least in the immediate short term. By the close of trading on Monday, the Shanghai market was up 2.4% from Friday’s close. But there is a deep contradiction inherent in Beijing’s efforts to prop up stock prices. In the near term, the government finds itself forced to manipulate the market in order to restore investors’ confidence. In the longer term, however, official operations to support share prices run counter to the idea that Beijing needs a robust and deep stock market to help resolve existing market distortions and to facilitate its broader policy of economic liberalization. This is a contradiction that Beijing may find it hard to reconcile...
    Published on July 6th, 2015

    Over the weekend the Chinese government rushed out an unprecedented grab-bag of measures intended to support the free-falling A-share market, which by Friday’s close had tumbled 29% from its mid-June high. By deploying almost every weapon in their armory, the authorities managed to arrest the market’s slide, at least in the immediate short term. By the close of trading on Monday, the Shanghai market was up 2.4% from Friday’s close. But there is a deep contradiction inherent in Beijing’s efforts to prop up stock prices. In the near term, the government finds itself forced to manipulate the market in order to restore investors’ confidence. In the longer term, however, official operations to support share prices run counter to the idea that Beijing needs a robust and deep stock market to help resolve existing market distortions and to facilitate its broader policy of economic liberalization. This is a contradiction that Beijing may find it hard to reconcile...
    Published on July 6th, 2015

    The political and economic reality is that a 40-year old political neophyte from a “peripheral” European economy has taken the eurocrats to the cleaners. It is clear that the Greek populace knew exactly what was coming and extracted €89bn of “good money” from an exceptionally incompetent European Central Bank. This pool of liquid funds should prove a key support for the next year or two, and with Greece running a primary budget surplus the economy should be able to survive without foreign credit for enough time to get back on its feet...
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