Most Recent
Gavekal Research
The Quiet Sound Of Another Bubble Bursting
Louis-Vincent Gave
29 Sep 2023
On September 20, British Prime Minister Rishi Sunak announced an overhaul of policies designed to help the UK meet its legally-binding target of cutting its carbon emissions to net zero by 2050. The market had not waited for Sunak to push back against the prevailing
green political orthodoxy to start selling off alternative energy names.
Gavekal Research
Webinar: After The China Shock
Thomas Gatley, Wei He
29 Sep 2023
After a nasty deflationary shock, China's macro data have started to turn around at the margin. Yet markets remain unconvinced, with equities headed down and the currency still under pressure. Our China macro and markets experts will tackle these and other urgent questions about the outlook.
Gavekal-IS
The Swiss Franc Is Gold On Prozac
Didier Darcet
28 Sep 2023
Gold has long acted as an alternative reserve of value in times of fiat currency debasement. Didier argues that Swiss franc deposits have a track record over recent decades of fulfilling the same function, but with much lower volatility.
Gavekal Research
Video: Breasting The Bond Rout
Louis-Vincent Gave
28 Sep 2023
In the last two months, US treasury bonds have suffered another steep sell-off, with 10-year yields rising to their highest since 2007. In this video interview, Louis explores why the market is seeing another down-leg now, examines the implications and asks where, with major equity indexes under pressure, investors can seek safety amid the turbulence.
Gavekal Dragonomics
Car Exports Have Two Engines
Andrew Batson
Equity Investors Need More Convincing
Thomas Gatley
The Struggle Over The Renminbi
Wei He
The Financial Risk Report 2023
Xiaoxi Zhang
Growth Momentum Stabilizes
Dragonomics Team
The Stealth Rescue Of Small Banks
Xiaoxi Zhang
Taking Stock Of Property-Policy Changes
Rosealea Yao
A Half-Hearted Fiscal Expansion
Wei He
Huawei’s Symbolic Victory
Tilly Zhang
The US-China Clean Energy Competition
Dan Wang
More Research
Tough Choices In Asset Allocation
Will Denyer
Of Wars And Walmart
Charles Gave
Paris Seminar — September 2023
Thomas Gatley, Didier Darcet, Cedric Gemehl, Louis-Vincent Gave
Buy On Yom Kippur?
Louis-Vincent Gave
India Macro Update: Limited Upside Ahead
Udith Sikand, Tom Miller
Memories, Memories
Charles Gave
The Message In The Shanghai Gold Premium
Louis-Vincent Gave
Korea’s Hidden Debt Problem
Vincent Tsui
Video: The Real State Of China's Economy
Christopher Beddor
A Shoe About To Drop
Tan Kai Xian
Gavekal Research
A Stealth Reversal In Japan
Udith Sikand
28 Jul 2023
On Friday, the Bank of Japan effectively backed off its ultra-aggressive monetary policy stance, but insisted it was only tweaking its yield curve control tool to give it more flexibility. Udith argues that an era of ultra-easy money in Japan looks to be ending, with consequences for global funding markets.
The global view
Video: Breasting The Bond Rout
In the last two months, US treasury bonds have suffered another steep sell-off, with 10-year yields rising to their highest since 2007. In this video interview, Louis explores why the market is seeing another down-leg now, examines the implications and asks where, with major equity indexes under pressure, investors can seek safety amid the turbulence.
Memories, Memories
Real yields on the 10-year bund fell as markets began to price in German reunification, dropping to reach 4% at the end of 1989, and the sky seemed the limit for Germany’s asset markets. In May 1990, the German stock market made a relative peak against the US and French markets—a peak it has never surpassed. Charles examines the historical lessons and considers the implications for today's developed economies.
London Conference — September 2023
Our research panels tackle the macro outlook in core OECD economies, the chance of a strong Chinese recovery and the pathway of emerging economies that seem to be disengaging from the traditional US dollar-centered monetary system. We end by asking what these macro trends mean for investment strategy and asset allocation.
A Better Tool Required: Cross-Country Equity Valuations
To gauge relative equity valuations between international markets, investors typically compare P/E ratios. But simple P/Es fail to account for different states of market development, different sectoral compositions, different risk-free rates and the ever-present risk of currency volatility. To iron out these discrepancies, KX proposes a new cross-market valuation methodology.
Test Your Knowledge
Why has Danish toy company Lego company abandoned its plans to make bricks from recycled plastic bottles?
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Chart of the Week
The renminbi’s recent weakness against the US dollar is mostly due to the dollar’s strength. The renminbi has actually appreciated against the CFETS index, the nominal effective exchange rate measure that serves as the central bank’s policy anchor. That’s because the PBoC has been aggressively intervening to prop up the currency against the dollar.
Open Chart
US economy & markets
Tough Choices In Asset Allocation
After a tough couple of months in the markets, how should investors position their portfolios? After 10-year US treasuries have delivered a total return of -4.7% since the end of July, while the S&P 500 has returned -6.6%, the immediate choices look unappetizing. On the other hand, recent market moves have led to changes in relative valuation that shift the mid-term asset allocation picture. So what should investors do?
A Shoe About To Drop
The Federal Reserve kept US rates on hold Wednesday. But the dot plot signaled another rise is likely at one of the two meetings remaining before the end of 2023, as policymakers puzzled over the unexpected strength of the US economy. Fed chair Jerome Powell advanced three related explanations for this strength. Among them, the length of US policy lags—is worth some deeper consideration.
Fading Sources Of Funds For US Investment
In a sophisticated market economy, there are four potential sources of funds for investment. In the case of the US, a quick review of these sources of investment funds is concerning and points to headwinds for both economic growth and asset prices.
Towards Labor Market Slack
The US economy continues to create new jobs, but at a rate that is trending ever lower over time. Meanwhile, signs are mounting that the labor market is shifting from uncomfortably tight to less tight.
Ukraine Fallout
Behind The Commodity Price Rally
Mixed Messages In The German Labor Market
Video: China-Russia After Wagner
The Fog Of War And Commodity Prices
China Risks Sliding Into A Proxy War
The Ultimate Head Fake
Gavekal Research
Webinar: After The China Shock
Thomas Gatley, Wei He
29 Sep 2023
After a nasty deflationary shock, China's macro data have started to turn around at the margin. Yet markets remain unconvinced, with equities headed down and the currency still under pressure. Our China macro and markets experts will tackle these and other urgent questions about the outlook.
India chartbook
Gavekal Research
India Macro Update: Limited Upside Ahead
Udith Sikand, Tom Miller
26 Sep 2023
India’s economic growth drivers are broadening amid a pick-up in domestic demand. But with limited scope for policy support and mounting external headwinds, the balance of risks is tilted to the downside, at least in the near term.
China chartbook
Gavekal Dragonomics
The Financial Risk Report 2023
Xiaoxi Zhang
19 Sep 2023
China’s property-market correction and the resulting sluggish economic growth have intensified stresses on two of the biggest financial weak points: local-government financing vehicles and property developers. This chartbook assesses the financial risks emanating from those two groups of borrowers, and examines the likely impact in store for commercial banks, bond markets and other creditors.
Europe's economy
The View From The Peak
Thursday’s decision is likely to be the final move in a 450bp hiking cycle that started in July 2022. When you are at the peak, the only way is down, and market’s focus quickly shifted to how rapidly the ECB will cut eurozone interest rates. However, despite expectations for an early cut, there are at least three reasons to think that no rate cuts are likely before the second half of 2024 at the earliest.
Trouble Building
The European Central Bank’s 4.25pp of rate rises since July 2022 and €1.6trn of balance sheet contraction have not yet brought eurozone inflation back down to target, nor even below 5% year-on-year. But the ECB’s tightening is having a clearly discernible effect on the bloc’s real economy.
A Shifting Disinflationary Wind
The gentle disinflationary breeze that cooled the eurozone in early summer ran out of puff in August. The HICP reading released Thursday topped expectations to come in unchanged from July at 5.3% YoY. Still, the case for eurozone disinflation in the coming months remains strong.
Can Eurozone Equities Break Out?
Having constantly undershot expectations since early May, the eurozone’s economic indicators continue to surprise on the downside. Yet the performance of eurozone equity markets does not reflect this deterioration. Cedric and Nick examine why.
Gavekal Dragonomics
How Small A Yard, How High A Fence?
Yanmei Xie
A new Biden administration catchphrase calls for a “small yard, high fence”: export and investment controls on China will be limited to a small number of critical technologies, but they will be very hard. Yanmei argues that advanced computing technologies will be locked inside that yard, while most other technologies are likely to sit outside it.
Emerging markets
Video: India's Rising Star
There are increasing signs that the Indian government’s focus on investment spending, is starting to “crowd-in” private investment and spur consumption. Moreover, inflation is cooling, paving the way for monetary policy to be eased. In this interview, Udith assesses India’s prospects and explains what this improving macro-outlook means for India’s already highly performing asset markets.
Three Questions About Frontier Debt
One of the many tasks on US Treasury Secretary Janet Yellen’s plate during her long Beijing weekend is to nudge China to give more debt relief to the poor countries which it lavishly financed over the past decade. China did make a big step in late June by finally signing a deal to help Zambia. But the gap between Western and Chinese ideas of how best to restructure debts is still wide.
An EM Decoupling Of Sorts
Rapid tightening of monetary policy in advanced economies has historically caused financial stress in emerging economies, forcing a tightening of their monetary policy. Hence, it may be surprising that investors are penciling in interest rate cuts across emerging markets, even as Western central banks plan more hikes. Udith examines the change in this formerly dependent relationship.
Webinar: Turkey And Thailand—Two Elections At A Hard Time For EMs
Turkey and Thailand go to the polls on May 14. Both countries have seen their share of authoritarian policymaking and populist democratic politics. In yesterday’s webinar, Udith Sikand and Vincent Tsui assessed each economy’s prospects and sought to draw some common lessons.
Latest video
Gavekal Research
Video: Breasting The Bond Rout
Louis-Vincent Gave
28 Sep 2023
In the last two months, US treasury bonds have suffered another steep sell-off, with 10-year yields rising to their highest since 2007. In this video interview, Louis explores why the market is seeing another down-leg now, examines the implications and asks where, with major equity indexes under pressure, investors can seek safety amid the turbulence.
Gavekal Research
Strategy Monthly: The China Blowback
Wei He, Nick Andrews, Will Denyer, Vincent Tsui
1 Sep 2023
As China’s economy weakens, foreign suppliers that grew fat supplying raw materials and machinery face lean times. The cratering of China’s property market will not quickly reverse, and conditions may worsen before they improve. Gavekal's research team explores the global implications.
Equities
Video: Breasting The Bond Rout
Of Wars And Walmart
Equity Investors Need More Convincing
Of Gold And S&P 500 Dividends
Towards Labor Market Slack
Can Eurozone Equities Break Out?
Oil & commodities
The Quiet Sound Of Another Bubble Bursting
The Next Phase Of The Ukraine War?
Video: The Man In Demand
An Altercation Of Economists
Strategy Monthly: The China Blowback
Destabilizing Malaysia
China tech
Video: China's Inward Turn
The End Of The Echo Boom?
Coping With Semiconductor Containment
Video: AI—Boom Or Bust?
Internet Platforms Back In Favor
The Foundation For An AI Boom
Covid-19
After May’s Payrolls
Friday was a classic risk-on day. US equities rose sharply, with cyclical andsmall-cap stocks outperforming. Corporate credit spreads narrowed. And US treasuries and gold fell. The news coming out is undoubtedly good, but Kai Xian argues it may not have been quite as good as Friday’s risk-on move in markets suggests.
The Invisible Second Wave
China’s second Covid wave has arrived more or less on schedule, without producing lockdowns or even much public discussion at all. Like follow-on waves elsewhere in the world, the moderate rise in Covid cases is not likely to result in big disruptions to consumer behavior or economic activity.
China’s Underwhelming Reopening
A few weeks after China surprised investors by ditching its Covid restrictions, Presidents Xi Jinping and Joe Biden held what looked like friendly and productive talks at the G20 summit. Commodities and Chinese economy-related assets rallied, but the bounce did not last. Louis explores why, and what might be next.
Shanghai Seminar — April 2023
Louis examined the global macroeconomic landscape to find the key trends and structural changes that matter for investors; Wei discussed China's economic recovery and outlined the near-term growth and policy outlook; and Arthur spoke on China’s long-term growth trajectory geopolitical strategy.
