Most Recent
Gavekal Research
Corporate Stress In The UK
Nick Andrews
27 Mar 2023
Having lately reacquired the “sick man of Europe” sobriquet, the UK’s economic performance has now picked up and Britain is likely to duck a recession. But banking stress will limit the credit reaching the real economy, compounding growing distress in the corporate sector.
Gavekal Dragonomics
Deregulation And Decoupling For IPOs
Thomas Gatley
27 Mar 2023
China’s securities regulators are simultaneously tightening regulation of offshore listings, and significantly deregulating onshore listings. Thomas argues that the new rules will add momentum to the trend towards US-China financial decoupling by ensuring that the vast majority of Chinese firms list onshore in future.
Gavekal-IS
Wicksellian Bonds
Didier Darcet
24 Mar 2023
Not much in the financial world is free, but one exception is the cost-free benefit that comes from diversifying a portfolio by combining different assets like stocks and government bonds. The decision whether, or not, to invest in bonds depends on their expected real return.
Gavekal Research
The Inversion Signal Gets Inverted
Charles Gave
24 Mar 2023
Consider the US yield curve expressed as the arithmetical difference between the return of a 10-year government bond and a three-month T-bill. Each time this differential has swung into negative territory, a US recession has unfolded in fairly short order—until now.
Gavekal Dragonomics
A Diminished Central Bank
Wei He
Centralization And Course Correction
Andrew Batson
The Reopening Recovery Is On Track
Dragonomics Team
Credit Growth Sends A Buy Signal
Thomas Gatley
Restrained Reflation
Andrew Batson
Exit Technocrats, Stage Left
Wei He, Christopher Beddor
Uninvestible No More?
Andrew Batson, Thomas Gatley, Wei He
Copper Is Not So Cyclical
Rosealea Yao
The Property Recovery Starts In Big Cities
Rosealea Yao
The Next LGFV Bailouts
Xiaoxi Zhang
More Research
Webinar: China’s New Agenda
Wei He, Thomas Gatley
The Rivalry Takes Shape
Arthur Kroeber, Yanmei Xie, Tom Miller
The Fed's Non-Response
Will Denyer
Resilient But Fundamentally Weak
Cedric Gemehl, Nick Andrews
Hong Kong Seminar — March 2023
Will Denyer, Arthur Kroeber, Louis-Vincent Gave
Macron’s Pyrrhic Victory
Cedric Gemehl
Peace Breaks Out
Louis-Vincent Gave
The Credit Suisse Take-Under
Louis-Vincent Gave
Time Is Running Out
Tan Kai Xian, Will Denyer
Video: The State Of China's Recovery
Christopher Beddor
Gavekal Research
A Gavekal Debate: US Bust, Or Not?
Will Denyer, Louis-Vincent Gave, Anatole Kaletsky
6 Feb 2023
During the last year, most of the world economy has been in an inflationary boom. Yet looking into 2023, our US analyst team of Will Denyer and Tan Kai Xian have become worried that the next big turn will be to a US deflationary bust. Both Louis Gave and Anatole Kaletsky disagree with this stance, although for different reasons.
The global view
Hong Kong Seminar — March 2023
Will Denyer discussed the banking trouble in the US and how it might affect the Federal Reserve’s course of action, Arthur Kroeber presented on China’s economic outlook and geopolitical strategy, and Louis sought to identify the key themes for investors in 2023.
Deglobalization, Uninvestible China And Capital Controls
Chinese exports to the US are near an all-time high, seemingly giving the lie to notions of deglobalization. Louis contends that is to look at things incorrectly as deglobalization has really been a story of impacted financial flows, rather than reduced trade activity.
Aging, Productivity And Inflation
As if the developed economies did not have enough problems to worry about, they face a situation of worsening demography, shrinking labor forces and a promise of generous pension benefits that will be hard to maintain without reducing the younger generation to penury.
Clash Of Empires Update: Identifying Winners And Losers
In the third installment of a series on moves towards a new financial architecture, Charles looks at how the need of Asian countries to accumulate US dollar reserves to cover their energy imports has dictated global capital flows over recent decades, and why that's changing.
Chart of the Week
Thailand is among the countries most eagerly awaiting a rebound in Chinese tourism. Before the pandemic halted outbound travel, Chinese visitors made up 25-30% of tourist arrivals in the Land of Smiles. Though they aren't considered the biggest spenders, a return of Chinese tourists is all but certain to provide a fillip to the Thai economy, which depends on tourism for as much as 10% of GDP. More tourist spending will also help support the Thai baht, which in recent years has been weighed down by concerns over the widening current account deficit and negative real interest rates.
Open Chart
US economy & markets
The Fed's Non-Response
At the first policy meeting since multiple US banks failed, the Federal Reserve chose to stay the course—hiking interest rates by 25bp to just under 5.0%. Treasury Secretary Janet Yellen and Fed Chair Jerome Powell sent mixed messages on the extent of guarantees being offered to skittish depositors in American banks, causing bank stocks in particular to sell off.
Time Is Running Out
Policy makers and Wall Street’s big banks have been hosing down fire risks in the US banking system with emergency liquidity. But the measures so far will not be enough, and time is running out for more assertive action to halt the emerging crisis.
Truth In Financial Conditions
Milton Friedman once compared hapless central bankers who fail to appreciate the lag between monetary policy and inflation to a “fool in the shower.” At first the water is too cold, so the shivering fool turns up the hot tap until he is enveloped in a scalding jet of steam. He frantically cranks up the cold, only to end up doused in a numbing stream of ice water.
What SVB Means For Fed Policy
Following the failures of Silicon Valley Bank and Signature Bank, the Federal Reserve promised to hose the system down with emergency liquidity to head off any deterioration of confidence in other institutions. Next, policymakers will have to reconsider the future course of interest rate hikes and quantitative tightening.
Ukraine Fallout
China Risks Sliding Into A Proxy War
The Ultimate Head Fake
Behind Russia’s Oil Production Cut
Investing For A New Cold War
Russia, Do Your Worst
Who Is Copying Who? Part II
Gavekal Dragonomics
Webinar: China’s New Agenda
Wei He, Thomas Gatley
24 Mar 2023
Hoping to turn the page on a traumatic 2022, China’s government has unveiled a new agenda to be carried out by fresh faces in 2023. In this webinar our China team discusses the outlook for the economy, the political risks and the drivers for markets.
India chartbook
Gavekal Research
India Macro Update: Normalization In Sight
Udith Sikand, Tom Miller
13 Dec 2022
Indian economic growth data is all over the place. Despite some positive signs, especially the upturn in the investment cycle, rising external volatility and domestic policy tightening mean growth could slow a little more, contend Udith and Tom. Here, they unpick the factors influencing India’s macro picture and markets.
China chartbook
Gavekal Dragonomics
Macro Update: Reversal, Reopening, Recovery
Dragonomics Team
27 Jan 2023
China’s remarkable reversal of Covid policies in late 2022 has set the stage for an equally unusual economic recovery in 2023. It’s early days yet, but consumer activity is quickly normalizing, and this consumption-led rebound will gather strength in coming months. Our latest quarterly chartbook examines the prospects and market implications of this recovery.
Europe's economy
Corporate Stress In The UK
Having lately reacquired the “sick man of Europe” sobriquet, the UK’s economic performance has now picked up and Britain is likely to duck a recession. But banking stress will limit the credit reaching the real economy, compounding growing distress in the corporate sector.
Resilient But Fundamentally Weak
Solvency fears at US regional banks and the “take-under” of Credit Suisse have raised concerns that European lenders may be next in line for trouble. Yet for all the woes of eurozone banks, they should avoid the kind of problems seen in the US and Switzerland.
Macron’s Pyrrhic Victory
After weeks of strikes and escalating social unrest, President Emmanuel Macron’s pension reform finally won legislative approval on Monday. Alas, for Macron, the political mechanism he used to pass the initiative will further divide French politics and make it hard to get fresh reforms through parliament.
Inflation Control Versus Financial Stability
In the broadest terms, the European Central Bank and the US Federal Reserve face the same problem: bringing inflation down without threatening the stability of the financial system. Here, we assess the ECB’s balancing act, in light of its 50bp rate hike and monetary policy statement Thursday.
Gavekal Dragonomics
Securing The Western Frontier
Tom Miller
China looks like a winner from the US withdrawal from Afghanistan, now free to tighten its grip on Central Asia. In this DeepChina report, Tom explains the complex reality of the latest round of the "great game." China is getting closer to Russia, skeptical of Afghanistan and Pakistan, and consolidating its economic hold on Turkmenistan.
Emerging markets
Webinar: The Next Step For Emerging Markets
Emerging market analysts Udith Sikand and Vincent Tsui outlined the two big forces that will drive EM performance over the rest of 2023, and explored the three main macro scenarios EM investors are likely to face.
Weighing The Emerging Markets
Does the pullback of the last few weeks ring time on the rally that lifted emerging market assets and currencies from October to January? Or does it present an attractive entry point for investors who may have missed the first stage of a protracted period of outperformance that promises to stretch through the rest of 2023?
A Constrained Brazilian
Luiz Inácio Lula da Silva has snuck a tight win in Brazil’s presidential election race, while defeated incumbent Jair Bolsonaro looks not to be contesting the result as feared before the second-round run-off. Assuming that an orderly transition of power duly unfolds, the effect should be to lower the political risk premium on deeply undervalued Brazilian assets.
Asia’s New Interventionists
Asian central banks are spooked by the US dollar’s apparent one-way ascent and are resorting to direct intervention. Is there method to their apparent scramble for control?
Latest video
Gavekal Dragonomics
Video: The State Of China's Recovery
Christopher Beddor
17 Mar 2023
China’s hotly anticipated economic indicators for January and February, released this week, revealed for the first time the state of the economic recovery after the reopening from Covid containment. Christopher unpacks what the data show and the likely trajectory for growth this year.
Gavekal Research
Strategy Monthly: Emerging Markets—Two Out Of Three Ain’t Bad
Udith Sikand, Vincent Tsui
3 Mar 2023
Between November 2022 and January 2023, EM assets enjoyed a sharp rally propelled by hopes for an early US Federal Reserve pivot and a powerful reopening boom in China. Then in February the doubts set in. Where does this leave the outlook for EMs?
Equities
Resilient But Fundamentally Weak
Hong Kong Seminar — March 2023
India Macro Update: Weaker Than Expected
The Chinese Equity Pullback
Webinar: The Next Step For Emerging Markets
Strategy Monthly: Emerging Markets—Two Out Of Three Ain’t Bad
Oil & commodities
Peace Breaks Out
Clash Of Empires Update: Identifying Winners And Losers
The Ultimate Head Fake
Behind Russia’s Oil Production Cut
Anchored Much?
Of Gold And Oil
China tech
China Risks Sliding Into A Proxy War
Video: The Asian Trade Cycle Lives
The Semiconductor Stranglehold Tightens
Eight Questions For China’s Tech Sector In 2023
A Respite In The Strategic Rivalry
The Enforcement Challenge For US Chip Controls
Covid-19
The Reopening Recovery Is On Track
Economic indicators for January and February provided the first clear picture of how the economy is faring after the reopening from Covid containment. The Dragonomics team argues that on the whole, the data point to a decent recovery driven by the property sector and household consumption, and is likely to continue in the months ahead.
Video: Shifting Global Fund Flows
After years of US dollar strength, 2023 opens with the prospect that Chinese holders of US dollars now begin to deploy the funds they accumulated over Covid. Meanwhile, the Bank of Japan may shift policy and spark repatriation flows. Louis examines the implications.
Macro Update: Reversal, Reopening, Recovery
China’s remarkable reversal of Covid policies in late 2022 has set the stage for an equally unusual economic recovery in 2023. It’s early days yet, but consumer activity is quickly normalizing, and this consumption-led rebound will gather strength in coming months. Our latest quarterly chartbook examines the prospects and market implications of this recovery.
Webinar: China’s Covid Surge And The Reopening Rally
China continues to reel from a massive wave of Covid infections, but cases may have already peaked in most places. In this webinar our China team discussed the pace of reopening and its market implications. Ernan Cui provided the latest updates on the Covid situation, and Thomas Gatley assessed how far the reopening rally has to run.
