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Embrace China’s Reopening Rally

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Embrace China’s Reopening Rally

Thomas Gatley
5 Dec 2022
Investor sentiment on China has turned around rapidly in recent weeks, with the MSCI China up 28% in November and the CSI 300 up 11%. Now investors face the question whether to fade the rally, on the view that most of the good news is already in the price, or to embrace it, on the view that there is more upside than downside.
Themes For 2023: Consequences Of The US Bubble Implosion

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Themes For 2023: Consequences Of The US Bubble Implosion

Louis-Vincent Gave
2 Dec 2022
As Louis has had multiple discussions with clients about the investibility of China and Europe over recent months, he has continually run into the view that the US is the "cleanest dirty shirt". Here, he explores whether the US’s best-of-a-bad-bunch status can survive the rupture of its easy money-induced asset bubble.

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Video: Unpicking China's Covid Exit

Christopher Beddor
2 Dec 2022
China took the first steps towards a de facto reopening this week, as the country’s strict Covid containment regime broke down following protests last weekend. In this interview, Christopher looks at why the breakdown happened and how reopening is likely to unfold in the coming weeks and months, including its implications for the economy.

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Europe’s Coming Mortgage Shock

Cedric Gemehl
2 Dec 2022
Wednesday’s news that eurozone consumer inflation dipped to 10.0% year-on-year in November, from 10.6% the previous month, will have come as small comfort to households in Europe facing higher debt service costs over the next 12 months, especially on their mortgages, as a result of central bank interest rate hikes.

Gavekal Dragonomics

Property Policy Gets More Direct
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Xiaoxi Zhang
Optimization Failure
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Ernan Cui
Covid Policy Descends Into Chaos
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Ernan Cui
A Respite In The Strategic Rivalry
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Dan Wang
Housing & Construction Review 2022
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Rosealea Yao
Growth Wanes As Covid Waxes
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Dragonomics Team
Playing The Policy Changes
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Andrew Batson
The Renminbi Needs A Growth Boost
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Wei He
Developers’ Bad Debts Threaten Banks
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Xiaoxi Zhang
Macro Update: Caution After The Congress
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Dragonomics Team

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Webinar: Fiscal And Monetary Policy After The Midterms
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Will Denyer, Tan Kai Xian
Strategy Monthly: US Policy In The Recession Of 2023
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Will Denyer, Tan Kai Xian
Another Equity Rally To Fade
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Tan Kai Xian
The Bank Of Japan Edges Toward Change
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Udith Sikand
One Step Closer To A Fed Pause
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Will Denyer
The Message In The Bund Curve
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Nick Andrews
Covid And China’s Political Choices
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Louis-Vincent Gave
Beginning Of The End For Zero-Covid
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Christopher Beddor
Europe’s Consumers Run Out Of Road
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Cedric Gemehl
The End Of China’s Bond Bull Run
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Wei He

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Beginning Of The End For Zero-Covid

Christopher Beddor
28 Nov 2022
Over the weekend, protests against strict Covid containment rules erupted across multiple cities in China’s biggest expression of political discontent for more than three decades. The demonstrations do not imminently threaten the existing political order, but they do mean the current Covid policy mix is no longer politically sustainable. The question now is exactly how messy and gradual China’s de facto reopening will be.
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Chart of the Week

Week 48, 2022

Week 48, 2022

Mass protests in China over the weekend mean the harshest Covid containment policies are no longer politically sustainable. Without them, cases are likely to rise much further. Even before the protests, the containment system faced a make-or-break moment. Measures announced earlier this month to “optimize” Covid policies only led to chaos among local officials, and the system has broken down. That doesn’t mean restrictions will abruptly lift; in fact, they will probably tighten in the next few weeks. Economic disruptions may also get worse.

Ukraine Fallout

Investing For A New Cold War
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Russia, Do Your Worst
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Who Is Copying Who? Part II
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The Microsoft-ification Of Warfare
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The End Of The Unipolar Era
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World Enters New Liquidity Crisis
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Webinar: Fiscal And Monetary Policy After The Midterms

Will Denyer, Tan Kai Xian
2 Dec 2022
With a change of political control looming in the US House of Representatives, fiscal policy could be increasingly important in dictating the remainder of this economic cycle. On top of that, the Federal Reserve may soon pivot. Will and KX unpick what this all means.

India chartbook

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India Macro Update: A Glimmer Of Hope

Udith Sikand, Tom Miller
15 Sep 2022
India’s economy is recovering nicely, even if the latest quarterly growth data showing a 13.5% year-on-year expansion was flattered by favorable base effects. Looking forward, the problem is an adverse external backdrop that is hurting exports and leaving India’s capital markets vulnerable to another risk-off move as global liquidity tightens.

China chartbook

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Macro Update: Caution After The Congress

Dragonomics Team
3 Nov 2022
China’s economy enjoyed a bounce after reopening from lockdowns, but the property downturn continues and Covid restrictions linger, while external demand is on the wane. Although growth prospects look poor, October’s Communist Party Congress delivered signals of continuity rather than a hoped-for change of course. In our latest quarterly chartbook, the Dragonomics team explores the outlook for policy, markets and the economy.

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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.

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Video: Unpicking China's Covid Exit

Christopher Beddor
2 Dec 2022
China took the first steps towards a de facto reopening this week, as the country’s strict Covid containment regime broke down following protests last weekend. In this interview, Christopher looks at why the breakdown happened and how reopening is likely to unfold in the coming weeks and months, including its implications for the economy.

Oil & commodities

An Ugly Week For Energy
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The Demise Of Imperial Privilege
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Can An Oil Price Cap Work?
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Behind The Rebound In Markets
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Video: Brazil After The Election
When Cartels Clash
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China tech

A Respite In The Strategic Rivalry
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The Enforcement Challenge For US Chip Controls
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US Chip Sanctions And China’s Options
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The US Runs Faster In The Chips Race
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Chip Investors Are Too Pessimistic
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Plenty Of Friction But No Flames Over Taiwan
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Covid-19

Video: Unpicking China's Covid Exit
China took the first steps towards a de facto reopening this week, as the country’s strict Covid containment regime broke down following protests last weekend. In this interview, Christopher looks at why the breakdown happened and how reopening is likely to unfold in the coming weeks and months, including its implications for the economy.
Covid And China’s Political Choices
Whether the weekend’s anti-lockdown protests in China prove bearish or bullish depends whether the Communist Party is an increasingly out-of-touch dictatorship or an organization that does try to respond to popular concerns because it prizes social stability. Louis examines the leadership’s options and the market implications.
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Beginning Of The End For Zero-Covid
Over the weekend, protests against strict Covid containment rules erupted across multiple cities in China’s biggest expression of political discontent for more than three decades. The demonstrations do not imminently threaten the existing political order, but they do mean the current Covid policy mix is no longer politically sustainable. The question now is exactly how messy and gradual China’s de facto reopening will be.
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Playing The Policy Changes
In recent days, officials have announced important revisions to Covid containment measures and rolled out new policies to support the property sector. The Dragonomics team argues these moves are positive but not major reversals: policymakers are trying harder to make current approaches to Covid and property work, rather than shift to something new.
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From the archives: oldies but goodies

Deficit Deniers Of The World Unite
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Deficit Deniers Of The World Unite

Anatole Kaletsky
In our politically correct age the pressure to bow down before certain popularly accepted and apparently proven “truths” can be overwhelming. In the aftermath of the US elections, two such nostrums are unnecessarily vexing investors—the urgency of deficit reduction and fear of higher taxes. I believe that both of these obsessions will soon be forgotten.
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Are We Entering into Revolutionary Times?
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Are We Entering into Revolutionary Times?

Louis-Vincent Gave
The role of a society’s elite is to rise to the challenges of the times, and find solutions fitting to those times, even if this involves a radical break with the past. But the modus operandi for most leaders is to try and maintain the status quo. But if the problems are large enough, this does not work, and the same challenges reappear until either a solution is found, the elite is replaced by a new elite, or the country, system or civilization disappears.
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The High Cost Of Free Money
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The High Cost Of Free Money

Charles Gave
Perhaps the most famous economic law is the one that there is no such thing as a free lunch. By keeping US short rates at abnormally low levels beyond the financial crisis and as growth bounces back beyond the dreams of the wildest optimists, the Fed increasingly seems to be trying to ‘feed the US economy for nothing’. This is worrying, for extended periods of cheap money typically come back with a hefty price tag.
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