Most Recent
Gavekal Research
Buy On Yom Kippur?
Louis-Vincent Gave
27 Sep 2023
An old saying advises investors to “sell the equity market on Rosh Hashanah, and buy it back at Yom Kippur.” However, this year any investor minded to trade according to the Jewish calendar would have been better off selling US treasuries as 10-year yields jumped from 4.29% to 4.52%. So, with the Jewish holidays now behind us, should we trust market lore and dive back into risk assets?
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.
Gavekal Research
Memories, Memories
Charles Gave
26 Sep 2023
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.
Gavekal Research
The Message In The Shanghai Gold Premium
Louis-Vincent Gave
25 Sep 2023
The last few weeks have seen an odd divergence in gold markets. In Shanghai the price of gold touched the renminbi equivalent of US$2,048 per troy ounce. Meanwhile, in New York the gold price has moved relatively little, trading sideways around US$1,925/oz. Louis ponders the signals and implications of this highly unusual price gap.
Gavekal Dragonomics
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
Property Policy Shifts
Rosealea Yao
More Research
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
London Conference — September 2023
Research Team, Dragonomics Team
And The Ugly Prize Goes To...
Charles Gave
Dangerous Road For German Carmakers
Yanmei Xie
A Better Tool Required: Cross-Country Equity Valuations
Tan Kai Xian
A World Awash In 'Safe' Assets
Louis-Vincent Gave
Showdown At The OK Corral
Louis-Vincent Gave
The View From The Peak
Cedric Gemehl
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
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.
A World Awash In 'Safe' Assets
As Europe’s data continue to point to tougher times, much the same can be said about the United States. There are many explanations for this odd divergence between growth and
bond yields. Louis suggests a shift in global trade and its funding as a reason for today’s pain in OECD bond markets.
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
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.
Prepare For The Bull Steepener
At Jerome Powell’s Jackson Hole speech on Friday the Federal Reserve chair stuck to his mantra of “getting the job done”, with no fresh encouragement offered to either bond bears or bond bulls. This will force investors to get back to their macro knitting at a point in the cycle when those of all persuasions can find something to confirm their biases.
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: Is A New Cycle Playing Out?
Anatole Kaletsky, Arthur Kroeber, Louis-Vincent Gave
7 Jul 2023
The global investment environment remains blighted by sustained inflationary pressure, tapped-out Western governments and a weakening Chinese economy. But tech stocks are again surging, this time on AI-fueled expectations. Anatole, Arthur and Louis pick through these dynamics to explain how these apparently conflicting trends may play out.
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: The Real State Of China's Economy
Christopher Beddor
22 Sep 2023
After August’s panic about a possible economic implosion in China has died down, Christopher Beddor offers a sober assessment of the current outlook. Growth momentum appears to be stabilizing, and the authorities are easing real estate market policy. However, the financial weakness of developers continues to put strains on less visible parts of the financial sector.
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
Equity Investors Need More Convincing
Of Gold And S&P 500 Dividends
Towards Labor Market Slack
Can Eurozone Equities Break Out?
Financial Engineering And US Outperformance
A Q&A On China’s Mounting Troubles
Oil & commodities
The Next Phase Of The Ukraine War?
Video: The Man In Demand
An Altercation Of Economists
Strategy Monthly: The China Blowback
Destabilizing Malaysia
Oil's Opacity Problem
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.
