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Gavekal Research
Tom Miller
Oct 24th 2014
Travels Along The New Silk Road: The Economics Of Power
China’s economic expansion overseas is one of the defining geopolitical shifts of our time. Chinese firms have already invested in excess of US$500bn abroad, and the annual flow of overseas investment is set to overtake the flow of foreign direct investment this year (see More Deals, More Players). The push into Africa has captured most attention, but China’s economic tentacles are spreading across developing Asia, too—not least in Central Asia...
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Gavekal Research
Joyce Poon, Tan Kai Xian
Oct 23rd 2014
Buying The Dip? Choose Asia
Markets remain jittery, but the last week has at least seen a break in the downward momentum. Hence it may be worth taking stock of relative performance by the big regions. Looking across the MSCI benchmarks, the All Country World index is down –4.7% since its peak in early September, while the US, Eurozone, Emerging Markets (ex-Asia) and Emerging Asia declined respectively by –3.9%, -5.2%, -8.4% and –5.4%.
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Gavekal Research
Tom Miller
Oct 22nd 2014
Blood And Bazaars On The New Silk Road
After more than three decades of passive foreign policy, China has a strong leader unafraid of articulating a vision of expansionism. Like Vladimir Putin, Xi Jinping wants to re-establish his country’s historical sphere of influence—but Xi’s vision is based on economic logic rather than political machismo. Across Asia, China is using its enormous domestic market, financial power and prowess in building infrastructure to suck its neighbors into...
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Gavekal Dragonomics
Long Chen
Oct 21st 2014
Slouching Towards 7% Growth
Global growth is slowing and anyone looking for cheer is not going to find it in China, where third quarter GDP grew 7.3% year-on-year—the lowest growth rate since the first quarter of 2009. The slowdown is hardly unexpected, given the limited effects of Beijing’s growth-supporting policies earlier in the year and the long downward slide of private sector investment (see So Much For China’s Mini-Stimulus and Can Reforms Revitalize The Private...
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Gavekal Research
Louis Gave
Oct 20th 2014
Give Last Week Back To The Indians
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Gavekal Research
Research Team
Oct 16th 2014
Torschlusspanik!
The Germans, it is said, have a word for everything—and their word for what we saw in European and US markets on Wednesday and in Asia on Thursday morning is Torschlusspanik. Literally ‘gate-shut-panic’, this describes the nasty crush that develops when everyone rushes at once for an exit that is fast closing; inevitably someone gets injured.
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Gavekal Dragonomics
Andrew Batson
Oct 16th 2014
Can Reforms Revitalize The Private Sector?
China’s heavy reliance on local governments and state enterprises for its stimulus efforts in recent years has diverted attention away from the true driver of growth: the private sector. But unfortunately investment by private firms has been steadily slowing for years, and so has overall growth. In this presentation, Andrew explains why private-sector investment has been weak, and what the government can do about it. There is potential for...
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Gavekal Research
François-Xavier Chauchat, Will Denyer, Joyce Poon, Udith Sikand, Tan Kai Xian
Oct 15th 2014
Five Corners (October 15): The Equity Rout
Overview: François Chauchat asks whether a US recovery is enough to drive global equity markets or has the world changed.
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Gavekal Research
Michael Meidan
Oct 14th 2014
Oil Markets On The Brink
Welcome to the “new normal” of the global oil markets. Investors are waking up to the reality that supply-demand fundamentals have gotten out of whack and are now readjusting. The price of Brent has fallen from its June high of US$115/barrel to around US$88/bbl, its lowest level since late 2010. This report will contend that prices could fall further before settling into a lower range and remaining there for a significant period.
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Gavekal Research
Anatole Kaletsky
Oct 14th 2014
Behind The Equity Market Meltdown
Why are stock markets around the world falling? The surest explanation is one that works whenever the markets move in a big way: there are more sellers than buyers after a long period without a meaningful correction (it is three years since the 20% decline that ended in October 2011). A more sophisticated account of the correction might point to the collapse of oil prices and its impact on natural resource shares. While falling oil prices are...
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Gavekal Dragonomics
Thomas Gatley
Oct 13th 2014
Shanghai A-Shares: The Illusion Of Value
China’s domestic stock markets have been on a tear: Shanghai stocks are up 15% since July, despite recent weak macro data and the absence of aggressive policy easing. Soon, overseas investors will be able to join in the rally: later this month, China will launch a new link between the Shanghai and Hong Kong stock exchanges. But should foreign investors really be eager to pile into Shanghai?
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Gavekal Research
Louis Gave
Oct 10th 2014
Normal Or Systemic Markets?
In The Crucible Arthur Miller wrote “until an hour before the Devil fell, God thought him beautiful in Heaven”. Granted, equity markets have not exactly suffered Lucifer-like de-ratings lately. Nonetheless, the price action in stock markets around the world is looking less and less healthy by the day. Let me explain: when examining the performance of a given index over a very long period of time, one typically finds that, like most things in...
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Gavekal Research
Charles Gave
Oct 09th 2014
If You Keep On Doing What You’ve Always Done...
...you'll keep on getting what you’ve always got. At least, that's what any sports coach worth his salt would tell a losing team in the half-time huddle. And perhaps this is the problem facing the big developed economies. Not enough of today's bien-pensants (Hollande, Merkel, Yellen, Bernanke...) or their advisers (Summers, Piketty, Krugman...) have spent time chasing a ball around a field. Let me explain.
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Gavekal Dragonomics
Long Chen
Oct 09th 2014
The Hidden Trade Deficit
China’s current account surplus, once the focus of global economic anxiety, is shrinking dramatically: it fell to US$182bn in 2013, from its peak of US$420bn in 2008, and as a share of GDP has fallen to 2% from 10%. The conventional wisdom is that this fall reflects much weaker export growth in the poor global environment that followed the financial crisis. In fact the problems of traditional goods trade are overstated: China’s merchandise trade...
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Gavekal Research
Thomas Gatley
Oct 08th 2014
5C China: Calling Time On The A-Share Rally
Stocks on the Shanghai exchange have rallied 15% over the last three months, and international investors are poised for the opening of relatively untrammeled access to onshore equities when the Shanghai-Hong Kong Stock Connect program kicks off later this month (though the rumor-mill suggests it will be pushed back for technical reasons). Tracker funds have been capitalizing on this renewed interest: Deutsche’s year-old Harvest CSI 300 China A-...
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Gavekal Research
François-Xavier Chauchat
Oct 08th 2014
5C Overview: Waiting For The Regional Rotation
After years of doubt about the efficacy of US economic policies, the revival of confidence in America stands out as one of the key developments of 2014. This turnaround has been attested by the recovery of capital investment, by the resilience of the US economy to the Federal Reserve’s tapering process, and more recently by the strength of the US dollar.
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Fathom China
Matthew Forney
Oct 07th 2014
Profile: Great Wall Motor: Off The Road
Great Wall Motor was once considered China’s most promising private car company. It had an excellent reputation, a strong and charismatic founder, a strong position in the fast-growing market for SUVs, and a head start in exporting cars to developed markets. Today, Great Wall risks losing its way.
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Gavekal Research
Arthur Kroeber
Oct 06th 2014
The Hong Kong Endgame
Today, after a week of excitement, the democracy demonstrations in Hong Kong have largely fizzled out—at least for now. As the city returned to work on Monday morning, the remaining protesters did not try to prevent civil servants from reaching their offices in the government’s downtown headquarters. By midday the numbers outside the complex had dwindled to just a few scores, down from the many tens of thousands that had jammed surrounding...
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Gavekal Research
Research Team
Oct 01st 2014
Five Corners (1 October): The Energy Selloff
Overview: Louis looks at the decline in oil prices and wonders whether the genesis can be found back in May when the leaders of China and Russia met for an historic summit.
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Gavekal Research
Michael Komesaroff
Sep 30th 2014
Dr Copper Comes A Cropper
It’s been a brutal year for commodities. Slower growth in China, and stalled economies in Europe and Japan, have eroded end-user demand even as the prospect of higher interest rates in the US has blunted investor appetite for zero-yield assets. At the same time the heavy investment of recent years is now bringing new sources of supply to market. In response, the S&P GSCI commodity index is down -7.2% over the year to date. Even copper, long...
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