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Gavekal Research
Vincent Tsui, Dan Wang, Fathom China Team
May 14th 2021
Webinar: The Semiconductor Endgame
It is increasingly clear that shortages of semiconductors are both more widespread and intractable than first thought. In the near term, the fear is of cascading disruption along the Asian electronics value chain. In the medium term, however, it is possible that massive supply responses create a glut of chips that causes prices to eventually crater.
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Gavekal Research
Cedric Gemehl, Nick Andrews
May 14th 2021
Heading For The Med
“Sell in May and go away,” has long been a popular adage in Europe, a continent renowned for its predilection for long summer holidays by the Mediterranean. Last year, however, “sell in May” would have proved disastrous as an investment strategy. This year too investors should treat the old saw with circumspection.
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Gavekal Research
Tan Kai Xian
May 13th 2021
Hardly Transitory, But Not A Spiral
After headline and core CPI readings hit multi-year highs for April, investors have inflation on their minds. The rise in US bond yields and continued fall in equities reflects fears that the Federal Reserve is behind the curve, and could be about to slam on the monetary brakes. My view is that these price pressures are far from transitory, but a spiral higher does not beckon.
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Gavekal Research
Dan Wang
May 13th 2021
The Future Of Chips Is Overcapacity
Semiconductors are tough to come by these days, and the shortage will be deep and long-lasting. Yet chips are about to turn into more of a commoditized product, just as companies make huge investments in production capacity and governments spend big to achieve self-sufficiency on national security grounds. This will lead to permanent excess capacity.
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Gavekal Dragonomics
Ernan Cui
May 12th 2021
The Population Turning Point Gets Closer
China’s 2020 census has confirmed that the country’s population could peak around 2025, rather than the consensus forecast of around 2030. Ernan writes that inconsistencies in the data suggest the census figures are overstated; indeed, China’s population may already have peaked in the last year, a decade ahead of schedule.
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Gavekal Research
Nick Andrews
May 12th 2021
Video: The Chill In EU-China Relations
Hailed as a breakthrough when it was struck back in December, the EU-China Comprehensive Agreement On Investment is in trouble, with little chance the deal will be ratified in the European Parliament amid a deep deterioration in bilateral relations. Nick examines what the political frost means for the earnings of European companies operating in China.
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Gavekal Research
Louis Gave
May 12th 2021
Where Will The Next Deflationary Shock Come From?
The 1986 oil price crash, to an extent, fired the starting gun on 30 years of global deflation. As commodity prices collapsed, so did the Soviet Union, giving the West a deflationary peace dividend. By the early 1990s, Japan’s real estate and equity market busts threatened its banks. The rollout of the North American Free Trade Area and the 1995 “tequila crisis” helped make Mexico a competitive manufacturing hub. Soon after, the 1997-98 Asian...
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Gavekal Research
Will Denyer
May 11th 2021
Playing The Inflation Rotation
It seems wherever you look today, there are inflation signals. If the Federal Reserve is right, and the signaled burst of inflation proves transitory, then all will be well. The risk is that inflation proves stickier than policymakers expect. If so, Monday’s -2.6% sell-off in the Nasdaq is just a taste of a rotation that still has further to run.
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Gavekal Dragonomics
Xiaoxi Zhang
May 11th 2021
The Screws Tighten On SOE Debts
China’s central authorities are ramping up their campaign to deal with hidden local-government debt, rolling out new rules and high-level political instructions. In this piece, Xiaoxi explains how this scrutiny will produce more defaults by state-backed firms, but also hopefully clarify the problematic legacy of implicit sovereign guarantees.
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Gavekal Research
Charles Gave
May 11th 2021
Ricardian Growth Is Fragile, Schumpeterian Growth Is Anti-Fragile
Capitalism works well when activity is undertaken using David Ricardo’s law of comparative advantage and Joseph Schumpeter’s process of creative destruction. Charles argues that an era of Ricardian growth for many countries and industries is running out of road and the drivers of Schumpeterian economic transformation are shifting.
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Gavekal Research
Anatole Kaletsky
May 10th 2021
A Post-Brexit Britain
Some long-term investors do seem to be worried that a breakup of the United Kingdom could add another element of uncertainty to what I described last year as the “triple whammy” of Brexit, Covid and the British Treasury’s surprising flirtation with tax increases and premature fiscal tightening. It now appears, however, that only one of these concerns is really justified.
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Gavekal Dragonomics
Ernan Cui
May 07th 2021
Coming Home For The Holidays
The number of tourists over China’s five-day Labor Day holiday recovered to 3.2% above 2019 levels, according to the Ministry of Culture & Tourism, although tourism revenue was still 23% below 2019. In this Quick Take, Ernan outlines explains what renewed confidence in domestic travel means for China’s services recovery.
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Gavekal Research
Tom Miller
May 07th 2021
The Global Pivot To The Indo-Pacific
The Indo-Pacific is at the heart of global geopolitics today. The US, UK, and European Union are all shifting their attention east. Tom argues that the new treatment of the Indian and Pacific Oceans as a single, connected space reflects a key shift in managing China’s regional power. The impact will be felt in both strategic and economic terms.
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Gavekal Research
Tom Miller, Udith Sikand
May 07th 2021
India Is Running Out Of Road
After Mumbai and Delhi, Bengaluru is the latest big Indian city to face a second wave of Covid infections. India’s underfunded health system is collapsing, as we feared it could a year ago. Yet markets are shrugging off the crisis: equities are flat, the rupee resilient. Tom and Udith investigate whether this disconnect is likely to persist.
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Gavekal Research
Udith Sikand
May 07th 2021
Video: The Economic Impact Of India's Second Wave
If India's latest Covid wave peaks in the next few weeks, economic catastrophe can be avoided. However, India does not have much policy space in which to operate, so the counter scenario of new and more virile mutations driving a worsening outbreak does mean that hitherto stoic local investors could yet throw in the towel on Indian risk assets.
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Gavekal Research
Will Denyer, Anatole Kaletsky, Louis Gave
May 07th 2021
Webinar: Global Investment Roundtable, May 2021
Joe Biden's enormous fiscal initiatives mark a potential sea change in the US government’s role in the economy. They may yet get watered down as the US president negotiates with more conservative members of his party, but tax and spend is clearly the new mantra in Washington DC. The question for investors is what this means for assets in the US and around the world.
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Gavekal Research
Louis Gave
May 06th 2021
The US Doesn’t Need A Wealth Tax
Louis had feared that the US would follow France in imposing a wealth tax on its citizens. But it turns out it doesn't have to, as the US is now embracing a combination of economic policies that seem set to destroy the capital base of rich Americans. This will have implications for asset holders and the value of the US dollar.
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Gavekal Research
Will Denyer, Tan Kai Xian
May 06th 2021
The Changing State Of US Liquidity
When it comes to creating and distributing US money, there are three main players: the Federal Reserve, the US Treasury and commercial banks. Recent events call for a status update on the prospects for money flows from each, and what it all means for the bond market.
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Gavekal Research
Will Denyer
May 05th 2021
Fighting The Fed Over Wages
Recent rollbacks of Covid restrictions in the US should spur consumer demand, adding to an inflationary brew. Most policymakers continue to claim such pricing pressure is “transitory”. Perhaps, but the employment cost index shows US wages having accelerated for the last two quarters and the balance of evidence points to this uptrend continuing.
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Gavekal Dragonomics
Rosealea Yao
May 05th 2021
The Steel Price Squeeze Is Here To Stay
China’s iron and steel prices have broken through their post-financial crisis highs, the result of strong domestic demand, constrained international supply and government plans to curb steel production. In this report, Rosealea explains why prices are likely to remain elevated but slowing demand growth should keep them from rising further.
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