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Gavekal Research
Tom Miller
Oct 15th 2019
Modi Shifts From Tub-thumping To Stimulus
After spending the first few months of his second term on nationalist politics, Indian Prime Minister Narendra Modi is shifting his government’s attention to the economy. The substantial corporate tax cut announced last month was welcome news. However, Modi will have an uphill battle to get the economy moving before ballooning twin deficits begin to bite.
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Gavekal Research
Will Denyer, Tan Kai Xian
Oct 15th 2019
The Fed Goes On The Offensive
Grocery shoppers get perturbed when they buy produce labeled as “organic” but get something from the agro-industrial complex. Investors, on the other hand, should welcome the Federal Reserve’s balance sheet boost, that was described on Friday as nothing more than “organic” growth. As it turns out, this is a heavily engineered offering by the custodians of money.
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Gavekal Research
Anatole Kaletsky
Oct 14th 2019
Sizing Up The Brexit Risks
The pound surged after Boris Johnson and Irish Prime Minister Leo Varadkar achieved a negotiating breakthrough on Thursday over arrangements for the Irish border. The question is: What next? Anatole argues that while these moves still point to a multi-pronged set of outcomes, at least there is now a measurable set of permutations.
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Gavekal Research
Arthur Kroeber
Oct 14th 2019
Trump’s Unreal Deal With China
The US-China trade cease-fire announced on Friday shows that President Trump needs a quick deal: facing a soft economy and likely impeachment, he wants to bank a win as soon as possible. The two sides are moving toward a deal in November, but that will not change China's economic model or end US efforts to constrain China's technological rise.
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Gavekal Research
Vincent Tsui, Udith Sikand, Tom Miller, Arthur Kroeber
Oct 11th 2019
Audio & Transcript — Gavekal Research Call October 2019
Vincent outlined EM Asia's "great moderation", as inflation is diverging from other emerging markets, creating opportunities in bonds. Udith argued that Indian growth may be bottoming out but a bad banking picture means that equities may have more downside. Tom addressed the remaking of Asian supply chains in light of the US-China trade war.
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Gavekal Research
Tan Kai Xian
Oct 11th 2019
Watching For Signs Of A US Spillover
Is the rot spreading? In the eurozone, there are signs that this year’s slump in manufacturing may be beginning to spill over to weigh on activity in the broader economy. Plenty of observers believe the US economy is destined to follow a similar path. Their fears may yet be realized, but so far there is no evidence the US economy is heading that way.
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Gavekal Research
Charles Gave
Oct 11th 2019
Please, Your Majesty, Do Nothing
Western democracies in the early 1990s stood unchallenged in the battle of big ideas. Alas, everything that has gone wrong in western economies over the last decade or so stems from the lessons that the technocracy took from this victory. Charles considers the mistakes and examines the investment consequences that must now follow.
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Gavekal Research
Tom Holland
Oct 10th 2019
At Home In The Range
Almost a month after missile attacks on key Saudi Arabian oil production and processing facilities pushed benchmark global oil prices up by 20% overnight, the market has moved on. Saudi Arabia has defied industry expectations by continuing to supply oil to the market in abundant quantities. The current market pricing reflects that.
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Gavekal Dragonomics
Xiaoxi Zhang
Oct 10th 2019
The Banks Still At Risk
The first wave of Chinese bank failures will not be the last. Over the summer, three smaller Chinese banks had to receive official assistance to continue operating. The problems that brought down those banks were not isolated issues, and there are other smaller banks still at risk. This report identifies the most troubled institutions.
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Gavekal Research
Udith Sikand
Oct 10th 2019
Video: India's Banking Blues
A tweet by the Reserve Bank of India caused a bit of a stir last week, saying that the “…Indian banking system is safe and stable and there is no need to panic…”. It was after a small regional bank had been effectively put into receivership. While this doesn't pose a systemic risk, it's another consequence of Indian banks’ decade-old bad loan problem.
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Gavekal Research
Will Denyer
Oct 09th 2019
Back To Balance Sheet Expansion
On Tuesday, Jay Powell confirmed that the US Federal Reserve will go back to growing its balance sheet once again following its meeting at the end of October. The aim is for the balance sheet to grow gradually along with the economy. While the Fed’s planned move is clearly positive for liquidity growth, it is likely to disappoint investors for two reasons.
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Gavekal Research
Anatole Kaletsky
Oct 08th 2019
To Impeachment And Beyond
What will determine whether the global economic expansion and equity bull market will continue in the year ahead? The political upheavals which dominated in the past three years, such as the trade war, Iran oil sanctions and Brexit, have seemed to subside or become priced in. But new political noise is being generated by the threatened impeachment of President Donald Trump.
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Gavekal Dragonomics
Tom Miller
Oct 08th 2019
The Belt And Road Slims Down
China is still signing up more countries for its Belt and Road Initiative, but money for Xi Jinping’s signature foreign policy is getting tighter. Growth in China’s overseas lending has ground to a halt, and overseas construction projects are declining. In this piece, Tom explains why a slimmer Belt and Road has become an economic necessity.
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Gavekal Research
Simon Pritchard
Oct 07th 2019
Hong Kong’s Core Problem
The Hong Kong government’s stated aim is to drive a wedge between radical protesters who are resigned to jail or worse, and a less committed group that it thinks will be cowed by increased penalties. Initial evidence suggests the strategy is a busted flush. Sunday saw large-scale illegal marches by mask-clad demonstrators before the now predictable violence unfolded.
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Gavekal Research
Nick Andrews
Oct 04th 2019
The German Spillover
Perhaps the most remarkable thing about this year’s slump in manufacturing is how few negative spillover effects it has had on demand in the broader economy—until now. Services PMIs for both the eurozone as a whole and for Germany took a sharp turn south in September. In Germany, the deterioration is making a technical recession all but inevitable.
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Gavekal Research
Will Denyer
Oct 04th 2019
Video: Where The Fed Stands
Investors are nervous about weak US data and a liquidity squeeze in the US repo markets. They are now looking to the Federal Reserve for reassurance. In this video, Will tells us what policy changes to expect from the Fed at the end of this month and why.
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Gavekal Dragonomics
Thomas Gatley
Oct 03rd 2019
The China Inc. Annual Report 2019
In the latest edition of his annual chartbook, Thomas outlines the fundamentals of China’s corporate sector. The latest downcycle in sales and profits was less severe than previous episodes, but private firms are still suffering from financial strains. The anemic bounce in credit growth points to little recovery in profits or capex in 2020.
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Gavekal Research
Will Denyer
Oct 03rd 2019
Echoes Of 2000 Strike A False Note
First there was the WeWork IPO failure and a string of other flops. Now the S&P 500 has slumped -3% in just two days, leaving the index down -4.6% from its July high. As a result, nervous investors are wondering whether the US may be seeing the beginning of the bursting of a bubble, just as in 2000. Are the fears justified?
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Gavekal Research
Vincent Tsui, Udith Sikand
Oct 02nd 2019
Strategy Monthly: An Asian Repricing
Asian inflation has decoupled from other emerging market regions and may be settling at a new permanently lower level. At the same time, lower Asian inflation also reflects weak capital spending and slower economic growth due to the global trade downturn. The best way to play this new low-inflation, low-growth era is with regional bonds.
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Gavekal Research
Louis Gave
Oct 02nd 2019
The Greater Good Versus Individual Liberty
Yesterday Hong Kong's streets were again the stage for violent clashes between protesters and police. At the heart of the conflict is a showdown between the shared identity in Hong Kong shaped by the common law system inherited by the British and the common narrative in China emphasizing the "greater good" over individual liberties.
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