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Gavekal Dragonomics
Dan Wang
Nov 24th 2020
This Time Is Different For Industrial Policy
Chinese bureaucrats are now busily drafting plans to achieve self-reliance in high technology. But as Dan argues in this piece, this latest industrial-policy push will be different. Thanks to US restrictions on Chinese firms, notably Huawei, the private sector is already convinced that developing substitutes for imported technology is necessary.
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Gavekal Research
Tom Holland
Nov 24th 2020
The Realignments Begin
It was no coincidence the first-ever visit to Saudi Arabia by an Israeli prime minister took place a day before US President-Elect Joe Biden announced his choice of Antony Blinken as Secretary of State, indicating a conciliatory stance towards Israel and Saudi's mutual enemy Iran. It was, however, coincidence that the price of oil should advance to its highest since early March on Tuesday.
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Gavekal Research
Tan Kai Xian
Nov 23rd 2020
A Boost From US Restocking
As the latest wave of US coronavirus infections continues to worsen, the probability of a modest contraction in fourth quarter GDP is rising. However, there are solid arguments for believing that the worst case scenario for 4Q remains no worse than a mild contraction in output.
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Gavekal Research
Louis Gave
Nov 23rd 2020
Three Strikes And Still In
In the last three weeks, investors in Chinese assets have suffered a series of shocks, with the suspension of the Ant IPO, antitrust actions against China’s tech giants, and the high-profile default of a local state-owned enterprise. Louis examines what may be going on behind the scenes, and sets out how investors should interpret these successive shocks.
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Gavekal Research
Charles Gave
Nov 20th 2020
Dear Cedric And Nick, Allow Me To Disagree...
...in Thursday’s Daily you argued that Hungary and Poland’s effort to veto yet another power grab by Brussels represents a mere hiccup in the march towards a European nation state. You can add Slovenia into that basket of recalcitrants. I believe that these three countries are posing an essential question: where does the legitimacy of a government come from?
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Gavekal Research
Tom Miller
Nov 20th 2020
The Scars Beneath India’s Cheer
As India celebrated Diwali this month, there was some reason for cheer on the economic front. After a deep downturn, demand has picked up, the economy is primed to return to growth in the fourth quarter, and the manufacturing sector is firing on all cylinders. Nevertheless, the scars from this year’s contraction will take a long time to heal.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Nov 20th 2020
Webinar: Europe And The Second Wave
European markets were ebullient earlier this week on news that an effective Covid-19 vaccine may be approved for use early next year. In the meantime, regional lockdowns aimed at curbing the escalating pandemic threatens Europe's economic recovery. This all but guarantees loose monetary and fiscal policy for the foreseeable future. In yesterday's webinar Nick and Cedric discussed how this shakes out for investors.
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Gavekal Dragonomics
Xiaoxi Zhang
Nov 20th 2020
The Macro Implications Of Microfinance
The surprise suspension of Ant Group’s IPO on November 4 was caused by the publication of new rules on online microfinance—a tiny sector that accounts for just 0.3% of China’s banking system. In this piece, Xiaoxi explains why microfinance is of so great macro importance to China’s financial regulators, and what they will do next.
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Gavekal Research
Nick Andrews, Cedric Gemehl
Nov 19th 2020
Limits To EU Solidarity
This week, Hungary and Poland vetoed the European Union’s €750bn recovery fund in a fit of pique at a new mechanism that will stop money going to “bad boy” states deemed to impede the rule of law. With southern Europe waiting for EU cash to support its post-Covid recovery, the two eastern bloc countries hope to force a compromise that will stop outside interference in their domestic affairs. The issue tops the agenda of today’s EU leaders’...
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Gavekal Research
Nick Andrews
Nov 19th 2020
Video: EU Summit Tensions
European Union leaders are today sitting down for a high stakes summit. Poland and Hungary are threatening to scupper the EU’s budget and grandly-announced Recovery Fund if they are further penalized for becoming authoritarian and eroding the rule of law. The pandemic continues to demand leaders’ attention and Brexit lurks as the ugly beast in the background.
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Gavekal Dragonomics
Wei He
Nov 18th 2020
The Second Wave Of Bond Inflows
There was a record increase in foreign holdings of Chinese bonds in the second and third quarters of 2020, almost all of it from private-sector investors. In this report, Wei explains why foreign investors will likely continue to buy up Chinese bonds and why Chinese authorities appear relaxed about this second wave of inflows to the bond market.
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Gavekal Research
Vincent Tsui
Nov 18th 2020
The Upside For Asian Currencies
As global uncertainty has started to recede following the US election result and on the promise of effective coronavirus vaccines, so the skies have begun to clear for Asian currencies. Recently the components of the East Asia ex-China currency complex have begun to appreciate across the board at an accelerating rate. The conditions are ripe for this to continue.
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Gavekal Research
Tan Kai Xian, Yanmei Xie
Nov 17th 2020
The Brake On US Growth
Hopes for effective coronavirus vaccination programs in 2021 propelled both the S&P 500 and the Russell 2000 small cap index to record high, but on the ground in the US, accelerating infections and rising hospitalization rates prompted more state and local governments to order additional restrictions in a bid to slow the spread of the virus.
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Gavekal Dragonomics
Xiaoxi Zhang, Wei He
Nov 17th 2020
Cracks Appear In Local Support For Bonds
A missed debt payment last week by a local state-owned enterprise in Henan province has created turmoil in China's corporate bond market. In this report, Xiaoxi and Wei explain why the default undermined one of the market's fundamental supports and why investors are now likely to be more discerning between provinces.
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Gavekal Dragonomics
Dragonomics Team
Nov 16th 2020
Full Steam Ahead
Economic data released on Monday showed China’s continued economic normalization, with property sales and infrastructure investment outperforming expectations, industrial activity staying strong and the consumer recovery picking up. In this Quick Take, the Dragonomics team outlines why this environment is favorable for bonds and risky for equities.
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Gavekal Research
Charles Gave
Nov 16th 2020
Are The Markets Trying To Tell Us Something?
I am not a technical analyst, but I am an avid consumer of charts, which I often use to check if my overall view is confirmed, or not, by the markets. Having undertaken this exercise recently, I have two strong convictions.
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Gavekal Research
Tom Miller
Nov 16th 2020
After RCEP: A Tough Ask For Pivot 2.0
On Sunday, China signed the Regional Comprehensive Economic Partnership. With the 15-nation trade agreement, Beijing has successfully positioned itself at the center of the region’s trade and investment networks. This will make it hard for US President-Elect Joe Biden to fulfill his pledge to place “America back at the head of the table” in international relations, at least in Asia.
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Gavekal Research
Nick Andrews
Nov 13th 2020
Biden And Brexit
Despite the UK enduring another Covid lockdown and facing a key Brexit deadline on November 15, its political class spent this week obsessing over a personality struggle inside the prime minister’s office. The real significance of a Brexit-supporting aide to Boris Johnson quitting his post may be that the UK is about to accept a trade deal will leave it as an effective satellite of the European Union. After all, hopes for a plucky Britain going...
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Gavekal Dragonomics
Dan Wang, Thomas Gatley
Nov 13th 2020
Another Trump Attack On Chinese Stocks
President Trump signed an executive order on Thursday barring US investments into a list of 31 Chinese firms, 13 of which are publicly listed. In this Quick Take, Dan and Thomas outline what obstacles the order faces before implementation, what impact it would have for investors and what the move means for Chinese equities both on- and offshore.
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Gavekal Research
Arthur Kroeber, Andrew Batson, Dan Wang, Wei He, Thomas Gatley
Nov 13th 2020
Webinar: China After The Recovery
Having gone into lockdown first, China was also the first economy to emerge, and has since enjoyed a rapid rebound in industrial production and exports, reflected in financial markets. But now that the economy is back to “normal”, policymakers have returned to a conservative stance which focuses on financial stability.
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