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E.g., 28-02-2021
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    Gavekal Research

    Can India Grow By Day?

    “India grows at night,” goes a popular saying, “when the government sleeps.” Prime Minister Narendra Modi has promised to change all that as he thinks that effective governance will enable India to “grow by day.” In this piece Tom assesses the changing mechanics of government in India with a particular focus on digital solutions that have the potential to bypass an often self-interested and sclerotic bureaucracy.

    0
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    Gavekal Dragonomics

    The Squeeze On Capex Loosens

    After slowing for years, fixed-asset investment in manufacturing and mining is showing signs of steadying as stimulus policies stabilize demand for their products. Manufacturing FAI could even recover modestly to 6-8% real growth next year. But firms’ caution after years of growth disappointment is unlikely to suddenly turn to exuberance.

    3
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    Gavekal Research

    The Economics Behind Korea’s Political Scandal

    The political turmoil engulfing South Korea claimed the scalps of both the prime minister and the finance minister on Wednesday, as embattled president Park Geun-hye opted for a cabinet reshuffle in a bid to shore up her sagging administration. In recent months Korea has seen the bankruptcy of Hanjin Shipping, the country’s largest shipping company, and the recall of millions of Samsung’s Galaxy Note 7 phones, the flagship product from the...

    0
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    Gavekal Research

    A European Head Fake

    Should investors be worried by a German bond market sell-off that has seen 10-year bund yields rise some 30bp over the last month? The last time European yields climbed this quickly, in early 2015, eurozone stocks swooned in the following year, with the benchmark index falling -27% peak-to-trough. Moreover, unlike the US which has seen a long expansion, it is not clear that a still weak eurozone can handle a rise in the cost of money.

    0
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    Gavekal Research

    The Gavekal Monthly: Deflation Ends; What Next?

    The biggest market move of the past month was a significant rise in bond yields across the US and Europe. Much commentary has suggested that this might be a symptom of a sustained rise in inflationary pressures, as wages and rents start to push up prices in the US, and Chinese producer prices end four long years spent in negative territory. We are skeptical. The recent rise in yields has so far reversed only half of the decline in the first half...

    0
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    Gavekal Research

    On The Brink Of Recession

    Full steam ahead, then? Friday’s release of the first GDP estimate for 3Q16 headline showed US growth rising to an annualized 2.9%, up from 1.4% in 2Q and 0.8% in 1Q. On the face of it, this reading points to the US economy emerging from yet another soft patch, and so backing away from the recession frontier. Not so fast. A close look at the underlying components of the GDP report reveals the US as being perilously close to that threshold.

    4
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    Gavekal Dragonomics

    The New Reality Of Housing Prices

    The wild ride of Chinese housing prices is a sign of how the housing market has become more speculative and policy-driven as fundamental demand has peaked. Policies intended to help small cities have only made prices in the largest cities frothier. Rosealea thinks this policy-driven volatility in prices will continue even as the cycle turns down.

    0
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    Gavekal Research

    Sterling Sellers Look Flushed Out

    Here is a simple question: “Why has the pound fallen so far, so fast?”. My simple answer is that the City of London is the world’s dominant financial center, and so pretty much anyone who deals in global markets has a significant exposure to sterling. As a result, the near term movements of sterling are being dictated less by every twist and turn of the Brexit process, but rather by more prosaic financial transactions.

    9
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    Gavekal Dragonomics

    Power Politics After The Plenum

    Economic policy in China is now entirely beholden to political demands for stability ahead of next year’s Communist Party Congress. Whether things change after depends on how much “core” leader Xi Jinping further strengthens his power, and how much he cares about reform. In this piece, Arthur assesses the outlook after this week’s Sixth Plenum.

    0
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    Gavekal Research

    When The Keynesian Multiplier Goes Negative

    Last week I published a paper whose main point was that Keynesian policies lead to an inevitable decline in an economy’s structural growth rate (see Is The Second Shoe About To Drop?). My immediate concern is that developed economies seem set to head off on another public spending binge as they try to slay “secular stagnation”. That piece stirred a number of questions from readers, so I am following up with an addendum that extends the argument...

    6
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    Gavekal Research

    Equities Decouple From The Renminbi

    The renminbi fell to a six-year low of CNY6.78 to the US dollar this week, capping a -3% fall since June. In recent years, similar moves sparked turmoil in stock markets at home and abroad. Yet this time investors have largely ignored it and both A-share and H-share indexes have ripped higher. Why is a weak renminbi no longer a risk-off event?

    0
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    Gavekal Research

    When The Facts Change, I Change My Mind

    After the Brexit vote, Anatole became deeply bearish, fearing that a populist insurgency could unleash a destructive retreat from globalization. With the US electorate seemingly set to reject that pathway on November 8, the likelihood of other nations following Britain by turning in on themselves is greatly diminished.

    17
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    Gavekal Research

    The End Of The Goldilocks Scenario?

    Over the last seven years global investors have benefited greatly from a combination of moderate growth and non-threatening inflation, allowing for constantly loose monetary policy. Yet for the US, we are increasingly concerned that, one way or another, this “Goldilocks scenario” is about to come to an end. Here’s why:

    4
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    Gavekal Research

    Europe’s Breakout Problem

    The eurozone’s cyclical recovery remains less than stellar, yet at least it lives. The single currency area’s composite flash PMI for October recorded its strongest reading since January 2015, rising to 53.7 against an expected 52.8.The reading was flattered by weakness in the last two months, but confirms that Europe has, for now at least, weathered the Brexit vote shock. What is especially encouraging is the breadth of the improvement, which...

    0
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    Gavekal Dragonomics

    Household Debt: How Fast Can It Grow?

    Discussions about China’s debt usually focus on corporate and local government borrowing, but households have also become more important. The level of household debt is no longer low, and since 2015 it has become the major driver of credit growth. In this piece, Chen Long investigates the limits to China’s new embrace of household leverage.

    2
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    Gavekal Research

    Safety First In EMs

    After a steady rise in emerging market inflows over the last seven months, tighter US financial conditions have led to an abrupt reversal. On the back of inflation concerns and a stronger US dollar, the seven day moving average of daily portfolio flows to EMs, as of last Monday, had fallen to its lowest level since the renminbi-induced sell-off 14 months ago. EMs are vulnerable to an externally-induced pull-back, for even if key central banks...

    0
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    Gavekal Dragonomics

    Andrew Batson: What Next For Chinese Growth?

    Chinese policymakers are set on maintaining economic stability ahead of a crucial Communist Party meeting next year—but while that means stabilizing growth it also means pushing back against a property bubble. In this video interview, Andrew assesses the tactical trade-offs that must be made in support of the strategy of stability.

    0
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    Gavekal Research

    The Milton Friedman I Knew

    In the late 1970s, when beavering away at my own little research firm, I received a letter from a “senior research analyst” at the Hoover Institution, named Milton Friedman. In the letter Friedman wrote that he agreed with some of what I had written in a recent report, but other sections had problems. He had gotten the paper from one of my clients, and I’ll admit it sent me just a bit over the moon.

    1
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    Gavekal Research

    Japan Does An Apple

    The Bank of Japan and the Japanese government have done their best to stop a grinding appreciation of the yen, but to no great avail. The unit is up 14% this year against the US dollar, which has seemingly delivered a body blow for the monetary easing “arrow” in Prime Minister Shinzo Abe’s 2012 revival quiver. This is certainly the view of foreign investors who this year have pulled money out of Japan at the fastest rate since 1987. And yet a...

    1
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    Gavekal Research

    Is The Second Shoe About To Drop?

    Keynesian beliefs are based on two key ideas. Firstly, recessions are caused by an excess of savings among nasty types known as rentiers. Secondly, if there is a shortage of demand, the government should conjure it up out of thin air by borrowing money to spend as needed. In the last few years we’ve seen what happens when the first of these two ideas is put into practice. Policymakers around the world have attempted to euthanize the rentier, and...

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