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Gavekal Dragonomics
Rogier Creemers
Dec 10th 2020
Social Credit And Digital Governance
China’s social credit system is widely misunderstood as a totalitarian tool. The reality is that it is a relatively low-tech part of a sophisticated Communist Party strategy to use digital means to deliver both better governance and social control. In this 22-page DeepChina report, Rogier Creemers explains the truth behind the social credit myths.
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Gavekal Research
Yanmei Xie
Dec 10th 2020
What Price Now The Big Tech Model?
On Wednesday the US Federal Trade Commission launched its antitrust suit against Facebook, alleging illegal anticompetitive acquisitions. The action came as no surprise. It has long been anticipated, and follows the suit against Google for anticompetitive practices filed by the Department of Justice in October. Nevertheless, in calling for the breakup of Facebook, with the forcible divestment of Instagram and WhatsApp, the FTC’s suit represents...
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Gavekal Research
Udith Sikand, Tom Miller
Dec 09th 2020
India Macro Update: Long Road To Recovery
India’s economy is starting to recover through a process that will be slow, painful and uneven. Growth may resume this quarter, but the economy is still on course to shrink by around -10% in the current fiscal year. The Covid-19 situation has stabilized and vaccines should soon be rolled out, yet local restrictions may feature right through next year. The government may finally ramp up fiscal spending, which should aid near-term growth prospects...
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Gavekal Research
Vincent Tsui, Udith Sikand
Dec 09th 2020
Asia’s Fully-Priced Winners
In the league table of Covid winners and losers, emerging Asia’s equity markets rank among the winners. The perception among international investors is that East Asian societies handled the outbreak better than Europe and the US, and better than non-Asian emerging economies. On top of that, Asian governments rolled out unconventional monetary and fiscal support relatively early, and regional exporters have benefited from solid external demand...
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Gavekal Dragonomics
Louis Gave, Arthur Kroeber, Thomas Gatley, Wei He, Dan Wang
Dec 09th 2020
Webinar: China And The World Economy In 2021
Arthur Kroeber and Dan Wang sketched out the likely course of the US-China rivalry under the new Biden administration; He Wei and Thomas Gatley analyzed key developments in China's economy and markets, and Gavekal CEO Louis Gave presented his views on the forces shaping global markets.
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Gavekal Dragonomics
Rosealea Yao
Dec 08th 2020
A New Reality For Commercial Property
Vacancy rates for office and retail space are picking up sharply this year despite a broad return to normality in China. In this report, Rosealea argues that Covid-19 accelerated an ongoing shift towards at-home work and entertainment. Developers must now grapple with the new reality that demand is unlikely to ever return to pre-Covid levels.
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Gavekal Research
Louis Gave
Dec 08th 2020
The Three Key Prices: The US Dollar
It is an axiom of Gavekal’s research that the starting point for looking at the global macro landscape is that three prices matter above all others: the 10-year US treasury yield, the price of oil, and the US dollar exchange rate. In the third of a three-part series, Louis examines the US dollar.
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Gavekal Research
Nick Andrews
Dec 08th 2020
The Limits Of Europe’s Rotation
The last five weeks have seen an impressive rally in Europe’s formerly beaten- down equity market sectors. As hopes have grown that vaccines will bring the coronavirus pandemic to an early end in 2021, the stocks of Covid losers such as banks, oil and gas companies, airlines and airports have leapt sharply higher. The Stoxx bank index, for example, is up 44% since the end of October in euro terms, 50% in US dollar terms.
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Gavekal Research
Tan Kai Xian
Dec 07th 2020
Rising Yields And US Housing
Investors are looking ahead to us economic growth picking up as vaccines are deployed and restrictions dialed back. With the Federal Reserve having anchored short rates near zero, this dynamic is causing a yield-curve steepening. The question is whether higher yields feed back into a still vulnerable US economy and choke off the recovery.
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Gavekal Research
Thomas Gatley
Dec 04th 2020
Sell A-Shares Into Strength
Over the last month, onshore Chinese equities have got swept up in the global rally. The CSI 300 gained 7% in November, surpassing July’s peak to set a new high for the year this week. And the broader Shanghai index is on the cusp of following. However, this is a rally running on fumes.
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Gavekal Research
Will Denyer, Vincent Tsui, Thomas Gatley, Udith Sikand, Cedric Gemehl
Dec 04th 2020
Webinar: Global Investment Roundtable, December 2020
The US equity market is seeing a switch from the winners of the pandemic like technology and online retail, to the beaten-up losers such as travel plays. At the same time, hopes for a strong economic recovery in 2021 are juicing up value stocks. Similar dynamics are being seen in other major markets. Our team of analysts discussed what happens next, and what’s in store in 2021.
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Gavekal Research
Will Denyer
Dec 04th 2020
Video: The Treasury’s Liquidity Programs And Markets
US Treasury Secretary Steven Mnuchin has come under fire for failing to extend a number of the Treasury’s liquidity support programs into 2021. But as Will outlines in this short video interview, while the existence of the facilities that are set to expire helped to shore up sentiment back in March and April, they have been little used, and are now largely irrelevant in practical terms.
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Gavekal Research
Louis Gave
Dec 03rd 2020
Tail Risk Insurance: Financials And Gold
US equities have just had a record month on hopes that a successful rollout of vaccines will allow the world economy to return to normal. The questions is what that will look like in financial markets, especially given that the US government is spending record sums.
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Gavekal Dragonomics
Thomas Gatley
Dec 03rd 2020
Access To Global Capital Has Peaked
After years of inflows via IPOs and foreign portfolio investment, the US is now moving to deny Chinese firms access to global capital. As a result, Thomas explains that the firms will instead have to rely on domestic markets for equity fundraising, which could cause a liquidity drag in onshore and Hong Kong equities.
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Gavekal Research
Cedric Gemehl
Dec 03rd 2020
The ECB And Euro Strength
In the last couple of days the euro has broken higher against the US dollar. The last time the euro hit US$1.20, European Central Bank officials led by president Christine Lagarde emerged to talk the currency down, worried that euro strength would import deflation and erode European competitiveness. The question now is whether the ECB will again come out to jawbone the euro lower.
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Gavekal Research
Vincent Tsui
Dec 02nd 2020
Asian Bonds Remain Attractive
Two weeks ago, the central banks of Indonesia and the Philippines each lowered their policy rates by 25bp, making their first rate cuts since the summer. Although the moves came as a surprise to the markets, they should not have done. Across Asia real interest rates are generally positive, and in some cases are above their long term averages, while inflation rates are modest. This gives central banks plenty of room to reduce nominal rates to...
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Gavekal Research
Tan Kai Xian
Dec 01st 2020
Georgia On My Mind
In the four weeks since the US election, the S&P 500 has climbed 7.5%. The bulk of that run-up can be attributed to hopes for an early vaccine roll-out, but at least some is due to the perceived decline in US political risk, Yet although US electoral risk may have diminished, it has not disappeared, and may yet return to affect investor positioning in markets over the coming weeks.
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Gavekal Research
Will Denyer
Dec 01st 2020
Strategy Monthly: Two Equity Rotations For A Post-Covid World
The impending rollout of vaccines in the United States is spurring two big equity rotations. With investors looking ahead to a post-Covid world, a rotation has begun from stocks that thrived in the pandemic to those that merely clung on. Second, the expectation that a robust economic recovery will push interest rates up has caused beaten-down value stocks to recover some mojo. Investors should play these rotations at a granular, sub-sector level...
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Gavekal Dragonomics
Wei He
Dec 01st 2020
Eroding The Implicit Guarantee
China’s financial regulators recently stepped in to calm a corporate bond market roiled by the unexpected default of a local state-owned enterprise. In this report, Wei argues that this reassurance does not translate to a reassertion of the implicit sovereign guarantee for local SOE debts; in fact, more local SOE defaults look likely for 2021.
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Gavekal Research
Louis Gave, Thomas Gatley
Nov 30th 2020
The Fate Of Chinese Listings In The US
Today, there are 365 Chinese companies listed on US markets. A handful of these have dual listings in Hong Kong, but for most, the US is their sole listing. Together, these 365 companies account for US$1.92trn of market capitalization. This increasingly looks like an anomaly. Why should Chinese companies choose to raise capital on Wall Street when they can tap the capital market in Hong Kong?
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