E.g., 26-01-2022
E.g., 26-01-2022
We have found 13351 results.
View by: Grid List
Sort by: Relevancy Date
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Xi Jinping Put

    Over the weekend the Chinese government rushed out an unprecedented grab-bag of measures intended to support the free-falling A-share market, which by Friday’s close had tumbled 29% from its mid-June high. By deploying almost every weapon in their armory, the authorities managed to arrest the market’s slide, at least in the immediate short term. By the close of trading on Monday, the Shanghai market was up 2.4% from Friday’s close. But there is...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Eurozone Is Not On The Brink

    When totally wrong-footed by an astonishing event that embarrassingly contradicts one’s expectations, it is tempting to seek refuge in high-flown metaphors and literary allusions, especially if this embarrassing turn of events happens in Greece. But rather than distracting attention with references to Pyrrhic Victories, Siren Voices and Labours of Hercules, let me get straight to the point and admit that my predictions about the Greek referendum...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Brighter European Dawn

    The political and economic reality is that a 40-year old political neophyte from a “peripheral” European economy has taken the eurocrats to the cleaners. It is clear that the Greek populace knew exactly what was coming and extracted €89bn of “good money” from an exceptionally incompetent European Central Bank. This pool of liquid funds should prove a key support for the next year or two, and with Greece running a primary budget surplus the...

    14
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Growth & Markets Monthly (July 2015)

    With the drama in Athens casting a pall over markets, what is the message from the Gavekal dashboard of economic and risk indicators? Overall, reasonably positive. Our main growth indicator suggests that the momentum of economic activity should pick up in the second half of the year. If correct, this would mark a repeat of the pattern seen in the last few years. Still, given the uncertainty associated with the Greek situation, there has been a...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    US Payrolls Are Running Out Of Juice

    Later today we will publish our Growth & Markets Monthly, updating Gavekal’s dashboard of essential economic and risk indicators. The markets side of the equation is relatively straightforward this month: although investors have not switched into full risk-off mode, with the outlook for Greece’s eurozone membership as uncertain as ever ahead of this weekend’s referendum, there has been a clear diminution in their appetite for risk. What of...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Unequal Sell-Off in Chinese Stocks

    While the world’s headlines are concentrating on Greece, the real drama in financial markets is happening much further to the East. Since its peak in mid-June, the Shanghai Composite Index has now fallen by almost -23%, putting mainland Chinese shares in what is generally accepted to be bear market territory. Meanwhile intra-day volatility has reached mind-blowing levels, with the index swinging by more than 6% from peak to trough in each of the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Japan’s Sustainable Bull Market

    Plenty of old hands who thrived in Japan’s 1980s bubble era spent the next 25 years watching a structural bear market unfold and are starting to opine that history may repeat itself. With due respect to this grizzled breed, we are skeptical about historical comparisons and reckon that the combined drivers of the modern Japanese market offer a rare opportunity. Ironically, one of the biggest factors supporting Japanese equity values is that...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (July 01): Manufacturing Machinations

    Overview: Charles Gave argues that the manufacturing sector remains the last bastion of proper economic data in the US, and the message being sent is not good. United States: Tan Kai Xian somewhat demurs from Charles and argues that the US manufacturing sector is unlikely to be the fountainhead of the next US recession. Europe: Central Europe has emerged as the manufacturing powerhouse of Europe at the expense of France and the southern...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Germany Is The Real Risk

    As the Greek crisis apparently reaches its climax it strikes me as odd that the default response is to seek refuge in “safe” German assets. If, as appears quite likely, the flawed euro-system really is heading into the next phase of its denouement, then German assets are the soft underbelly of the system, and they are likely to suffer most. Here is why:

    13
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Asia’s Infrastructure Arms Race

    In what finance minister Lou Jiwei called a “win-win for Asia,” China yesterday launched the Asian Infrastructure Investment Bank in a signing ceremony in Beijing. The AIIB will promote connectivity and common development across Asia, but China is the leading shareholder and will be able to veto major decisions. The AIIB “represents an important move on the part of China to fulfill its growing international responsibilities, and to improve and...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Overview: Manufacturing And Recessions

    I know that metal bashing and the business of making things comprises a declining part of economic activity in most industrialized economies. Yet as economist Brian Reading used to say in the 1980s, GDP may be getting lighter, but manufacturing continues to have a heavy influence.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Will Weak Manufacturing Derail Growth?

    Marching into the second half of 2015, the US economy is gradually recovering after another weak start to the year. The majority of forecasters are now expecting a rebound in the US second quarter gross domestic product growth. This makes sense as domestic demand remains strong, supported by lower oil prices, a strong job market and deleveraged household balance sheets. However, while we have seen a robust rebound in most economic data series,...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Greferendum And The Markets

    Contrary to most of this morning’s headlines, the astonishing weekend events in Greece will almost certainly prove bullish for risk assets around the world and especially in Europe. The European market mayhem triggered by Alexis Tsipras’ bizarre referendum announcement (which Greek officials only found out about through Twitter in the midst of a negotiating session with the Troika in Brussels) seems reminiscent of the panics about US politics...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Chinese Equity Demand And The Acceleration Phenomenon

    More than any other major stock market, Shanghai is driven by flows from domestic retail investors. And obviously, in the past couple of weeks, many of these retail investors have decided to head for the exits (the Shanghai Composite Index has plunged -22% from its early June high). Of course, this drop only brought Shanghai back to where the index stood in mid-April; but why the sudden rush for the door? Have the drivers of retail sentiment...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    How Low Will Interest Rates Go?

    Continued weak growth and high borrowing costs have led the People’s Bank of China to cut interest rates again. The timing looked like a gift to stock-market investors, coming after the 20% correction in the Shanghai market over the past two weeks, but stocks were nonetheless down another 3.3% on Monday. We think more monetary easing is inevitable, though we suspect that for the next half-year or so the central bank will try hold off on rate...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Europe: Central Europe Takes All

    Let’s start with a shocking figure: almost 80% of the additional value-adding activity created by the EU industrial sector in the last 10 years took place in Germany (47%), Austria (4%) and central and eastern European economies (28%). This obviously exceeds the weight of these countries in Europe’s economy (27%). But why has the locus of manufacturing shifted so radically and rapidly to Central Europe?

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C China: Better Manufacturing, Not Just Bigger

    China’s status as the workshop of the world faces no serious challengers. Accounting for nearly 25% of global manufacturing value-added, it is by far the world’s largest single manufacturing economy. But the country’s leaders still seem discontented. China may have quantity, they fret, but it lacks quality. It is not enough for China to be a “big” manufacturer, they say, it must also be a “strong” one. With a spate of new industrial policies...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Asia: “Make In India”, But For Who?

    Last year Indian prime minister Narendra Modi unveiled his “Make in India” initiative in an attempt to replicate the successes of the tried and tested East Asian development model in which economies pursue export-led manufacturing growth. To boost the share of manufacturing in output—currently at 16%—and its contribution to employment—around 12%, mostly in the “informal” sector—Modi outlined a number of key policies. But while developing...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Don’t Fret (Yet) About US Housing

    In the summer of 2013, a sharp rise in US bond yields driven by the taper tantrum derailed the US housing market. Will the upward spike in 10-year treasury yields from 1.7% in February to 2.4% today do the same? So far, the market is showing no signs of fear. Despite a 40bp increase in mortgage rates, monthly housing sales and prices remain highly encouraging, as do the weekly numbers for mortgage applications. Meanwhile, US homebuilder stocks...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Gauging The Chances Of A US Recession

    A successful investment strategy requires an early warning system to monitor risks in key markets. Right now, I am most worried about a possible recession in the global system’s most important economy, namely the United States. Any evidence of an impending US recession will surely spark a collapse in investor confidence as it becomes clear that central bankers are not, in fact, the omnipotent creatures of their billing. I am especially...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The UK’s Sweet Spot

    Is the UK economy running out of steam? Growth slowed to just 0.3% quarter-on-quarter in the first three months of this year. That was the slowest for more than two years, and a reminder that while businesses have employed more workers, headline productivity growth has all but stalled. The fear now is that with the tightening labor market pushing up wages, poor productivity will lead to slower real growth, making it harder for the UK to attract...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Macro Update: After Easing, A Limited Recovery

    In the latest quarterly chartbook, Chen Long summarizes the outlook for China’s growth and economic policies in a concise presentation. After a very weak start to 2015, the authorities stepped up their supportive policies. Housing sales are now growing again as a result, but the industrial sector is still weak, and the recovery has been marginal. But the fixes to some of the first half’s fiscal problems should offer more support to growth in the...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Buy India On Bank Reform

    In recent months India has offered investors incrementally bad news due to bad monsoon rains, the government suffering a series of political missteps and a tougher external financing environment as higher US interest rates are contemplated. Moreover, the gradual rise in the oil price has diminished the growth-boosting dividend that India won in the second half of last year. So it was pleasing to get some “good India” news yesterday with the...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Bear Market, Or A Rotation?

    Last week’s violent sell off in Chinese A-shares inflicted punishing losses on mainland retail investors and prompted any number of skeptical international commentators to declare that mainland China’s stock markets were a bubble that had now burst. The Shanghai Composite Index fell 13% over the week, losing an eye-watering 6.4% on Friday alone to round off the worst week for Chinese equities since the financial crisis of 2008. With the index...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Hedging The Unknown

    As Athens and its creditors inch painfully towards a deal that should see the release of fresh bailout funds, the probability that Greece will be unceremoniously ejected from the eurozone is diminishing. Grexit has never been Gavekal’s core scenario, however I have long held the view that while the chances of a Greek exit may have been relatively small, the damage it would have inflicted on financial markets would have been disproportionately...

    5
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Athens Has No Choice

    The main actors in the Greek crisis seem happy to choreograph an ending with this week’s “last ditch” negotiations to be followed on Monday by a “final” summit of European Union leaders. Adding to the theatre, Greek Prime Minister Alexis Tsipras will today meet Vladimir Putin in St Petersburg, where talks will presumably focus on the basis for co-operation and financial support between the two nations in the event of Grexit. Our view remains...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Still A Lonely Power

    China, the political scientist David Shambaugh declared last year, is a “lonely power”—lacking close friends and possessing no allies. That is something that Xi Jinping’s “proactive” foreign policy aims to change. His New Silk Road vision—now officially termed the “Belt and Road Initiative”—is to forge a “community of shared destiny,” in which Asia’s prosperity is tied to China’s rise. Rather than building formal alliances, Beijing’s goal is to...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Fed And Dollar Depreciation

    So no surprises. A slightly more dovish Federal Open Market Committee stuck to the script of future monetary policy moves being data dependent. Since the US central bank yesterday scaled back its 2015 GDP growth forecast to 1.8%-2%, the implication is that rate increases, even if they start in September, will be a gradual affair. Investors liked what they heard as this suggests that Goldilocks lives, and a “not-too-hot, not-too-cold” scenario...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Greek Default Would Trigger Regime Change, Not Grexit

    As Greece moves inexorably towards default, the big news from the markets is not contagion but the opposite—the remarkable lack of response in the euro exchange rate ($1.125 today compared to $1.123 the day before January’s Greek election) and sovereign bond spreads in the Club Med (BTP-bund spread today is 150bp, against 120bp on January 23). Is this just a case of investor complacency and wishful thinking, like the period prior to Lehman? Or...

    16
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    China Update: Local Government Bond Issuance Takes Off

    From a standing start just one month ago, China’s local government bond market has leapt into life with remarkable vigor. Since mid-May, when Jiangsu became the first province to issue bonds under Beijing’s local government debt restructuring program, a further 16 provinces have also tapped the market, raising a total of RMB600bn.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (June 17): Bond Market Shakeout

    Overview: Charles Gave argues that the lack of market-making capacity in the financial sector means that the next big market move could be highly disorderly. United States: 10-year Treasuries look overvalued on a fundamental basis, but don’t expect an immediate correction says Tan Kai Xian. Europe: German bond yields have had a roller coaster ride of late so François Chauchat checks in to reassess their valuation anchors. China: From a standing...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Yen In The Hands Of Foreigners

    Having traded in a tight range since late last year, the Japanese yen made a technical breakout last week, weakening beyond ¥125 to the dollar for the first time since 2002. While Bank of Japan governor Haruhiko Kuroda came out to jaw-bone against more falls, higher volatility is a worry for investors who have grown used to making Japanese equity gains in US dollar terms. We would stick with Japanese stocks which continue to benefit from strong...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Turning Cautious On Land Reform

    The Chinese leadership’s recent enthusiasm for “modern agriculture” featuring large, mechanized farms has waned in recent months, as abuses mount and efficiency gains fail to appear. The evolution of land reform policy is thus an excellent lesson in how reformist ambitions do not always survive an encounter with China’s messy reality.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Switch In Favor Of US Multinationals

    In recent weeks the US dollar has grown increasingly sensitive to changes in expectations for US interest rate hikes, with the currency’s DXY index fluctuating daily in response to every shift in sentiment about the precise timing of the US Federal Reserve’s first upward move. But while the exact date of the lift-off is crucial to the short term trajectory of the foreign exchange market, over the longer run the US dollar’s upside looks limited.

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Overview: Efficiency, Capital And Bond Market Spreads

    In the “good old days” much of the capital deployed in financial markets was devoted to making markets work better. Until the mid-1980s investment banks were often partnerships whose capital was directly owned by the partners. On occasions when a disorderly market emerged that capital was “put to work”, sometimes for just a few minutes—profitability was very high. Such capital was often “owned” by a family such as the Rothschilds, Barings or...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Treasury Yield Normalization

    The trigger for the recent jump in 10-year treasury yields from 1.9% to 2.4% was leveraged investors unwinding long positions on European government bonds. This is not surprising as a “deflating” eurozone was a key reason for last year’s decline in global bond yields. Today, the outlook has improved as the single currency area looks to be enjoying a modest recovery. Absent a Greek-inspired contagion, Europe is likely to be less of a factor...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Europe: A Quick Tour Of Bund Valuation Anchors

    With 10-year Bund yields collapsing to almost 0% and then surging to 1% in a few months, the German bond market seems to have lost its valuation anchor. The launch of a massive quantitative easing operation by the European Central Bank, and then the violent unwinding of positions by investors who had front-run this program explains most of these erratic moves. But, after the storm, are German bonds cheap or expensive? We make a quick tour of the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C China: Local Government Bond Issuance Takes Off

    From a standing start just one month ago, China’s local government bond market has leapt into life with remarkable vigor. Since mid-May, when Jiangsu became the first province to issue bonds under Beijing’s local government debt restructuring program, a further 16 provinces have also tapped the market, raising a total of RMB600bn. The rapid pace at which local governments are issuing bonds to pay down their short term debts means that Beijing’s...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Asia: Not The Taper Tantrum II

    The sell-off in developed market sovereign bonds over the last couple of months is uncomfortably reminiscent of the “taper tantrum” of two years ago. The triggers may have been different; in 2013 the sell-off was led by US treasuries, this time it was German bunds. Nevertheless, both occasions saw a 50bp rise in Global Bond Index yields in 40 or so trading days.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    From Farce To Irrelevance

    The good news is that a Greek default, which has become more likely after Prime Minister Alexis Tsipras’ provocative rejection of what he described as the “absurd” bailout offer by Greece’s creditors, no longer poses a serious threat to the rest of Europe. The bad news is that Tsipras does not seem to understand this. To judge by Tsipras’ belligerence, he firmly believes that Europe needs Greece as desperately as Greece needs Europe. This is the...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    The Capital Spending Downshift

    Easier monetary policy and targeted stimulus may stabilize China’s economy, but anyone hoping for a rebound in capital spending growth is sure to be disappointed. Real gross fixed capital formation rose a meager 6.6% in 2014, the slowest pace since 1999 and far below the 15% average in 2002-11. It is likely that investment growth will fall a bit further this year. One reason is that even after rate cuts, China’s real cost of capital is still...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Oil At Its Ceiling, Not Floor

    With oil prices rebounding strongly this week, despite the non-event of last Friday’s meeting of the Organization Of Petroleum Exporting Countries, it seems appropriate to re-examine the case for cheaper oil that we have been presenting since late last year. Specifically, our view in December that US$50/bbl was more likely to be a ceiling than a floor for the Brent oil price in the long term has been contradicted by market actions of recent...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Making Sense Of Corporate China

    Like it or not, financial liberalization means that global portfolios will soon have to include far more Chinese stocks and bonds. Investors need to pay close attention to what they are buying.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    CEQ Q2 2015 - How To Invest In Shanghai Without Losing Your Shirt

    Investing in Chinese equities will soon no longer be optional. Doing so successfully is a challenging task, but not an impossible one.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Youku Tudou: Watch With Care

    Youku leads in China’s raucous online video market, but will struggle to stay independent thanks to government censorship and a business model combining the worst aspects of YouTube and Netflix.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Gome: A Second Life, From Behind Bars

    The once and perhaps future king of bricks and mortar retail shows how to come back from the dead, survive the online onslaught, and thrive while its founder serves a 14-year jail term.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Nu Skin: Life In The Gray Zone

    A multi-level marketing firm shows it is possible to survive while skirting the edges of Chinese commercial law.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Tingyi: Scale Over Margins

    Conventional wisdom says consumer-products firms do best to sacrifice volume for margins. China’s biggest instant-noodle maker proves otherwise.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Biostime: High-End Success Story

    A leader in the ethically challenged infant formula industry proves the value of a high-priced strategy.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Books-Straight From The Crocodile's Mouth

    Alibaba’s World: How a Remarkable Chinese Company Is Changing the Face of Global Business

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    By The Numbers

    Deflation tightens its grip. Headline YoY GDP growth fell to 7% in the first quarter, but more striking was the drop in nominal GDP to 5.8%, the lowest figure since 2009. This implied a GDP deflator of -1.1%, compared to an average of 0.8% in 2014. QoQ GDP growth also slowed to an anemic 5.3%. The slowdown was led by weakness in heavy industry and property; employment, wages and consumption all maintained solid gains.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    CEQ: The Chinese Company

    In this special issue of the CEQ focusing on the Chinese company, Matthew Forney lays out the rules of the road for investing in China, and how avoid getting caught by the stereotypes of Chinese companies entrepreneurial miracles or fraud-ridden freak shows. Five profiles offer bottom-up lessons on how Chinese companies work.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Protect And Survive

    Bond yields keep rising, emerging markets are softening and key cyclical stocks have taken a bath. The more I look at the global situation the more I am convinced that both economies and markets are reaching a point of transition. And as that old sage Yogi Berra said: “When you come to a fork in the road, take it!”

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Chinese Equities And The Taiwan Syndrome

    Is China’s equity market going through a structural re-rating, or blowing up a bubble fueled by easy money and dumb investors? The broad Gavekal view is that China is again pursuing transformative economic reform which should end with a less meddling state and a greater role for market forces (see The New Way To Think About China). In emerging markets, such bursts of reform usually follow a financial crisis so conditions are rarely conducive to...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Other Reason To Avoid Turkey

    Investors had long priced in the risk that the ruling AK Party of Turkey’s Recep Tayyip Erdoğan could win a two-thirds majority in last Sunday’s parliamentary election, a result that would have allowed the president to reinforce his constitutional powers at the expense of parliament. What they failed to price in was the risk that the AKP could fail even to win a simple majority. In the event, that is exactly what happened, leaving Turkey facing...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Thinking Big About China

    There are two big facts about China today. One: its economy is slowing, and will almost certainly continue to do so for the next couple of years. Two: under its forceful president Xi Jinping, it is making a big push on many fronts to increase its influence around the world. The question is which of these facts deserves more attention.

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    QSCB: The New Way To Think About China

    China’s annual economic growth rate has slowed to its lowest level since the early 1990s, and is set to slow further over the next few years. But for investors the headline growth numbers are likely to prove rather less important than President Xi Jinping’s determination to establish China as a major international financial power at the center of its own regional trading and investment network. If realized, Beijing’s objectives imply clear...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Death Throes Of The Bond Bubble

    What should we conclude from the jump in bond yields that has transfixed investors in every market around the world since late April, when a disappointing German auction started the sudden rout? The simplest answer, and probably the best one, is “not much”. Like the US taper tantrum of May 2013 and the brief bump in Japanese bond yields a few months earlier, when the Bank of Japan got serious about quantitative easing, the present market...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    To Cheer Or Fear US Wage Growth?

    Is the US equity market merely taking a breather before the next upward leg of the bull run? Or has it reached a worrying plateau, marking US stocks out for a protracted period of underperformance? With domestic profit margins facing a squeeze between the strong US dollar on one hand, and stirrings of wage growth on the other, we are worried it is the latter. As we argued on Tuesday, the US dollar’s strength means that any rewards US firms...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Spat In The Spratlys

    It is typhoon season once again in the South China Sea. Last May, China ignited a storm of violent protest across Vietnam when it started drilling for oil off the Vietnamese coast. This year the squall is further south in the disputed waters of the Spratly Islands, where the US has demanded that China halt its land reclamation efforts. Ordered to leave the area by the Chinese military last week, a US Navy surveillance aircraft ignored the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Will The Buyback Craze Ever End?

    Scientists tell us one of the things that sets us humans apart from other mammals is our relatively large prefrontal cortex, the part of our brain that allows us to resist the lure of instant gratification and instead sacrifice ephemeral pleasures for solid long term gains.

    6
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Eurozone Recovery Hardens

    On the one hand there is increasing optimism about the eurozone’s cyclical recovery and diminished concerns over sovereign risk linked to the Greek crisis. On the other hand, there are rising concerns about a stuttering US economic recovery, as shown by yesterday’s release of weak factory orders for April. Markets are playing catch-up to the shifting economic sands and risk calculus. Bund yields yesterday jumped 17bps to 0.71%—narrowing the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (3 June): Shifting Capital Flows

    Overview: Louis Gave traces China’s rejection of planned economy shibboleths over the last 30 years and contends that Beijing is charging full tilt toward the final frontier: the liberalization of capital itself. United States: With the strength of the US dollar favoring imports over US-made goods, the US current account balance is set to deteriorate. This, argues Will Denyer and Tan Kai Xian, will mean a bigger supply of US dollar liquidity in...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Not Déjà Vu Again For The US

    With the mid-point of 2015 approaching it looks to be a case of “déjà vu again” for a US economy suffering early year blues. As with other “soft patch” periods, there are plausible explanations for this stodginess that don’t just involve beating up on statisticians for their seasonal adjustment techniques. The US indeed had a cold winter and the West Coast port strike disrupted trade flows. But the real question for investors is whether the US...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A British-Style Recovery For France?

    France looks to have emerged from three years of stagnation after growing at a better than expected 0.6% QoQ in 1Q15. The improved mood can be seen in consumer confidence being up near a five year high. Given that the euro slid more than 20% against the dollar in the last year while Brent crude fell 40%, this should not really come as a huge surprise. Rather, the question is if these better numbers mean the French economy is about to stop...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C China: Capping Capital Outflows

    The People’s Bank of China has achieved its purpose. Since mid-March, when the central bank intervened in the foreign exchange market to halt the depreciation of the renminbi against the US dollar, capital outflows from China have diminished, averting the threat of domestic financial instability.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Asia: A Buffer Against Future Taper Tantrums

    Asia’s fragmented financial markets have grown a great deal more inter-connected since the currency crisis of the late 1990s. Even so, regional financial integration still lags far behind real sector integration. According to International Monetary Fund data, intra-regional shipments now make up the lion’s share of Asia’s cross-border trade. In contrast, even though their share has doubled over the last ten years, intra-Asian equity flows make...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Greeks Inch Toward Surrender

    The Greek situation rumbles on without resolution after a weekend that saw more posturing, but no deal between Athens and the Brussels group. The message from European Union leaders is that Greece must bow, and while Prime Minister Alexis Tsipras remains defiant, it was noteworthy that his interior minister indicated a willingness to cede ground on Syriza’s anti-austerity program. As this messy endgame plays out, the question facing jaded...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    A New Market For Power

    China’s government has a new plan to reform the electricity sector, introducing a more competitive, market-based pricing system and encouraging cleaner power. If the reforms are successful, the big winners will include end-users and greener, more efficient producers. The losers will be the grid companies, which face a future of squeezed margins.

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Growth & Markets Monthly (June 2015)

    This month saw a clear deterioration of our growth indicators. The pattern of the last few years with a weaker than expected first half of the year appears to be holding up. The question is whether 2015 will see the habitual pick-up in the second half of the year? On the inflation front, things remain quiet. US breakeven inflation rates, which looked as if they may have been breaking upwards last month, are now heading south again. Given the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Overview: First You Get The Money

    In Scarface, Al Pacino observes “First, you get the money, then you get the power, then you get the women”. To some extent, this sums up the challenge facing China’s leadership. Indeed, the lesson the Party learnt once Deng Xiaoping took over from the power-mad Mao Zedong was that ceding control over a part of the economy delivered more power internationally as booming growth made China a more credible regional, then global, power.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: The Rising Supply Of 'Earned' US Dollars

    The US dollar is the world’s reserve currency, which means the US can settle its current account deficit by issuing more US dollars. As Charles says, this means any contraction in the US current account deficit means fewer US dollars flowing abroad (see The US Current Account And Vanishing Global Liquidity). Naturally the reverse is also true. Following the strengthening of the trade-weighted US dollar index over the past four years, the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Europe: The Euro Financial Spinning Top

    Read any “International Economics 101” text book and European economies are often still described as being less reliant on the financial sphere than their “Anglo-Saxon” counterparts. Such a view is in serious need of an update as capital flows have been at the heart of the eurozone system. Absent a fiscal union, and given still fairly low labor mobility, “financial velocity” has been essential to the sustenance of the single currency area. When...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Beijing’s Margin Risk Calculus

    It is easy to point to possible triggers for yesterday’s gut-wrenching -6.5% sell-off in China’s Shanghai Composite A-share index. The Communist Party’s People’s Daily newspaper ran an editorial warning against the risks of an asset bubble. The central bank drained liquidity from the interbank market ahead of a series of initial public offerings next week which could lock up as much as RMB5trn. One of China’s sovereign funds reduced its...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    In Shanghai Rally, Two Worlds Collide

    After reaching touching distance of 5,000 the Shanghai Composite fell 6.5% yesterday, capping off a tumultuous month for China’s equity markets. Yet with accommodative policy, positive political signals, and increased openness to foreign fund inflows all continuing to support the bull market, it seems unlikely that this is the rally’s end. Meanwhile valuations continue to take a back seat. Indeed, with the median price to earnings ratio now...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Animal Spirits And The Revival Of European Finance

    Despite escalating worries over Grexit and a soft patch in US growth, the first quarter of 2015 saw a pleasing stabilization in the eurozone, driven by improved consumption (see More Air In The Reflation Balloon). The question is whether such green shoots can weather a more than 35% rebound in Brent crude since January, and a 4% rise in the euro since mid-March. The case for Europe being able to resist such headwinds relies in large part on a...

    2
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    A Question Of When, Not If

    The cacophony emanating from China can be disorientating. On the one hand, China’s domestic stock markets are in the throes of a vigorous bull run. Locally-listed equities are up 140% in the last 12 months, with repeated government support measures and rising openness to international fund flows sustaining the momentum. On the other hand, China’s economic growth continues to slow, while the geopolitical drumbeat is increasingly daunting. With...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Return Of European Political Risk

    A surprising facet of the post-2010 euro crisis period has been the degree to which the political center in the European Union has held. Despite record unemployment in the struggling South, extremist movements have mostly been contained to the fringes. So it is ironic that just as the long anticipated cyclical recovery arrives, the political tide looks to be turning the other way. Voters in this weekend’s Spanish regional elections gave the...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Making Sense Of China’s Reform Strategy

    Since coming to power in late 2012, Xi Jinping has delivered one surprise after another. Simple labels of reformer or conservative are an increasingly difficult fit. Instead, we should take Xi at his word: he is mainly a nationalist pursuing a dream of national revival.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Germany Is Not Turning Japanese

    Germany has economic problems that most countries would die for—low unemployment and steadily rising real wages mean that policymakers must respond to bottlenecks such as labor shortages (see Germany Normalizes). The longer-term worry is that these “gaps” will become permanent as high-growth Germany must also grapple with Japanese-style demographics. The fear is that its post-2010 expansion could be a swan song before the structural growth...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Two Steps Forward, One Step Back

    A series of developments over the last week have called into question how committed Beijing really is to reforming the finances of China’s local governments, which in recent years have accumulated enormous debts. We believe the recent stream of statements and new policy measures is consistent with Beijing’s broad debt management strategy, which aims to avoid the risk of disruptive deleveraging and defaults (see [China] The Emerging Strategy For...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Towards A US Recession?

    Yesterday the Federal Reserve minutes showed policymakers to be nervous about the outlook for US growth, and so more likely to extend the zero interest rate policy. I would, of course, argue that this is to confuse cause and effect, as US economic weakness in fact stems directly from ZIRP (see The Untimely Demise Of US Productivity). But what concerns me today is less whether a quarter point rise in policy rates happens next month or in...

    10
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    What Could Spur US Equities

    A common bias for investors is to assume that relationships between the market and economy in one phase must persist in the next. For example, since 2009 US firms have mostly grown profits by expanding margins—i.e. cost-cutting. Hence, the logic runs that if wages start to rise, profit margins must fall, leading to weak profit growth, and hence lower equity prices. Implicit in this logic is an assumption that margins must drive profits. There is...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Five Corners (20 May): Assessing Oil's Comeback

    Overview: In light of the rebound in oil prices Anatole Kaletsky questions his own view that the oil market is becoming driven by “marginal cost producers”, rather than classic monopoly dynamics.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Next Phase Of Japan’s Bull Market

    Japanese equities continue to benefit from a situation where corporate growth is decent, but the outlook is not so hot as to spur central bank tightening (see A Japanese Goldilocks). The Nikkei 225 is again close to its peak in 2000, despite the yen having pretty much flat-lined against the dollar since late last year. Still, is this really sustainable considering that Japan remains highly dependent on external demand and the kicker from the...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Untimely Demise Of US Productivity

    Let’s start with a statement of fact: since 2002 the growth of US productivity, measured as non-farm output per hour worked, has collapsed. Outside of recession periods, this is the first time since the 1950s that the four-year moving average of the annual rate of change in productivity has fallen so low. This matters because without a rise in productivity, the US economy will struggle to boost its citizens’ standard of living, whether measured...

    3
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Can Wage Growth Continue To Outpace GDP?

    Labor is taking home more of China’s economic gains, and will continue to do so, though the reasons have more to do with fortunate demographic timing than brilliant policymaking. This trend, Thomas argues, will help keep consumer spending resilient amid the investment slowdown.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Dissonance In Markets

    Perhaps the biggest challenge confronting investors today is the disconnect between financial markets and economic data. Indeed, despite weak readings from the growth locomotives of the global economy (China and the US), recent weeks have seen bonds selling off, commodities going on a tear, and deep cyclical equities experiencing huge rebounds. In short, while economic data is pointing towards a mediocre global growth outlook, markets are...

    1
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Overview: Regime Change In The Oil Market Only Just Starting

    Since late last year, when the battle for oil market share broke out between OPEC and the US frackers, we have argued that this is not just a contest between rival groups of producers, but between distinct pricing regimes, based on very different economic principles (see Will US$50 Be Oil’s Floor, Or Its Ceiling? and The Macro Dividend From Oil).

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Europe: Russia’s Diminished Pricing Power

    Is Russia a player to be reckoned with in the oil pricing game? Last year Russia accounted for 11.7% of global oil production, ranking below the US (12.6%) but above Saudi Arabia (10%). In theory this elevated position should lend Russia formidable pricing power. In practice, however, Russia lacks the flexibility to make the most of its market share, a failing it is unlikely to overcome in the next couple of years.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C Asia: Malaysia Will Manage To Contain The Pain

    Unlike many oil and commodity-dependent emerging economies that have seen growth collapse, Malaysia looks to be doing just fine—its economy grew at 5.6% YoY in 1Q15, roughly in line with its post-2009 average. Hence, even as the Malaysian ringgit continues to track the oil price lower, an argument can be made that the markets have got it wrong.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C United States: Why So Calm After The Oil Price Collapse?

    After oil prices halved, profits in the sector look to have followed suit—S&P 500 energy firms in 1Q15 saw an eye watering -55% YoY plunge in earnings. Given this backdrop, it was to be expected that gory tales would emerge from the oil fields of Texas and North Dakota of bankruptcies, mass layoffs, forced sales and shotgun marriages. To be sure the oilfield services space has seen a bit of this, but generally an eerie calm prevails.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    5C China: Why The Crude Buying Spree?

    China’s economic growth may be slowing, but its appetite for oil imports is undiminished. In the first quarter of 2015, China imported a record 589mn barrels of crude, up 7.5% from the first quarter of 2014. Last month alone, China imported 222mn barrels of oil, overtaking the US, which imported a relatively modest 216mn barrels, as the world’s biggest importer.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Bull Market, What Bull Market?

    Underweighting US equities has become a consensual position and yet the market continues to flirt with new highs. So what gives? My approach has always been to rely on decision rules built on historical data analysis. When enough of these rules signal a “buy” or “sell”, I make a move (for a good example of this approach see Managing Equities In A Strong Dollar World). My esteemed colleague Anatole has been arguing for a while that the S&P500...

    4
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    The Ruble Reconfigured

    Yesterday the Central Bank of Russia announced it had embarked on a program of foreign exchange purchases that will see it buy between US$100mn and US$200mn a day. It explained its move by saying the purchases are intended to replenish Russia’s foreign exchange reserves, depleted by last year’s currency market interventions. In effect, however, the central bank is serving the market with notice that it does not want the ruble to strengthen any...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    More Air In The Reflation Balloon

    If investors were wondering what triggered the recent spike in eurozone bond yields, perhaps an answer emerged in yesterday’s 1Q15 GDP report. A month ago the yield on bunds out to 9-year maturities were negative and the 10-year touched 0.05%, implying a lost decade of growth—today the curve is positive beyond the 4-year. The argument of our Paris-based team has been that the eurozone is at the start of a cyclical pickup aided by low oil prices...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Dragonomics

    Property Responds To Treatment

    Although China’s economic data for April were generally mediocre, property was a bright spot. National property sales rebounded to a 7% YoY gain, after 1% decline in March, marking the first positive growth in 15 months. The latest interest rate cut is likely to further fuel the recovery, and indeed preliminary data point to continued sales gains in May. Broad-based monetary easing has proved a more effective remedy for weak housing demand than...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    Why Asia Should Suck Up Tantrum II

    Asian currencies took a hit yesterday as the ongoing global bond market sell-off forced capital outflow. Yet unlike the “taper tantrum” of two years ago, the region has navigated this sell-off with limited collateral damage—emerging Asia’s benchmark bond index has fallen by -3% in the last two weeks compared with a -19% peak-to-trough slump in 2013. In this piece we are not going to opine on the outlook for global bond markets as our last two...

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    New York Seminar May 2015 - Anatole, Louis, Joyce & Will

    We held our US spring seminar in New York on May 11, with Anatole, Louis, Joyce & Will offering their views on the most important developments in the global economy.

    0
  • Please login, request a trial or contact our sales team for more information

    Gavekal Research

    When Bond Markets Become Silly

    Investors are understandably spooked by recent bond market ructions given a backdrop of weakening growth in major economies, and continued accommodative central bank policy. Francois argued yesterday that this “tantrum” was partly technical, but also the result of markets looking through to higher inflation expectations due to an apparently better economic outlook (see Tantrum II And European Portfolios). I agree with him that markets are being...

    2
Show me: results