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Gavekal Research
Vincent Tsui
Mar 18th 2021
Video: Conflicting Forces In The Hong Kong Market
The Hong Kong stock market started 2021 as one of the world’s best performing, gaining 14% in the first six weeks of the year. In the weeks since, however, Hong Kong-listed equities have given back half those gains as sentiment has soured. In this short video interview, Vincent weighs the opposing forces at work in the local market to assess how they are likely to play out in the future.
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Gavekal Dragonomics
Ernan Cui
Mar 18th 2021
The New Plan For Urbanization
The 14th five-year plan outlines significant changes to China’s household registration (hukou) system. In this report, Ernan writes that this new policy direction is to reduce the significance of the system over time by reducing urban/rural inequality. Rural areas will benefit, but at a cost to China’s overall economic growth.
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Gavekal Dragonomics
Xiaoxi Zhang
Mar 17th 2021
Time To Fix Credit Ratings
2021 could be a pivotal year for the overhaul of credit ratings, which have long been an impediment to the functioning of China’s corporate bond market. The defaults of a few AAA-rated state firms have now pushed regulators into tackling long-standing problems, at a moment when cyclical and structural conditions are favorable for reform.
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Gavekal Research
Louis Gave
Mar 17th 2021
Attack Of The Drones
Military technology is a lynchpin of the geopolitical balance. And the superiority of US weaponry has been one of the principal factors underpinning the US dollar’s status as the world’s reserve currency. However, recent events raise important questions about whether the US can retain this superiority.
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Gavekal Research
Tan Kai Xian
Mar 16th 2021
Let's Twist Again
When they sit down on Wednesday, the members of the Federal Open Market Committee will face a couple of knotty questions. Should they attempt to do anything about rising bond yields? And if so, what?
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Gavekal Research
Cedric Gemehl
Mar 16th 2021
How Bad Is Europe’s Vaccine Problem?
The Covid news from Europe only seems to lurch from bad to worse. The suspension by several European Union countries of distribution of AstraZeneca's Covid vaccine over possible side-effects threatens to disrupt the EU’s vaccination programs and damage public confidence in vaccines in general. So how bad are things likely to get?
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Gavekal Dragonomics
Dragonomics Team
Mar 16th 2021
Looking Past The Base Effect
The collapse in activity during the Covid-19 lockdowns in early 2020 has ensured some eye-popping economic data for January-February 2021. In this report, the Dragonomics team looks past base effects to find consumption and services still on track to normalize this year, while industry and property will likely cool as policy tightens at the margin.
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Gavekal Research
Louis Gave
Mar 15th 2021
When Currencies Misbehave
In recent days, investors have had to absorb a series of troubling headlines from Europe, yet news that should be either bearish for the euro or bullish for the dollar failed to keep the euro from gaining last week. Meanwhile, the yen continues to grind lower. Why is that, and what does the inability of the dollar to rally tell us about the future?
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Gavekal Dragonomics
Andrew Batson
Mar 12th 2021
There Is No Plan To Boost Consumption
Consumption and domestic demand are everywhere in the Chinese government’s latest policy rhetoric, with high-level promises to “boost consumer spending across the board” and “create a robust domestic market.” In this piece, Andrew explains why the new five-year plan is not actually a plan to boost consumption.
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Gavekal Research
Yanmei Xie
Mar 12th 2021
The New High-Pressure US Economy
Having just signed off on US$1.9trn of Covid relief, the US government has now spent US$5trn on support measures since the pandemic began. Unfazed by warnings that it could overheat the economy and spur runaway inflation, the White House plans another big package of public investment that aims to tackle climate change, upgrade US infrastructure and revamp education. Joe Biden seems intent on spurring a “high-pressure” economy.
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Gavekal Research
Cedric Gemehl, Nick Andrews
Mar 12th 2021
The Yield Curve Control That Dare Not Speak Its Name
A year ago today, European Central Bank president Christine Lagarde said “we are not here to close spreads”. With a fair amount of water having flowed under the bridge since then, the spread between 10-year Italian BTP’s and bunds has fallen from 261bp to just 94bp. So when on the anniversary of that proclamation, she said the “ECB is not doing yield curve control”, one could be forgiven for demurring.
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Gavekal Research
Udith Sikand, Tom Miller
Mar 12th 2021
Webinar: The Shape Of India's Recovery
With the release of pent-up demand and more fiscal spending, India's economy is rebounding sharply. Its growth potential is also being raised by a new push towards privatization and an industrial policy that supports manufacturers. The question is whether India can overcome institutional lethargy and make these policies work. Tom and Udith addressed such issues and the latest market developments impacting sub-continent assets.
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Gavekal Research
Anatole Kaletsky
Mar 11th 2021
Stop Worrying About Bond Yields And Buy Equities
Is it time to buy or sell global equities? I think investors should be adding exposure for four broad reasons. As argued in February, during the last mini-correction the global bull market that began on March 20, 2020, is still in its early stages and the cyclical economic problems that usually provoke bear markets are not yet on the horizon.
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Gavekal Research
Tom Miller
Mar 11th 2021
Is The Belt And Road Turning Green?
China is trying to clean up its domestic energy sector, but critics accuse it of exporting an outmoded and dirty energy model around the world under the guise of the Belt and Road Initiative. In 2019, Xi Jinping pledged to turn the BRI “green and clean.” Tom argues that there may have been a moderate shift towards green energy, but not a decisive one.
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Gavekal Research
Louis Gave, Charles Gave, Didier Darcet
Mar 10th 2021
Gold, Renminbi Bonds And The Clash Of Empires
As the US expands its deficits to pay for pandemic relief, emerging economies that use the US dollar for reserve backing have reason to fret. China is being incentivized to accelerate development of the renminbi as both an international standard and store of value. Louis, Charles and Didier offer a potential roadmap for how renminbi internationalization may unfold.
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Gavekal Dragonomics
Thomas Gatley
Mar 10th 2021
The Capex Renaissance Is Coming
2021 is set to be a strong year for capital spending by Chinese companies. In this report, Thomas explains why solid returns on assets across the industrial sector and low borrowing costs are creating incentives for firms to invest in new capacity. This should allow policymakers to cut back on spending without tanking overall investment.
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Gavekal Research
Charles Gave
Mar 10th 2021
Updating The Malthusian Constraint
In June 2019, I argued that big shifts in the US economy and financial markets largely result from changes in the relative price of energy. If oil prices are rising faster than nominal GDP, this points to energy shortages and more of the economy’s value-added going as the “miners’ rent”. This situation points to rising inflation and contracting price/earnings ratios.
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Gavekal Research
Louis Gave
Mar 09th 2021
The Bursting Of The Electric Car Bubble, And Consequences
A friend recently sent me the following quote from the Barrow Hanley small-cap manager, Jim McClure: “Should an investment narrative become particularly disputed, the best course of action is to identify the camp that is more emotional, and bet heavily against them”. This was good advice a few years back when anti-Tesla/anti-Elon Musk sentiment was rampant. And it would have been good advice again in early January, when the pendulum had swung...
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Gavekal Research
Will Denyer
Mar 09th 2021
Video: US Equities In A Changed Macro Environment
US tech stocks have been hit hard, as attention focuses on the underlying quality of themes like the migration to electric vehicles. Yet this shakeup is also happening against the backdrop of a fast-changing investment environment due to a strengthening US growth outlook, rising inflationary pressure and an unnerved bond market which is driving yields higher. In this video interview, Will seeks to unpack these dynamics in order to navigate a...
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Gavekal Research
Andrew Batson
Mar 08th 2021
The Missing Target
For four decades, every five-year plan has included a target for average GDP growth. The latest plan, presented last Friday, did not. This points to China's leadership having a more complex view of development goals argues Andrew. These now include a range of metrics including technological capability, national security, financial stability and living standards.
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