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Gavekal Research
Chen Long
Apr 26th 2019
The Least Ugly Duckling
In a year marked by unexpected US dollar strength, the renminbi is one of the few major currencies to be up against the dollar. The reason is simple enough: the resumption of trade talks between the US and China. Yet although a trade pact is now substantially priced in, there are reasons to believe the renminbi has further upside potential.
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Gavekal Dragonomics
Chen Long
Apr 26th 2019
Video: Is The Worst Behind Us?
At our seminar in Shanghai, Chen Long presented the outlook for China’s economy and markets. Crucially, the credit cycle appears to have bottomed out, and credit growth should accelerate towards the end of the year. He expects the overall economy to follow suit. He also covered the outlook for capital markets, equities and the renminbi.
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Gavekal Research
Louis Gave
Apr 26th 2019
The Case Of The Missing Inflation: Chinese Monetary Policy
China’s response to the Fed’s QEII program in 2010 was to tighten monetary policy, as it feared a spill-over effect into inflation. Since that point China has seen credit growth progressively slow, making it an inhibitor to any global rebound in inflation. This orientation by China is changing as the focus of policy shifts away from crimping the shadow finance sector.
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Gavekal Research
Anatole Kaletsky
Apr 25th 2019
Why The Bulls Are Back In Charge
Now that the S&P 500 has hit a new all-time high and other stock markets have recovered most of the steep losses they suffered last summer, it seems a lifetime since the financial panics of 2018. Investors who bought the dip have enjoyed Wall Street’s strongest quarterly performance in this bull market. After being so well rewarded, how should bullish investors who kept the faith now respond?
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Gavekal Dragonomics
Rosealea Yao
Apr 25th 2019
The Property Cycle Perks Up
China’s property market data has been surprising on the upside. Thanks to easier credit and looser administrative restrictions, sales volumes picked up in March and prices rose. In this paper, Rosealea examines whether the upturn can last, and assesses what it means for land sales, construction activity, materials prices and the broader economy.
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Gavekal Research
Cedric Gemehl
Apr 24th 2019
A Fire-Tested Macron
Tomorrow will see Emmanuel Macron deliver the big national address that got upended by the Notre Dame inferno on April 15. His speech will outline a mix of tax breaks, constitutional modernizations and symbolic grand gestures. The broad story, however, is that the effort to reform France remains broadly on track.
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Gavekal Research
Louis Gave
Apr 24th 2019
How Contagious Is The Health Care Downturn?
On paper, this should have been a good year for health care stocks: global growth has disappointed, long term interest rates have fallen, the US yield curve for a brief while was inverted and a looming US-China trade deal should see China buy lots of health care gear and drugs from the US. Yet, even though the stars aligned, health care has been the worst performing major US equity sector this year. Notwithstanding a bounce yesterday, the sector...
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Gavekal Research
Tom Holland
Apr 23rd 2019
Iran Waivers And The Oil Price Spike
US Secretary of State Mike Pompeo has announced that the US will not roll over waivers on its sanctions on Iranian oil exports when they expire in May. The question for investors is this: If Washington does make good on its threat, to what extent are other oil producers able and willing to increase output in order to make up any supply shortfall in global markets?
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Gavekal Research
Louis Gave
Apr 23rd 2019
The Case Of The Missing Inflation: Energy’s Impact
When the Fed launched QE2 in 2010, there was widespread fear that a great inflation beckoned. It has not exactly worked out that way. Louis considers the role energy played in a decade of becalmed US consumer prices. Yet, with oil prices again rising, he asks whether the market has grown complacent in its analysis of the relationship between oil and inflation.
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Gavekal Research
Tom Miller
Apr 18th 2019
Video: India's Hard-To-Call Election
India’s cacophonous exercise in democracy is well underway and polling suggests there is only a 50% chance of a Narendra Modi-led BJP holding onto power. Tom dives into the details of why the “bear-hugging” reformer has electoral problems this time around. Tom also considers the likely outcome of the election for Indian asset markets.
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Gavekal Research
Louis Gave
Apr 18th 2019
The Case Of The Missing Inflation
As the Federal Reserve launched the second round of its quantitative easing, the fear was that the unorthodox monetary policy would ignite a new round of inflation—even hyper-inflation—throughout the world, with dramatic effects on asset prices. But inflation failed to materialize, and now nobody seems to be worried about it anymore.
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Gavekal Research
Charles Gave
Apr 17th 2019
US Financial Asset Valuations Stretched Every Which Way
Charles dusts off his equity and bond valuation models for the US and is disturbed to see that for only the fourth time since the mid-1980s both asset classes are simultaneously overvalued. In this piece, he asks: what gives?
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Gavekal Dragonomics
Chen Long
Apr 17th 2019
Stabilization Confirmed
The raft of economic data released by China on Wednesday morning suggests the world’s second largest economy is proving more responsive than expected to the authorities’ supportive policy measures. The question is no longer whether the government will hit its 2019 growth target, but whether the apparent success will make Beijing halt its easing.
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Gavekal Research
Tom Miller, Udith Sikand
Apr 17th 2019
Modi And The Markets
Indian markets are pricing in a victory by the ruling BJP in this year’s general election, a six-week process of mindboggling complexity that started on April 11. But while this will be the most likely single outcome when results are announced on May 23, nothing is a foregone conclusion under India’s unpredictable first-past-the-post system.
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Gavekal Dragonomics
Ernan Cui
Apr 16th 2019
An Epidemic That Can No Longer Be Denied
The world’s deadliest pig disease is now established in the world’s largest pork market. The spread of African swine fever in China has been more severe than the government has admitted, and as a result pork prices are spiking and imports are surging. But as Ernan argues in this report, the impact of this epidemic is still only in its early stages.
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Gavekal Research
Udith Sikand
Apr 16th 2019
The Populist Challenge In Indonesia
These are populist times. After the elections of Duterte in the Philippines, Trump in the US, Bolsonaro in Brazil, and the return to power last year of Mahathir Mohamad in Malaysia, investors would do well to take note of the last minute opinion poll gains made by another rabble-rousing populist seeking election to high office in Indonesia.
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Gavekal Research
Will Denyer
Apr 15th 2019
Inflation Is The Real Risk
Happy days seem to be here again as risk assets soar on a dovish Federal Reserve and better growth outlook. Yet, investors should take note. The Fed has three official mandates; namely, to keep inflation low and stable, keep unemployment down, and keep interest rates low and stable. Yet among those “equals”, the first is thought to be bearing down on inflation.
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Gavekal Research
Arthur Kroeber
Apr 12th 2019
Video: Where Now For EU-China Relations?
The annual EU-China summit concluded this week with usual diplomatic platitudes about deepening partnerships and strengthening cooperation. But the meeting took place against a backdrop of heightened tensions, after the EU declared China a “systemic rival” and with many European politicians highly critical of China’s economic nationalism.
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Gavekal Research
Louis Gave
Apr 12th 2019
Europe's Cruel Summer
The eurozone is rapidly becoming the Errol Flynn of global economies: it just never fails to disappoint. From weak German PMIs, through falling French industrial production, to Italy slipping back into recession, it is hard to think of a single European data point over the past 12 months that gave any reason for cheer. Will things get better over the coming months?
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Gavekal Research
Dan Wang
Apr 12th 2019
The End Of The Smartphone S-Curve
Smartphones are a maturing industry. Sales in China, the US, Europe and Japan are declining, and demand growth in India and Africa is not fast enough to drive a new surge in global sales. The industry is hoping that 5G and foldable phones will trigger a fresh upgrade cycle. But neither will drive a significant increase of sales in the near term.
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