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Gavekal Research
Charles Gave
Jan 20th 2021
The Logos, Idiotes And Demagogues
Charles revisits the idea of the Greek "logos", "idiotes", demagogues and citizens, and how the Greeks believed that those who controlled the logos—the language used to describe the world—ipso facto controlled the political system. Problems arise when a new, competing logos started to emerge.
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Gavekal Research
Cedric Gemehl
Jan 20th 2021
Towards Stealth Debt Cancellation
The grand panjandrums of the European Central Bank meet Thursday amid growing calls for them to cancel the vast sums of eurozone member governments’ debt they have bought over the last year. There is zero chance they will formally agree to any debt cancellation, but the ECB may do so by stealth.
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Gavekal Research
Tom Miller
Jan 19th 2021
Flows Will Still Favor Indian Equities
Indian cows tend to be scrawny beasts, but India’s equity bulls have rarely looked fatter. Stocks scaled record highs last week after a 10-week binge on easy foreign money. The feeding frenzy has faded since Friday, but local benchmarks remain up 25% in US dollar terms since the start of November, and foreign investors’ appetite for Indian assets does not yet look sated. While the vigorous rebound in India’s economy from last summer’s slump may...
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Gavekal Research
Tan Kai Xian
Jan 19th 2021
Follow The Money
After last spring’s lockdowns, the Federal Reserve undertook a huge liquidity response and the US government borrowed hand over fist to keep a range of economic actors afloat: US companies got forgivable loans, households received cash grants and the jobless were offered enhanced unemployment payments. Even after this splurge, the Treasury is still left with wheelbarrow-loads of cash. In the year ahead, how these record sums of money are...
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Gavekal Dragonomics
Xiaoxi Zhang
Jan 19th 2021
Small Borrowers Still Struggling
Even after a dramatic economic recovery, many of China’s smallest businesses are still struggling. In this piece, Xiaoxi shows how the government’s financial-support measures did little to improve small businesses’ access to financing, which is already tightening. But the policies are helping banks avoid a potential spike in bad loans.
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Gavekal Research
Tom Miller
Jan 18th 2021
Biden’s United Front Against China
As the outgoing Trump administration exits with a flurry of executive actions directed against China, Beijing is not sitting around hoping for Joe Biden to spark a new era of détente with the US. The recent tightening of control in Hong Kong shows that President Xi Jinping has no intention of giving an easy early ride to a leader who has pledged to build a “united front of US allies and partners” to constrain a resurgent China. The European...
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Gavekal Research
Cedric Gemehl
Jan 18th 2021
Europe’s New Political Cycle
After a six-month respite, European political risk is back on the radar screen. Last Wednesday, ministers from the Italia Viva of former prime minister Matteo Renzi walked out of Italy’s cabinet in a dispute over how EU Covid recovery funds should be spent, leaving the coalition government of prime minister Giuseppe Conte scrabbling to survive. On Friday, the cabinet of Dutch prime minister Mark Rutte resigned over a scandal involving the over-...
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Gavekal Dragonomics
Dragonomics Team
Jan 18th 2021
A Two-Speed Recovery
China’s Q4 GDP growth surpassed pre-Covid rates, with housing and manufacturing leading while services lagged and infrastructure investment slowed. In early 2021, this divergence is likely to continue as consumers stay home for the Chinese New Year and poor credit growth drags on infrastructure investment.
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Gavekal Research
Yanmei Xie, Will Denyer
Jan 15th 2021
Biden’s Spending Plan
In a speech late Thursday, US President-Elect Joe Biden called on Congress to approve an additional US$1.9trn of federal spending to tackle the Covid-19 pandemic and support the US economy. If approved, Biden’s package will bring US government stimulus spending since the start of the pandemic to more than US$5trn. Heavy on support for households, Biden’s proposal would avert the risk of a first quarter contraction in the US economy and prime the...
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Gavekal Research
Louis Gave
Jan 15th 2021
The First, And Last, Line Of Defense
US equity valuations are stretched and bond yields are rising. This has always proved an ominous combination. What’s different this time is that the Federal Reserve continues to inject vast amounts of liquidity into the system. But will the Fed’s infections continue? And if they do, as the pandemic recedes will they prove big enough both to finance economic reopening and to keep asset prices afloat?
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Gavekal Dragonomics
Thomas Gatley
Jan 14th 2021
For Exports, It’s Stronger For Longer
China’s exports have been boosted by two side effects of the Covid-19 pandemic: a shift of consumer spending to goods from services, and the failure of manufacturing in other countries to get back to full capacity. How long can those advantages last? Thomas argues they will continue to boost exports through the first half of 2021.
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Gavekal Research
Arthur Kroeber
Jan 14th 2021
Video: China's Post-Pandemic Roadmap
A year after Covid-19 was first revealed in China, the country has emerged as one of the key economic winners of the global pandemic. In this video interview, Arthur assesses how it did this and looks at the new priorities for Chinese industrial development in a world that has become less open and more suspicious of Chinese intentions. He seeks to answer these questions with reference to US trade and technology policy toward China as a new...
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Gavekal Research
Tom Holland
Jan 14th 2021
A Debate On The US Dollar
In investment, few things can prove as dangerous as a “safe bet” in the foreign exchange market. So, when 2021 began with a firm consensus that the US dollar was destined to fall, only for the DXY index to rally 1% over the last week, people quickly began to question the prevailing consensus. Within Gavekal, this sparked a spirited debate on the direction of the dollar. Readers will not be surprised to learn that there was a range of views, with...
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Gavekal Dragonomics
Rosealea Yao
Jan 13th 2021
New Ceilings For Property Financing
China’s policymakers are expanding their restrictions on bank financing of the property sector, imposing limits on mortgage lending in addition to curbs on borrowing by developers. In this report, Rosealea explains why the new regulations do not shift her expectations of flat property sales and a modest decline in construction activity in 2021.
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Gavekal Research
Simon Pritchard
Jan 13th 2021
The Squeeze Of Old Hong Kong
Last Wednesday Hong Kong police arrested scores of pro-democracy activists for joining forces to try and win a local parliamentary election and thereafter block government legislation. The use of a tough new national security law to suppress routine political organization threatens more international opprobrium that will further cut the city off from the Anglosphere.
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Gavekal Research
Vincent Tsui
Jan 13th 2021
The Paradox Propelling Asian Currencies
This year, the world is likely to see a sharp bifurcation in economic performance. In developed economies, mass vaccination programs enable a return to economic normality, while in emerging markets, vaccine supply and distribution problems will slow recovery. Paradoxically, EM economic underperformance will favor the outperformance of emerging Asia’s currencies.
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Gavekal Research
Louis Gave
Jan 12th 2021
Did Big Tech Just Jump The Shark?
For investors, the last decade has been the era of Big Tech. But since September, US social media and consumer-related stocks essentially went nowhere. The unexciting performance belies all the attention these companies have been attracting lately. Following last week’s upheavals in Washington, several Big Tech firms took action to block people and services.
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Gavekal Research
Charles Gave
Jan 12th 2021
The UK After Brexit
Four and a half years after the vote, Britain is properly out of the European Union and moving into a new era. It will surely be a freer nation, says Charles, but in this piece he asks: will it be a richer one? Spoiler alert, he thinks the upshot will be the City of London emerging as the world’s über financial capital.
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Gavekal Research
Will Denyer
Jan 11th 2021
The Road Ahead For US Yields
Friday’s US labor market figures showing a surprise 140,000 contraction in December’s non-farm payrolls emphasized just how tough the winter months are going to be for the world’s largest economy as coronavirus infection rates and resulting hospitalizations continue to accelerate. Yet the grim near-term economic outlook notwithstanding, the first week of 2021 saw inflation expectations push higher, with the 10-year breakeven inflation rate...
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Gavekal Dragonomics
Ernan Cui
Jan 11th 2021
Covid Headaches Continue
China diagnosed 527 new cases of Covid-19 in the first 10 days of 2021, mostly in Hebei province, in the biggest local outbreak since July 2020. In this Quick Take, Ernan explains why this outbreak is challenging China’s Covid-19 playbook and why its timing is particularly concerning ahead of the Chinese New Year.
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