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E.g., 20-09-2020
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    Gavekal Dragonomics

    New Infrastructure, Old Problems

    China is promising a boost in so-called “new infrastructure,” of which 5G network development is a major component. Dan explains how the scale of spending involved in building 5G infrastructure is too small to provide a meaningful boost to growth, and why any possible economic benefits from a faster mobile network will not be realized anytime soon.

    0
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    Gavekal Research

    The Kitsune Market (Part II)

    Last week, Louis introduced the Kitsune, Japan’s mythical nine-tailed fox, and outlined four tail risks which could upend investment after Covid-19. Today he examines two more important tail risks: that the pandemic might not prove deflationary but inflationary, and the risk that the market’s “don’t fight the Fed” mentality could collapse under the weight of its own contradictions.

    10
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    Gavekal Research

    The Short, Medium And Long Term Outlook

    At the end of March, just after the collapse of global stock markets and non-dollar currencies had reached its climax, I argued that it was too early to buy equities but probably a good time to sell US dollars. The first of these ideas turned out to be wrong, the second irrelevant. But far from admitting defeat, I think it is worth doubling down on both these recommendations.

    4
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    Gavekal Research

    The Kitsune Market

    The Kitsune, the mythical Japanese fox which portends a change of fortune, has nine tails. Inspired by the unnatural conditions in markets, Louis has identified nine tail risks which could upend the investment world over the short to medium term. In the first installment of a two-part series, he outlines four tail risks that investors should consider hedging against.

    12
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    Gavekal Dragonomics

    No Swift Recovery For Corporate Profits

    Broad equity indexes in China seem to be faring much better than they should, given the poor Q2 outlook for Chinese corporate profits. Thomas surmises this is due to investors’ belief that policy stimulus will grow to 2009 levels and continue into Q3—a belief that is likely to disappoint, leading to a potential correction in H2.

    2
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    Gavekal Research

    Whale Watching In The Gulf

    Gavekal’s dynamite fishing analogy maintains that the biggest impact of a market shock only shows up after a delay, much like the effects of an underwater explosion. First the small fry float to the top, then the mid-size fish. Only much later does the dead whale break surface. After the oil price shock investors are asking if the Saudi riyal's peg to the US dollar could be that whale.

    5
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    Gavekal Dragonomics

    Steel Prices Signal Stability

    Steel prices have stabilized after falling around 10% from their peak, reflecting a relatively rapid recovery in construction activity from the Covid-19 lockdowns. In this piece, Rosealea argues that the steel market is signaling a stabilization in China’s domestic demand from improving housing sales and a boost to infrastructure spending.

    0
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    Gavekal Research

    Of Cows And Negative Oil

    A friend has a sizable dairy farm in France. He usually sells his cows’ milk to local makers of yogurt and cheese for anywhere between €250 and €350 per 1,000 liters. Today, with most local cheesemakers shut down, buyers are offering just €1 per 1,000 liters for his milk. It could be worse, though. He could be in oil.

    11
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    Gavekal Dragonomics

    East Africa’s Chinese Gamble

    China’s deep economic roots in Africa provoke alarm in the US and concern among debtor nations, especially as some costly infrastructure projects prove financially unviable. But our latest in-depth DeepChina report explains why China’s presence is generally welcome in East Africa, even as the era of huge loans and megaprojects draws to an end.

    7
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    Gavekal Dragonomics

    A Poor Prognosis For US-China Ties

    The Covid-19 pandemic has been bad for the health of the US-China relationship, which was already in poor shape. In this piece, Arthur explains how US security hawks have seized the opportunity to hammer home the argument that China is untrustworthy, pushing the US debate over China policy in a more confrontational direction.

    2
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    Gavekal Research

    New Concerns For A New World

    We are in uncharted policy territory. Never before have we seen the kind of GDP contractions now being projected for most OECD countries, and never before have investors had to deal with such extremes of uncertainty. Against this backdrop, Louis attempts to answer 10 of the most burning questions posed by clients about the shape of the post-Covid-19 world.

    7
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    Gavekal Research

    Waiting For Godot (21st Century Edition)

    For years, investors have been waiting for China’s massive accumulation of debt to lead to a “Minsky moment”. Instead, in the Covid-19 crisis it is Western central banks that are blowing out their balance sheets in a desperate attempt to stabilize financial markets and their economies—while Chinese government bonds have proved “anti-fragile”.

    2
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    Gavekal Research

    The Truth In Trump’s Tweets

    Oil market pundits were quick to dismiss Donald Trump’s tweeted claim Thursday that Saudi Arabia and Russia are ready to agree crude production cuts of 10-15mn bpd as “absurd” and “incredible”. But oil production cuts of the magnitude flagged by Trump are certainly in the pipeline—whether as the result of a new Opec+ agreement or not.

    1
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    Gavekal Dragonomics

    Getting Out Of Lockdown

    China is starting to get out of its strict Covid-19 lockdown, but its economy will not get fully back to normal until the outbreaks in other countries also get under control. In this piece, Andrew and the team dig into the data to piece together the economy’s trajectory for March and April: a narrowing decline rather than a fast rebound.

    5
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    Gavekal Research

    Who Will Win The War On Covid-19?

    In recent weeks leaders around the world have deployed all the rhetoric of wartime to declare hostilities against Covid-19. Louis examines which, if any, of the three major global powers—the US, Europe and China—is likely to emerge from the war a relative “winner”, and draws the appropriate investment conclusions.

    11
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    Gavekal Research

    How Long For The Costly Cure?

    Is the cure worse than the disease? This question is already being asked about the economic lockdowns being imposed in response to Covid-19. It will be asked a lot more in the coming weeks as the economic pain gets worse. The short answer is that the cure is costly, but needed; and well-designed policies can enable a transition to a much lower-cost approach by mid-May if not earlier.

    7
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    Gavekal Dragonomics

    The Coming Collapse Of Exports

    As other economies shut down to contain their outbreaks, China’s hopes of a V-shaped growth rebound are evaporating. Thomas explains how the ensuing collapse in Chinese exports could result in a 4-8pp drop in GDP growth for Q2, offsetting any domestic recovery and pressuring policymakers to ramp up economic assistance.

    0
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    Gavekal Research

    Four Baskets For Four Quadrants

    As investors survey the shattered remnants of the past decade’s bull market, they can reasonably assume that the winners of the future will not be those who dominated in the last decade. Louis applies the Gavekal Four Quadrants framework to address the question of which asset class will emerge victorious in a new macro environment.

    0
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    Gavekal Research

    Lockdowns Loom; What’s The Exit Strategy?

    We are heading into another difficult week. Covid-19 case numbers and fatalities outside China continue to grow rapidly. Social lockdowns are spreading to more US states and European countries. In the short run, fiscal support is on the way. Longer term, governments will have to start asking the uncomfortable question of when the economic pain outweighs the public health gain.

    1
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    Gavekal Research

    After The Perfect Storm

    While most media attention is focused on the Covid-19 outbreak, the energy industry simultaneously faces a solvency crisis and a liquidity seizure of epic proportions is unfolding before us. In short, these events have created a perfect storm. What comes next depends on how this three factors driving markets play out

    0
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