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Gavekal Dragonomics
Andrew Batson
Apr 02nd 2020
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.
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Gavekal Research
Arthur Kroeber
Mar 26th 2020
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.
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Gavekal Research
Arthur Kroeber
Mar 23rd 2020
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.
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Gavekal Research
Tom Holland
Mar 13th 2020
The Conditions Needed For A Bottom
Financial markets are now in full-blown panic mode. For investors, the key question is: What will it take for markets to form a bottom, and when will this happen? No one can answer with any precision. However, it is possible to discern the broad conditions needed to allow the markets to find a bottom. We are nowhere near them yet.
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Gavekal Dragonomics
Thomas Gatley, Xiaoxi Zhang, Wei He
Mar 09th 2020
Limited Help For Struggling SMEs
Chinese policymakers have announced a wide range of monetary and fiscal measures intended to help the smaller firms hit hardest by the Covid-19 outbreak. The helpfulness of these measures will likely only be marginal; however, Thomas, Xiaoxi and Wei are cautiously optimistic that most SMEs can still weather the ongoing crisis.
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Gavekal Dragonomics
Wei He
Feb 27th 2020
The Next Infrastructure Stimulus
As size of China’s growth shock from the coronavirus shutdown becomes clear, yet another infrastructure stimulus looks to be on the way. In this piece, Wei assesses the scale of the possible boost. The most likely outcome is that public-works spending accelerates to 8-9% in 2020 from just 3.3%, a nice boost but still well below historical peaks.
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Gavekal Research
Andrew Batson
Feb 24th 2020
Far From Priced In
Asian markets switched to risk-off mode Monday as investors reacted to further coronavirus news outside of China. Yet in onshore markets, investors are optimistic that the economy will quickly normalize as the spread of the virus comes under control, and that the central bank will provide policy easing. Neither belief looks well-founded at the moment.
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Gavekal Research
Charles Gave
Feb 19th 2020
Time And Risk
The financial world is organized around two axes: time and risk. If some authority manipulates the time axis, the effect will be to compromise the risk axis. This is not an abstract formulation. It has the potential to threaten portfolios and the solvency of major institutions.
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Gavekal Research
Louis Gave
Feb 18th 2020
Q&A On The Coronavirus Situation
Louis spent last week meeting with clients in the US and discussions centered on the coronavirus situation. His starting point is that the Chinese authorities now have every incentive to overstate, rather than understate, the severity of the viral outbreak. He explores the impact on growth in the rest of the world and asset price movements.
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Gavekal Research
Andrew Batson
Feb 17th 2020
The Risk Of Falling Behind The Epidemic Curve
China’s government was slow off the mark in responding to the initial outbreak of the new coronavirus. Although the government is now fully mobilized to fight the outbreak, it risks falling behind the curve again—this time in responding to the economic damage wrought by its extended shutdown of normal life and business activity.
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Gavekal Dragonomics
Rosealea Yao
Feb 12th 2020
The Lingering Impact On Property
While the 2003 SARS outbreak had only a transitory impact on China’s housing market, the 2020 coronavirus episode is proving to be much more serious. In this piece, Rosealea argues that the big hit to housing sales will leave developers short of cash and limit their ability to keep projects going. This points to a lingering drag on construction.
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Gavekal Research
Andrew Batson, Ernan Cui
Feb 11th 2020
Back To Work, Not Back To Normal
China’s businesses are starting to get back to work, but the economy is still very far from normal. On Monday, the extended holiday declared by the government to help contain the coronavirus outbreak came to an end (except in Hubei province). But most businesses still face great difficulty in resuming their normal activities.
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Gavekal Research
Didier Darcet
Feb 05th 2020
A Quant View Of The Virus
There is now enough data on the spread of Covid-19 to permit a useful quantitative analysis of its likely evolution. In this paper, Didier notes that while the spread of the virus continues to accelerate, the “jolt” of that acceleration is now slowing. This suggests the outbreak is likely to peak by early March.
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Gavekal Dragonomics
Arthur Kroeber
Feb 04th 2020
The Long And Short Of Covid-19
There is now enough information available to begin to make useful judgments about both the short term and long term impact of the Covid-19 outbreak. In this extensive analysis, Arthur examines the health risks posed by the virus, its economic impact, and likely political fallout.
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Gavekal Research
Louis Gave
Jan 22nd 2020
How Sturdy Are The Zeitgeist's Five Pillars?
The investment zeitgeist can be thought of as a set of assumptions that investors hold about structural growth drivers, key prices and policy approaches. An investment manager should understand what makes up the zeitgeist and how it is changing. Louis outlines five foundational pillars that he considers integral to the current situation.
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Gavekal Dragonomics
Gilliam Hamilton
Jan 20th 2020
The Year Of Many Targets
2020 is a big year for China’s central planners. Beijing has set a wide range of targets to be achieved by the year’s end, and the policies enacted to meet these objectives have had far-reaching effects. In this report, the Dragonomics team examines seven such targets, the policies implemented to reach them, and the consequences for China’s economy.
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Gavekal Dragonomics
Rosealea Yao, Andrew Batson
Jan 08th 2020
The Mortgage Rate Reset
China’s central bank is moving forward with its interest-rate reforms, ordering mortgages to be reset based on the new loan prime rate. Rosealea explains that this shift will make monetary policy more transparent and effective by re-linking mortgage rates to official policy rates, but it does not herald a cycle of major cuts in mortgage rates.
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Gavekal Research
Louis Gave
Dec 13th 2019
Is Brexit The Midwife To A New Investment Environment?
With the confirmation of a conservative victory in the UK election, and a long awaited trade deal between the US and China, the pieces are falling into place for a weakening of the US dollar and a continuation of the global reflation trade. Already, both sterling and the euro have strengthened in response to the reports of a Tory victory.
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Gavekal Research
Research Team
Dec 13th 2019
Our 2019 Holiday Reading List
“So many books,” lamented the late Frank Zappa, “so little time.” For readers wondering which of the 130mn books published since the invention of the printing press they should curl up with over the coming break, hopefully Gavekal’s annual holiday reading picks may help.
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Gavekal Dragonomics
Rosealea Yao
Nov 21st 2019
The Crackdown On Developer Financing
China’s financial regulators are squeezing funding for property developers in order to discourage land speculation and cool down property prices. In this piece, Rosealea argues the crackdown has been fairly successful, and does not pose a big risk to construction. Slightly easier demand-side policies will help offset tough supply-side restrictions.
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