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Gavekal Dragonomics
Thomas Gatley
Jun 08th 2020
US Politics Versus Chinese Stocks
Financial markets are the latest field in which US-China political tensions are playing out. Thomas describes two lines of attack US hawks are pursuing against China: blocking Chinese firms from US equity markets and pressuring US asset managers to avoid Chinese equities. The risk associated with Chinese stocks has therefore materially increased.
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Gavekal Dragonomics
Dan Wang
Jun 05th 2020
A Charm Offensive For Supply Chains
As multinationals in China face growing pressure to shift their supply chains elsewhere, China’s government is doing everything it can to hold on to them. As Dan explains in this piece, China’s ability to get businesses back on their feet after the Covid-19 lockdown is a great advertisement for its attractiveness as a place to do businesses.
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Gavekal Research
Tom Holland
Jun 04th 2020
Video: The Upsurge In Oil
The price of Brent crude oil has doubled in the past six weeks, supported by the beginning of a recovery in demand as economies come out of lockdown and by expectations that the Opec+ cartel will extend the deep production cuts it agreed in April. Tom weighs the forces likely to drive the oil market over the coming months.
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Gavekal Dragonomics
Andrew Batson, Wei He, Vincent Tsui
Jun 03rd 2020
Webinar: China's Economic Outlook After The NPC
China research director Andrew Batson was joined by China macroeconomist Wei He and Asia analyst Vincent Tsui to discuss the news from the National People's Congress and what it means for China's economic recovery, the likely direction of fiscal and monetary policy, and the consequences of Hong Kong's national security law.
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Gavekal Dragonomics
Rosealea Yao
Jun 02nd 2020
A Property Rebound In May
Property sales are quickly recovering from their Covid-19 crash, with upward momentum that should continue for several months to come. However, Rosealea argues there are growing risks that China’s property market will start overheating, forcing policymakers to step in and leading to a downwards drift by July/August at the earliest.
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Gavekal Research
Pierre Gave
Jun 02nd 2020
The Case For Commodities
For most of the last decade, we have been in a period of low investment in the commodity sector. Yet, over the next 20 years the global population will grow by almost 2bn—a 25% increase. Migration into cities will continue, with the world’s urban population growing by almost 50%, creating enormous demand for infrastructure.
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Gavekal Research
Research Team
Jun 02nd 2020
Strategy Monthly: Recovery And Its Risks
As economies have begun to emerge from their coronavirus lockdowns, there remain two big near-term macro risks that could derail a recovery. On one hand, solid demand on top of massive central bank monetary expansion could fuel rising inflation. On the other, a big round of permanent job losses could dent demand and slow the economic recovery.
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Gavekal Dragonomics
Thomas Gatley
Jun 01st 2020
The Chill On Corporate Capex
The Covid-19 lockdown led to a historic collapse in corporate capital expenditure in early 2020, but what comes next? In this piece, Thomas introduces a new model for understanding China’s investment cycle. Private-sector capex should stay weak in the second half of 2020, lagging public-sector infrastructure spending, but rebound in 2021.
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Gavekal Research
Louis Gave
Jun 01st 2020
As The World Reopens
A few weeks ago, I outlined three scenarios that could unfold as the world reopened for business. Since then, it looks like the market is starting to tentatively position scenario #3 in which the world economy rips and inflation rises due to pent-up demand, budget deficits, low oil prices and money printing. This makes sense, but the rotation may soon face a number of challenges.
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Gavekal Research
Andrew Batson, Wei He
May 29th 2020
The Renminbi As Collateral Damage
The rise in US-China tensions over the past week is taking a toll on China’s currency, which has weakened to CNY7.15 to the dollar from around CNY7.10, approaching its lows of last September. This has raised a worrying question: is China about to use currency depreciation as a weapon in its widening dispute with the US?
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Gavekal Research
Arthur Kroeber, Charles Gave, Louis Gave, Anatole Kaletsky
May 29th 2020
Webinar: Global Investment Roundtable, May 2020
Yesterday Louis Gave, Charles Gave and Anatole Kaletsky joined Arthur Kroeber at the Global Investment Roundtable. They discussed different scenarios for how and when the world’s major economies can exit the Covid-19 crisis and what it means for investors.
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Gavekal Research
Louis Gave
May 27th 2020
The Kitsune Market (Part IV)
Over recent weeks, Louis has examined in detail nine “Kitsune” tail risks which could blindside financial markets in the wake of the Covid-19 crisis. But in contemplating these tail risks, Louis has been forced to wonder if he has missed the forest for the trees, overlooking perhaps the greatest risk of all for investors: that the 40-year inverse correlation between equities and bonds may be breaking down.
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Gavekal Dragonomics
Wei He
May 27th 2020
Infrastructure Faces Fiscal Constraints
Hopes for an infrastructure boom are rising after China’s legislature approved a record amount of bond sales. But as Wei explains, the Ministry of Finance’s conservative budget targets will still limit how much localities actually spend. Infrastructure investment is headed for around 10% growth in 2020, not enough for a very strong recovery.
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Gavekal Research
Charles Gave
May 26th 2020
Hong Kong And The Ethic Of Responsibility
German sociologist Max Weber made the distinction between the ethic of conviction, based on the philosophy of Immanuel Kant, and the ethic of responsibility, based on consequentialist philosophy, a grandchild of Aristotelian logic. The distinction between the two may help investors to determine their response to developments in Hong Kong.
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Gavekal Research
Simon Pritchard
May 25th 2020
The Death Of Old Hong Kong
On Monday morning, the streets around Gavekal’s offices in Hong Kong’s Wan Chai district teemed with harried commuters rather than baton-charging police and political protesters. Unfortunately, uncertainty about Hong Kong’s future as a free society will linger longer than the tear gas that had drenched the area a few hours earlier. There is now a fair chance that China’s imposition of a new national security law in Hong Kong will cause a chain...
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Gavekal Dragonomics
Ernan Cui
May 25th 2020
The Truth About Unemployment
China’s government is promising to deliver stability in employment this year, although it has not made a full accounting of how the Covid-19 lockdown affected jobs. In this report, Ernan presents comprehensive estimates of the scale of job losses: in the range of 60-100mn. This is far more than China’s social safety net is designed to handle.
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Gavekal Dragonomics
Andrew Batson
May 22nd 2020
Aiming For Stability Without A Target
The coronavirus has made a mockery of China’s annual growth target, so the leadership has done the only sensible thing: given up on it. In this Quick Take, Andrew explains how that decision, and the fiscal measures rolled out at the National People’s Congress, show how China is not trying to drive a rapid rebound to its previous growth trend.
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Gavekal Dragonomics
Xiaoxi Zhang
May 20th 2020
The Corporate Bond Crisis That Wasn’t
China’s corporate bond market has not been bothered by the biggest shock to the economy in decades. In this piece, Xiaoxi explains why, since the beginning of the Covid-19 pandemic, there has been no surge in defaults, spreads have barely widened and new issuance has surged. A continued bull market in government bonds will be more good news.
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Gavekal Research
Vincent Tsui
May 19th 2020
Surviving A US$100bn Funding Gap
Developing economies are struggling from reduced trade and harder access to capital. They also face a US$109bn cut in remittance income this year as construction sites in the rich world close, ships stay in port and restaurants are shuttered. This could spur a spiral of poverty and protest that ends with debt defaults that even suck in well-managed emerging markets.
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Gavekal Research
Arthur Kroeber, Dan Wang
May 18th 2020
A US Full-Court Press Against China
The US-China relationship has deteriorated rapidly, and the main reason seems to be that Donald Trump has decided that a “tough on China” approach should be central to his reelection campaign. Acrimony between the two countries is likely to get much worse between now and November, and US actions are starting to spread from technology to finance.
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