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Gavekal Research
Louis Gave, Anatole Kaletsky
Jan 21st 2022
Webinar: To Rotate Or Not To Rotate
Louis is convinced that the trend of higher energy prices, steeper yield curves and value stock outperformance is here to stay—at least until some major event comes along to change the story. Anatole, by contrast, continues to think that the inflation surge is about to be revealed as a scare and reckons that strong earnings growth will soon be driving a resurgence in growth stocks.
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Gavekal Dragonomics
Wei He
Jan 21st 2022
Assets, Liabilities And The Renminbi
Since mid-2020, the renminbi has enjoyed its third major appreciation cycle of the last decade. This appreciation cycle is now coming to an end. But Wei argues in this piece that the depreciation that follows should be much less dramatic than after the last two cycles, thanks to structural changes in China’s international investment position.
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Gavekal Dragonomics
Xiaoxi Zhang
Jan 19th 2022
Waiting For Developer M&A
The offshore bond market remains worried about the prospects for China’s property developers, who look unable to refinance a huge wave of bonds coming due. Regulators prefer to see this stress dealt with by M&A deals, but so far transactions are few. To deliver the “stability” they have promised, regulators will have to get more hands-on.
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Gavekal Dragonomics
Dragonomics Team
Jan 17th 2022
Further Easing For 2022
China’s Q4 economic data release was presaged by a policy rate cut by the People’s Bank of China as officials work to counteract the country’s mounting economic headwinds. The Dragonomics team believes that China will continue to face downside risks; policymakers are therefore likely to ramp up supportive measures accordingly in the coming months.
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Gavekal Research
Tan Kai Xian, Thomas Gatley, Cedric Gemehl, Vincent Tsui
Jan 14th 2022
Webinar: Global Investment Roundtable, January 2022
In the US and Europe, the new year has begun with a huge wave of workplace absenteeism due to surging omicron Covid cases. In China, policymakers are adopting a whack-a-mole approach to multiple Covid outbreaks, while other emerging economies are curtailing market opening measures. Our team outline their base case views for growth, inflation and markets in 2022.
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Gavekal Research
Louis Gave
Jan 14th 2022
Gold As An Emerging Market Play
Spare a thought for gold bugs. At the beginning of 2021, their reasoning was clear. With all the money-printing and fiscal stimulus across the rich world, inflation would breeze past 2%. From there, it would be just a short skip and a jump to higher gold prices. Inflation did indeed breeze past 2%. But gold prices fell. So, what went wrong? As Gavekal has long maintained, investors should look at gold as a derivative play on emerging markets.
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Gavekal Dragonomics
Thomas Gatley
Jan 13th 2022
Behind The Incredible Export Boom
Chinese export growth ostensibly continues to outpace the rest of the world this year, but Thomas believes this could in part be due to misleading data. Exporters have been incentivized to reduce their under-invoicing, which has in turn materially inflated China’s export growth over the past three years.
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Gavekal Research
Louis Gave
Jan 12th 2022
Breakout Time... Again
In early 2021 US bond yields charged higher, and oil and gold both looked poised to break out decisively to the upside. The underperformance of value stocks seemed to be coming to an end. Then two developments pulled the rug out from under the cyclical trade. Fast forward, and today we might be back in early 2021. Louis asks what could shock markets this time.
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Gavekal Dragonomics
Rosealea Yao
Jan 11th 2022
Housing Demand Begins To Stabilize
Chinese policymakers are scaling back their crackdown on real estate, having signaled a pivot towards prioritizing stable growth. The change in rhetoric has had a visible effect on the housing market, with a particularly sharp pickup in sales volumes in late December. This should lead to a further sequential improvement in sales and prices in Q1.
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Gavekal Research
Simon Pritchard
Jan 10th 2022
Strategy Monthly: The Supply-Side Shock
Soaring infection rates due to the omicron Covid wave are causing widespread disruption to supply chains around the globe. A resolution to global supply issues rests on Beijing maintaining this balancing act, as it also moves to shore up growth.
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Gavekal Dragonomics
Ernan Cui
Jan 07th 2022
Covid Containment Evolves
After a string of outbreaks, China’s Covid strategy is evolving. No longer aiming for zero cases, authorities are focused on quickly containing local outbreaks. This has mostly worked well, and travel will be less restricted over the Lunar New Year holiday. But the harsh lockdown in Xi’an shows what can go wrong if the virus gets out of hand.
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Gavekal Research
Louis Gave
Jan 06th 2022
As January Goes
We are only six days into the year, but most investors must hope that the adage “as January goes, so goes the year” does not hold true for 2022. After all, the S&P 500 is down -1.4% and the Nasdaq has shed -3.5%. And behind this pullback in the broader indexes, pain in the more speculative parts of the market is starting to add up. Since early November, the bitcoin price has fallen -36.5% and the Russell 2000 growth index is flirting with...
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Gavekal Research
Louis Gave
Jan 06th 2022
SWOT Analysis For 2022
Despite a spate of exogenous shocks in 2021, currency markets largely remained placid, bonds barely sold off and the US equity market continued to scale new heights. This year, however, the global policy backdrop is shifting. Clearly, 2022 will be different from 2021. But how different? Louis analyzes the strengths, weaknesses, opportunities and threats in the new year.
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Gavekal Research
Thomas Gatley
Jan 05th 2022
Validation For VIEs
China’s policymakers have given foreign investors in Chinese internet firms an unexpected gift: regulatory validation for the variable-interest entity, a corporate structure which allows firms to skirt a prohibition on foreign investment. Thomas explains that while regulatory uncertainty remains for restricted sectors, a key risk has been removed.
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Gavekal Research
Charles Gave
Dec 21st 2021
Rethinking The International Liquidity Crisis
In recent weeks Charles has published a series of reports assessing changes in the reserve of value that underpins the global financial system. In this report, he returns to one of his older frameworks for the US-dollar-centered system to see if it still has explanatory power. He concludes that it does, but he is not reassured by the findings.
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Gavekal Dragonomics
Wei He
Dec 20th 2021
One Small Cut For Lending
China announced a 5 bp cut to its one-year loan prime rate on Monday, the latest in a series of supportive measures enacted by officials to ease policy following China’s sharp slowdown in growth. In this Quick Take, Wei explains why future rate cuts are likely on the way, and why the cuts will be positive for Chinese bonds.
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Gavekal Research
Tilly Zhang
Dec 17th 2021
Video: The Struggle For Self-Sufficiency
US efforts to slow the development of China’s domestic semiconductor industry through export bans on US-origin technology has duly stymied its leading chipmakers. As a result, Beijing is working hard to achieve some form of technological self-sufficiency. In this interview, Gavekal Fathom China’s Tilly Zhang outlines two prongs of the effort.
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Gavekal Dragonomics
Tom Miller
Dec 16th 2021
Securing The Western Frontier
China looks like a winner from the US withdrawal from Afghanistan, now free to tighten its grip on Central Asia. In this DeepChina report, Tom explains the complex reality of the latest round of the "great game." China is getting closer to Russia, skeptical of Afghanistan and Pakistan, and consolidating its economic hold on Turkmenistan.
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Gavekal Dragonomics
Dragonomics Team
Dec 15th 2021
A Welcome Reprieve For Property
Chinese economic data stabilized in November as exports strengthened and the deep declines in property showed signs of narrowing—a welcome respite from the sharp drops in September and October. Even so, the sector is stabilizing at a low level rather than rebounding to previous highs, underscoring the need for continued policy support.
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Gavekal Research
Thomas Gatley, Wei He
Dec 13th 2021
A Green Light For Onshore Chinese Equities
Chinese officials are signaling a shift in policy to counter downward pressure on growth, a move which Thomas and Wei believe will set the stage for a rally in onshore equities through 1Q22. The main risk is that policymakers under-deliver on their new rhetoric of stability. Meanwhile, the outlook for offshore Chinese equities is more mixed.
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