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Gavekal Dragonomics
Wei He
Jan 06th 2021
The Renminbi Races Out Of The Starting Gate
The renminbi gained 1% against the US dollar in the first two trading days of 2021, leading China’s central bank to signal a pushback against appreciation by tweaking foreign-lending limits. In this Quick Take, Wei explains that such moves are likely to slow than stop the currency’s gains, as fundamentals still favor the renminbi.
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Gavekal Dragonomics
Andrew Batson
Jan 05th 2021
Decoding The Assault On Alibaba
The antitrust investigation into Alibaba, following close on the heels of the cancellation of the Ant IPO, has raised big questions about the changing political environment for Chinese internet companies. In this piece, Andrew considers the best- and worst-case scenarios, and concludes that at a minimum, growth prospects have dimmed.
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Gavekal Research
Louis Gave
Jan 04th 2021
Gravity Or Liquidity? Which Will Win In 2021?
In hindsight, 2020 showed that if three conditions are met, a stock can break free from the earth’s gravity, and lift off for destinations only sci-fi writers could have imagined. Consequently, one of the most important questions for investors in 2021 is whether such inter-galactic travel can continue. Or will the coming year instead see a shift in investor behavior, with gravity once again exerting its downward pull?
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Gavekal Research
Anatole Kaletsky
Dec 22nd 2020
Goldilocks And The 10 Bears Of 2021
In recent years Anatole has written a series of articles describing 10 key risks for investors. He readily accepts that this year’s exercise was rendered redundant by the emergence of Covid-19 in January. Next year, however, he believes that a greater range of factors could weigh on markets and in this piece assesses them one by one.
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Gavekal Dragonomics
Rosealea Yao
Dec 18th 2020
A Looming Correction For Iron Ore
Iron ore prices hit an eight year high in early December in response to a tight steel market. Rosealea writes that this uptick in steel demand, likely due to China’s strong steel-intensive export figures, is unsustainable and should subside in the new year—resulting in a correction for iron ore prices in the coming months.
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Gavekal Research
Charles Gave
Dec 18th 2020
The Boom Of 2021
As he gazes into next year, Charles has reviewed some of his most trusted indicators and found that the US is moving towards an inflationary boom that should mean stronger growth, rising inflation and higher bond yields. If the Federal Reserve acts to crimp this adjustment in the price of money, he warns that the US dollar could tank.
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Gavekal Dragonomics
Wei He
Dec 17th 2020
The Road To Policy Normalization
China’s economy is almost back to normal after Covid-19, and that means economic policy will also normalize: the question is not whether, but how. In this piece, Wei argues that the most likely policy settings for 2021 will be somewhat tighter fiscal policy and a deceleration in total credit growth, but no increase in policy interest rates.
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Gavekal Research
Vincent Tsui
Dec 16th 2020
The Lure Of Korea In A Rotation
Hopes for a return to normality as Covid vaccines get rolled out have helped fuel a global rotation from growth to value equities, and from previous “Covid winners” to “Covid losers”. Due to its better pandemic management, clear policy headroom and exposure to the electronics sector, Asia has generally been a Covid winner. Hence, Udith Sikand and myself have argued that beaten-up non-Asian markets are the way to play this rotation (see Asia’s...
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Gavekal Dragonomics
Thomas Gatley
Dec 16th 2020
A Reluctant Executioner
MSCI announced on Tuesday the removal of 10 Chinese securities from its indexes in response to a US executive order. In this Quick Take, Thomas explains why MSCI’s narrow interpretation of the order leads to risk of more Chinese securities being added to the list, and how the decision adds to existing headwinds for Chinese equities.
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Gavekal Dragonomics
Dragonomics Team
Dec 15th 2020
Credit Has Peaked, Growth Has Not
China’s economic momentum continued to accelerate in November despite an October peak in credit growth, with exports and manufacturing investment taking the lead while more policy-dependent sectors plateaued. In this piece, the Dragonomics team explains why China is likely to maintain its strong economic growth through 1Q21.
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Gavekal Research
Louis Gave
Dec 15th 2020
The 10 Important Changes Of The Past Year
Two years ago, 10-year treasury yields were falling (and trading below their 200-day moving average), oil prices were falling (and also below trend) and the US dollar was rising (and trading above its trend level). Today, the situation has reversed for all of these anchor prices in the global system. This profound change can be explained with reference to 10 tectonic shifts in the global economy.
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Gavekal Dragonomics
Xiaoxi Zhang, Andrew Batson
Dec 14th 2020
The Re-Centralization Of Finance
China’s banking system has been steadily decentralizing for thirty years, with smaller and local banks gaining market share from the large, centrally controlled state banks. In this piece, Xiaoxi and Andrew show that this long-term trend has now come to a halt, and argue that the banking system will start to re-centralize in coming years.
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Gavekal Dragonomics
Rogier Creemers
Dec 10th 2020
Social Credit And Digital Governance
China’s social credit system is widely misunderstood as a totalitarian tool. The reality is that it is a relatively low-tech part of a sophisticated Communist Party strategy to use digital means to deliver both better governance and social control. In this 22-page DeepChina report, Rogier Creemers explains the truth behind the social credit myths.
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Gavekal Dragonomics
Louis Gave, Arthur Kroeber, Thomas Gatley, Wei He, Dan Wang
Dec 09th 2020
Webinar: China And The World Economy In 2021
Arthur Kroeber and Dan Wang sketched out the likely course of the US-China rivalry under the new Biden administration; He Wei and Thomas Gatley analyzed key developments in China's economy and markets, and Gavekal CEO Louis Gave presented his views on the forces shaping global markets.
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Gavekal Dragonomics
Rosealea Yao
Dec 08th 2020
A New Reality For Commercial Property
Vacancy rates for office and retail space are picking up sharply this year despite a broad return to normality in China. In this report, Rosealea argues that Covid-19 accelerated an ongoing shift towards at-home work and entertainment. Developers must now grapple with the new reality that demand is unlikely to ever return to pre-Covid levels.
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Gavekal Research
Louis Gave
Dec 08th 2020
The Three Key Prices: The US Dollar
It is an axiom of Gavekal’s research that the starting point for looking at the global macro landscape is that three prices matter above all others: the 10-year US treasury yield, the price of oil, and the US dollar exchange rate. In the third of a three-part series, Louis examines the US dollar.
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Gavekal Research
Thomas Gatley
Dec 04th 2020
Sell A-Shares Into Strength
Over the last month, onshore Chinese equities have got swept up in the global rally. The CSI 300 gained 7% in November, surpassing July’s peak to set a new high for the year this week. And the broader Shanghai index is on the cusp of following. However, this is a rally running on fumes.
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Gavekal Research
Will Denyer, Vincent Tsui, Thomas Gatley, Udith Sikand, Cedric Gemehl
Dec 04th 2020
Webinar: Global Investment Roundtable, December 2020
The US equity market is seeing a switch from the winners of the pandemic like technology and online retail, to the beaten-up losers such as travel plays. At the same time, hopes for a strong economic recovery in 2021 are juicing up value stocks. Similar dynamics are being seen in other major markets. Our team of analysts discussed what happens next, and what’s in store in 2021.
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Gavekal Dragonomics
Thomas Gatley
Dec 03rd 2020
Access To Global Capital Has Peaked
After years of inflows via IPOs and foreign portfolio investment, the US is now moving to deny Chinese firms access to global capital. As a result, Thomas explains that the firms will instead have to rely on domestic markets for equity fundraising, which could cause a liquidity drag in onshore and Hong Kong equities.
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Gavekal Dragonomics
Wei He
Dec 01st 2020
Eroding The Implicit Guarantee
China’s financial regulators recently stepped in to calm a corporate bond market roiled by the unexpected default of a local state-owned enterprise. In this report, Wei argues that this reassurance does not translate to a reassertion of the implicit sovereign guarantee for local SOE debts; in fact, more local SOE defaults look likely for 2021.
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