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Gavekal Research
Dec 10th 2014
Five Corners (10 December): Contrarian Ideas For 2015
Overview: Anatole Kaletsky looks at the struggle between the Middle-East sheiks and US oil producers and concludes that oil is about to finally conform to standard economic theory. One unintended consequence may be the effective liquidation of western oil majors. United States: Will Denyer considers the dramatic scaling back of the US shale oil sector but argues that US capital spending should do just fine next year. Europe: Francois Chauchat...
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Gavekal Research
Joyce Poon
Dec 09th 2014
China A-Shares: Beyond The Leverage
It is no secret that China’s A-share market has risen as far and as fast as it has over the last few weeks because stock prices have been propelled by an explosion in margin trading and soaring interest in index futures. But although rising leverage can add enormously to the momentum of a stock market rally to create a runaway snowball effect, leverage by itself is not enough to set the ball rolling in the first place. At least some of the...
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Gavekal Research
Charles Gave, François-Xavier Chauchat, Will Denyer, Tom Miller
Dec 09th 2014
New York Seminar December 2014 - Charles, Francois, Tom & Will
We held our winter seminar in New York on December 5 with Charles, Francois, Tom and Will offering their views of the global economic pulse and recent market developments.
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Gavekal Research
Andrew Batson
Dec 08th 2014
5C China: No One Expects Chinese Inflation
Not many prices are rising in China these days. Core consumer-price inflation has averaged less than 2% over the past two years. The producer price index has been falling for nearly three years. Prices of coal, iron ore and now oil, once bolstered by Chinese demand, are in retreat globally. Housing prices are in their longest correction since 2008.
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Gavekal Research
Tom Miller
Dec 08th 2014
A Dream Of Asian Empire
After years of passive diplomacy, China is now making it clear that it wants to play a substantive role on the global stage. In foreign policy, Xi Jinping’s “Chinese dream” means restoring China’s historical dominance in Asia. China is serious about winning friends and helping its neighbors to benefit from its rise, but its own interests come first: it wants to generate new trade networks, open up transit routes for its exports, and develop its...
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Gavekal Research
Research Team
Dec 05th 2014
Normalization of Chinese oil demand
China’s investment–heavy and energy-intensive model of economic growth over the last decade meant that the country accounted for about two thirds of global oil demand growth. A frenzy of building, manufacturing and freight movement resulted in an extra 450,000 barrels of oil, on average, being consumed each day. But as China’s economy eases into a lower growth trajectory and energy efficiency policies are adopted, oil demand growth could halve...
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Gavekal Dragonomics
Long Chen
Dec 05th 2014
A Leverage-Driven Rally
China’s domestic “A-share” market is on steroids. The Shanghai Composite index has now risen by 42% since the middle of the year, and has shot up by 18% just in the nine trading days since the People’s Bank of China cut benchmark interest rates. Sure, the rate cut provided a fillip to sentiment, yet even so the current rally looks highly unusual. Over the last three years, the A-share market has broadly mirrored China’s economic cycle, rising...
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Gavekal Research
Long Chen
Dec 04th 2014
China's Leverage-Driven Rally
China’s domestic ‘A-share’ market is on steroids. The Shanghai composite index has now risen by 38% since the middle of the year, and has shot up by 15% just in the eight trading days since the People’s Bank of China cut benchmark interest rates. Sure, the rate cut provided a fillip to sentiment, yet even so the current rally looks highly unusual. Over the last three years, the A-share market has broadly mirrored China’s economic cycle, rising...
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Gavekal Research
Louis Gave
Dec 03rd 2014
The Burning Questions For 2015
With two reports a day, and often more, readers sometimes complain that keeping tabs on the thoughts of the various Gavekal analysts can be a challenge. So as the year draws to a close, it may be helpful if we recap the main questions confronting investors and the themes we strongly believe in, region by region.
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Gavekal Research
Pierre Gave
Dec 03rd 2014
Growth & Markets Monthly (December 2014)
This month saw our main growth indicator drop into negative territory for the first time in more than a year. The key drags were the commodity-related components and the underperformance of growth-sensitive stock markets such as South Korea and Sweden. The chief concern for markets is whether lower oil prices and the new monetary activism of the Bank of Japan and promises of action from the European Central bank can help reignite market momentum...
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Gavekal Dragonomics
Research Team
Dec 03rd 2014
CEQ: The Xi Jinping Scorecard
How is Xi Jinping doing? A year after the landmark Third Plenum at which China's leader laid out his vision for reforming China, this issue of the CEQ takes a close look at the progress of the reform program. Our expert contributors assess the achievements and the shortfalls, the winners and the losers.
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Gavekal Dragonomics
Long Chen
Dec 02nd 2014
The Dilemma Of Deposit Insurance
After debating it for more than 20 years, China has begun the process of setting up a deposit-insurance system, which will give the government’s formal backing to most bank deposits. Deposit insurance is the conventional protection against financial crises in 112 countries: it shields households from the vagaries of financial markets, helps prevent bank runs and improves financial stability. But China’s different starting point means that it...
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Gavekal Research
Louis Gave
Dec 01st 2014
A Better Class Of Bubble
We never tire of pointing out that, when it comes to bubbles, no two bubbles are ever the same. Firstly, bubbles can bid up asset values because of their perceived ‘scarcity’ (typically land and real estate, but also tulips, or gold…) or because of their productivity (canals, railroads, telecom lines, energy…). This distinction matters because, in the first case, an economy is left with no more land (or gold, or tulips…) than at the outset. In...
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Gavekal Research
Research Team
Dec 01st 2014
Quarterly Strategy Chartbook - Avoiding The Pitfalls Ahead
Forces of creative destruction are building up in the world economy as never before. Several of Gavekal’s key indicators are signalling that we are moving into a mild deflationary boom, in which cheaper resources, lower technology costs—especially for robotics—and accelerating disintermediation—notably in the financial sector—all promise to act as game-changers over the coming years. Reliably picking winners in such disruptive times is difficult...
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Gavekal Dragonomics
Research Team
Nov 30th 2014
CEQ Q4 2014
China’s growth decelerates again. After a short mid-year recovery, China’s GDP growth slowed again to 7.3% in the third quarter. Senior leaders’ comments about the “new normal” for economic growth show a further slowdown is expected. The trade balance is solid, thanks to decent demand from the US and Europe and falling commodity prices. But consumption and income growth are starting to weaken.
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Gavekal Dragonomics
Research Team
Nov 30th 2014
CEQ Q4 2014 - Irresistible Advance Of The Private Sector
Markets over Mao: The Rise of Private Business in China, by Nicholas R. Lardy (Peterson Institute for International Economics, 2014)
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Gavekal Dragonomics
Research Team
Nov 30th 2014
CEQ Q4 2014 - Socialist Rule Of Law, Hong Kong Democracy Movement
So What Exactly Is 'Socialist Rule Of Law With Chinese Characteristics'?
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Gavekal Dragonomics
Research Team, Thomas Gatley, Long Chen
Nov 30th 2014
CEQ Q4 2014 - The Market Is Open - Should You Buy?
Foreigners can now invest in domestic Chinese shares through their Hong Kong brokers. Unfortunately, there are precious few reasons to buy.
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Gavekal Dragonomics
Tom Miller, Research Team
Nov 30th 2014
CEQ Q4 2014 - Quiet Empire Building Along The New Silk Road
China is pursuing infrastructure diplomacy in Central Asia, and it wields a big checkbook. The recipients of its largesse have mixed feelings.
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Gavekal Dragonomics
Arthur Kroeber, Research Team
Nov 30th 2014
CEQ Q4 2014 - End Of The Golden Age
Xi Jinping’s reforms are clearly designed to benefit Chinese firms at the expense of their foreign competitors. Even so, foreign investment keeps pouring in.
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