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Gavekal Research
Udith Sikand, Vincent Tsui, Tom Miller
Feb 19th 2021
Webinar: Emerging Markets In The Next Phase Of The Pandemic
Emerging markets have had a strong run, fueled by floods of stimulus in developed markets. Much of that money has flowed to Asia, where export sectors have thrived on rich-world consumers’ demand for electronics and other goods. The question is whether Asian EMs will be able to keep up this outperformance as they lag far behind in the vaccination race. Our team addressed these issues, and considered whether commodity-based EMs can again have...
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Gavekal Research
Udith Sikand
Feb 18th 2021
Geared To Global Recovery
Since the global recovery trade got going at the beginning of November, Japanese equities have performed respectably, returning some 24% in US dollar terms. But they have not outperformed. This is disappointing. With high operating leverage—the ratio of fixed to variable costs—and more than half their revenues generated overseas, Japanese corporates should be a clear play on global recovery. Indeed, the consensus-beating 3% QoQ rise in Japan’s...
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Gavekal Research
Tom Miller
Feb 17th 2021
China Versus The Anglosphere
Beijing’s ability to weaponize its global trade power is concentrating minds from Washington to Canberra. On Tuesday it was reported that China has proposed controls on the production and export of rare earths. This threat is the latest example of why reducing critical dependence on Chinese trade is now a strategic priority for many countries, in particular those in the Anglosphere.
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Gavekal Research
Vincent Tsui
Feb 15th 2021
The Importance Of Taiwan
Across Europe and the US, car plants are getting shuttered because of a shortage of microchips from Asia. This storm is centered on Taiwan, which for decades has been an unsung contract supplier of electronics and chemicals. For those who had not noticed, its firms now dominate high-end global chip production and current industry dynamics mean this grip is only likely to intensify.
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Gavekal Research
Udith Sikand
Feb 12th 2021
A New Super-Cycle?
A surge in commodity prices has led to hopes for a new “super-cycle”. Bulls say that commodities have been in the doghouse for a decade, ensuring limited new capacity additions, yet demand is now getting supercharged globally by easy monetary and fiscal policies. Bears retort that commodity investors have a case of the vapors, as the next phase of global growth, especially in China, will be less resource-intensive.
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Gavekal Research
Arthur Kroeber
Feb 11th 2021
Vaccines, Efficacy And Variants
Despite volumes of new information and the lightning creation of vaccines promising a path out of the pandemic, uncertainty remains. Almost daily we are bombarded with a mix of good news (the vaccines work really well!) and bad (new mutations resist vaccines!) that make it hard to know whether we should rejoice or despair. This note provides a framework for assessing these persistent uncertainties.
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Gavekal Research
Udith Sikand
Feb 08th 2021
Video: An Indian Blowout?
Indian risk assets have ripped in response to last week's big-spending budget, and reports that a collapse in Covid-19 cases points to the country having achieved "herd immunity" ahead of max vaccinations. In this video, Udith considers both India's public health situation and the chances of fiscal stimulus kick-starting growth without spurring an adverse financial reaction.
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Gavekal Research
Charles Gave, Didier Darcet, Louis Gave
Feb 05th 2021
Webinar: Uncharted Territory And Portfolio Construction
Charles has sought to codify his many investment rules into a rigorous portfolio construction framework, which includes identifying periods when returns stop being normally distributed and move into the "tails". Right now markets could be going through a phase change, and in this webinar, he explained why. He was joined by Didier, who who heads the quant team in Paris, and Louis.
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Gavekal Research
Anatole Kaletsky
Feb 04th 2021
Six Reasons To Stay Bullish
Is the recent speculative mania the beginning of the end of the post-2009 bull market in stocks? Or is it only the end of the beginning? Anatole argues that today’s speculation is reminiscent of the later stages of dot-com bubble, but he remains a confirmed bull on global equities. In this paper he offers six reasons why this is no contradiction.
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Gavekal Research
Udith Sikand
Feb 04th 2021
The Other Emerging Markets
Until hit by a wobble in late January, emerging markets enjoyed heavy portfolio inflows over the last several months, and there are signs the risk aversion wobble is fading. Although the macro picture favors the currencies of Asia’s manufacturers, other less prominent forces could cause the currencies of non-Asian, commodity-exporting emerging markets to outperform.
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Gavekal Research
Tom Miller, Udith Sikand
Feb 02nd 2021
India’s Go-For-Broke Budget
Indian equities have risen 7.6% in the last two days, after the government of prime minister Narendra Modi threw fiscal caution to the winds in the 2021-22 budget it presented on Monday. India will attempt to spend its way out of economic crisis, with a five-year plan for deficit-fueled growth. “We have spent, we have spent and we have spent,” said finance minister Nirmala Sitharaman, after announcing big increases in capital expenditure with no...
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Gavekal Research
Arthur Kroeber
Feb 01st 2021
Vaccine Slippage
It is looking likely that most countries will miss their Covid-19 vaccination targets for 2021. This creates a risk of slower than expected economic growth, especially in Europe which take half a year to emerge from its double-dip recession. Moreover, any activity dependent on international travel or large-scale gatherings will remain severely depressed until well into 2022.
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Gavekal Research
Dan Wang
Jan 26th 2021
Supply-Chain Risks For The Covid Vaccine
The race to vaccinate the world in the wake of the Covid-19 pandemic will be one of the most complex projects ever attempted. Most developed economies aim to fully vaccinate their adult population by year’s end. Dan outlines the manufacturing and logistical challenges involved the vaccine rollout
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Gavekal Research
Anatole Kaletsky
Jan 22nd 2021
Risks In The Biden Era
In December, Anatole outlined 10 disparate risks that could derail the bull market in 2021. That was before the Democrats won full control of the US government, paving the way for approval of Joe Biden’s new super-size stimulus package. In light of the developments over the last month, Anatole reassesses his 10 risks.
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Gavekal Research
Vincent Tsui
Jan 21st 2021
The Turn In Asian Inflation
Over the last year, a collapse in oil and commodity prices slashed inflation in Southeast Asia and buoyed real interest rates. As a result, regional central banks were able to cut policy rates and mitigate the impact of massive Covid disruption. However, this disinflationary tailwind is set to abruptly reverse in the coming months as inflationary pressure inevitably builds up. Ultimately, this rise in prices may wash through the system as a “...
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Gavekal Research
Udith Sikand
Jan 21st 2021
Video: The Good And Bad News For Emerging Markets
US president Joe Biden’s planned US$1.9trn fiscal support package for the American economy may provide a metaphorical shot in the arm for at least some emerging markets, partially offsetting the negative economic effects caused by the delayed rollout of actual coronavirus inoculations. Udith assesses the conflicting forces affecting emerging economies.
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Gavekal Research
Charles Gave
Jan 20th 2021
The Logos, Idiotes And Demagogues
Charles revisits the idea of the Greek "logos", "idiotes", demagogues and citizens, and how the Greeks believed that those who controlled the logos—the language used to describe the world—ipso facto controlled the political system. Problems arise when a new, competing logos started to emerge.
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Gavekal Research
Tom Miller
Jan 19th 2021
Flows Will Still Favor Indian Equities
Indian cows tend to be scrawny beasts, but India’s equity bulls have rarely looked fatter. Stocks scaled record highs last week after a 10-week binge on easy foreign money. The feeding frenzy has faded since Friday, but local benchmarks remain up 25% in US dollar terms since the start of November, and foreign investors’ appetite for Indian assets does not yet look sated. While the vigorous rebound in India’s economy from last summer’s slump may...
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Gavekal Research
Tom Miller
Jan 18th 2021
Biden’s United Front Against China
As the outgoing Trump administration exits with a flurry of executive actions directed against China, Beijing is not sitting around hoping for Joe Biden to spark a new era of détente with the US. The recent tightening of control in Hong Kong shows that President Xi Jinping has no intention of giving an easy early ride to a leader who has pledged to build a “united front of US allies and partners” to constrain a resurgent China. The European...
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Gavekal Research
Vincent Tsui
Jan 13th 2021
The Paradox Propelling Asian Currencies
This year, the world is likely to see a sharp bifurcation in economic performance. In developed economies, mass vaccination programs enable a return to economic normality, while in emerging markets, vaccine supply and distribution problems will slow recovery. Paradoxically, EM economic underperformance will favor the outperformance of emerging Asia’s currencies.