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Gavekal Research
Vincent Tsui
Jun 05th 2020
Picking Winners In Asian Currencies
A terms of trade improvement and the relative resilience of electronics demand have helped support Asian currencies through the coronavirus crisis despite the deep contraction in world trade. Now as the world emerges from lockdown, any recovery in external demand, coupled with any revival of risk appetite that sees capital flow out of the safe haven US dollar, will be positive for Asian currencies.
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Gavekal Research
Udith Sikand, Tom Miller
Jun 03rd 2020
India Macro Update: End Of The Growth Story
India has experienced a draconian lockdown that could result in output shrinking by -25-45% in the second quarter of the year. The result will be a sharp worsening in the fiscal deficit and a low structural growth rate that leaves India as just another emerging market rather than a growth story to rival China’s. Udith and Tom consider what it means for asset markets.
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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 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
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 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
Tom Holland
May 21st 2020
Saudi's Peso Problem
Two weeks ago in early May, the Saudi Arabian Monetary Agency issued an unusual statement. Sama, it insisted, is committed to maintaining the Saudi riyal’s exchange rate peg at SAR3.75 to the US dollar, and has the resources to do so. Stress signals don’t come much clearer.
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Gavekal Research
Udith Sikand
May 20th 2020
Video: Pressure Points In Emerging Markets
Emerging markets have broadly weathered the liquidity squeeze that threatened to engulf them in March, however Udith is not convinced they are out of the woods. Growth shocks associated with the Covid-19 crisis mean that many smaller markets on the frontier are at risk of debt defaults, which could end up spurring forced selling by foreign investors.
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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
Tom Miller, Udith Sikand
May 14th 2020
India's Mini Bazooka
India’s finance minister yesterday outlined a US$265bn fiscal package to save the economy. It looks to be just enough to stop a slide into depression but not much more. A worrying factor in its response is an apparent lurch towards protectionism, which would undermine any gains made from much-needed reforms to land and labor markets
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Gavekal Research
Louis Gave
May 14th 2020
The World Has Changed, Quick! Buy More Of The Same
As countries around the world, and some US states, are starting to emerge from their enforced Covid-19 hibernation, investors have to choose between one of three potential outcomes. Either the virus re-emerges and causes new lockdowns, the post-Covid-19 world is not growth friendly, or pent-up demand and supportive policies leads to global growth ripping.
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Gavekal Research
Louis Gave
May 13th 2020
Webinar: The Kitsune Market — Tail Risks In An Unnatural Time
Most of the world’s big economies have been shut down in response to a pandemic disease—a truly unprecedented event. This led to extreme market moves and also generated an unusually large array of tail risks. Louis likens these to the nine tails of the magical kitsune or fox of Japanese mythology. In yesterday's webinar he elaborated on this idea.
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Gavekal Research
Charles Gave
May 12th 2020
Japan's Stealth Bull Market
In times of great market uncertainty, like today, investors should seek sanctuary in the stocks of companies that are cheap, enjoy positive cash flows, have plenty of cash on their books, and which are quoted in an undervalued currency. Today, Charles writes, the shares of non-financial companies in Japan fit the bill on all four counts.
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Gavekal Research
Louis Gave
May 08th 2020
The Kitsune Market (Part III)
In this third part of a series assessing risks thrown up by massive government interventions to stop Covid-19 lockdowns turning into an economic depression, Louis turns his sights on efforts to prevent bankruptcies at all costs. He also considers the rapidly fraying US-China relationship and existential choices faced by Saudi Arabia as it decides how to handle a collapse in oil prices.
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Gavekal Research
Wei He, Udith Sikand, Andrew Batson
May 07th 2020
Webinar: China And Emerging Markets Update
China has started to reopen its economy, but it is proving hard to get Chinese consumers and small businesses up and running again. He Wei and Andrew Batson provided the latest updates on policy efforts to revive China’s economy. Udith Sikand reviewed the broader outlook for emerging markets.
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Gavekal Research
Udith Sikand, Vincent Tsui, Tom Miller
May 05th 2020
Webinar: What Does Covid-19 Mean For Emerging Markets?
So far the Covid-19 pandemic seems to have been a less significant health event in most emerging markets. Yet EMs are bound to suffer a lot of economic damage not only from their own lockdowns but also from the demand collapse in Europe and the US. Udith Sikand and Vincent Tsui analyzed where the investment opportunities lie, and Tom Miller offered the prognosis for India.
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Gavekal Research
Udith Sikand, Vincent Tsui
May 04th 2020
Strategy Monthly: Emerging Markets Under Pressure
Aside from China, emerging markets have not been hit as hard as rich countries by Covid-19, but their asset markets have been hammered. An optimistic view holds that undervalued EM assets can now bounce back. Udith and Vincent are more cautious: a dollar-squeeze could yet hurt markets that have otherwise decent fundamentals and attractive valuations.
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Gavekal Research
Charles Gave
May 01st 2020
The Truth About Banks And Bonds
As I elucidated last week Knut Wicksell’s key idea was that in any market economy there are not one, but two key interest rates, whose relative position drives the cycle. The theory makes good sense, but computing the two rates is tricky. My insight is that I don’t need to compute these two rates but instead measure the structural performance of bank equities in each market.
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