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E.g., 26-09-2020
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    Gavekal Research

    Asia Ditches Fiscal Conservatism, Conservatively

    As the external environment darkens, Asian governments are turning on the fiscal spigots—cautiously. Moves announced in recent weeks do not radically move the dial, but they should support growth. For now, monetary policy will remain the main counter-cyclical tool for arresting a downturn in Asia, but recent moves reflect an end to an era of fiscal consolidation.

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    Gavekal Research

    The EM Oil Shock That Won't Be

    Three “master” prices tend to dictate price levels in most asset markets—US interest rates, the US dollar and energy prices. A synchronized fall in these three prices usually bodes well for emerging market assets, while a rise bodes ill. Since it is rare for all three master prices to move together, the challenge for investors is to figure out which way the cross currents are flowing. If one master price is making a big move, its effect can...

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    Gavekal Dragonomics

    Taiwan’s Manufacturers Rethink Reliance On China

    Could Taiwan be a winner in the US-China trade war? As Dan reports in this piece, US tariffs have succeeded in getting major contract manufacturers of electronics to shift jobs out of China, some of which are going to Taiwan. But this trend is not enough to end Taiwan’s dependence on Chinese growth, or its vulnerability to Chinese competition.

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    Gavekal Research

    India Macro Update: After Demonetization

    India has been a strong growth story over recent years and offered a haven from the commodity boom-bust-boom cycle that has roiled emerging markets. However the investment climate has darkened in recent months due to the government’s surprise “war on cash” and the central bank seemingly coming to the end of its easing cycle. In this chart book, Udith and Tom take a systematic look at the macro environment and review the outlook for major asset...

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    Gavekal Research

    The End Of The Smartphone S-Curve

    Smartphones are a maturing industry. Sales in China, the US, Europe and Japan are declining, and demand growth in India and Africa is not fast enough to drive a new surge in global sales. The industry is hoping that 5G and foldable phones will trigger a fresh upgrade cycle. But neither will drive a significant increase of sales in the near term.

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    Gavekal Research

    The Upside In India

    The biggest immediate problem is that corporate India is not investing. Private businesses are over-leveraged and economic demand is weak. Hamstrung by US$130bn of bad loans, India’s state banks aren’t lending. The government has made little headway on the long-running debate over how to clean up their overstretched balance sheets.

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    Gavekal Research

    More Power To India

    India’s economic expansion is being retarded by an impaired banking system whose non-performing loan ratio, depending on your methodology, is as high as 12%. The biggest contributor to this bad debt mound is the country’s power sector which accounts for about 10% of bank credit (INR6trn) and 20% of “stressed” loans. The irony is that fast growing India—which currently uses about 1010kWh of power per head versus a global average of about 3000kWh—...

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    Gavekal Research

    Two Cheers For India

    The end of China’s investment boom means the global economy is seeking a new driver of growth. India’s economy outpaced China’s last year, making it the world’s fastest-growing large economy. Tom and Udith analyze what India must do to fulfill its potential

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    Gavekal Research

    India Macro Update: Navigating The Fog

    In this regular quarterly update, Udith and Tom survey the key developments in India’s macro-economy and markets, which have been clouded by the demonetization episode and yet more changes to national economic statistics. The fog may not be about to clear as the government prepares to rollout a new national goods and sales tax with the potential for significant economic disruption.

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    Gavekal Research

    Can India Grow By Day?

    “India grows at night,” goes a popular saying, “when the government sleeps.” Prime Minister Narendra Modi has promised to change all that as he thinks that effective governance will enable India to “grow by day.” In this piece Tom assesses the changing mechanics of government in India with a particular focus on digital solutions that have the potential to bypass an often self-interested and sclerotic bureaucracy.

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    Gavekal Research

    India Gets Serious About Its Banks

    Indian equities delivered the best returns of any emerging market in 1Q17, as the economy rebounded from November’s demonetization debacle. With manufacturing expanding for three straight months, consumer demand returning to normal levels, and the BJP’s decisive victory in state elections boosting sentiment, MSCI India surged by 17%. Growth in the fiscal year to March 31 likely topped 7%, enabling India to retain its crown as the world’s fastest...

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    Gavekal Research

    India Macro Update: The Pain Before The Gain

    India reports its third quarter GDP tomorrow and in this chartbook Udith and Tom offer their assessment of the economy. They expect the official numbers to show a pick-up in growth due to firms restocking after the rollout of the new Goods & Services Tax and think this trajectory will continue through to next year. They advise investors to stick with richly-valued equities, treat bonds cautiously and not worry too much about a currency...

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    Gavekal Research

    Strategy Monthly: India — Poised For A Pickup

    India clearly offers one of the best long-term growth stories in the world today. In 2016 for the first time it added more to global nominal GDP growth than China. Demographics are favorable, opportunities for infrastructure- and housing-driven growth are abundant, and despite some hiccups the Modi government has done a good job of taming inflation and setting the country on a structurally sounder path. For investors, the problem is that Indian...

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    Gavekal Research

    Can ‘Make In India’ Work?

    In September 2014, Prime Minister Narendra Modi launched an initiative to transform India from an industrial laggard into a global manufacturing hub. The “Make in India” plan is sorely needed: in 2014, India’s merchandise exports accounted for a paltry 1.7% share of the global total. That was on a par with Taiwan, whose population is smaller than Delhi’s. India relies heavily on imports of consumer goods, especially from China, and runs a large...

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    Gavekal Research

    The Effectiveness Of EM Rate Cuts

    An easier Fed stance suggests that the US dollar is unlikely to trend significantly higher from its present levels. The prospect of limited US dollar upside frees Asian central banks from the necessity of defending their exchange rates, and gives them leeway to support growth by cutting interest rates. However, the impact of rate cuts on both growth and asset prices will vary among Asian EMs.

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    Gavekal Research

    Why Brazil Trumps India

    The last year has been tough for emerging market investors—a recent survey showed that only 20% of actively managed EM funds beat their benchmark compared to an average 60-70% over the past five years. Recent weeks have not provided much respite with out-of-favor, commodity-rich markets like Russia and Brazil going on a tear, while much loved darlings such as India have taken a pounding.

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    Gavekal Research

    The Surge In Anti-Fragile Assets

    The latest round of data releases appears to confirm fears that the world is facing another synchronous global downturn. If so, it will be different from other slowdowns, in that it will not have been caused by rising interest rates or higher energy prices. What’s more, it will be setting in when there is little prospect of a globally coordinated response, when monetary policy appears to have lost traction, and when asset prices are looking...

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    Gavekal Research

    Crisis And Opportunity In Kashmir

    India and Pakistan engaged in air-to-air combat yesterday, raising the prospect of war between the two nuclear powers. Markets fell only marginally but are vulnerable if the conflict escalates, which for the moment looks unlikely. If Modi keeps his nerve, the crisis could put the BJP on a sure path to victory in May’s general election, heralding a rally in Indian asset prices.

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    Gavekal Research

    India Macro Update: The Risk In The Rupee

    Indian Economic growth in the second quarter was expected to slow due to the impact of “demonetization” and a new sales tax being rolled out, yet the biggest hit to growth came from an overvalued rupee hitting net-exports. The impact of a strong currency may be to defer India’s capital spending cycle and put the economy on a lower growth trajectory. Since Indian equities are richly valued, Udith and Tom are cautious about their outlook. In this...

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    Gavekal Research

    Why India Can Move Faster

    India’s lack of efficient roads and railways lowers productivity, depresses aggregate demand, raises costs and stymies trade—all impediments to economic growth. The good news is that India’s latest infrastructure push, financed initially by public investment, is showing signs of traction. The latest government budget committed a hefty US$32bn to roads, rail and other infrastructure, a big increase within a broader environment of fiscal...

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