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Gavekal Research
Cedric Gemehl, Nick Andrews
Jun 11th 2021
Financial Stability Über Alles
Even as headline consumer inflation pushes higher across the developed economies, hitting a 13-year high of 5.0% in the US over the 12 months to May, the European Central Bank served notice on Thursday that it has zero intention of scaling back its asset purchases in the near term. In the statement released following Thursday’s meeting, the ECB governing council declared that in the coming quarter, it will continue to buy assets under its...
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Gavekal Research
Udith Sikand, Vincent Tsui, Tom Miller
Jun 11th 2021
Webinar: The Risk To Emerging Markets
In yesterday's webinar, Udith Sikand, Vincent Tsui and Tom Miller weighed up the risks of capital flight from emerging markets as the Federal Reserve again starts talk of tapering. They focused on the different outlook for Asian exporting powerhouses and commodity producers, and discussed India, which is emerging from a severe second wave of Covid-19.
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Gavekal Research
Udith Sikand, Tom Miller
Jun 10th 2021
India Macro Update: Down But Not Out
India’s economic recovery was hit by the April-May surge in Covid-19 infections, with the only silver lining being that the second wave was less economically damaging than the first one. With cases now declining and many states opening up, the worst of the economic disruption should be over. However, the outlook for investors in the key asset classes is challenging.
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Gavekal Research
Thomas Gatley
Jun 10th 2021
A Different Kind Of Inflation
China’s producer price gauge is surging, stoking fears that the country is both succumbing to global inflationary pressures and stirring them up. However, such fears are misplaced, writes Thomas, since China does not face the kind of bottleneck problems blighting the supply-side of the US economy.
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Gavekal Research
Tom Miller
Jun 09th 2021
The One For All Problem
Now that a deal has been done on corporate taxation, this weekend’s Group of Seven summit will focus on helping low-income countries roll out Covid-19 vaccination programs. Given inevitable production and distribution problems, the world is unlikely to be fully vaccinated before the end of 2022.
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Gavekal Research
Will Denyer
Jun 09th 2021
Video: Weighing The Fed’s Unconventional Options
The Federal Reserve’s next move is likely to be verbal guidance over a tapering of asset purchases, argues Will. That is increasingly a consensus market position, so in this interview he explores other policy options that the Fed could choose to pursue.
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Gavekal Research
Louis Gave
Jun 08th 2021
Why Am I Hearing This Now?
Two big storylines have recently emerged in Western media and Louis is not convinced this is down to editors stumbling on new information. In the case of the Wuhan “lab leak” theory and China’s suddenly challenged demography, he thinks that both the US and Chinese governments have an interest in spinning new narratives.
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Gavekal Research
Thomas Gatley
Jun 08th 2021
When To Fade The Chinese Equity Rally
After officials moved against crypto-currency and commodity speculation a few weeks ago, investors jumped back into equities, perking up a market that had been moribund since March. However, on balance, this looks like a counter-trend rally that should ultimately be faded, as the corporate profit cycle is starting to roll over.
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Gavekal Research
Yanmei Xie, Udith Sikand
Jun 07th 2021
Thin End Of The Corporate Tax Wedge
Counterintuitively, the agreement on a global minimum corporate tax rate struck at the weekend by G7 finance ministers may in the near term prove positive at the margin for global equities in general. In the longer term, however, the weekend’s agreement is likely to prove the thin end of the corporate taxation wedge.
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Gavekal Dragonomics
Rosealea Yao
Jun 07th 2021
The Urbanization Surprise
China’s 2020 census revealed that urbanization has been faster over the past decade than official statistics showed. That means the fundamentals for housing demand are stronger than most had realized. As Rosealea argues in this piece, the census should drive an upward reassessment of long-term trends in China’s urbanization and commodity demand.
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Gavekal Research
Arthur Kroeber, Louis Gave, Anatole Kaletsky
Jun 04th 2021
Webinar: Global Investment Roundtable, June 2021
The big question is still about how durable the current burst of inflation will prove to be. Anatole and Louis joined Arthur to debate this—and everything else going on in the world economy—at our monthly global investment roundtable.
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Gavekal Dragonomics
Gilliam Collinsworth Hamilton
Jun 04th 2021
Video: Fixing China’s Population Crunch
China’s latest census revealed a low fertility rate, pointing to the population soon topping out. In response, the government has said that couples can now have up to three children but, as things stand, there is no reason to think that they will. In this video interview, Gilliam assesses the various policy levers that the authorities can pull to stop the Chinese nation getting smaller.
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Gavekal Research
Nick Andrews
Jun 04th 2021
Supply Squeezes ≠ Consumer Inflation
As the eurozone’s economy reopens, supply squeezes are intensifying at the same time that producer price inflation is rising rapidly, sparking fears that pandemic-induced supply chain disruptions at a time of booming demand will soon feed through into a sustained rise in the consumer inflation rate. These fears are overstated.
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Gavekal Dragonomics
Dan Wang
Jun 03rd 2021
The Xinjiang Pressure Test
The US government’s criticism of China’s treatment of the Uyghur minority in Xinjiang, and China’s government’s tough response, is a very public test case for multinationals with China operations. They don’t want to take sides. But as Dan explains in this piece, foreign companies will, if forced to choose, move closer to the US position.
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Gavekal Research
Udith Sikand, Vincent Tsui
Jun 03rd 2021
Strategy Monthly: Tapering Without The Tantrum?
The US Federal Reserve’s April minutes revealed that some policymakers are keen to begin talking about tapering the Fed’s assets purchases. In 2013, talk of Fed tapering triggered a traumatic sell-off in emerging market assets and currencies. So how great is the risk of a similar emerging market rout this time around?
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Gavekal Research
Tan Kai Xian
Jun 03rd 2021
Here Comes The US Capex Boom
Amazing as it sounds given all that has happened in the last 15 months, the US economy is already entering a “mid-cycle” phase that should change the drivers of growth. Sectors like housing and durable goods have enjoyed double-digit growth over the last year, but now face head winds. In contrast, firms across the US seem set to go on a capital spending binge.
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Gavekal Dragonomics
Rosealea Yao
Jun 02nd 2021
Striking A Balance On Steel Restrictions
China’s steel output restrictions are softening following a sharp downward price correction. Rosealea writes that while environmental targets prevent officials from abandoning production curbs altogether, they will need to introduce demand-side constraints to match these supply-side measures and to avoid a repeat of the recent price dislocations.
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Gavekal Research
Charles Gave
Jun 02nd 2021
When Money Becomes Spending Coupons
Something is changing in the way our capitalist systems create money. For at least 200 years, Charles argues, money-creation began with a request for credit by an economic agent. In the new system, we are seeing the issuance of what amount to “spending coupons”. These coupons will never be retired, and he worries that over time their numbers will rise exponentially.
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Gavekal Research
Cedric Gemehl
Jun 02nd 2021
Europe’s Savings Fuel
Like their American cousins, Europeans are itching to cast off their pandemic shackles, have fun and go shopping. But when and how much? The first point will depend on the threat posed by new Covid variants, but the news there is cautiously encouraging. As for the quantum of the comeback, a useful gauge lies in eurozone household savings levels.
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Gavekal Research
Vincent Tsui
Jun 01st 2021
Asia’s Big Fiscal Shift
The lesson Asian policymakers learnt from the 1997-98 financial crisis was the importance of self-reliance. In its aftermath, they deployed undervalued exchange rates to pursue export-led growth and secure big current account surpluses that gave central banks ample forex reserves. To cut their reliance on foreign capital for deficit financing, they limited both public spending and domestic demand. The effort ensured a stable macro environment...
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