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October 21, 2024
China Corporate Debt Deleveraging
October 21, 2024 10:45 AM UTC
Private companies ex property developers have seen a small pay down of debt, but the largest remaining portion of non-financial debt ex LGFV is central and local SOE’s. They have low profitability and have shown few signs of increased leverage. This leaves the onus on fiscal policy.
October 18, 2024
China September Data Rotates Higher, But
October 18, 2024 7:30 AM UTC
Q3 GDP and September monthly figures were slightly better than expected. Combined with a speed up of local government spending in Q4 and more completion of uncompleted homes, we change our 2024 GDP forecast to 4.8% v 4.6%. However, despite a further Yuan1.5-2.0trn of fiscal stimulus to come, we st
October 15, 2024
U.S. Tensions for China: Protected by BRICS and BRI?
October 15, 2024 9:30 AM UTC
BRICS can provide a political buffer but not economic, as BRICS are still searching for practical areas for cooperation. However, Donald Trump universal tariffs threats could focus BRICS on more intra EM trade. BRI has already helped to redirect China exports to EM countries, despite the slowdown
October 14, 2024
China Fiscal Stimulus: Details to Follow
October 14, 2024 8:37 AM UTC
Further details of the size of extra central government spending/scaled up local authority purchases of unsold complete homes for affordable housing should be seen late October/early November from the National People Congress. We estimate Yuan1.5-2.0trn in total of extra spending, which leads us t
October 10, 2024
China and Japan Debt Compared
October 10, 2024 1:35 PM UTC
China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption. Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a stru
October 03, 2024
China: Any Lessons from the 1997-98 Asian Crisis?
October 3, 2024 1:30 PM UTC
Overall, the warning from slow real credit growth on reduced credit supply and demand is the main lesson from the Asia crisis 1997-98. China High FX reserves; low borrowing overseas and dominance of domestic investors in Yuan markets argues against a currency crisis. Asia widespread banking cris
October 02, 2024
Markets: Rate Cuts or Geopolitics?
October 2, 2024 9:36 AM UTC
Israel will likely counteract Iran, which will prompt a further missile attack by Iran. However, our bias remains that Israel main aim is to have a buffer zone in southern Lebanon up to the Latani river and not fight a prolonged war with Iran. This limits the economic fallout globally and on oil
September 27, 2024
September 26, 2024
EM FX Outlook: Fed Easing Helps but Divergent Trends
September 26, 2024 8:00 AM UTC
USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis. However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY). Where inflation differentials are modest against the U.S., but
September 25, 2024
Outlook Overview: Rate Cuts But How Far?
September 25, 2024 7:30 AM UTC
· The U.S. economy is slowing, with the critical question being whether this is a soft or harder landing. Our broad analysis leaves us inclined to the soft landing view into 2025, though we shall watch real sector data closely over the next 3-6 months to check the trajectory. Else
September 24, 2024
China Outlook: Unbalanced Growth and Slowing
September 24, 2024 8:54 AM UTC
Growth is benefitting from momentum in public investment/exports and high tech production. However, domestic demand is slower and this is a drag on H2 2024 and 2025 growth prospects. Aside from the ongoing negative drag from the residential construction crisis, consumption is also softe
China Steps Up Support, But Not a Game changer
September 24, 2024 8:39 AM UTC
China has surprised and cut the 7 day reverse repo rate by 20bps to 1.5%, with a 50bps cuts in the RRR rate. Combined with other measures this is a step-up in support and could help GDP on the margin, but the measures are not game changers as monetary policy is currently ineffective. While furth
Equities Outlook: Choppy U.S. and Outperformance Elsewhere
September 24, 2024 8:30 AM UTC
• We now forecast 5450 for the S&P500 for end 2024, but could see a move to 5200/5000 in the next 3-6 months as volatile data keeps the soft v hard landing debate alive. On our baseline of a U.S. soft landing, we would see the S&P500 at 5600 by end 2025. The tech sector is still really i
September 18, 2024
China Banking Stress Tests: The Good, The Bad and the Ugly
September 18, 2024 8:05 AM UTC
The good news is that China’s 19 major domestic systemically important banks (D-SIB’s and 72% of loans) hold up well under most solvency and liquidity tests, though some capital shortfalls start to appear with a moderate or severe NPL sensitivity shock scenario. The safety net would likely be
September 16, 2024
China: Weak August Data
September 16, 2024 6:58 AM UTC
China August data was worse than expected and confirms the weak trend in H2, with retail sales a real worry. The government risks missing the 5% growth target for 2024 and targeted fiscal policy moves are likely, but need to be implemented quickly. 10bps cut in the 7 day reverse repo rate is also
September 15, 2024
September 27 Outlook Webinar: Rate Cuts But How Far?
September 15, 2024 11:17 AM UTC
Uncertainty about whether the U.S. economy will have a soft or hard landing is growing as the market approaches Q4. This is shaping the debate regarding the scale of easing through the remainder of 2024 and 2025 by the Fed. European easing is underway, but how much further will central ba
Sep 27 Outlook Webinar: Rate Cuts But How Far?
September 15, 2024 10:30 AM UTC
Uncertainty about whether the U.S. economy will have a soft or hard landing is growing as the market approaches Q4. This is shaping the debate regarding the scale of easing through the remainder of 2024 and 2025 by the Fed. European easing is underway, but how much further will central ba
September 09, 2024
China Equities: More of the Same or Game changing Policies
September 9, 2024 9:15 AM UTC
We remain strategically underweight China Equities in global and EM equity baskets, due to the structural slowing of growth and low EPS prospects. Event risk around the U.S. presidential election will also start to be considered. Further targeted policies from China authorities could cause inter
September 04, 2024
Country Insights: Labor Productivity and Growth in China
September 4, 2024 9:30 AM UTC
The most recent update of our Country Insights model ranks China as the seventh strongest performer in our labor productivity growth sub-factor. However, the country's score has shown a clear downward trend after the GFC.
September 02, 2024
China Harder Landing Scenario
September 2, 2024 10:55 AM UTC
We see a 30% probability of a harder landing in China GDP growth in 2025, which we most likely be in the 3-4% region but could persist into 2026 (Figure 1). A large than projected slowdown in consumption would be a key concern, alongside persistently moderate negative deductions from residential
August 29, 2024
August 28, 2024
China Consumer Volatility
August 28, 2024 1:30 PM UTC
China consumption patterns are divergent; slowing and becoming more volatile at a sub sector level. Less certainty over new employment and wage growth, plus wealth worries over housing are some of the causes. We forecast GDP to slow in H2 and be 4.0% in 2025.
August 21, 2024
China Housing Bailout: More Needed
August 21, 2024 9:00 AM UTC
Though China’s authorities have taken some action to help the residential construction sector, the negative drags from the huge excess completed housing and uncompleted projects continues to weigh directly on the construction/steel and cement sector and consumer confidence. Aggressive policy actio
August 15, 2024
China Data: Soft Start to Q3
August 15, 2024 6:40 AM UTC
Overall, the July data is consistent with our forecast of a weaker H2 and we still look for 4.7% GDP growth for 2024. The data is also consistent with our forecast of 4.0% in 2025 GDP growth. Consumption behavior could stall further and cause more of a drag than we anticipate and we now see a 30
August 14, 2024
EM Markets Divergence with China Harder Landing Concerns
August 14, 2024 3:35 PM UTC
Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S. What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets
August 13, 2024
Market Turbulence and What has Changed?
August 13, 2024 12:22 PM UTC
• We see the recent market turbulence as being partially a reduction in risky positions. However, the U.S. economy is slowing and triggering a debate about a soft or harder landing (we see slowing rather than recession in our baseline), while EZ data shows the recovery is not gaining moment
July 23, 2024
China: The Squeezed Middle and Bottom 50%
July 23, 2024 8:15 AM UTC
Uncertainty over income and employment, adverse wealth effects from lower house prices, plus growing risk aversion, will likely mean that consumption continues to struggle. This is one of the key reasons why we forecast slower H2 GDP growth and look for 4% in 2025.
July 22, 2024
China: Surprise 7 Day Reverse Repo Rate Cut
July 22, 2024 8:41 AM UTC
China 10bps cut in the 7 day reverse repo rate and 1 and 5yr Loan Prime Rate (LPR) was sooner than expected, as a move had not been anticipated until the Fed cuts rates. However, this is not the start of a new aggressive policy phase, but rather a tactical move given the targeted nature of easing.
July 18, 2024
Trump 2.0: Markets Guessing Policy Priorities
July 18, 2024 9:10 AM UTC
If Trump is elected president we still feel that the top priorities for implementation will likely be reducing immigration and making permanent tax cuts that are due to lapse in 2025. Trump would likely jawbone on all issues, but actual policy changes are more important for persistent moves in mar
July 15, 2024
China: Retail Sales Drags Q2 GDP
July 15, 2024 7:33 AM UTC
We are revising down our 2024 GDP forecast from 4.9% to 4.7%, both due to the weaker than expected Q2 GDP figure but also the weak underlying momentum of consumption. Some further targeted policy measures are likely in the coming months, but will struggle to lift economic momentum.
July 10, 2024
China: Weak CPI and M2 Trends
July 10, 2024 7:27 AM UTC
China disinflation process is clear in the June CPI data, with excess production and soft consumer spending producing a lower than expected outcome. Combined with weak M2 money growth, parts of China economy remain weak and point to a softening of GDP growth in H2. However, policy action will li
July 02, 2024
China: 3rd Plenum Incremental Not Game Changing
July 2, 2024 8:10 AM UTC
The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy. However, they are unlikely to be game changers, such as a Yuan2-4trn program of buying most unsold homes or structural increase in the unemployment/health and pension safety nets to free
July 01, 2024
EM After the Elections: Fiscal Focus and Inflation Questions
July 1, 2024 8:05 AM UTC
Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil. India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip
June 26, 2024
June 25, 2024
Outlook Overview: Cyclical and Structural Forces
June 25, 2024 10:15 AM UTC
• The global economy is showing signs of healing, as inflation comes back towards targets and growth recovers momentum in some economies. Nevertheless, the cyclical headwind of lagged monetary tightening remains in DM countries, and will likely be one of the forces slowing the U.S. economy
EMFX Outlook: USD Strength to Ebb with Different EM Impact
June 25, 2024 8:05 AM UTC
We see Fed rate cuts from September starting to soften USD strength into year end and 2025. Beneficiaries will include currencies with inflation moving towards target and high real rates or, alternatively, undervalued currencies. This should benefit the Brazilian Real (BRL) and Indonesian Rupiah
Equities Outlook: Choppy U.S. and Outperformance Elsewhere
June 25, 2024 7:05 AM UTC
• U.S. equities are overvalued and waiting for earnings growth to catch-up, which leaves the market choppy, directionless and vulnerable to intermittent 5% corrections. Our forecast slowing of the U.S. economy before Fed rate cuts or nervousness about the post-election prospects are potenti
June 19, 2024
China Outlook: 2024 on Track, but 2025 Headwinds
June 19, 2024 9:35 AM UTC
Public investment and industrial production in high tech and renewables are helping to support growth and should get the economy close to 5% in 2024. However, underneath the surface, consumption is slowing, private sector investment and employment growth is sluggish, and residential property inves
June 17, 2024
China Data: Mixed Momentum and No MTF Cut Until October
June 17, 2024 6:59 AM UTC
Overall the May data suggests that enough momentum exists for Q2 GDP to be above 5.0% Yr/Yr, which given the Q1 GDP figure means that the odds are good that the 2024 5.0% GDP target can be meet. However, we see a softer of H2 GDP and 4.0% GDP in 2025, given weak domestic demand is unlikely to chan
June 12, 2024
China CPI: Core Slows and 10bps June 17 MLF Cut?
June 12, 2024 7:34 AM UTC
China disinflation is clear in the latest numbers for May, with core falling 0.2% on the month. Further stimulus will likely arrive in the form of monetary easing. While it is a close call, we look for a 10bps cut in the medium-term lending facility rate (MLF) from 2.50% on June 17.
June 11, 2024
DM Fiscal Consolidation Problems: Politics/Central bank QT and Low Nominal GDP
June 11, 2024 2:10 PM UTC
Some governments are politically reluctant to restrain government expenditure growth or in the U.S. case raise taxes. This means that intermittent fiscal stress and concerns can be seen in the coming years. However, to get to crisis levels would require a government that abandons any attempts
June 07, 2024
China Excess Production: Exports Going Cheap?
June 7, 2024 8:45 AM UTC
China excess of production over domestic demand is causing disinflation pressures in China, but also leading to a fall in export prices as China companies seek buyers for production. Though this is a helpful factor to the global inflation debate, it is causing trade tensions with the U.S. and EU o
June 03, 2024
China Finance Weakest Links: Small Banks and Property Finance
June 3, 2024 9:19 AM UTC
China authorities appear to have the financial stability spill over from the property sector until control currently, through a combination of direct support for housing and forced mergers of weak banks (mainly rural so far). This game plan will likely be followed for the next few years. However,
May 17, 2024
May 16, 2024
France and Japan: Debt Fuelled Growth Problem
May 16, 2024 10:30 AM UTC
Most of the surge in debt/GDP in Japan and 40% in France is due to higher government debt and this should not be a binding constraint provided that large scale QT is avoided – we see the ECB slowing QT in 2025 and are skeptical about BOJ QT in the next few years. The adverse impact of higher deb
May 15, 2024
China: Too Much Debt In Some Sectors
May 15, 2024 9:55 AM UTC
While part of corporate debt is quasi government (SOE and LGFV’s) and China creditors can be pursued to rollover by the authorities for larger borrowers, households and part of the private sector are focused on the previous buildup of debt. With China authorities reluctant to aggressive ease fis