China
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December 2, 2024 10:08 AM UTC
Internal dynamics within BRICS argues against a BRICS currency due to divergent economies and structures, though BRICS could one day look to have a payment system. Nevertheless, the threat of tariffs on BRICS if they form a new currency will also likely help the USD against EM currencies in H1 202
November 27, 2024 11:05 AM UTC
China labor force will likely not grow in the remainder of the decade, due to falling population; reluctance to consider large-scale inward immigration; a female participation rate that is high by EM standards and limited growth in employment among those over 55. Meanwhile, education and rural to
November 22, 2024 9:08 AM UTC
Trade and geopolitics will be the key drivers for the Trump administration relationship with key EM countries. While uncertainty on policy tactics are high, China and Vietnam will be among the first to see trade threats and actual tariffs. Mexico will see threats over the 2026 USMCA review and i
November 21, 2024 7:06 AM UTC
Much uncertainty still exists on policy but in 2025 the EU will likely be under pressure from targeted new tariffs by the Trump administration, while also being asked to spend more on defense spending. Purchasing extra LNG and military hardware from the U.S. is one way towards a potential trade de
November 15, 2024 7:42 AM UTC
China October data is mixed with a bounce in retail sales helped by government trade ins and a holiday, but industrial production and housing construction disappointing. This all argues for further fiscal stimulus. However, given our view that some tariff increases against China by the U.S will
November 13, 2024 9:55 AM UTC
The U.S. can put pressure on other countries by starting tariffs at a more moderate scale and country and industry specific and then credibly threatening to increase and broaden tariffs as it did in 2018-19 to get trade concessions from other countries. This also reduce the scale of the adverse in
November 11, 2024 10:06 AM UTC
Details of the Yuan10trn fiscal package show that it is all directed at a debt swap for LGFV’s and repackaging hidden local government debt. This will have little net fiscal stimulus. True fiscal stimulus will be seen for 2025 GDP growth, but it could be delayed until further details are seen
November 6, 2024 6:54 AM UTC
A Trump victory is now widely expected with results so far and has prompted knee jerk reaction in markets with U.S. Treasury yields and USD higher. Policy uncertainty is high over tariffs, though the 2017 tax cuts will likely be renewed with some additional tax cuts elsewhere -- House race is tigh
November 4, 2024 7:05 AM UTC
China most likely faces aggressive disinflation rather than Japan style deflation that depress GDP. China is a middle income country with incomplete urbanization/consumption, while China authorities appear more proactive than Japan in the 1990’s. However, support for households remains light, wh
October 28, 2024 11:41 AM UTC
Bottom Line: The BRICS Summit, which was held in Kazan on October 22-24, was the first summit following BRICS has expanded to include Ethiopia, Iran, Egypt and the United Arab Emirates. Despite expectations, Kazan deceleration, which was a joint statement signed after the summit, is not a game-chan
October 24, 2024 10:50 AM UTC
The proposed Yuan1trn capital injection for the six largest banks would be pre-emptive, while China is also quick to merge weaker/failing small to mid-sized banks. However, rising NPL’s; plus, low net interest margins with low policy rates; low nominal GDP and pressure to rollover LGFV/SOE debt wi
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 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 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 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 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 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 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 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 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 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
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
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 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 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 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
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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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
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