Global Macro Strategy

Callum Henderson

Macroeconomics

<ul><li>Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing'</li><li>Policymaker actions may have exacerbated concerns, but a careful study of the data suggests all is not lost</li><li>Chinese manufacturing is facing a major downturn, but services are still strong; a twin-speed economy</li><li>Commodity exporters to China face a secular decline in demand, but service exporters should prosper</li><li>Our rebalancing, your problem - EM faces greater challenges from China's rebalancing than China itself</li><li>Short-term risks of a hard landing have been reduced, but medium-term risks continue to increase</li></ul>

Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing'Policymaker actions may have exacerbated concerns, but a careful study of the data suggests all is not lostChinese manufacturing is facing a major downturn, but services are still strong; a twin-speed economyCommodity exporters to China face a secular decline in demand, but service exporters should prosperOur rebalancing, your problem - EM faces greater challenges from China's rebalancing than China itselfShort-term risks of a hard landing have been reduced, but medium-term risks continue to increase

Asia Calling: China's Great Rebalancing - Why the Consensus Is Wrong

Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately starting to play out; although markets currently feel very oversold and could rally sharply over the short term, we believe that there is further downside for EM equities in absolute and relative terms over the remainder of the year.

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately starting to play out; although markets currently feel very oversold and could rally sharply over the short term, we believe that there is further downside for EM equities in absolute and relative terms over the remainder of the year.

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

Banks in Hong Kong are highly exposed to China. As all eyes are on the radical stock market moves in China, the currency pressure and the visible signs of economic woes, maybe Hong Kong banks will be even less spared than their China counterparts?As at 1H15, HK$216bn of BEA’s loans were to China, out of its HK$453bn in total – so 48% of total. <a href="https://www.smartkarma.com/entities/341" target="_blank" data-smartkarma-citation="entities:341">Bank Of East Asia</a> is very much a China bank.<h2>BEA - Total NPLs (HK$m)</h2><figure class="editor-figure"><img src="https://static-prod.smartkarma.com/images/media/000/004/882/original/BEA%20Total%20NPL.png?1452144846" class="editor-image img-responsive" data-smartkarma-image-id="4882"></figure><div style="text-align: center;" class="content-remarks"> Source: SNL Financial</div>Its NPLs are up nearly 2x in the past two and a half years. From…

Banks in Hong Kong are highly exposed to China. As all eyes are on the radical stock market moves in China, the currency pressure and the visible signs of economic woes, maybe Hong Kong banks will be even less spared than their China counterparts?As at 1H15, HK$216bn of BEA’s loans were to China, out of its HK$453bn in total – so 48% of total. Bank Of East Asia is very much a China bank.BEA - Total NPLs (HK$m) Source: SNL FinancialIts NPLs are up nearly 2x in the past two and a half years. From…

China Bank Pressure, Refocus in Hong Kong

Thematic (Sector/Industry)

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%, which is not overly worrisome, but nonetheless it remains substantial.Indonesia tops the charts due to less well-known banks, and many that are subsidiaries from banks outside the country. On average NPL formation for Indonesia’s listed banks is 87% but when including only the major domestic banks the figure is less dramatic at 31%.  At the very least,…

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%, which is not overly worrisome, but nonetheless it remains substantial.Indonesia tops the charts due to less well-known banks, and many that are subsidiaries from banks outside the country. On average NPL formation for Indonesia’s listed banks is 87% but when including only the major domestic banks the figure is less dramatic at 31%.  At the very least,…

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main concerns for 2016 as the signs pointing to a "sudden stop" continue to grow.

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main concerns for 2016 as the signs pointing to a "sudden stop" continue to grow.

China

Bank of China Limited provides banking services. The Company offers deposits, loans, foreign currency transaction, fund settlement, and other services. Bank of China provides its services to individuals, enterprises, and other clients.

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Bank of China (601988 CH)

Asia Calling: China's Great Rebalancing - Why the Consensus Is Wrong

Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing' Policymaker actions may have exacerbated...

Callum Henderson

China and the EM Ugly Contest

Our bearish outlook for 2016 predicated on the rising risk of a “sudden stop” for China and uncontrolled FX depreciation across EM is unfortunately...

John-Paul Smith

China Bank Pressure, Refocus in Hong Kong

Banks in Hong Kong are highly exposed to China. As all eyes are on the radical stock market moves in China, the currency pressure and the visible...

Daniel Tabbush

A Gradual NPL Cycle in Asia

Only three countries in Asia Pacific are seeing NPLs in decline during over the past three to four quarters. The average rate of growth is 20%,...

Daniel Tabbush

A "Sudden Stop" For China in 2016?

After an intriguing 2015 when the economy surprised to the downside by the stock market performed "relatively" well, China is amongst our main...

John-Paul Smith

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