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.

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that 2016 will be "The Year of Visit to Korea" with the aim of attracting 8 million Chinese tourists this year. The Korean government introduced new measures to attract more Chinese visitors this year including:<ul><li>Exemption of visa fees for Chinese group travelers starting January 2016 for one year.</li><li>Addition of four new air routes between China and Korea starting March 2016 (12 additional flights/week). </li><li>Reduction in the age of Chinese people who are eligible for multiple entry visas to 55 from 60. </li></ul>

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that 2016 will be "The Year of Visit to Korea" with the aim of attracting 8 million Chinese tourists this year. The Korean government introduced new measures to attract more Chinese visitors this year including:Exemption of visa fees for Chinese group travelers starting January 2016 for one year.Addition of four new air routes between China and Korea starting March 2016 (12 additional flights/week). Reduction in the age of Chinese people who are eligible for multiple entry visas to 55 from 60. 

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when visiting mainland Korea while visa is not required to visit Jeju island. We believe that the tremendous success of attracting Chinese visitors to Jeju island may also lead to relaxed visa policies for Chinese visiting mainland Korea. Timing of potential change of Chinese visa policy to Korea - Although it may not be discussed much openly, we think that there are increasing talks behind the doors to relax the visa policy for Chinese visitors to Korea (ex. 3 months no visa policy) in order to attract more Chinese visitors and help to attract foreign capital. In terms of time-frame, we believe it could over the next two years, especially as the incumbent Presidential regime is pro-FTA with China and open to attracting more Chinese capital. The potential change to existing visa policy such as 3 months no visa could be both ways (Chinese visitors to Korea and Korean visitors to China).

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when visiting mainland Korea while visa is not required to visit Jeju island. We believe that the tremendous success of attracting Chinese visitors to Jeju island may also lead to relaxed visa policies for Chinese visiting mainland Korea. Timing of potential change of Chinese visa policy to Korea - Although it may not be discussed much openly, we think that there are increasing talks behind the doors to relax the visa policy for Chinese visitors to Korea (ex. 3 months no visa policy) in order to attract more Chinese visitors and help to attract foreign capital. In terms of time-frame, we believe it could over the next two years, especially as the incumbent Presidential regime is pro-FTA with China and open to attracting more Chinese capital. The potential change to existing visa policy such as 3 months no visa could be both ways (Chinese visitors to Korea and Korean visitors to China). 

Potential Change of Chinese Visa Policy to Korea

Differentiated global TMT & Internet Research

New Street Research Insights

New Street Research

Research is provided by our team of experienced analysts. Our work is idea driven, based on independence of thought, sector expertise, and firmly focused on fundamentals and valuation of telecoms and internet names globally. New Street is headquartered in London with offices in New York, Singapore and Australia. 

New Street Research is an independent, partner-owned, research firm specialising in equity and debt research. Our equity research embraces the following sectors:

Pan European Telecom Services and Cable
US Telecoms, Cable, Satellite and Towers
Global Emerging Market Telecoms
Japan Telecoms
Asian Internet
Pan European Healthcare
US Healthcare
Japanese Healthcare

We also provide debt research on:
Pan European Telecom Services and Cable

Equity Bottom-Up

We believe JD.com is set for further gains. The company aims to grow at 2x the market rate and currently is exceeding this comfortably. The strong relationship with Tencent is helping to drive the business and is benefiting both parties.JD.com relies on its warehousing capacity to offer value to merchants. Speed to delivery is a key advantage as JD.com has been investing in warehousing an d logistics for over 5 years.The key measures to watch going forward will be growth in GMV and a move to positive Ebitda margins from 2015. There have been concerns at the distance to profitability but we believe JD.com is building a strong sustainable business and will eventually generate significant profits.&nbsp;

We believe JD.com is set for further gains. The company aims to grow at 2x the market rate and currently is exceeding this comfortably. The strong relationship with Tencent is helping to drive the business and is benefiting both parties.JD.com relies on its warehousing capacity to offer value to merchants. Speed to delivery is a key advantage as JD.com has been investing in warehousing an d logistics for over 5 years.The key measures to watch going forward will be growth in GMV and a move to positive Ebitda margins from 2015. There have been concerns at the distance to profitability but we believe JD.com is building a strong sustainable business and will eventually generate significant profits.&nbsp;

China

JD.com, Inc. is an online direct sales company in China. The Company offers a wide selection of products through its website and mobile applications. JD.com sells appliances, computers, digital products, communication products, garments, books, and household items to consumers and vendors.

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JD.com (9618 HK)

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

2016 - "Year of Visit to Korea"

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that...

Douglas Kim

Potential Change of Chinese Visa Policy to Korea

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when...

Douglas Kim

JD.com: Internet Growth Powerhouse

We believe JD.com is set for further gains. The company aims to grow at 2x the market rate and currently is exceeding this comfortably. The strong...

New Street Research

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