In today’s briefing:
- China Unlikely to Escape Middle-Income Trap Without Social or Political Reform
- China Consumption Disappoints
- [ETP 2024/35] Crude Oil Slips Amid Demand Concerns; Nat-Gas Under Pressure from Oversupply
- EM Watch: 5 Charts on the Nosediving Chinese Indicators!
- Vietnam: 2024 Rotation Drives Record Fund Ownership
- UK Banks: Key Stocks Fuel Sector Comeback
- US: Presidential Race Narrows After a United DNC; Debates to Be Decisive
- CX Daily: Beijingers Spurn Eating Out Amid Sluggish Economy
China Unlikely to Escape Middle-Income Trap Without Social or Political Reform
- As economic growth of China move to sub-5% level (a figure which may have been manipulated upward), the living standard of its lower-middle and lower class are hopeless to improve.
- Standing at USD12970 in 2023, the capita real GDP grows much slower than previous decade.
- This is the middle income trap which is experienced by other middle-income Asian countries as well, like Philippines, Thailand, and Malaysia.
China Consumption Disappoints
- China consumption patterns are slowing and becoming more volatile at a sub sector level. There is also less certainty over new employment and wage growth.
- China’s consumption is vital to growth when production is transitioning from old economy dependency on residential investment, steel, cement and other industries.
- We forecast GDP to slow in H2 and be 4.0% in 2025
[ETP 2024/35] Crude Oil Slips Amid Demand Concerns; Nat-Gas Under Pressure from Oversupply
- For the week ending 23/Aug, US crude inventories fell by 846k barrels, while analysts expected a 2.7 mb drawdown. Gasoline stocks dropped more than expected, while distillate inventories unexpectedly rose.
- US natural gas inventories rise 35 bcf for the week ending 23/Aug, exceeding analyst expectations of a 33 bcf buildup. Inventories are 12.1% above the 5-year seasonal average
- Exxon expects global crude oil demand to remain around 100m bpd through 2050. Brokerages lowered target prices on Occidental and Halliburton.
EM Watch: 5 Charts on the Nosediving Chinese Indicators!
- China’s exports fired on all cylinders during the spring, but we are now starting to see signs of fading inventories in the US (and to some extent, Europe) again.
- We believe the front-loading of imports, with rising freight rates being a symptom of this, propelled the Chinese economy ahead of the feared tariffs implemented by the Biden administration and potentially increased under a Trump presidency.
- We know that Chinese exporters have front-loaded exports of cars and other goods ahead of the tariff deadlines in both the US and Europe, and we are now seeing freight rates moderating alongside some concerning nowcasts out of China.
Vietnam: 2024 Rotation Drives Record Fund Ownership
- Vietnam has achieved a significant milestone, with over one-third of Asia Ex-Japan funds now invested in the country for the first time in our holdings history.
- Average fund weights hit a new high of 1.01% last month, as an additional 5.1% of funds opened exposure in 2024.
- Notable fund-level activity in 2024 includes new positions from JP Morgan and Fidelity, with the most optimistic investors assigning over a 10% weight to Vietnam.
UK Banks: Key Stocks Fuel Sector Comeback
- Exposure to the UK Banking sector is nearing all-time highs as funds rotate back into the sector following the 2020 sell-off
- Broad rotation into various stocks within the sector. HSBC is experiencing a robust recovery in ownership, and Natwest has reached record levels of UK fund ownership.
- Value managers are the most exposed to UK Banks, while Agg’ Growth funds lag behind their style peers.
US: Presidential Race Narrows After a United DNC; Debates to Be Decisive
- Energized Democrats have narrowed the polling gap, with The Economist average showing Harris likely to win 277 Electoral College votes, although RCP’s average shows Trump narrowly ahead in swing states.
- This is no longer 1968 Redux, despite many similarities. RFK Jr’s withdrawal means there’s no George Wallace to erode Democratic votes. Centrist Harris is positioning well to capture swing voters.
- Both candidates would further increase public debt, but Harris has more credible funding plans. The debates will still be crucial, but a Harris win would be marginally better for markets.
CX Daily: Beijingers Spurn Eating Out Amid Sluggish Economy
- F&B / Charts of the Day: Beijingers spurn eating out amid sluggish economy
- Corruption /: Death penalty upheld for former official in China’s largest corruption case
- Debt /: Inner Mongolia region is struggling to fund basic services as debt crisis looms
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