In today’s briefing:
- CX Daily: Behind the Massive Sell-Off in Chinese Wealth Management Products
- UK: Expectations Still Need Re-Anchoring
- Malaysia: Anwar Well-Positioned to Spur Economic Recovery as Capital Flows Back
- What’s Working? High Stock Price, Leverage, High Value-Add Companies and Shorting
CX Daily: Behind the Massive Sell-Off in Chinese Wealth Management Products
In Depth: Behind the massive sell-off in Chinese wealth management products.
Pfizer CEO dismisses reports of a Paxlovid generic for China.
Local governments set to borrow $146 billion in first quarter.
UK: Expectations Still Need Re-Anchoring
- Forceful rate hikes have pushed UK inflation swap rates towards normal levels, yet the work isn’t over. Consumer and business expectations remain extremely elevated.
- Real income resistance is prolonging excess inflation through second-round effects that have repeatedly stepped up. 5% wage settlements are worryingly becoming the norm.
- The BoE recognises the forces necessitating real losses. We still expect it to reinforce its credibility with another 50bp hike in Feb-23 ahead of April’s critical wage round.
Malaysia: Anwar Well-Positioned to Spur Economic Recovery as Capital Flows Back
- FX reserves, which had declined over 10% from Mar’22 to Oct’22, rebounded by 8.9% in Nov-Dec’22. Anwar’s inclusive policies will likely induce a steady rebound in net capital inflows.
- Base effects have facilitated 9.3%YoY real GDP growth in Q1-Q3 2022 led by strong private consumption and net exports; better growth cut the fiscal deficit to 4% of GDP YTD.
- Net foreign portfolio outflows averaged 1.75% of GDP since 2013. As FPI rebounds, and non-bumiputera businesses invest anew, Malaysia’s real GDP will grow 6% despite the OECD recession in 2023.
What’s Working? High Stock Price, Leverage, High Value-Add Companies and Shorting
- The sharp downdraft predictably hurt smaller caps, lower priced and high beta shares more than their opposites. Small caps appear relatively undervalued.
- Shorts are doing well. Not only did stocks drop, producing short beta, but highly shorted stocks fell much more, driving alpha.
- Price momentum barely added value. Stocks that had rallied over the past year gained a bit more than others, but not enough to be meaningful. The trend was inconsistent.
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