In today’s briefing:
- EM by EM #30 Pick-up from King Carry?
- US Recession Still Likely but Imports to Rebound Sooner, Benefiting India-ASEAN
- Portfolio Watch: Celebration for the right or wrong reasons?
- China Housing Market’s ‘Silver October’ Tarnishes
- EA: Inflation Tracking Toward Target
- The Weekly Market Monitor – On Deflation, Spot Bitcoin ETFs, Rising Delinquencies, & Faltering China
EM by EM #30 Pick-up from King Carry?
- After a prolonged saga of stimulus negotiations and the expenditure of countless man-hours in preparation, it is evident that the Chinese stimulus can, at best, provide temporary relief to an ongoing structural issue that is not going away anytime soon.
- While we received some positive numbers this week, with industrial production and consumer spending exceeding expectations, the housing market figures remain dismal and are unlikely to improve unless the CCP alters its course.
- Apart from causing concern in the financial sector, the direct impact on the labor market is an often overlooked yet plainly evident consequence of the current crackdown on real estate
US Recession Still Likely but Imports to Rebound Sooner, Benefiting India-ASEAN
- China continues losing US market share at 1pp+ per year since Mar’18 (when its share was 21.8%); in the year to Sep’23, China’s share of US imports declined to 14%.
- US imports have declined YoY in 10 of the past 11 months. Although we expect the US to go into recession this quarter and next, US imports have already troughed.
- Although the US economy will weaken (as PCE is slowed by student-loan repayments, and fiscal pullback begins), US imports should start rebounding in Q1CY24, boosting India and ASEAN, not China.
Portfolio Watch: Celebration for the right or wrong reasons?
- The Fed was ‘navigating by the stars under cloudy skies’, but now markets have implicitly been allowed a go.
- The provisional result? Rally in bonds and a subsequent rally in equities.
- In this week’s Portfolio Watch, we’ll have a closer look at the reasoning behind the move lower in yields and whether they are a sign of misalignment between hopes and expectations versus still lingering suboptimal fundamentals. We also try to gauge whether the recent weakness in the USD will continue, and its link to the manufacturing cycle.
China Housing Market’s ‘Silver October’ Tarnishes
- China’s housing sales continued to slide in October, a traditionally peak month for the real estate sector, showing that recent supportive government policies failed to boost the ailing property market.
- Commercial housing sales by area in October declined 28.4% from September to 77.73 million square meters, according to data released Wednesday by the National Bureau of Statistics (NBS).
- September and October are usually two months of upbeat property sales and are known as “Golden September and Silver October.
EA: Inflation Tracking Toward Target
- The final EA HICP inflation print confirmed the 2.9% flash for Oct-23. Disinflation was broadly experienced across countries, primarily driven by food and energy prices.
- Underlying inflation has also eased further, with the median impulse now close to the ECB’s target in each of the EA’s Big-4 member states.
- November remains likely to be a temporary trough ahead of December base effects. The ECB should hold rates if the impulse stays here and eventually cut if it falls further.
The Weekly Market Monitor – On Deflation, Spot Bitcoin ETFs, Rising Delinquencies, & Faltering China
- Our Fear & Frenzy Sentiment Index has hit ‘FRENZY,’ sending a short-term SELL signal!
- The Fed is likely done, especially with inflation expectations falling, keeping real yields high. Unfortunately, some macro indicators hint at deflation, which is the ugly side of disinflation.
- China, new week, same story. China’s property sector is going absolutely nowhere. In fact, things are worsening with the decline in house prices the steepest nine(!) years.
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