In today’s briefing:
- Is China Entering a Balance Sheet Recession?
- Can Emerging Asia Benefit from Investment Diversification Away from China?
- CX Daily: Dark Arts of Fund Manager in China’s Bond Market Lift Lid on Debt Mess
- The Energy Cable #29 – A weak USD paving the way for commodities?
- EM by EM #13 – A sweetspot for Brazilian Equities?
- US Manufacturing Watch: Indicators point to a cyclical rebound
- Nasdaq and S&P Futures
Is China Entering a Balance Sheet Recession?
- China’s recent difficulties are drawing unfavourable comparisons with Japan’s struggles in the 1990s. We argue, however, there are key differences that may affect China’s fate.
- While it is true that China’s households are deleveraging, this behaviour is not replicated by the corporate sector. Balance sheet repairs are not a widespread phenomenon yet.
- Fresh policy support is forthcoming but is unlikely to be sufficient to face the massive challenges looming. More ambitious stimulus and structural reform are needed.
Can Emerging Asia Benefit from Investment Diversification Away from China?
- The newly-released UNCTAD World Investment Report provides further evidence that China is no longer the investment magnet it once was.
- Greenfield investments have remained admirably resilient in emerging Asia despite the global macroeconomic difficulties, suggesting that growth opportunities remain available.
- Investors are taking note of the cyclical and structural difficulties that China is facing and are reallocating their capital elsewhere. Southeast Asian markets stand out as winners.
CX Daily: Dark Arts of Fund Manager in China’s Bond Market Lift Lid on Debt Mess
- Bonds / Cover Story: Dark arts of fund manager in China’s bond market lift lid on debt mess
- GDP /: China’s GDP grew 6.3% in second quarter, missing market expectations
- Corruption /: Another ex-chairman of China Everbright Group investigated for suspected corruption
The Energy Cable #29 – A weak USD paving the way for commodities?
- Welcome to your weekly maverick energy newsletter from both sides of the pond.
- Stars are starting to align for energy as i) the business cycle seems to be holding up better than feared, ii) the USD is weakening and iii) ongoing supply negative news (prolonged Saudi Arabian supply cut and Russia abandoning the grain deal).
- Time to go long energy?
EM by EM #13 – A sweetspot for Brazilian Equities?
- Main takeaways: Brazilian Equities are on offer and provide solid value for long-only. If commodities are in for a rebound Brazil may be a decent option to seek exposure.
- Plenty of recessionary clouds near mid-term and while fixed income remain the game in town, yields coming down may provide a narrow opportunity for equities. Regular EM readers here would know that we have been bullish on Brazilian Sovereigns since March.
- The fundamental drivers behind this thesis have roughly been two folded: The market being over-pessimistic of the re-ascension of Lula to the office and over-concerned with the inflationary resilience of the Brazilian Economy.
US Manufacturing Watch: Indicators point to a cyclical rebound
- Welcome to this edition of the Watch series where we’ll take a closer look at US manufacturing, see if it can provide some guidance as to where in the business cycle we’re at, and ultimately whether the current momentum across most risk assets can be sustained – or maybe even add further.
- This is the first release in our “Cycle Week” where we try to assess where all major asset classes see the cycle heading given the current price action.
- We will release pieces on how FX, equities, credit and commodities inter-connects with the current cycle dynamic in the coming days.
Nasdaq and S&P Futures
- The large US banks opened higher on Friday, trading up by 1.5% to 3.7% in the morning session on news of earnings beat by JP Morgan and Wells Fargo.
- JP Morgan, Bank of America, Citibank, and Wells Fargo formed a bearish Candlestick pattern despite the earning beat on above-average volume.
- In the technology sector, the Semiconductor ETF (SOX), Nvidia, Microsoft, META, Micron Technology, C3 AI, SPDR Technology ETF, and Palantir all had bearish price action and candlestick patterns.
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