In today’s briefing:
- Is It Time To Buy China?
- China: As Economic Conditions Deteriorate Further, Policy Has To Give
- US-China-Taiwan: Just How Much Has Political Risk Changed?
- EM Funds Raise ASEAN Allocations
- The Philippines: Ample Dry Powder For 2H22
- CX Daily: The Challenges Ahead for China’s Digital Yuan
- CX Daily: Missfresh Implosion Highlights Bitter Business of Selling Groceries Online
- UK: Labour Market Pains Propagating
Is It Time To Buy China?
- Investors are overly pessimistic, but China may already be a contrarian ‘buy’
- Latest economic data show positive surprises. GDP momentum is rising but investor positioning data evidence another big cut in exposure to China
- Monetary policy stable and supportive. No sign of credit bust, or boom. Great potential for policy ‘pivot’ later in 2022
China: As Economic Conditions Deteriorate Further, Policy Has To Give
- There was little good news in the latest batch of Chinese economic data. Domestic demand is weakening again after a brief rebound in June.
- The drags on the economy are now deeply rooted – a contracting real estate sector whose ill-effects are spilling over into consumer despondency, weak investment and credit stresses.
- Policy responses remain inadequate and sometimes contradictory. Policy makers are betting that incremental and cautious measures will allow employment and incomes to stabilise. We suspect that they are too optimistic.
US-China-Taiwan: Just How Much Has Political Risk Changed?
- US House Speaker Pelosi’s visit has set in train developments that will raise big power frictions structurally, and for a long time.
- The US and China will do what is necessary to avoid direct clashes. They may even restart direct talks which China just cancelled. But, tensions will persist
- China’s strategy was never principally about an invasion. It was always about relentlessly increasing the pressure on Taiwan to force a negotiation on Beijing’s terms.
EM Funds Raise ASEAN Allocations
- Regional rebalance occurring among active EM funds. Out of EMEA and the major Asian nations and in to ASEAN, MENA and South America.
- ASEAN reversal shows EM investors moving from underweight to overweight since late 2021, driven by a record ownership and a rising number of funds positioned overweight the benchmark.
- Indonesia and Thailand the key drivers and to a lesser extent Malaysia. The Philippines has been notably absent from the move higher, whilst Singapore allocations fell over the same period.
The Philippines: Ample Dry Powder For 2H22
- While the Philippines’ 2Q22 GDP print surprised on the downside, the recovery still has legs.
- Notably, excess private savings actually increased in the period, suggesting cutbacks to discretionary spending, perhaps because of the spike in Covid-19 caseloads or the high-inflation environment.
- It will be business-as-usual for the BSP as we expect a 50bps hike in August, followed by 25bps hikes in September and November as terminal rates are in sight.
CX Daily: The Challenges Ahead for China’s Digital Yuan
Digital yuan / Cover Story: The challenges ahead for China’s digital yuan
Floods / Flash floods in Southwest China kill seven as tourists ignore warning
Jobless / China’s youth unemployment rate rises to another record
CX Daily: Missfresh Implosion Highlights Bitter Business of Selling Groceries Online
In Depth: Missfresh implosion highlights bitter business of selling groceries online
Beijing sanctions more individuals in Taiwan in response to U.S. congressional visits
Fugitive behind $15 billion Myanmar business hub arrested in Thailand
UK: Labour Market Pains Propagating
- The UK unemployment rate held at 3.8%, while the underlying data showed more slight rises. Retirement is subduing labour supply while demand (vacancies) is falling.
- Changes in wage settlements and unemployment suggest further progression towards the cycle burning out, especially leading into preliminary August data.
- Inflation has crushed real wages to record falls, reversing 2020’s rise and growth since 2007. While helpful for the BoE, that record probably prevents a Tory re-election.
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