In today’s briefing:
- It’s A Duration Crisis, Not (Yet) A Credit Crisis… Bonds, Not Banks Look Dangerous
- Steno Signals #60: Worse than Lehman in China!? The 3 Most Important Questions Right Now!
- Asset Allocation Watch: Country Garden Melt-Down? 5 Charts on Cross-Asset Spill-Overs!
- China Deflation Watch – What Happens in China Stays in China
- Will Xi fire the stimulus cannon?
- The Week That Was in ASEAN@Smartkarma – Bukalapak’s Specialty, ASSA & Logistics, and Indosat
- Cocoa Market Started Collapsing // Soybean Spreads crash down
It’s A Duration Crisis, Not (Yet) A Credit Crisis… Bonds, Not Banks Look Dangerous
- The sell-off in government bonds could have further to go. US Treasury 10-year yields could test 5%
- This fall in the value of prized collateral threatens to undermine the entire financial system, hit Global Liquidity hard and damage equities
- Threat is most visible in very depressed levels of US bond term premia. Watch the slated step-up in Treasury coupon issuance and likely decline in foreign buying of US debt
Steno Signals #60: Worse than Lehman in China!? The 3 Most Important Questions Right Now!
- Welcome to our weekly flagship editorial.
- The markets over the past week or two have made little sense as commodities (especially energy) have continued to outperform risk assets despite China apparently suffering from long-covid symptoms economically.
- Chinese money and credit trends look worse than US trends post Lehman, which means that either China rebounds or else it is the end of the Chinese economy as we know it! We have timed our rotation from high-beta tech/AI to Energy/Commodity proxies amazingly well, but we need to remain vigilant at this juncture.
Asset Allocation Watch: Country Garden Melt-Down? 5 Charts on Cross-Asset Spill-Overs!
- We have spent this Sunday evening trying to prepare ourselves for the opening given the turmoil expected in China after Country Gardens (the former largest developer) is to suspend trading of at least 10 onshore bonds after a week where they failed to pay coupons of a couple of international payments.
- The Hang Seng Property Index (HSP) is down 20% y-t-d but only lost 0.2% on Friday despite another landslide in the Country Garden stock.
- If the HSP Index drops over the coming days, it ought to be taken as a signal that Chinese RE credit will decline further due to a lack of confidence in the financial system.
China Deflation Watch – What Happens in China Stays in China
- Hello everyone, and welcome to our China Week where we try to gather all forces to cover the ongoing economic situation in China, which is subject to substantial volatility and political turbulence currently.
- In this piece, we will look at Chinese deflationary trends and whether they will spread to the West and/or elsewhere on the globe.
- Through the Pandemic, China was “outprinted” / “outcredited” by the US, Europe and the UK for the first time in several decades.
Will Xi fire the stimulus cannon?
- Politburo DisappointmentThe Chinese Politburo, executive committee of the CCP, gathered for their quarterly meeting on economic affairs on July 23rd.
- While the readout from the meeting suggested that the CPP remained confident that China would reach its relatively modest target of 5% GDP growth for 2023, the tone was markedly more pessimistic than April’s meeting.
- With sluggish domestic demand and youth unemployment surpassing 20%, last week’s readout was noticeable for admitting to “new challenges” for the Chinese economy.
The Week That Was in ASEAN@Smartkarma – Bukalapak’s Specialty, ASSA & Logistics, and Indosat
- The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
- The past week saw insights on Bukalapak, Adi Sarana Armada (ASSA IJ), Metro Pacific Investments Co (MPI PM), DBS (DBS SP), Indosat Tbk PT (ISAT IJ), and Mitra Adiperkasa.
- There was also a macro piece looking at Singapore’s future prospects and its need to improve its productivity plus company insights on Thai Union Group (TU TB) and Sunway REIT.
Cocoa Market Started Collapsing // Soybean Spreads crash down
- Cocoa Market Started Collapsing Run-ups in commodity markets tend to be slow but steady but meltdowns on the other hand fast and sharp – a bit comparable with equity markets but definitely more volatile.
- Especially Parabolic advances, like the one in cocoa futures, often end with a sweeping reversal.
- Fortunately, the soybean complex is one we covered intensively during this year.
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