In today’s briefing:
- The End of the Chinese Growth Miracle?
- Bond Market Monitor: The First Anniversary
- Malaysia’s Budget 2023 (Anwar’s Version)
- The Highlights of USDAs 2023 Commodity Outlook // Where Stock Prices Are Headed in 2023
- US: Inflation Shock Implies More Rate Hikes Needed Even as Recession Looms
- Inflation Watch: 7 Charts on EUR Inflation After Smoking Hot Prints from Spain and France
- CX Daily: China Threatens Retaliation After U.S. Sanctions Chinese Firms With Alleged Russia Ties
- CX Daily: China’s Tax System Gets a Digital Upgrade
- AFC Vietnam Fund February 2023 Report
The End of the Chinese Growth Miracle?
- China risks turning old before getting rich, with the labour force shrinkage progressively dragging on growth. There is little that policy can achieve to reverse this decline.
- Productivity growth is not forthcoming, with the low-hanging fruits of sectoral reallocation and industrialization already exhausted. Global decoupling worsens matters.
- Capital accumulation will also face rapidly diminishing returns, while a concentration of political power increases the risks of policy mistakes and damage economic growth.
Bond Market Monitor: The First Anniversary
- February 24th was the first anniversary of Russia’s invasion of Ukraine. We believe the likelihood of the war ending this year is very small.
- The 2/10 spread has remained in a negative territory, meaning the recession is coming.
- Slower and/or smaller than expected rate hikes provide a bullish case for bond investments this year.
Malaysia’s Budget 2023 (Anwar’s Version)
- While the headline consolidation seems welcome, this relies heavily on assumptions of higher government revenues, which gave the government more scope for spending.
- The government continues to seek alternatives to reintroducing the abolished Goods and Services Tax, but these do not raise sufficient revenues to fund key policy objectives.
- Measures to strengthen public finance governance and industrial upgrading are welcome steps to bolster long-term fiscal and economic prospects.
The Highlights of USDAs 2023 Commodity Outlook // Where Stock Prices Are Headed in 2023
- The agency estimates that roughly 46% of Ukraine’s wheat production lies in areas where the war is currently threatening the planting process.
- US Soybean Crush Margin remains very high and therefore continues to support soybean meal prices
- USDA is expecting a larger uptick in planted acres for Wheat and Rice but a large drop in planted acres for Cotton.
US: Inflation Shock Implies More Rate Hikes Needed Even as Recession Looms
- Core PCE increased 6.9%MoM (annualized) in Jan’23, and hence was up 4.71%YoY, moving further away from the FOMC’s 2%YoY target (rather than edging towards it as had been expected).
- M2 growth averaging 18.2%YoY in Mar’20-Feb’22 (vs a pre-Covid average of 6.8%YoY in the previous 60 years) is the cause. FedFunds must rise to 5.5% by May’23 to compensate.
- Severely inverted yield curve indicates that a recession (from Q2CY23 onward) will also help generate slack, taming inflation. Any delay in recession’s onset will entail even more rate hikes.
Inflation Watch: 7 Charts on EUR Inflation After Smoking Hot Prints from Spain and France
- Inflation once again printed at high levels in Spain and France
- Will the ECB be forced to tighten even further than priced in?
- Here is how we view the inflation risks in Europe and the likely response from the ECB
CX Daily: China Threatens Retaliation After U.S. Sanctions Chinese Firms With Alleged Russia Ties
- Funds /: How China’s investment funds fared in 2022
- China-U.S. /: China threatens retaliation after U.S. sanctions Chinese firms with alleged Russia ties
- Li Yining /: Li Yining, who helped bring private investment to China’s state sector, dies at 92
CX Daily: China’s Tax System Gets a Digital Upgrade
- Tax / Cover Story: China’s tax system gets a digital upgrade
- Investment banking /: Investment banker Bao Fan is aiding an investigation, China Renaissance says
- Corruption /: Ex-provincial vice governor indicted for bribery, leaking insider information
AFC Vietnam Fund February 2023 Report
- Renewed fear of more aggressive US interest rate hikes, and some financial difficulties at Vietnam’s fourth-biggest listed property developer, Novaland (NVL), sent the VN-Index sharply lower, down -9.2% (in USD terms) in February.
- Also, the NAV of our AFC Vietnam Fund closed the month -6% lower at an NAV of USD 2.839, according to internal estimates.
- February’s market correction was mainly caused by concerns about US inflation and higher than expected US interest rates.
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