Macro: China: A Moment of Danger – and a Turning Point for Policy? and more

• Despite harsh restrictions, the trajectory of infections in Shanghai appears to be following that in Hong Kong. We also expect infections spikes in other localities that will spark more lockdowns.
• There is a clear shift in tone in recent statements made by the State Council that indicated rising worry over the state of the economy. More stimulus is virtually certain.
• If China’s policymakers fail to follow through with demand-side measures, the institutional barriers to doing so must be so considerable that even in crisis they militate against the optimal response.

• The rebound on the Dow Jones Industrial Average over the past several weeks has been impressive, as is the case with other US stock market indices
• However, when we zoom out and measure it in the proper manner against Gold with an historical lens, a different image emerges
• Overall, the picture on this Spooky Chart –Dow/Gold Ratio– still warns of another low over the coming 1-2 months i.e. a move in favour of Gold and against stocks

• We look in particular at the prospects for the globalisation which has so greatly benefited emerging Asia. Prior to the recent crises, globalisation had held up reasonably well.
• While the trade in goods may have lost some momentum, other dimensions of globalisation have continued to expand even in the face of repeated crises. 
• The trend towards self-sufficiency, protectionism and inward policies will hurt. However, there are offsetting forces which can help sustain cross-border flows of goods, services, capital, people and data.

• 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 Ultrajaya Milk (ULTJ IJ), Berli Jucker (BJC TB), and GoTo (GOTO IJ) ahead of listing today in Jakarta from Sumeet Singh and Brian Freitas.
• We also had insights from Henry Soediarko on Jasa Marga (JSMR IJ) and from Lloyd Moffatt on Steel Pipe Industry of Indonesia (ISSP IJ).

• UK GDP growth stalled to 0.05% m-o-m in Feb-22 as temporary covid-related health spending ended. Another 1pp might be subtracted over the next few months.
• Broader health spending remains bloated, symptomatic of the strains squeezing private sector activity as taxes increase to the detriment of long-term growth.
• Inflation’s erosion of real incomes is a painful headwind, but the annual GDP rate benefits from carry-over effects. We forecast 1% q-o-q in Q1 and 4.1% in 2022.

• Q4FY22 is expected to be a roller coaster quarter with COVID 3.0 impacting the first month of the quarter.
• However, Feb’22 witnessed some recovery as fewer fatalities revived the confidence in improving health conditions and thereby diminished the risk parameters.
• OUR TOP 10 “TRADING BUYs” Earnings Play: SBI, ICICI bank, Tata Steel, Nalco, Ashok Leyland, Eicher Motors, PSP Projects, ITC, Varun beverages, Tech Mahindra

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