This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. OVER THE HORIZON: Thematic Review Year-To-Date
- Our most prominent theme this year has been to BUY HK/China markets. We are still very bullish on these SECULAR BULL markets.
- We have been Bullish on gold and discussed the asymmetry of its price movements given the global tightening starting in 2021/22. Gold will continues to benefit from negative real rates.
- We have been Bearish on Japan since publishing Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend on April 2nd. Japan’s market is facing significant headwinds going forward.
2. Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)
- Hong Kong Dollar continues to trade at the strong end of its band resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.
- HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.
- Xtep International (1368 HK) , Xiaomi Corp (1810 HK) and China Education Group (839 HK) all had breakouts to form uptrends. All are part of the consumption sector in China
3. GEM Funds Underperform in Q3.
- Active EM Funds delivered an average return of +6.85% in Q3, underperforming the iShares MSCI Emerging Markets ETF by 0.83%, with 38.8% of funds beating the index.
- Morgan Stanley Developing Opportunity and Aikya Emerging Markets topped the performance charts for the quarter.
- Underweights in Alibaba Group Holding and Meituan, and overweights in SK Hynix and cash holdings hurt performance.
4. HK/China: DOOM AND GLOOM? DON’T GET FOOLED AGAIN
- As HK/China markets complete their retracements after the best rally in more than a decade, the exaggerated pessimism from the media and analysts returns.
- The government continues to roll out measures to relieve the pressure on the property market in what is a multi-year process with no quick fix.
- Even after a historic rally, the HSI still trades at a significant valuation discount which will narrow in the coming months.
5. China Watch: Time to play briefing bingo again..
- Welcome to our China Watch series, where we look at the Chinese case through the lens of Western investors.
- Tomorrow, we will have another briefing aimed at boosting the property market, which is one of those tricky conundrums to deal with.
- Housing starts have already dropped back 20 years, and the value of unsold homes and projects is sky-high.
6. Steno Signals #121: Whatever It Takes—In the US, but NOT in China
- Happy Sunday from Copenhagen!I spent most of Saturday morning discussing the fiscal briefing with clients.
- Even though I’m admittedly not as actively involved in business with China as I was a few years ago, I still feel relatively comfortable assessing the ramifications of the briefing.
- It was exactly what I feared: a big nothing burger.
7. Portfolio Watch: China needs to deliver, or it could end in tears
- The fiscal briefing in China tomorrow will be crucial, as inflows into the country have significantly diminished in recent days.
- This highlights the need for a constant stream of positive news to sustain the rally.
- Given the expectations building around the message from Chinese authorities, we don’t have high hopes that they will exceed market consensus.
8. The Week at a Glance: No Bazooka from China (Yet) – Over to You, ECB
- The recent Chinese fiscal briefing was underwhelming, as expected.
- China continues to focus on supply-side measures, which remain ineffective in addressing the pressing need for increased demand.
- Instead of stimulating consumption across the economy, China is attempting to incentivize asset demand and reshuffle credit profiles—approaches unlikely to produce meaningful results.
9. Comparison Between China and Japan Debts
- China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption.
- Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a structural headwind for China GDP.
- Though China corporate debt/GDP ratio is higher than Japan in 1990, China LGFV debt is 50% of GDP and will be swapped for local and central government debt.
10. CrossASEAN Ground Zero – Bukalapak, Astra International, OhHaju, and Sea Ltd
- This week we look at Bukalapak, as Emtek increases its direct stake, Astra‘s latest healthcare push into cardiology, and Ohhaju (OKJ TB), Thailand’s latest organic food IPO.
- We also look at Sea Ltd (SE US)‘s latest move to apply for a digital banking licence in Thailand, which will help to further increase the platform’s regional footprint.
- CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
