Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
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More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

&lsquo;Pay no attention to that man behind the curtain&rsquo;&nbsp;- Wizard of OzThe nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.

&lsquo;Pay no attention to that man behind the curtain&rsquo;&nbsp;- Wizard of OzThe nature and scale of Beijing&rsquo;s reaction to the bursting of the China equity bubble should dispel two of the three myths which supposedly justified the bull market, namely that the administration was in firm control of events and that it was intent on implementing a programme of liberal reforms towards the economy and financial markets.The one remaining myth, which is still being propagated by the China bulls, is that despite the continuing growth slowdown, the underlying state of the Chinese economy is sound. Mark is currently undertaking a study of the financial characteristics of the Chinese corporate sector, which we intend to publish in early September. For this piece I am taking some of his preliminary findings to illustrate the fault lines, which exist through the Chinese economy and which continue to underpin our bearish view towards the Chinese economy and equity market.

Haitong Securities Co Ltd (A) (600837 CH)

Shanghai Pudong Development Bank Co. (600000 CH)

Vanguard FTSE Emerging Markets ETF (VWO US)

China Pacific Insurance (Group) Co., (601601 CH)

CHINA: Reform & Omnipotence Myths Dispelled