Scribd Logo
Upload

Welcome to Scribd!

  • 59 views

    Gavekal Presentation

    Uploaded by

    Fernando Kling

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Gavekal Presentation

    Uploaded by

    Fernando Kling
    59 views35 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    59 views35 pages

    Gavekal Presentation

    Uploaded by

    Fernando Kling

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 35

    April 2020

    China Staggers
    Out Of Lockdown
    Andrew Batson
    How is China’s recovery from lockdown going?

    2
    A quick recovery in March…

    3
    …followed by a slower one in April

    4
    5
    Why Chinese authorities are still cautious

    6
    7
    How strict are China’s public health controls?
    Online survey of 180 people in 26 provinces conducted on April 21 (NOT a random
    sample):
    • 84% live in low-risk areas, but 60% still have to go through a temperature or
    personal information check in order to enter their neighborhoods.
    • 53% also reported they cannot receive door-to-door deliveries or cannot receive
    deliveries from some logistics companies.
    • Of the 64% who are working at their normal workplace, 87% must go through health
    checks at the entrance to their workplace or are required to wear masks.
    • 53% of respondents had visited a shopping mall in April, and observed an average of
    54% of the normal customer flow.
    • 64% of respondents had been to a dine-in restaurant in April, and observed an
    average of 51% of the normal customer flow.
    • Only 15% had visited any nearby recreational facilities (mostly gyms).
    • 68% are worried about the risk of being quarantined if they travel outside their city.

    8
    What is China’s policy response going to look
    like?

    9
    The stages of China’s coronavirus response (by date of
    Politburo meeting)
    • January 20. Lockdown begins: containing the virus takes precedence over everything. Economic issues are
    ensuring supply of food, energy, medical care, and maintaining liquidity in financial system. Policy response
    is modest: 10bp rate cut, lower interbank rates. Leadership believes epidemic will be only a temporary
    shock and the economy will return to normal after lockdown is lifted; maintains pre-existing goals and
    priorities.
    • February 8. Get ready to resume production. After economic activity ground to almost a complete halt,
    the government starts making plans for getting the economy started again. Leadership realizes losses from
    an extended lockdown are sizable, and begins emphasizing stability and need to strengthen policy support
    of economy. “Targeted” fiscal support including tax breaks and exemptions from social insurance payments.
    • March 18. Epidemic under control. First day of no new cases, epidemic now mostly under control.
    Toughest lockdown measures relaxed. Main focus is getting economy back to work as quickly as possible
    while staying safe.
    • March 27. Brace for global impact. After developed countries fail to control spread of coronavirus and go
    into lockdowns of their own, leadership realizes China will suffer a major shock from external demand, in
    addition to its domestic lockdown. Economic policy response steps up: 20 bp rate cut + IOER cut, lower
    interbank rates; also pledges to expand fiscal deficit, expand special-purpose local bonds, issue special
    treasury bonds (no numbers).
    • April 17. Prepare for an extended downturn. Slogan shifts from 六稳 (“six stables”) to 六保 (“six ensures”):
    ensure employment, ensure people’s livelihood, ensure survival of market participants (i.e. SMEs), ensure
    food and energy supply, ensure stability of the supply chain, ensure functioning of grassroots institutions.
    Goal is ensure eventual return to normality more than a push for growth for its own sake. Continued 10
    emphasis on fiscal policy; pledges to expand unemployment benefits and other social welfare spending (no
    11
    12
    13
    14
    15
    16
    17
    What will happen to China’s
    global role after the crisis?

    18
    19
    20
    21
    Contact and disclaimer
    This presentation was prepared by
    Andrew Batson, China research director
    [email protected]

    All research is available online at research.gavekal.com

    Copyright © Gavekal Ltd. Redistribution prohibited without prior consent.

    This report has been prepared by Gavekal mainly for distribution to market professionals and
    institutional investors. It should not be considered as investment advice or a recommendation
    to purchase any particular security, strategy or investment product. References to specific
    securities and issuers are not intended to be, and should not be interpreted as,
    recommendations to purchase or sell such securities. Information contained herein has been
    obtained from sources believed to be reliable, but not guaranteed.

    22
    www.gavekal.com

    Gavekal Ltd Gavekal Dragonomics


    Head Office China Office
    Suite 3101, Central Plaza Room 2110, Tower A
    18, Harbour Road Pacific Century Place, 2A Gongti Beilu
    Wanchai, Hong Kong Beijing 100027, China

    Tel: +852 2869 8363 Tel: +86 10 8454 9987


    Fax: +852 2869 8131 Fax: +86 10 8454 9984

    For inquiries contact


    [email protected]
    GavekalResearch

    April 2020

    Too late to sell


    Too early to buy
    Anatole Kaletsky
    Investor sentiment is still surprisingly confident

    GavekalResearch 25
    Equity bear markets almost invariably retest their lows

    GavekalResearch 26
    Dollar now more expensive than Trump inauguration
    bubble

    GavekalResearch 27
    Currency turning points often are not retested

    GavekalResearch 28
    If this crisis ends could we get a 1999-style melt-up?

    GavekalResearch 29
    Shiller PE has been comically bearish for 30 years

    GavekalResearch 30
    Even Shiller PE now makes equities extremely cheap

    GavekalResearch 31
    Outside the US equities are back near their 2009 lows

    GavekalResearch 32
    Since price regime changed in 2014 oil is just a normal
    commodity

    GavekalResearch 33
    The long-term risk: end of 40-year disinflation
    trend
    • New monetary policy: fiscal support, higher inflation

    • De-globalization: end of the “China price”

    • Technology: disruptors become monopolists

    • Politics: balance of power shifts back towards labor

    • Demographics: globally fewer producers, more consumers

    GavekalResearch 34
    www.gavekal.com

    Gavekal Ltd Head Office Gavekal Dragonomics


    Suite 3101 Central Plaza China Office
    18 Harbour Road Room 2110, Tower A
    Wanchai, Hong Kong Pacific Century Place, 2A Gongti Beilu
    Beijing 100027, China
    Tel: +852 2869 8363
    Fax: +852 2869 8131 Tel: +86 10 8454 9987
    Fax: +86 10 8454 9984

    For inquiries contact


    [email protected]

    You might also like