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

In January’s ‘Government and Markets’ report, we used the themes in the 2016 GEM overview and China outlooks to introduce our intra-GEM country weightings.We provide more detail on each of these countries in the full version of this report, focusing on the economic, financial and structural governance issues that we believe will be the most important market drivers over the course of this year and beyond.

In January’s ‘Government and Markets’ report, we used the themes in the 2016 GEM overview and China outlooks to introduce our intra-GEM country weightings.We provide more detail on each of these countries in the full version of this report, focusing on the economic, financial and structural governance issues that we believe will be the most important market drivers over the course of this year and beyond.

Governance, Valuations and the Crisis of State Capitalism

Global Macro Strategy

Callum Henderson

Macroeconomics

* CNY remains under pressure given the economic slowdown, concerns about debt and capital outflows* China's FX reserves look more than enough, but true adequacy depends on the nature of the FX regime* China can go forward or back on the FX regime; loosening controls on foreign flows sends a bold message* Expect greater flexibility of the CNY basket and wider bands, sooner rather than later, ahead of SDR* CNY will be a basket currency not a basket case and short-term weakness against the USD will not last

* CNY remains under pressure given the economic slowdown, concerns about debt and capital outflows* China's FX reserves look more than enough, but true adequacy depends on the nature of the FX regime* China can go forward or back on the FX regime; loosening controls on foreign flows sends a bold message* Expect greater flexibility of the CNY basket and wider bands, sooner rather than later, ahead of SDR* CNY will be a basket currency not a basket case and short-term weakness against the USD will not last

Asia Calling: CNY - A Basket Currency, Not a Basket Case

<ul><li>Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing'</li><li>Policymaker actions may have exacerbated concerns, but a careful study of the data suggests all is not lost</li><li>Chinese manufacturing is facing a major downturn, but services are still strong; a twin-speed economy</li><li>Commodity exporters to China face a secular decline in demand, but service exporters should prosper</li><li>Our rebalancing, your problem - EM faces greater challenges from China's rebalancing than China itself</li><li>Short-term risks of a hard landing have been reduced, but medium-term risks continue to increase</li></ul>

Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing'Policymaker actions may have exacerbated concerns, but a careful study of the data suggests all is not lostChinese manufacturing is facing a major downturn, but services are still strong; a twin-speed economyCommodity exporters to China face a secular decline in demand, but service exporters should prosperOur rebalancing, your problem - EM faces greater challenges from China's rebalancing than China itselfShort-term risks of a hard landing have been reduced, but medium-term risks continue to increase

Asia Calling: China's Great Rebalancing - Why the Consensus Is Wrong

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that 2016 will be "The Year of Visit to Korea" with the aim of attracting 8 million Chinese tourists this year. The Korean government introduced new measures to attract more Chinese visitors this year including:<ul><li>Exemption of visa fees for Chinese group travelers starting January 2016 for one year.</li><li>Addition of four new air routes between China and Korea starting March 2016 (12 additional flights/week). </li><li>Reduction in the age of Chinese people who are eligible for multiple entry visas to 55 from 60. </li></ul>

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that 2016 will be "The Year of Visit to Korea" with the aim of attracting 8 million Chinese tourists this year. The Korean government introduced new measures to attract more Chinese visitors this year including:Exemption of visa fees for Chinese group travelers starting January 2016 for one year.Addition of four new air routes between China and Korea starting March 2016 (12 additional flights/week). Reduction in the age of Chinese people who are eligible for multiple entry visas to 55 from 60. 

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when visiting mainland Korea while visa is not required to visit Jeju island. We believe that the tremendous success of attracting Chinese visitors to Jeju island may also lead to relaxed visa policies for Chinese visiting mainland Korea. Timing of potential change of Chinese visa policy to Korea - Although it may not be discussed much openly, we think that there are increasing talks behind the doors to relax the visa policy for Chinese visitors to Korea (ex. 3 months no visa policy) in order to attract more Chinese visitors and help to attract foreign capital. In terms of time-frame, we believe it could over the next two years, especially as the incumbent Presidential regime is pro-FTA with China and open to attracting more Chinese capital. The potential change to existing visa policy such as 3 months no visa could be both ways (Chinese visitors to Korea and Korean visitors to China).

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when visiting mainland Korea while visa is not required to visit Jeju island. We believe that the tremendous success of attracting Chinese visitors to Jeju island may also lead to relaxed visa policies for Chinese visiting mainland Korea. Timing of potential change of Chinese visa policy to Korea - Although it may not be discussed much openly, we think that there are increasing talks behind the doors to relax the visa policy for Chinese visitors to Korea (ex. 3 months no visa policy) in order to attract more Chinese visitors and help to attract foreign capital. In terms of time-frame, we believe it could over the next two years, especially as the incumbent Presidential regime is pro-FTA with China and open to attracting more Chinese capital. The potential change to existing visa policy such as 3 months no visa could be both ways (Chinese visitors to Korea and Korean visitors to China). 

Potential Change of Chinese Visa Policy to Korea

China

BYD Company Limited manufactures automotive products. The Company produces ordinary passenger cars, commercial vehicles, and other products. BYD also operates battery making, rail transportation construction, and other businesses.

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BYD (002594 CH)

Governance, Valuations and the Crisis of State Capitalism

In January’s ‘Government and Markets’ report, we used the themes in the 2016 GEM overview and China outlooks to introduce our intra-GEM country...

John-Paul Smith

Asia Calling: CNY - A Basket Currency, Not a Basket Case

* CNY remains under pressure given the economic slowdown, concerns about debt and capital outflows* China's FX reserves look more than enough, but...

Callum Henderson

Asia Calling: China's Great Rebalancing - Why the Consensus Is Wrong

Falling Chinese asset markets have resulted in growing fears that China's economy is in a 'hard landing' Policymaker actions may have exacerbated...

Callum Henderson

2016 - "Year of Visit to Korea"

The Korean government did a massive marketing push yesterday in Beijing to attract more Chinese visitors to Korea in 2016. It was announced that...

Douglas Kim

Potential Change of Chinese Visa Policy to Korea

Korea has two visa policies for Chinese visitors to Korea – one for mainland Korea and one for Jeju island. Chinese visitors must get visa when...

Douglas Kim

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