In today’s briefing:
- Balance Sheet Recession in China’s Private Sector ?
- Hunt for Yield in the Hang Seng Companies
Balance Sheet Recession in China’s Private Sector ?
- Overall, we maintain the view that parts of China’s household sector are showing signs of a balance sheet recession, due to the buildup of debt in the past 20 years.
- The non-financial corporate sector is more difficult to interpret, due to strength for SOE/high tech manufacturing and private sector confidence being less impacted than consumers.
- Fiscal policy is favored in this environment, as interest rate cuts alone risk being ineffective for sections of the household sector.
Hunt for Yield in the Hang Seng Companies
- As the US government has entered into a lower interest rate environment, it would be intuitive to hunt for yield in the hang seng companies.
- The net interest margin should widen and the loan book of the banks may be impacted by the fall of the local housing prices and secondary market transactions.
- The housing supply of the new housing remains subdued but the yield returns seem attractive.
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