In today’s briefing:
- This Is China’s Successor in Global Manufacturing
- The Fed & Global Liquidity After SVB: Climate Change!
- Silicon Valley Bank a Stern Reminder but No Cause for Panic in Asia
- Asian Economies Back At Pre-Pandemic Levels, But Scars Remain
- US Housing Market Forecast: Brace for a 15% Drop in Prices
- UK: Data Issue Hawkish Reminder
- CX Daily: China’s Financial Industry Regulators to Get Reshuffle of Responsibilities
This Is China’s Successor in Global Manufacturing
- China’s spectacular growth window is closing and their demographics aren’t looking good.
- The prime candidates for becoming “the Next China” are to be found in Africa.
- Looking at a number of quantifiable variables such as dependency rate, education, infastructure and much more, we narrow down the contenders to a couple of really intriguing African countries.
The Fed & Global Liquidity After SVB: Climate Change!
- QT is effectively dead. We have believed this since the US gilt crisis in 2022, but the SVB issue now confirms it. Game over. QE is back
- 2023 will still be volatile. The major markets will range trade, but unlike 2022, investors will enjoy large absolute gains in areas like commodities, EM and cyclicals
- Other Central Banks will follow the US Fed. The US Fed is de facto following a bifurcated monetary policy: high rates for inflation and the Fed B/S for financial stability
Silicon Valley Bank a Stern Reminder but No Cause for Panic in Asia
- The failure of the US-based Silicon Valley Bank is unlikely to degenerate into a major financial crisis.
- Asian markets are set, though, to continue suffering asset price corrections and currency depreciations in the near term.
- Nevertheless, the metrics of Asian resilience such as strong bank capitalisation and external accounts will ensure that these spillovers will be limited in scale and duration.
Asian Economies Back At Pre-Pandemic Levels, But Scars Remain
- Most Asian economies have regained their pre-pandemic GDP levels, but substantial gaps remain relative to pre-pandemic growth trajectories. Richer economies experienced a smaller gap due to policy and structural advantages.
- Long-Run scars may manifest via diminished labour market, human capital, and investment prospects. Post-COVID turbulence makes things worse.
- With a more turbulent global environment risking a higher occurrence of economic shocks, resilience-enhancing reforms are a top priority for Asian policymakers.
US Housing Market Forecast: Brace for a 15% Drop in Prices
- Based on the stellar rise in the 30-year US mortgage rate, US home prices look extremely expensive relative to history.
- We provide a regression model using the 30-year fixed mortgage rate and months of supply of new one-family homes to estimate the change in home prices 12 months from now.
- This regression model suggests home prices will drop by as much as 15% from the latest-known level. iShares U.S. Real Estate ETF (IYR US)
UK: Data Issue Hawkish Reminder
- The UK unemployment rate remained at 3.7% again in Jan-23. Ongoing resilience amid high vacancies indicates it may resist rising in Q1, extending cyclical excesses.
- Inflated pay settlements continue to drift higher, with over 70% exceeding 4% in January and signs of anchoring around 5%. Such pressures remain far too high.
- Silicon Valley Bank’s smooth failure is unlikely to break UK excesses, so the BoE still has more work to do, with another two 25bp rate hikes in our unchanged view.
CX Daily: China’s Financial Industry Regulators to Get Reshuffle of Responsibilities
Cover Story: China’s financial industry regulators to get reshuffle of responsibilities
China’s new premier vows to support private enterprises
China’s Health Commission invites expert opinions on egg freezing
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