In today’s briefing:
- India: This Is As Good As It Gets For the Economy
- The Philippines: Too Much Pessimism over a Marcos Presidency
- Is the Environment Supportive of EM FX Relative-Value Trades?
- CX Daily: Why Is China’s Powerful Export Engine Losing Steam?
- Persistent Risk Premium Threat
- Stocks Down / Sales Estimates Up. A Screen.
- CX Daily: Coal, Once a Boon, Turns Chinese Rustbelt City Into a Bust
India: This Is As Good As It Gets For the Economy
- Corporate India booked a robust earnings season for 1Q22, which is a product of the sanguine macro backdrop and the release of pent-up demand with the easing of most restrictions.
- However, this may be as good as it gets for the economy amid several headwinds to growth. The recent heat waves threatens industrial activity and wheat crop yields.
- Capacity utilisation rates remain low, holding back the capex drive and investment growth, despite the buoyant earnings season. Watch for growing pressure on the RBI to keep yields in check.
The Philippines: Too Much Pessimism over a Marcos Presidency
- Ferdinand “Bongbong” Marcos secured a majority of votes, which is no mean feat, given that political parties are overshadowed by the familial elites who dominate Philippine politics.
- Marcos’ victory reflects the failure of the EDSA movement to deliver the economic goods, which chimes with President Duterte’s appeal, despite his War on Drugs and human rights record.
- There is a material likelihood that Marcos could manage the inter-elite contestations to push through reforms that his predecessor failed to do, despite significant political capital on hand.
Is the Environment Supportive of EM FX Relative-Value Trades?
- In line with my view that the dollar remains strong in the near term, one of the trading strategies that I have suggested is relative-value trades within EM currencies.
- The volatility of EM currencies continues to rise, which in theory is supportive of relative-value trades as such environments are usually accompanied by wide dispersion among EM currencies.
- However, I find that cross-correlations among EM currencies have risen, leading to a narrowing of dispersion between them, which means the environment is no longer supportive of relative-value trades.
CX Daily: Why Is China’s Powerful Export Engine Losing Steam?
Cover Story: Why is China’s powerful export engine losing steam?
How a nursing home resident in a body bag was found alive
Exclusive: Several Chinese regions to delay savings bond issuances to keep Covid at bay
Persistent Risk Premium Threat
- Economies are increasingly facing stagflationary squeezes. A series of additional cost shocks would extend the pressures even without traditional second-round effects.
- Adapting to a higher operational risk premium could create additional shocks as firms pursue shorter and simpler supply chains that reverse the benefits of globalisation.
- Forecasts implicitly assume risk premia normalisation, as they erroneously did with other risks after the Great Recession. More stagflationary errors may occur.
Stocks Down / Sales Estimates Up. A Screen.
- Below is a screen of companies with rising sales estimates for 2022 and stocks that have fallen the most.
- This is somewhat “off-brand” from our short research, but we thought it could be helpful.
- Contact us if you would like the Excel version, or a sub-sort (sector, cap, liquidity, multiple), or to hear about our short research.
CX Daily: Coal, Once a Boon, Turns Chinese Rustbelt City Into a Bust
In Depth: Coal, once a boon, turns Chinese rustbelt city into a bust
Former China Supreme Court judge handed 14-year prison sentence for corruption
PBOC encourages banks to set deposit rates based on market signals
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