China: The Bull Among US
Stoking the beast or cyclical upturn? That was the main question we were left to ponder following our research visit to Beijing in March. But the visit raised other issues in our mind, not least about some of the accepted wisdoms regarding ‘rebalancing’ the Chinese economy. Addressing this issue also allowed us to review some of the popular misconceptions about growth drivers in developed countries – the US in particular – as well.Asianomics Country Report No. 5/2017, China: The Bull Among Us, is not just about the current, indisputable upturn in activity on the Mainland. It is also about the myth of the Chinese unitary state, the misunderstanding of the role of consumption in the economy and the importance of interest rates as a signaling mechanism, especially in this world of credit-driven activity. At a specific point in the bust phase of the business cycle, companies begin to cut costs faster than revenues are falling. Profits recover and the upcycle begins again. The evidence points to a recovery in Chinese profitability over the last year.
Asianomics, founded by Dr Jim Walker in 2007 and based in Hong Kong, specialises in economic analysis research, cross-referencing their work with credit cycles, profit cycles and cash flows. Asianomics focus is on developments in the Asia-Pacific region, and they also cover developed markets like the US and Europe.
The Austrian Economics model provides a framework for the economic research. The basis of the School of Austrian Economics is that economies work more efficiently and effectively when companies and individuals are free from excessive interference by government and special interest groups. The Asianomics economic research team includes Deputy Chief Economist Sharmila Whelan who is recognised for non-consensus thinking and her depth and quality of primary research, and Chief Economist Dr. Jim Walker.
Asianomics’ subscribers have access to regular economic commentary, stand-alone Country Reports, Special Reports and Investment Strategy Reports. Dr. Jim Walker also provides weekly webcasts.
Dr. Jim Walker is regarded as one of Asia’s leading economists. Prior to setting up Asianomics, he was the Chief Economist at CLSA Asia-Pacific Markets, where he worked for more than 16 years. He has achieved numerous ‘Best Economist’ rankings in the Asiamoney, Institutional Investor and Greenwich surveys of fund managers.
Previous successful calls include:
- In 1995 Dr. Jim Walker wrote about the prospect of Asia being forced off its de facto dollar peg “within the next two-three years”. The Asian Crisis, precipitated by the Thai baht devaluation, began in July 1997.
- Forecasted the US 2007 downturn and financial sector meltdown in series of ‘Apocalypse’ reports.
- Called early the upswing in the Indian stock market in the final quarter of 2013.
Recent Recommendations:
- Overweight China - We are overweight Chinese equities with momentum improvement in the economy.
- Short Sterling, Long Renminbi - China’s currency offers good upside with a positive carry.
- Short European Financials, Long Indian Financials - This is the simplest pair trade to play superior demographics and growth in Asia relative to the region with the biggest problems.
- Long EM Asia, Short Developed countries - South and SE Asia, and direct investors from North Asia, are ‘buy and hold’ investment bets.
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