Profit Cycles
Where did last year's surprise global recovery come from and, more importantly, how long will it last?It came from where it always does, a recovery in profits. This recovery was facilitated by the end to the extraordinary efforts to weaken major currencies against the US dollar (ostensibly called 'monetary easing' but in reality just plain old beggar-thy-neighbour exchange rate depreciations). In turn, this allowed the natural cycle to take over again with companies cutting their cloth to suit.
As the global profit cycle gets fully underway - a 2018 story, not last year's - then there is more upside, especially for emerging markets (the ones where stocks are still valued on earnings rather than depressed discount factors). We look at all of the Asian economies and show where the profit and investment cycles are most likely to power ahead in our latest Asianomics Special Report, Profits, Investment and Lending Rates. China, Japan, Malaysia and Vietnam look set to lead the way.
When will it all end? Not before 2019 at least, more likely 2020 or 2021.
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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