Chart: China is likely to be a problem this year for the markets. China Real GDP Growth and (other 14 slides)
Hopefull not.
Source: ML
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Strategy
April and next few months are likely be dominated by doubts about China growth.
China is not looking that strong this year and is not like it will be a usual support for the global economy.
China GDP growth estimate is down to the levels of 6%. Yuan is weaker. Inflation is higher. China rates are higher. Foreign exchange reserves are lower vs max levels. China Investment levels are lower. Savings levels are lower. The current account is getting less positive. Imports are growing fast and faster than exports. Budget balance is negative as usual. Public debt is rising and overall leverage is huge.
The US hoped for a long time for revaluation of yuan. But the trade is ongoing in the wrong direction for the US trade balance. Overall Yuan is weaker… It is stronger vs. recent low – but still weaker overall.
Now president Trump’s trade war with the US that is reminiscent of President Herbert Hoover’s Smoot Hawley Tariff Act that went into law in 1930 could weigh down on China overall weak growth and spin off the next leg of global cooling.
The trade war is likely to have further weakening result on the yuan and stimulate farther capital flight from China, achieving counter results vs. US initial goals.
MSCI China rebalancing could serve to offset capital flight but this argument not very strong.
China has possibly further aggravated the US by launching oil price futures in yuan, which is supposed to undermine a bit US dollar dominance in energy markets.
Hope that international Silk Road project will stimulate domestic China growth is acceptable, however.
China market is still overall +1.8% YTD to the end of March, but it was weak in March down 3.2% and 70btps weaker than US markets.
China is very straightforward in achieving its growth targets. Most of the growth comes from regional provinces. Their administrations are judged based on the criteria if the growth has been achieved or they get fired.
Domestic China GDP Per capitals levels achieving 10K per person closer – moves China closer t be the biggest middle-class nation with subsequent political problems.
China meddling in North Korea could overall reduce risk in South East Asia – another positive. But the risk reduction is unlikely to offset weaker China growth risk.
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| ISRAEL: Israel shares higher at close of trade; TA 35 up 0.27%
| ITALY: Italian equities likely to perform in 2018 whatever the government
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JAPAN: Foreign investor sales of Japan shares offset by central bank
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QATAR: Qatar shares fall below 8600 on strong selling pressure
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| RUSSIA: Russia Stocks Fall Most Globally as UK Responds to Poisoning
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TAIWAN: Taiwan shares lower at close of trade; Taiwan Weighted down 0.29%
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Comment
Monthly performance is between 2018-03-30 and 2018-02-28
Best global markets YTD EM LATIN AMERICA +7.24%, FM (FRONTIER MARKETS) +4.36%, EM (EMERGING MARKETS) +1.07%,
While worst global markets YTD EUROPE -2.57%, USA -1.09%, EFM ASIA 0.70%,
Best global markets last month FM (FRONTIER MARKETS) +0.34%, EM LATIN AMERICA-1.13%, EFM ASIA-1.43%,
While worst global markets last month USA -2.59%, EM (EMERGING MARKETS) -2.03%, EUROPE -1.53%,
Best last month among various countries' equity markets were TUNISIA +17.73%, EGYPT +11.80%, KENYA +9.69%, SAUDI ARABIA DOMESTIC +7.94%, VIETNAM +6.79%, ROMANIA +5.90%, LITHUANIA +5.43%, PERU +3.52%, PORTUGAL +3.30%, CZECH REPUBLIC +2.91%,
While worst last month among various countries' equity markets were BOTSWANA -12.17%, GREECE -9.23%, OMAN -9.04%, MAURITIUS -8.82%, TURKEY -8.67%, ESTONIA -8.66%, INDONESIA -7.36%, SOUTH AFRICA -7.00%, NIGERIA -6.32%, POLAND -6.29%,
Best YTD among various country equities were TUNISIA +30.27%, KENYA +22.16%, ROMANIA +20.56%, KAZAKHSTAN +18.71%, VIETNAM +17.55%, LITHUANIA +14.44%, SAUDI ARABIA DOMESTIC +12.26%, UKRAINE +11.28%, BRAZIL +11.19%, JORDAN +11.06%,
While worst YTD among various country equities were MAURITIUS -25.65%, ZIMBABWE -12.27%, PHILIPPINES -11.91%, OMAN -8.95%, POLAND -8.18%, CANADA -7.84%, INDONESIA -7.47%, AUSTRALIA -7.32%, INDIA -7.31%, GREECE -6.85%,
