CoreMacro

The HK dollar is under an assault from rising US interest rates and a weak economy. To defend the exchange rate peg, the HKMA will continue to tighten liquidity, which will boost HK interest rates above those in the US across the entire yield curve. That will cause major damage to this economy and HK-domiciled companies' stocks. Downgrade the MSCI HK equity index within a global portfolio from neutral to underweight.

China's economy is about to experience demand-driven deflation. The lack of an economic recovery and falling producer prices will depress corporate profits and, hence, share prices. Beijing will allow the yuan to depreciate more to prop up its economy.

The 20th Communist Party Congress concluded on Sunday with President Xi Jinping cementing his third term in office. We are maintaining our cautious stance on Chinese stocks and the exchange rate. The lack of a significant shift away from current macro and regulatory policies means that China’s economic recovery and stock performance remain at risk.

Special Report

There has been an unprecedented divergence between global and Chinese thermal coal ("coal") prices since the Russia-Ukraine war commenced in February 2022. Such a wide price gap is unsustainable. This price convergence will continue, with international prices falling faster than Chinese ones.

Special Report

In this report, we elaborate on why the Chinese central government has been reluctant to open stimulus taps as much as in the past, especially when it comes to the ailing property market. In recent years, there has been a major shift in Beijing’s assessment of the trade-offs between short-term economic growth, sociopolitical stability and the nation's long-term goals. We explain this difficult balancing act, little-known in the global investment community.

Special Report

Special Report

Special Report