Deutsche Bank Research’s Post

#chartoftheweek: China's stimulus measures, including a reduction in reserve requirements for banks and approximately $114 billion in liquidity support for stocks, provided a significant boost to markets. The CSI 300 surged 15.96% this week, breaking above its long-term moving average for the first time since 2022. The MSCI China A index also saw a strong performance, increasing by 20.33%. Additionally, the MSCI Emerging Markets index rose by 6.6%, benefiting from the favorable impact of China's financial support. These measures helped stabilize and uplift the broader Chinese and emerging markets, reinforcing investor confidence and driving significant gains across the board

Most recently, we wrote on #China, #Risk, durable #Goods and the #Currency war. Read ⬇️ 🌏 China's Economic Confidence Boost As China approaches its 75th anniversary, authorities are working hard to revitalize confidence. The People's Bank of China (PBOC) has announced a comprehensive package addressing policy rates, liquidity, the property sector, and the stock market, with unexpected guidance on future policies. However, to truly uplift domestic confidence, further fiscal spending is necessary, as hinted at in this week's Politburo meeting. Despite aiming for an official growth target of "around 5%" for this year, downside risks remain, while 2025 could see an upside to our forecast of +4.3%. 📊 Quarterly Country and Sector Risk Changes: Normalization Complete  We've upgraded 14 countries, reflecting the ongoing recovery in economic outlooks. Yet, the journey ahead is uneven due to protectionist policies and geopolitical tensions. In sectoral analysis, nine sectors have improved while five have declined. Downgrades were seen across all regions, particularly in the automotive sector in Germany and Switzerland, and the retail sector in China due to weak consumer outlooks. 📈 Durable Goods: Poised for a Rebound in 2025  Following a slowdown in 2022 and 2023, durable goods sales are projected to remain sluggish in 2024 but are set for a robust recovery in 2025. Key factors include decreasing financing costs, a shift from expensive services to goods, replacement cycles from 2021 purchases, technological innovation, and easing supply-chain disruptions. 💱 The Great Loosening Cycle: Balancing FX, Inflation, and Growth  Central banks are navigating a complex landscape. The Fed's significant cut is a positive move for the global FX market, yet challenges remain. We categorize countries into four clusters based on their priorities: Emerging Europe, Chile, and Colombia: Focus on boosting growth while managing inflation. Advanced economies in Europe, China, and Thailand: Growth with fewer inflation concerns. Most of Asia, Latin America, South Africa, and Norway: Slower easing due to weak exchange rates and financial stability. Large African economies, Türkiye, and Argentina: Restoring exchange rate confidence and reducing inflation. Switzerland and Japan may need interventions to manage appreciation pressures. #Ludonomics #AllianzTrade #Allianz https://lnkd.in/eby-DUBQ

📉 Chinese Market Euphoria Fades as Stimulus Hopes are Dialed Back After weeks of optimism, Chinese markets faced a sharp correction, with the CSI 300 index plunging 7.1%—its largest one-day drop since 2020. Investors had been riding a wave of euphoria, anticipating a large-scale "bazooka" fiscal stimulus to boost the economy. However, those hopes were dashed as Chinese authorities signaled a more measured approach. At a recent briefing, China’s National Development and Reform Commission (NDRC) announced plans for bond issuance and hinted at support for the property market. Yet, there was no clear commitment to the aggressive fiscal measures that investors had expected. This tempered the enthusiasm built on prior monetary easing, leading to a sharp sell-off in both mainland and Hong Kong stocks. The focus now shifts to an upcoming finance ministry press conference, where market participants are hoping for more concrete details on fiscal policy. While there’s still a possibility of a stimulus package, it’s likely to be more modest in scope, dampening the earlier market exuberance. The response highlights the fragile sentiment in China’s markets, where high hopes for government intervention have been tempered by concerns over economic stability, a weakening property sector, and external risks like global trade uncertainties. #China #CSI300 #MarketCorrection #Stimulus #GlobalEconomy #Investing #FiscalPolicy #MarketSentiment

The U.S. Fed’s potential rate cuts should stabilise the Asia credit market overall, but have a mixed impact on the region’s economies. Discover the details in our 2024 APAC Market Outlook by portfolios managers Stephen Chang, Adam Bowe CFA, GAICD, Tadashi Kakuchi, and Subhash Ganga: https://pim.co/rizql77h   #EconomicOutlook #China #India #Japan #EmergingMarkets #PIMCOAPACInsights

We have said consistently in recent months that Chinese monetary and fiscal authorities will have to deliver more in the way of stimulus measures if the country’s growth aspirations are to have any meaningful chance of success. In its own Dick Turpin moment, China’s Politburo yesterday stood and delivered an outsized, surprise stimulus initiative and global markets are enthusiastically responding this morning. Asian bourses are generally higher, led by the CSI 300 index which gained as much as 3.3% at the open, but which has subsequently consolidated back to around 0.75% higher on the day at the time of writing. The Hang Seng was also higher initially but has subsequently dipped back below the waterline (-0.28%). But the Asia iTraxx credit indices are lower for choice, indicating better selling of protection and better buying of risk.

15 amazing facts about the FTSE China A50 Index you probably didn't know: Top 50 Companies: The FTSE China A50 Index comprises the 50 largest A-share companies listed on the Shanghai and Shenzhen Stock Exchanges. Market Capitalization: Companies are selected based on their market capitalization, making it a benchmark for equity investment in Mainland China. Diverse Sectors: The index includes companies from various sectors such as banking, insurance, consumer goods, industrials, and financial services. Banking Dominance: The banking sector holds the largest weight in the index, averaging around 44%. Quarterly Review: The index is reviewed quarterly by an independent committee to ensure it remains representative of the Chinese market. High Liquidity: The China A50 is known for its high liquidity and low spreads, making it popular among traders. Global Economic Indicator: The index is often used as an indicator of the overall health of the Chinese economy. Ping An Insurance: One of the notable companies in the index is Ping An Insurance, a major player in the life insurance sector. China Merchants Bank: Another significant company in the index is China Merchants Bank, which is a key player in the banking sector. Industrial Giants: The index includes industrial giants like Sany Heavy Equipment and Great Wall Motor. Consumer Goods: The consumer goods sector, which includes companies like BYD and Haier, represents about 12% of the index. Financial Services: The financial services sector, including companies like CITIC Securities, holds an 11% share in the index. Economic Growth: The growth of the China A50 index reflects China’s rapid economic development over the past few decades. Currency Impact: The value of the index can be influenced by the strength or weakness of the Chinese yuan (CNY). Trade Relations: Changes in China’s trade relationships, especially with major partners like the US, can significantly impact the index. #markets #chinaA50 #trading #trade #stocks #indices

The U.S. Fed’s potential rate cuts should stabilise the Asia credit market overall, but have a mixed impact on the region’s economies. Discover the details in our 2024 APAC Market Outlook by portfolios managers Stephen Chang, Adam Bowe CFA, GAICD, Tadashi Kakuchi, and Subhash Ganga: https://pim.co/si43n0yr   #EconomicOutlook #China #India #Japan #EmergingMarkets #PIMCOAPACInsights

Speaking with Radio Television Hong Kong (RTHK) Money Talk last week, Martin W. Hennecke, our Head of Asia Investment Advisory, discussed that GDP growth rates are not actually highly correlated with stock market movements, and there remains potential for rebound, particularly in some of the less popular markets. He also discusses inflation risks linked to deficits in U.S. and Europe led by Italy, and shares that investors who can tolerate a degree of volatility should consider allocating a good portion of their assets to inflation-proof investments, with equities falling into this category as firms with an edge in the marketplace can typically pass through rising input costs to their clients. Listen to Martin’s discussion in full here: https://lnkd.in/gWJSigZ2 [rthk.hk] #SJPAsia #China #Inflation #Property #Equities #GDP

📊 Key Insights from HKMA's Half-Yearly Monetary and Financial Stability Report for September 2024. 📊 🌍 Global Economy: Markets adjusted to aggressive US rate cuts and the JPY/USD exchange rate experiencing a 10% fluctuation. The global outlook remains clouded by uncertainties from the pace of US rate cuts, the upcoming US presidential election, and geoeconomic fragmentation. 🏦 Domestic Economy: Hong Kong's economy saw moderate growth, with GDP rising by 2.5%-3.5%year-on-year, driven by stronger goods exports and sustained growth in external trade and inbound tourism. The unemployment rate remained stable at 3.2%. 🏠 Property Markets: The housing market softened since May, with housing prices declining by 5% despite policy relaxations across all segments. Transaction volumes decreased by 12% compared to the previous year. 💹 Financial Stability: The report provides detailed analyses of monetary and financial conditions, banking sector performance, and potential risks. The banking sector showed improved profitability, with a 7% increase in net profit margins. However, credit risks remain a concern, with non-performing loan ratios rising slightly to 1.8%. 📈 Outlook: The outlook remains clouded by uncertainties from US rate cuts, the upcoming US presidential election, and geoeconomic fragmentation. #HKMA #FinancialStability #EconomicOutlook #HongKong