China
As a short-term (0-3 months) trade, go long an equal-weighted basket of Chinese Investable and A-shares / short the KOSPI. This is a bet on mean reversion. We do not recommend that medium- and long-term investors implement this strategy.
The rebound in China's producer prices and profits this year owes more to external demand than to meaningful progress under Beijing's anti-involution campaign.
Geopolitical risk may rotate to Russia/Ukraine in Q3, while the Middle East could reignite in Q4.
The equity bull market is getting long in the tooth. Bonds should perform well once economic growth begins to slow. The dollar will strengthen over the coming months before resuming its downtrend. While crude has likely found a near-term floor, we favor metals over energy in the long run.
China holds a structural advantage in this "Age of Electricity" by operating the world's largest electricity system. However, this advantage has inherent limits, and the US remains competitive despite its challenges.
This report addresses five frequently asked questions from our Greater China clients over the past few months.