Sectors

The regulatory clampdown on Chinese platform companies is over. However, these companies have entered a new phase of active government control. Going forward, most platform companies’ strategic and business decisions will prioritize national interests, at the expense of shareholder interests. After the recent sharp outperformance, we suggest reducing the allocation to China's Investable Index from neutral to underweight within both global and EM equity portfolios.

The Web 2.0 bubble is bursting, with far-reaching consequences for US stock market behaviour, sector allocation, and global asset allocation.

Heading into a black hole, you pass a point of no return known as the ‘event horizon’ after which your impending oblivion is sealed. US recessions also have an event horizon, which we are fast approaching. We reveal a leading indicator of this event horizon, and what it means for investment strategy.

Global investors should sell Chinese assets on strength this year and diversify into other emerging markets. American investors should limit China exposure. Short CNY-USD.

China's reopening is much more positive for the Chinese economy than it is for the rest of the world, as it will boost its domestic service sector activity and consumer spending much more than the industrial economy. A slowdown in Chinese industrial activity will put downward pressure on its demand for raw materials and energy, helping the world avoid another spike in inflation. Upgrade Macau casinos to overweight as the key beneficiaries of reopening. Off-shore TMT and bank shares face structural headwinds.

The crucial question for 2023 is: will the US and UK Beveridge Curves shift back inwards to their pre-pandemic versions, ushering in a soft landing? Or, will we slide down the new post-pandemic Beveridge Curves into recession? Plus: we reveal the most important chart for Europe and the most important chart for China in early 2023.

China’s semiconductor demand and imports will continue to contract in 2023H1. Despite economic reopening, Chinese consumers will hold back spending on smartphones, personal computers (PC) and other consumer electronics over the next six months. Meanwhile, overseas customers will continue to reduce their orders for electronic goods made in China following the excessive consumption experienced during the pandemic. There is more downside for both Chinese and global semiconductor share prices. We recommend a relative trade: long Chinese semiconductor stocks / short global semi stocks.

This week we present our Portfolio Allocation Summary for January 2023.

Vietnamese stocks can remain shaky for a few more months. But they have cheapened considerably, and equity portfolios with longer terms investment horizon should overweight them in EM, Emerging Asia and Frontier Market portfolios.

Both the US and China have structural imbalances that need correcting. The former has a structurally imbalanced labour market in which demand far outstrips supply. The latter has a massively overvalued housing market. The concurrent correction of these two structural imbalances in the world’s two largest economies will necessitate a sharp slowdown in global growth, and leads to several investment conclusions.