Emerging Markets
Stay short Greater China assets. Stay long Japanese yen. Hold back on Brazil for now but look forward to opportunities in future.
We recommend that investors use the following framework to think about whether potential disinflation would be bullish or bearish for share prices: disinflation will prove to be bullish for global share prices if it is due to an improvement in supply-side dynamics, but bearish if it is demand driven. We believe it is the latter.
The 20<sup>th</sup> 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.