Mercados Emergentes

Informe especial

Resumen Ejecutivo Con la materialización de la cuarta crisis del Estrecho de Taiwán, las probabilidades de una gran guerra entre las potencias mundiales han aumentado. Nuestros árboles de decisión sugieren que las probabilidades son alrededor del 20%, o el doble de lo que estaban sólo por la guerra rusa en Ucrania. El mundo está jugando a la “ruleta rusa” … con un revólver de cinco cartuchos. De cara al futuro, nuestro caso base es que las tensiones sobre Taiwán se aplanarán (pero no disminuirán) después de que concluyan los eventos políticos domésticos en EE. UU. y China este otoño. Sin embargo, si China intensifica las tensiones después del vigésimo congreso nacional del partido, entonces las probabilidades de una invasión aumentarán significativamente. Si estalla un conflicto en Taiwán, entonces las probabilidades de que Rusia se vuelva aún más agresiva en Europa aumentarán. Es muy probable que Irán persiga armas nucleares.   Pocos Catalizadores Positivos en la 2.ª Mitad de 2022 Ruleta con un revólver de cinco tiros Ruleta con un revólver de cinco tiros Recomendación TácticaFecha de InicioRetorno IR LARGO EN TESOROS A 10 AÑOS DE EE. UU.2022-04-141.3% IR LARGO EN VALORES DEFENSIVOS / CICLÍCOS GLOBALES2022-01-2013.8% Conclusión: Los inversores deberían mantenerse posicionados de forma defensiva al menos hasta que el congreso del partido chino y las elecciones intermedias de EE. UU. concluyan este otoño. El riesgo geopolítico del próximo año dependerá de las acciones de China en el Estrecho de Taiwán. Artículo   Gráfico 1 Crece la Especulación Sobre la Tercera Guerra Mundial Ruleta con un revólver de cinco tiros Ruleta con un revólver de cinco tiros Los pesimistas que prestan atención a los acontecimientos mundiales se han preocupado en los últimos años por el riesgo de que pueda estallar la tercera guerra mundial. El término ha aumentado en las búsquedas en línea desde 2019, aunque es la tendencia subyacente de multipolaridad global, más que los eventos críticos específicos, lo que justifica la preocupación (Gráfico 1).1 ¿Cuáles son las probabilidades de una gran guerra entre EE. UU. y China, o EE. UU. y Rusia? ¿Cómo podría calcularse eso? En este informe presentamos una serie de “árboles de decisión” para formalizar los diferentes escenarios y probabilidades. Si definimos la Tercera Guerra Mundial (WWIII) como una guerra en la que Estados Unidos se involucra en combate directo con Rusia o China, o con ambos, entonces llegamos a una probabilidad del 20% de que estalle la Tercera Guerra Mundial en los próximos un par de años. Esas son probabilidades inquietantemente altas, pero la historia enseña que estas probabilidades no son irreales y que los inversores no deben ser complacientes. El politólogo Graham Allison ha mostrado que las probabilidades de una guerra entre EE. UU. y China a largo plazo son de aproximadamente el 75% basándose en analogías históricas. La conclusión es que las naciones tendrán que afrontar este riesgo de Tercera Guerra Mundial y rechazarlo para que el entorno político global mejore. Lo más probable es que lo hagan, ya que la Tercera Guerra Mundial, y el riesgo de guerra nuclear que conllevaría, constituyen la restricción última. Pero el comportamiento actual de las grandes potencias sugiere que aún no han reconocido sus restricciones y están dispuestas a continuar con maniobras de riesgo a corto plazo. Las Probabilidades de Una Invasión China de Taiwán La primera pregunta es si China invadirá Taiwán. En abril de 2021 predijimos que la cuarta crisis del Estrecho de Taiwán ocurriría dentro de 12-24 meses pero que no derivaría en una guerra a gran escala. Esta opinión ahora está siendo puesta a prueba. En Diagrama 1 ofrecemos un árbol de decisión para trazar las opciones políticas de China hacia Taiwán y asignar probabilidades a cada opción. Diagrama 1 Árbol de Decisión para la Cuarta Crisis del Estrecho de Taiwán (Próximos 24 Meses) Ruleta con un revólver de cinco tiros Ruleta con un revólver de cinco tiros   Aunque China ha alcanzado la capacidad para invadir Taiwán, las probabilidades de fracaso siguen siendo demasiado altas, especialmente sin mayor progreso en su tríada nuclear. Por lo tanto, damos sólo un 20% de probabilidad a que China se movilice para una invasión de inmediato. No hace falta decir que cualquier signo concreto de que China está planeando una invasión debe tomarse en serio. Los inversores y los medios subestimaron la acumulación militar de Rusia en torno a Ucrania en 2021 en su detrimento. Al mismo tiempo, existe una buena probabilidad de que EE. UU. y China simplemente estén probando el statu quo en el Estrecho de Taiwán, que se reforzará tras el episodio actual. Después de todo, esta crisis fue la cuarta crisis del Estrecho de Taiwán: ninguna de las crisis anteriores condujo a la guerra. Si los presidentes Biden y Xi Jinping simplemente están mostrando músculo antes de importantes eventos políticos domésticos este otoño, entonces ya han logrado su objetivo. No son necesarias más demostraciones de fuerza por ninguna de las partes, al menos durante los próximos años. Damos un 40% de probabilidad a este escenario, en el cual las tensiones de la semana pasada persistirán pero se reforzará el statu quo. En ese caso, el problema estructural del Estrecho de Taiwán volvería a estallar en algún momento después de las elecciones presidenciales de EE. UU. y Taiwán en 2024, es decir, fuera del marco temporal del diagrama. Desafortunadamente somos pesimistas a largo plazo y daríamos alta probabilidad a la guerra en Taiwán. Por esa razón, otorgamos probabilidades iguales (40%) a una situación que se deteriore dentro de los próximos dos años. Si China amplía los simulacros y las sanciones después del congreso del partido, una vez que Xi haya consolidado el poder, entonces quedará claro que Xi no está simplemente actuando para su audiencia interna. De manera similar, si la administración Biden continúa presionando por controles de exportación de alta tecnología más estrictos contra China después de las elecciones intermedias, e insiste en que los aliados y socios de EE. UU. hagan lo mismo, entonces EE. UU. implícitamente cree que China se está preparando para algún tipo de operación ofensiva. El peligro de invasión aumentaría del 20% al 40%. Incluso en ese caso, aún se debería creer que la diplomacia de crisis entre EE. UU. y China evitará una guerra a gran escala en 2023-24. Pero el riesgo de cálculo erróneo sería muy alto. El último elemento de este árbol de decisión sostiene que China preferirá las “tácticas de zona gris” o la guerra híbrida en lugar de una invasión anfibia convencional del tipo visto en la Segunda Guerra Mundial. Las razones son varias. Primero, las invasiones anfibias son las operaciones militares más difíciles. Segundo, las fuerzas chinas son inexpertas mientras que EE. UU. y sus aliados están atrincherados. Tercero, la guerra híbrida sembrará división entre los aliados de EE. UU. sobre la mejor respuesta. Cuarto, Rusia ha demostrado varias veces en los últimos 14 años que la guerra híbrida funciona. Es una forma de maximizar los beneficios estratégicos y minimizar los costos. El mundo sabe cómo reacciona Occidente ante invasiones pequeñas: aplica sanciones económicas. Aún no sabe cómo reaccionaría Occidente ante invasiones grandes. Por eso China estará incentivada a dar mordiscos pequeños. Y, sin embargo, en el caso de Taiwán esas tácticas pueden no ser sostenibles. Nuestro árbol de decisión sobre Taiwán no contempla la probabilidad de que una guerra híbrida o una “guerra por poder” evolucione hacia una guerra mayor. Pero esa probabilidad es, de hecho, alta. Así que no estamos sobreestimando el riesgo de una gran guerra entre EE. UU. y China. Conclusión: En los próximos dos años, las probabilidades subjetivas de una guerra por poder entre EE. UU. y China por Taiwán son de aproximadamente el 32%, mientras que las probabilidades de una guerra directa EE. UU.-China son de alrededor del 4%. La verdadera prueba llega después de que Xi Jinping consolide el poder en el congreso del partido de este otoño. Esperamos que Xi se concentre en reiniciar la economía por lo que seguimos favoreciendo los mercados emergentes asiáticos excluyendo China y Taiwán. Las Probabilidades de Guerra de Rusia con la OTAN La segunda pregunta es si la guerra de Rusia en Ucrania derivará en una guerra más amplia con Occidente. Las probabilidades de una gran guerra Rusia-Occidente son mayores en este caso que en el de China, ya que una guerra ya está en curso, mientras que las tensiones en el Estrecho de Taiwán hasta ahora son meros desfiles de fuerza. El caso base de un inversor debería mantener que la guerra en Ucrania permanecerá contenida en Ucrania, ya que los europeos no quieren pelear una guerra devastadora con Rusia sólo por el Donbás. Pero a menudo las cosas salen mal en tiempos de guerra. La pregunta crítica es si Rusia atacará a algún miembro de la OTAN. Eso desencadenaría el Artículo Cinco del tratado de la alianza, que establece que “un ataque armado contra uno o más [miembros de la alianza] en Europa o América del Norte se considerará un ataque contra todos ellos,” justificando el uso de la fuerza armada si es necesario para restaurar la seguridad. Desde la invasión rusa de Ucrania este año, el presidente Biden ha declarado repetidamente que EE. UU. “defenderá cada pulgada del territorio de la OTAN,” incluidos los estados bálticos de Letonia, Lituania y Estonia, que se unieron a la OTAN en 2004. Esto no es un cambio de política pero sí es la línea roja de EE. UU. y es muy probable que sea defendida. Por lo tanto, es una restricción importante para Rusia. En Diagrama 2 trazamos las diferentes opciones de Rusia y asignamos probabilidades. Diagrama 2 Árbol de Decisión para la Guerra Rusia-Ucrania (Próximos 24 Meses) Ruleta con un revólver de cinco disparos Ruleta con un revólver de cinco disparos   Damos un 55% de probabilidad de que Rusia declare la victoria tras completar la conquista de la región del Donbás en Ucrania y el corredor terrestre hacia Crimea. Comenzará a buscar legitimar sus conquistas mediante algún acuerdo diplomático, es decir, un alto el fuego. Este es nuestro caso base para 2023. Hay evidencia de que Rusia ya está empezando a moverse hacia la diplomacia.2 La razón es que la economía rusa está sufriendo, los precios globales de las materias primas están cayendo, se está gastando sangre y tesoro ruso. El presidente Putin habrá logrado en gran medida su objetivo de incapacitar a Ucrania mientras controle la boca del río Dniéper y el resto del territorio que ha invadido. Putin necesita sellar sus conquistas e intentar rescatar la economía y la sociedad. Cuanto antes mejor para Rusia, de modo que se pueda prevenir que Europa forme un consenso e implemente un embargo total de gas natural en los próximos años. Sin embargo, existe el riesgo de que la ambición de Putin lo supere. Por eso damos un 35% de probabilidad a que la invasión se expanda al suroeste de Ucrania, incluyendo la estratégica ciudad portuaria de Odesa, y al este de Moldavia, donde tropas rusas están estacionadas en la región separatista de Transnistria. Esta nueva campaña dejaría a Ucrania totalmente sin salida al mar, neutralizaría a Moldavia y daría a Rusia mayor acceso marítimo. Pero unificaría a la UE, precipitaría un embargo de gas natural y debilitaría a Rusia hasta un punto en que podría volverse desesperada. Podría contraatacar y esa represalia podría concebirse que conduzca a una guerra más amplia. Asignamos sólo un 7% de probabilidad a que Putin ataque a Finlandia o Suecia por intentar unirse a la OTAN. Stalin fracasó en Finlandia y el ejército de Putin ni siquiera pudo conquistar Kiev. El Reino Unido se ha comprometido a apoyar a estos estados, por lo que un ataque contra ellos muy probablemente desencadenaría una guerra con la OTAN. Una decisión de atacar a Finlandia solo ocurriría si Rusia creyera que la OTAN planea desplegar bases militares allí, es decir, la línea roja declarada de Rusia. Cualquier ataque ruso contra los estados bálticos es menos probable porque ya están en la OTAN. Pero existe cierto riesgo de que ocurra si Putin se vuelve desesperado. Ponemos el riesgo de una invasión de los bálticos en un 3%. En resumen, si Rusia usa su estrangulamiento energético sobre Europa no para negociar un alto el fuego favorable sino para expandir sus invasiones, entonces las probabilidades de una guerra más amplia aumentarán. Conclusión: El resultado es una probabilidad del 55% de desescalada durante los próximos 24 meses, un 35% de una pequeña escalada (por ejemplo Odesa, Moldavia) y un 10% de una escalada mayor que involucre a miembros de la OTAN y probablemente conduzca a una guerra OTAN-Rusia. Tácticamente, los inversores deberían comprar moneda y activos de mercados desarrollados europeos si la economía global se recupera y Rusia realiza un claro giro hacia detener su campaña militar y perseguir conversaciones de alto el fuego. Cíclicamente, se necesita una comprensión más profunda entre EE. UU. y Rusia para un mercado alcista duradero en activos europeos. Las Probabilidades de Ataques de EE. UU. e Israel contra Irán La tercera crisis geopolítica que tiene lugar este año podría posponerse mientras salimos a impresión, si el presidente Biden y el ayatolá Ali Khamenei acuerdan reincorporarse al acuerdo nuclear EE. UU.-Irán de 2015. Pero seguimos siendo escépticos. La administración Biden quiere reincorporarse al acuerdo nuclear de 2015 y liberar alrededor de un millón de barriles por día de crudo iraní para reducir los precios en la bomba antes de las elecciones intermedias. La gran estrategia de EE. UU. también quiere comprometerse con Irán y estabilizar Oriente Medio para que EE. UU. pueda reorientarse hacia Asia. La UE propone el acuerdo ya que tiene una necesidad aún mayor de los recursos iraníes y quiere prevenir que Irán obtenga armas nucleares. Rusia y China también apoyan porque quieren eliminar las sanciones estadounidenses para comerciar con Irán y no necesariamente desean que Irán tenga armas nucleares. Solo hay un problema: Irán necesita armas nucleares para asegurar la supervivencia de su régimen a largo plazo. La pregunta es si Khamenei está dispuesto a autorizar un acuerdo con los estadounidenses por segunda vez. El primer acuerdo fue traicionado a gran costo para su régimen. El presidente Ebrahim Raisi, que espera reemplazar al supremo Khamenei de 83 años antes o después, seguramente se opone firmemente a apostar su carrera y seguridad personal a que los republicanos ganen las elecciones de 2024. Irán ya ha alcanzado la capacidad de ruptura nuclear – tiene suficiente uranio enriquecido al 60% para construir dispositivos nucleares – y no está claro por qué alcanzaría esta capacidad si no pretendiera finalmente obtener un elemento disuasorio nuclear. Especialmente dado que podría necesitar algún día proteger su régimen de ataques militares por parte de EE. UU. y sus aliados. Sin embargo, nuestro nivel de convicción es medio porque el presidente Biden quiere levantar las sanciones y puede hacerlo unilateralmente. La administración Biden no ha tomado ninguna de las acciones preliminares para que un acuerdo se materialice, pero eso podría cambiar.3 Hay un buen caso cíclico que favorecería un acuerdo temporal y de corta duración. Según Bob Ryan, estratega de materias primas y energía de BCA, Arabia Saudita y los EAU sólo tienen aproximadamente 1.5 millones de barriles de capacidad de producción de petróleo excedente entre ambos. El embargo petrolero de la UE y las sanciones occidentales sobre Rusia forzarán la detención de alrededor de dos millones de barriles por día, absorbiendo la mayor parte de la capacidad de la OPEP. Por tanto, la administración Biden necesita el millón de barriles que Irán puede aportar. No podemos negar que los iraníes podrían firmar un acuerdo para permitir que Biden levante las sanciones. Eso beneficiaría su economía. Podrían permitir inspectores nucleares mientras secretamente desplazan su foco al desarrollo de ojivas y misiles balísticos. Aunque Irán no renunciará a la larga a la búsqueda de un disuasivo nuclear, es experto en ganar tiempo. Aun así, la política doméstica de Irán no respalda un acuerdo, y su gran estrategia sólo apoya un acuerdo si EE. UU. puede proporcionar garantías de seguridad creíbles, cosa que EE. UU. no puede hacer porque su política exterior es inconsistente. La gran estrategia de EE. UU. apoya un acuerdo pero sólo si es verificable, es decir, no si Irán lo utiliza como cobertura para perseguir una bomba de todas formas. Irán no se ha rendido después de tres años de sanciones máximas de EE. UU., una pandemia y la agitación global. Y Irán ve una perspectiva mucho mayor de extraer beneficios estratégicos de Rusia y China ahora que se han vuelto agresivos contra Occidente. Moscú y Pekín pueden ser socios estratégicos debido a su acrimonia compartida hacia Washington. Mientras que EE. UU. puede traicionar a la administración Raisi tan fácilmente como traicionó a la de Rouhani, con el resultado de que la economía volvería a ser zarandeada y el Líder Supremo y el establecimiento político serían, a los ojos del público, el doble de engañados. Diagrama 3 expone las opciones de Irán. Diagrama 3 Árbol de Decisión para la Crisis Nuclear de Irán (Próximos 24 Meses) Ruleta con un revólver de cinco disparos Ruleta con un revólver de cinco disparos   Si las negociaciones colapsan (50% de probabilidad), entonces Irán dará una carrera loca por un arma nuclear antes de que EE. UU. e Israel ataquen. Si EE. UU. e Irán acuerdan un pacto (40%), entonces Irán podría cumplir los términos del acuerdo hasta las elecciones de EE. UU. de 2024, retirando el tema de las preocupaciones de los inversores por ahora. Pero su interés a largo plazo en obtener un disuasivo nuclear no cambiará y el conflicto se reavivará después de 2024. Si las conversaciones continúan sin resolución (10%), Irán hará progresos graduales en su programa nuclear sin las restricciones del acuerdo (aunque puede que no necesite apresurarse). En resumen, Rusia y China necesitan a Irán independientemente de si éste congela su programa nuclear, mientras que EE. UU. e Israel formarán una alianza Abraham de equilibrio de poder para contener a Irán incluso si congela su programa nuclear. Conclusión: Los inversores deberían asignar un 40% de probabilidad a un acuerdo nuclear temporal y de corta duración entre EE. UU. e Irán. La caída del precio del petróleo sería fugaz. La oferta a largo plazo no se expandirá porque EE. UU. no puede proporcionar a Irán las garantías de seguridad que necesita para detener irreversible su programa nuclear. Las Probabilidades de la Tercera Guerra Mundial Ahora viene la parte imposible, donde intentamos poner estas tres crisis geopolíticas juntas. En lo que sigue estamos simplificando en exceso. Pero el propósito es formalizar nuestro pensamiento sobre los diferentes actores y sus opciones. Diagrama 4 comienza con nuestras conclusiones respecto al conflicto China/Taiwán, ajusta las probabilidades de una guerra rusa más amplia como resultado, y añade nuestra opinión de que es muy probable que Irán persiga armas nucleares. De nuevo, el marco temporal es de dos años. Diagrama 4 Árbol de Decisión para la Tercera Guerra Mundial (Próximos 24 Meses) Ruleta con un revólver de cinco disparos Ruleta con un revólver de cinco disparos   El escenario alternativo de conflicto a la Tercera Guerra Mundial consiste en “guerras limitadas”: un concepto peligroso que se refiere a guerras híbridas y por poder en las que EE. UU. no está involucrado, o sólo está involucrado de forma indirecta. O podría ser un conflicto con Irán que no involucre a Rusia y China. Comenzamos con China porque es la potencia global más capaz y ambiciosa en la actualidad. El ascenso estratégico de China está trastornando el orden global y desafiando a Estados Unidos. También empezamos por China porque tenemos alguna evidencia este año de que Rusia no pretende expandir la guerra más allá de Ucrania. O China toma acciones agresivas adicionales en Taiwán – creando una oportunidad única para que Rusia asuma mayores riesgos – o no. Si no, las probabilidades de la Tercera Guerra Mundial caerán drásticamente durante el período de dos años. Este escenario es nuestro caso base. Pero si China ataca Taiwán y EE. UU. defiende a Taiwán, damos una alta probabilidad a que Rusia invada los bálticos. Si China realiza ataques híbridos y EE. UU. sólo apoya a Taiwán de forma indirecta, entonces aumentamos las probabilidades de agresión rusa sólo marginalmente. El resultado es una probabilidad del 20% de la Tercera Guerra Mundial, es decir, una guerra directa entre EE. UU. y Rusia, o China, o ambos. Si esta guerra podría permanecer limitada es debatible. Los ejercicios de guerra desde 1945 muestran que cualquier guerra entre grandes potencias nucleares es más probable que escale que lo contrario. Pero las armas nucleares traen destrucción mutuamente asegurada, la restricción última. El riesgo de escalada nuclear es la razón por la que redondeamos a la baja la probabilidad de la Tercera Guerra Mundial en nuestros árboles de decisión. El escenario más probable del 59% de “guerras limitadas” puede parecer un resultado positivo, pero incluye aumentos importantes en las tensiones geopolíticas respecto al nivel actual, como una guerra híbrida china contra Taiwán. Conclusión: Según este ejercicio, las probabilidades de la Tercera Guerra Mundial podrían ser tan altas como el 20%. Esto es el doble del nivel en nuestro árbol de decisión sobre Rusia, lo cual es apropiado dado que nuestro pronóstico sobre la crisis de Taiwán se ha materializado. El factor crítico es si Pekín continúa escalando la presión sobre Taiwán después del congreso del partido este otoño. Eso podría desencadenar una peligrosa reacción en cadena. La economía global y los mercados financieros todavía enfrentan riesgo a la baja por la geopolítica, pero 2023 podría ver mejoras si Rusia se mueve hacia un alto el fuego y China retrasa la acción contra Taiwán para reiniciar su economía. Conclusiones para la Inversión Cuando Rusia invadió Ucrania a principios de este año, nuestro colega Peter Berezin, estratega global jefe, argumentó que las probabilidades de un Armagedón nuclear eran del 10%. Como mínimo, esta es una probabilidad razonable para las probabilidades de que Rusia y la OTAN lleguen a las manos. Ahora la esperada crisis de Taiwán se ha materializado. Calculamos que las probabilidades de una gran guerra se han duplicado al 20%. La correlación es una probabilidad del 80% de un mejor resultado. Analíticamente, seguimos viendo a Rusia persiguiendo un objetivo limitado – neutralizar a Ucrania para que no sea próspera ni militarmente poderosa – mientras que China también persigue un objetivo limitado – intimidar a Taiwán para que busque la subordinación en vez de la condición de nación. A menos que estos objetivos cambien, todavía estamos lejos de la Tercera Guerra Mundial. El mundo puede convivir con una Ucrania lisiada y un Taiwán subordinado. Sin embargo, no se puede negar que la trayectoria de los asuntos globales desde la crisis financiera global de 2008 ha seguido un camino incómodamente similar al que condujo a la Segunda Guerra Mundial: crisis financiera, recesión económica, deflación, agitación interna, depreciación de la moneda, proteccionismo comercial, monetización de la deuda, rearme militar, inflación y guerras de agresión. Si la ruleta es el juego, entonces las probabilidades de una guerra global son de una sexta parte o 17%, no muy lejos del resultado del 20% de nuestros árboles de decisión. Incluso suponiendo que seamos alarmistas, el hecho de que podamos formular un argumento coherente y formal de que las probabilidades de la Tercera Guerra Mundial son tan altas como el 20% sugiere que los inversores deberían esperar a que las tensiones actuales sobre Ucrania y Taiwán disminuyan antes de hacer grandes apuestas nuevas y arriesgadas. Una lista de comprobación simple muestra que el contexto macro global y geopolítico es sombrío (Tabla 1). Necesitamos mejoras en la lista antes de mostrarnos más optimistas. Tabla 1 Pocos Catalizadores Positivos en la 2.ª Mitad de 2022 Ruleta con un revólver de cinco tiros Ruleta con un revólver de cinco tiros     Gráfico 2 Mantenerse en Posición Defensiva en la 2.ª Mitad de 2022 Manténgase en posición defensiva en el segundo semestre de 2022 Manténgase en posición defensiva en el segundo semestre de 2022 Específicamente, lo que los inversores necesitan es estar razonablemente tranquilos de que Rusia no expandirá la guerra a la OTAN y de que China no invadirá Taiwán en el corto plazo. Esto requiere un nuevo entendimiento diplomático entre Washington y Moscú y entre Washington y Pekín que evite el conflicto. Ese tipo de entendimiento sólo puede forjarse en la crisis. Las crisis relevantes están en curso pero aún no han concluido. Es probable que haya más caídas para los inversores en renta variable global antes de que los riesgos de guerra se disipan mediante la solución habitual: la diplomacia. Espere mejoras concretas y creíbles en el sistema global antes de adoptar una postura generalmente sobreponderada hacia activos de riesgo. Favorezca los bonos gubernamentales sobre las acciones, las acciones estadounidenses sobre las globales, los sectores defensivos sobre los cíclicos, y desfavorezca la moneda y los activos chinos y taiwaneses (Gráfico 2).     Matt Gertken Director de Estrategia Geopolíticamattg@bcaresearch.com  Notas al Pie 1      Véase Graham Allison, Destined For War: Can America and China Escape Thucydides’s Trap? (Nueva York: Houghton Miffin Harcourt, 2017). 2     Por ejemplo, el acuerdo mediado por Turquía para enviar grano desde Odesa, el apoyo diplomático para reincorporarse al acuerdo nuclear de Irán de 2015, los referendos en territorios conquistados como Jersón y los intentos de aumentar la influencia en conversaciones de reducción de armamentos. Cortar la energía de Europa es en última instancia un plan para coaccionar a Europa a aceptar un alto el fuego favorable para Rusia. 3     Irán sigue planteando demandas extraneous – más recientemente que el OIEA deje de investigar cómo ciertas partículas de uranio producidas por el hombre aparecieron en sitios nucleares no divulgados en Irán. El OIEA no ha abandonado esta investigación y su credibilidad sufriría si lo hiciera. Mientras tanto, Biden está aumentando y no reduciendo sanciones sobre Irán, aunque el alivio de sanciones es una demanda iraní central. Biden no ha eliminado a la Guardia Revolucionaria Iraní ni a la Fuerza Quds de la lista de terrorismo. Ninguno de estos obstáculos es prohibitivo pero al menos esperaríamos ver algún movimiento antes de cambiar nuestra opinión de que un acuerdo es más probable que fracase que que tenga éxito. Temas Estratégicos Posiciones Tácticas Abiertas (0-6 Meses) Recomendaciones Cíclicas Abiertas (6-18 Meses) Matriz Regional de Riesgo Geopolítico "Promedio de Aciertos": Operaciones de Estrategia Geopolítica ()

Executive Summary Oil Markets Remain Tight US and Iranian negotiators received an EU proposal for reviving the Iran nuclear deal on Monday, which could return ~ 1mm b/d of oil to markets.  The EU’s embargo of Russian seaborne crude imports, which commences December 5, will remove 90% of seaborne imports of Russian crude (~ 2.3mm b/d) by year-end.  In February 2023, another 800k b/d of refined products will be embargoed.  December also will usher in insurance and reinsurance sanctions on shipping Russian oil – arguably the strongest sanctions the EU, UK and US can impose. Without those Iranian barrels, the determination of the EU, UK and US to enforce a Russian oil embargo will be suspect. We give odds of 60% to a US-Iran deal getting done in the near term.  Our Geopolitical Strategy maintains the likelihood of a deal is 40% at best. Bottom Line: Oil markets are pricing in the likelihood of large energy supply dislocations over the next couple of months.  The evolution of prices hinges upon the degree to which the EU’s embargo on Russian oil imports is implemented.  A revived Iran nuclear deal with the West would offset some of the embargoed Russian oil.  Even so, oil balances still will remain tilted to deficit conditions in 2023.  We continue to expect Brent will move above our 2022 $110/bbl expectation by 4Q22, and average $117/bbl next year. Feature US and Iranian negotiators received a proposal from EU negotiators for reviving the Iran nuclear deal on Monday.1 If the US and Iran can agree, the door opens for 1mm b/d of Iranian oil to return to markets. These barrels are becoming increasingly important to the EU, especially following the suspension of southerly flows of oil on Russia’s Druzhba pipeline due to a payment dispute.2 Brent popped ~ $1.50/bbl Tuesday morning as the Druzhba news broke, and the backwardation in the forward market increased (Chart 1). Brent gave back these early gains by the end of trading, following news a Hungarian refiner transferred the fee required to use the Ukrainian section of the pipeline.3 Chart 1Oil Markets Remain Tight Complicated Motives On All Sides The EU obviously has an interest in freezing Iran’s nuclear program and accessing more Iranian fossil fuels while it is locked in an energy struggle with Russia – hence the its proposal to revive the Iran nuclear deal. However, the US and Iranian positions are more complicated. Iranian’s Supreme Leader Ali Khamenei has an interest in removing the US’s economic sanctions – and in obtaining deliverable nuclear weapons, notes Matt Gertken, BCA Research’s chief geopolitical strategist. Khamenei’s plan is to develop a nuclear weapon so that Iran can deter any aggression from a future US administration or the Abraham alliance. This is the path to regime survival, power succession, and national security. Hence Iran will not freeze its nuclear program over the long run. But Khamenei may wish to buy time while the Democrats still run the White House. Chart 2KSA, UAE Preserving Spare Capacity We’ve noted repeatedly the Biden administration has been pressing the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) – the only states in OPEC 2.0 able to raise output and maintain production at higher levels – to increase output for the better part of this year. These efforts yielded only a 100k b/d production increase earlier this month. KSA and the UAE insist they are close to the maximum levels of oil they can supply to the market, given their current production and the need to maintain minimal spare capacity (Chart 2).4 KSA’s max capacity is 12mm b/d. The Kingdom will be producing at or slightly above 11mm b/d later this year to offset declines in non-core OPEC 2.0 production. KSA’s trying to get its max capacity to 13mm b/d, but that will take until 2027, according to the state oil company ARAMCO. UAE’s max capacity is 4mm b/d. It will be producing at or close to 3.5mm b/d this year, and after that they’ll want to hang on to that last bit as spare capacity. UAE’s trying to get its spare capacity to 5mm b/d, but that’s going to take until 2030, according to its state oil company ADNOC. There’s an increasing risk to the Russian output arising from the EU embargo scheduled to take effect December 5, and sanctions on providing insurance and reinsurance to ships carrying Russian material. If the EU/UK/US embargo is successful and results in Russia being forced to shut in 2mm b/d by the end of next year, per our expectation, KSA and UAE spare capacity will not cover the loss of production, and falling output within OPEC 2.0. Given these dynamics – and the expectation at least some of the sanctions will stick after Dec. 5 – KSA and UAE have to hang on to those last barrels to be able to meet the increasingly likely loss of Russian shut-in production. Additional spare capacity is not available in the US shales, or in any of the other producing provinces outside OPEC 2.0 sufficient to cover the loss of Russian barrels. Indeed, output from OPEC 2.0 outside the core producers has been trending lower for years (Chart 3).5 Complicating a deal with Iran is the possibility it could re-open the breach between the US and KSA. If KSA wanted to express its displeasure with a US-Iran deal it wouldn’t need to do much to re-balance the market: If the Kingdom does not offset production losses by the rest of OPEC 2.0, or step up to cover, e.g., Libyan production – now back on the market with just under 500k b/d – global supply falls and prices rise, all else equal.6 Chart 3KSA, UAE Are Core OPEC 2.0 Our Geopolitical Strategy gives 40% odds of an Iran deal and 60% odds that negotiations fall apart (or drag on without resolution). We make the odds higher – 60% chance of success – given the compelling interest of the Biden administration to get more oil into the market going into midterms in November, and a general interest in the West to offset potential losses of Russian volumes to sanctions that kick in in December. The difference in these views hinges on what Iran will do, as the Biden administration is seeking a deal. Sanctions Kicking In In December The EU is set to roll into its embargo of Russian oil imports on December 5. If fully implemented, ~ 2.3mm b/d of seaborne imports of Russian crude oil will be excluded from EU markets by year-end. Beginning in February, another 800k b/d of refined products will be embargoed. EU, UK and US shipping insurance and reinsurance sanctions also are set to kick in in December. These arguably are the strongest sanctions available to the West in its effort to take Russian oil and refined products off the market (no insurance means no shipping). The EU recently relaxed sanctions on buying and transporting Russian crude oil, which will allow additional volumes of oil to be purchased and transported to end-use markets.7 While this will let a little more Russian oil into the market in the near term, we believe it opens the possibility of additional exceptions being made by the EU to make more oil available, if prices move sharply higher on the back of increasing supply scarcity. The EU and US are looking a bit wobbly on the insurance and reinsurance bans due to kick in in December.8 If they relax or forego these sanctions in some fashion, more Russian crude and products will flow to market in 4Q22 than currently is anticipated. This would undermine US efforts to secure a price cap on Russian oil sales. Slower sanction enforcement is a path available to Biden that does not involve bowing to Iran’s various demands. Some, but not all, of the Russian volumes lost to EU exports will continue to be scooped up by China and India, which have become the largest buyers of Russian oil following the sanctions imposed by the West after the invasion of Ukraine.9 India loaded 29.5mm barrels of Russian crude in July – a record – while China loaded 18.1mm barrels. These levels likely will fall, but these two states will remain big buyers of Russian crude and products going forward. Household Budgets Will Remain Strained High energy prices – particularly for gasoline and diesel fuel – and falling real incomes have eaten into US household budgets, and are a key factor for Biden’s low approval ratings (Chart 4). July US CPI was unchanged from June and was 8.5% higher y-o-y. While the gasoline price index dropped from June, it remained one of the main contributors to the high energy index. (Chart 5).10 Based on the sharp increase in gasoline prices over the first six months of this year, we estimate the cost of running a car is 50% higher in 1H22 vs. 1H21 in the US. Chart 4Wealth Destruction Key To Low Biden Approval Chart 5Energy Driving High US Prices US gasoline and distillate prices have rolled over since mid-June, driven by high refined-product prices, which weakened demand, and fear of global recession as central banks tighten monetary policy. Higher Russian crude output in 1H22 – up 3.6% to ~ 10.1mm b/d – partly contributed to weaker product prices. However, this trend likely will reverse: Russian crude output in 2Q22 was down 1.1% y/y to 9.7mm b/d, based on our estimates. We expect prices of gasoline and diesel fuel to remain at elevated levels, given low inventories (Chart 6), and a second consecutive year of lower US refining capacity (Chart 7). Higher crude oil prices brought about by Russian oil and product embargoes will feed into these refined product prices, pushing them higher. Chart 6Low Product Stocks… Chart 7…And Refining Capacity Are Bullish For Petrol Products There is scope for an increase in gasoline demand over the rest of the driving season, while elevated US and overseas distillate demand will support diesel and heating oil prices. The eurozone’s record high inflation in July was driven by energy prices (Chart 8), indicating high energy prices are a problem for households worldwide. According to the Household Electricity Price Index, residential electricity prices in EU capitals were more than 70% higher in 1H22 y/y. The IMF expects high fuel prices will increase EU households’ share of energy expenditure by 7% in 2022.11 In response to high energy prices, governments are enacting policies such as price caps and direct transfers to lower the damage to household wealth.12 An unintended consequence of this will be high prices for longer, as consumers will not register the signal the market is sending via higher prices to encourage lower demand. This will result in continued draws on inventories. Chart 8High Energy Prices Responsible For Eurozone Inflation Investment Implications With EU sanctions scheduled to become effective December 5, oil markets are focused on supply measures that could sharply reduce Russian oil exports. This makes the US-Iran negotiations to revive the Iran nuclear deal critically important. Agreement to restore the deal could return 1mm b/d of oil to markets at a time when supplies are at risk of contracting sharply going into 2023. Failure to restore these volumes will tighten supply significantly if the EU’s embargo of Russian oil imports is successful. We give the restoration of the Iran nuclear deal a 60% chance of success. In and of itself, the return of Iranian oil exports will not offset all of the potential loss of Russian crude oil exports to the EU. That said, the evolution of crude oil prices hinges upon the degree to which the EU’s embargo on Russian oil imports is implemented. There's a subtle point to be aware of in the evolution of US-Iran negotiations: The Biden administration could just turn a blind eye to Iranian crude sales, without agreeing to revive the nuclear deal being negotiated. Signing a deal, on the other hand, would be more positive for supply than merely not contesting Iranian's renewed exports of 1mm b/d of crude. It is worthwhile bearing in mind that the point of the deal is that Iran pauses its nuclear program, which reduces war risk in the medium term, or as long as deal is in force. Reducing the level of agita in the region, at least for a couple of years, is a net benefit. Our geopolitical strategist Matt Gertken notes, "If Iranians sign a deal, then they are endorsing Biden and the Democratic Party for 2024, meaning they want a Democratic White House in the US through 2028. There would be no reason to sign it unless you plan to implement at least through 2024." We remain bullish oil, and continue to expect Brent to trade above $110/bbl on average this year, and $117/bbl next year. We remain long the XOP ETF to retain our exposure to oil and gas E+Ps.   Robert P. Ryan Chief Commodity & Energy Strategist rryan@bcaresearch.com Ashwin Shyam Research Analyst Commodity & Energy Strategy ashwin.shyam@bcaresearch.com Paula Struk Research Associate Commodity & Energy Strategy paula.struk@bcaresearch.com     Commodities Round-Up Energy: Bullish The EIA expects US natural gas inventories to finish the injection season at ~ 3.5 Tcf – 6% below the five-year average – at the end of October (Chart 9). LNG exports are expected to average 11.2 Bcf/d, which, if realized, will be 14% over 2021 levels. The EIA increased its estimate of LNG exports on the back of an earlier-than-expected return of Freeport LNG exports. For 2023, the EIA expects US LNG exports will average 12.7 Bcf/d. Close to 70% of the 57 bcm of US LNG exports are being shipped to Europe, where it is helping offset the cutoff of Russian gas supplies following the war in Ukraine. In 1H22, the US became the world’s largest exporter of LNG. Dry gas production in the US is expected to average just under 97 Bcf/d in 2022, a 3% increase over 2021 levels. Base Metals: Bullish Total Chinese copper imports for July were up 9.3% at ~464kt for July, despite economic weakness and a property market slowed by companies' payment defaults and lower consumer confidence in real estate groups. Copper in SHFE warehouses were at 35kt which is 65% lower y/y as of the week ending August 5th, while stocks in China’s copper bonded inventories were 40% lower y/y at 262kt for the month of June. Low copper prices and Chinese stocks, and high imports indicate that the world’s largest copper consumer is capitalizing on weak prices to restock low inventories. Precious Metals: Bullish The World Gold Council reported gold ETF outflows for the third consecutive month in July at 80.1 tons (Chart 10) due to low gold prices, a strong USD and a hawkish Fed. The latest July US CPI data was unchanged from June, as high prices due to pandemic induced supply chain bottlenecks eased. Inflation remains well above target. Despite the mildly positive inflation data, we expect the Fed to hike interest rates again in September. The magnitude of this hike will depend on the August US CPI and employment prints, given the Fed’s data dependency. By year-end, if the Russian oil embargo and insurance bans on shipping vessels are implemented in their current form, high crude oil prices will feed into inflation, and the Fed will be forced to remain aggressive. Chart 9 Chart 10     Footnotes 1     Please see Agreement on nuclear deal within reach but obstacles remain published by politico.com on August 8, 2022. 2     Please see Russia suspends oil exports via southern leg of Druzhba pipeline due to transit payment issues published by reuters.com on August 9, 2022. 3    Please see Oil drops on Druzhba pipeline news and U.S. inflation expectations published by reuters.com on August 10, 2022.  According to the International Association of Oil Transporters, the Druzhba pipeline capacity is ~ 1.3mm b/d.  In July, its southern leg supplying Hungary, the Czech Republic and was carrying ~ 230k b/d, according to OilX, a satellite service monitoring oil and shipping movements globally. 4    Please see Tighter Oil Markets On The Way, which we published on July 21, 2022, for additional detail. 5    Please see footnote #4. 6    The background factor in this situation is Russia’s involvement in Libya’s civil disorder.  We noted in our July 14, 2022 report Russia Pulls Oil, Gas Supply Strings: “Sporadic force majeure declarations and output losses in Libya, where Russian mercenaries actively support Khalifa Haftar’s Libyan National Army (LNA), continue to make supply assessments difficult.” 7     Please see How the EU Will Allow a Slight Increase in Russian Oil Exports published by Bloomberg.com on August 1, 2022. 8    Please see US warns of surge in fuel costs as it renews push for Russian oil price cap published by ft.com on July 26, 2022. 9    Please see Russian crude prices recover on strong India, China demand, and Column-Russian crude is more reliant on India and China, but signs of a peak: Russell | Reuters, published by reuters.com on August 7 and August 9, 2022. 10   After fuel oils, the 44% y-o-y increase in the gasoline price index was the largest contributor to the increase in the energy index. 11    Please see Surging Energy Prices in Europe in the Aftermath of the War: How to Support the Vulnerable and Speed up the Transition Away from Fossil Fuels, published by the IMF on July 29, 2022. 12    For an example of such policy, please see State aid: Commission approves Spanish and Portuguese measure to lower electricity prices amid energy crisis     Investment Views and Themes Strategic Recommendations Trades Closed in 2022

Executive Summary Unit Labor Costs, Not Oil Prices, Are The Key To US Core Inflation Inflation is not about oil, food or used car prices. Looking at prices of individual components of a consumer basket is akin to missing the forest for the trees. Despite the latest drop in US headline inflation, various core CPI measures continue trending up and registered considerable month-on-month rises in July. Wages and, more specifically, unit labor costs are the true measure of genuine and persistent inflation. US wage growth is very elevated, and the pace of unit labor cost gains has surged to a 40-year high. The conditions for sustainable and persistent disinflation in the US are not yet present. US inflation will prove to be much stickier and more entrenched than many market participants presently believe. The recovery in China will be U- rather than V-shaped, with risks tilted to the downside. The mainland’s property market breakdown is structural, not cyclical. Excesses are very large, and problems are snowballing, rendering the enacted policy stimulus insufficient. Bottom Line: US core inflation lingering above 4% and easing financial conditions will compel the Fed to continue hiking rates. This will cap global risk asset prices and put a floor under the US dollar.  We continue to recommend an underweight allocation to EM in global equity and credit portfolios. Consistently, we are also reluctant to chase EM currencies higher. Feature The bullish macro narrative circulating in the investment community is that conditions for a cyclical rally in global risk assets have fallen into place. Specifically: US inflation will drop sharply as US growth has crested and commodity prices have plunged; The Fed is nearing the end of a tightening cycle; China has stimulated sufficiently, and its economy is about to recover, which will boost economic conditions among its trading partners in general and EM in particular. These assumptions along with the fact that the S&P 500 index has found support at a 3-year moving average – a proven line of defense – suggest that US share prices have likely bottomed (Chart 1). Are we witnessing déjà vu of the 2011, 2016, 2018 and 2020 market bottoms? Chart 1Déjà Vu? Is 2022 Like The 2011, 2016 And 2018 Bottoms In The S&P 500? We have reservations about all of the above fundamental conjectures. We elaborate on these reservations in this report. On the whole, we contend that the current environment is different, and the roadmaps of all post-2009 equity market bottoms are not necessarily currently applicable. BCA’s Emerging Markets Strategy team believes that (1) US consumer price inflation is much more entrenched and will prove stickier than is commonly believed; and (2) the Chinese property market’s breakdown is structural, not cyclical; hence, the recovery will not gain traction easily.  Is This The End Of The US Inflation Problem? Not Quite This week’s US inflation data confirmed that headline CPI inflation has probably peaked: prices in several categories plunged. However, inflation is not about oil, food or used car prices. Chart 2 reveals that historically there have been several episodes whereby core inflation remains elevated despite plunging oil prices. Chart 2US Core Inflation Does Not Always Follow Oil Prices Looking at price dynamics among the individual components of the CPI basket is akin to missing the forest for the trees. Inflation is a very inert and persistent phenomenon. Underlying inflation does not change its direction often and/or quickly. That is why we believe that it is premature to celebrate the end of the US inflation problem. A few observations on this matter: Despite the drop in US headline inflation, various core CPI measures − like trimmed-mean CPI, median CPI and core sticky CPI − all continue trending up and registered substantial month-on-month rises in July (Chart 3). The range of core inflation based on these annual and month-month annualized rates is between 4-7%. In brief, the rate of genuine/sticky inflation is well above the Fed’s 2% target. Given its unconditional commitment to bringing inflation down to 2%, the Fed will continue hiking interest rates ceteris paribus. Chart 3US Core CPI Measures Are Still Very High Chart 4US Wages Growth Has Been Surging   We continue to emphasize that wages and, more specifically, unit labor costs are the true measures of persistent and genuine inflation. We have written at length about why wages and unit labor costs are more important to inflation than oil or food prices. US wage growth is very elevated and is accelerating (Chart 4). Unit labor costs, calculated as hourly wages divided by productivity, have also been surging to a 40-year high (Chart 5, top panel). Chart 5Unit Labor Costs, Not Oil Prices, Are The Key To US Core Inflation The reason for this very strong wage growth and swelling unit labor costs is the very tight labor market. The bottom panel of Chart 5 demonstrates that labor demand is still outpacing labor supply by a wide margin. Hence, wage inflation will not subside until the unemployment rate rises meaningfully. Bottom Line: Conditions for sustainable and persistent disinflation in the US are not yet present.  Inflation will prove to be much stickier and more entrenched than many market participants presently believe. Core inflation lingering above 4% and easing financial conditions will compel the Fed to continue hiking rates. This will cap risk asset prices and put a floor under the US dollar.   China: Is This Time Different? If one believes that China’s current business cycle is similar to all previous ones seen since 2009, odds are that a buying opportunity in China-related financial markets is at hand. Chart 6 illustrates that the credit and fiscal spending impulse leads the business cycle by about nine months. Given that this impulse bottomed late last year, a trough in the Chinese business cycle is due. Chart 6Is A Recovery In China's Business Cycle Imminent? It is always risky to suggest that this time is different. Nevertheless, at the risk of being wrong, we contend that a combination of (1) property markets woes, (2) an impending export contraction, and (3) the dynamic zero-COVID policy will reduce the multiplier effect of current stimulus measures. Hence, a meaningful recovery in economic activity will likely fail to materialize in the coming months. The challenges facing the mainland property market are now well known. Yet, excesses are very large, and problems are snowballing, making policy stimulus insufficient. In particular: Authorities are contemplating bailout funds for property developers in the range of RMB 300-400 billion to enable them to complete housing that has been pre-sold. This is not sufficient financing for overall property construction. Table 1How Large Are Property Developers Bailout Funds? Table 1 illustrates that these amounts are equal to just 3-4% of annual fixed-asset investment in real estate excluding land purchases, 1.5-2% of total financing of developers, and 3-4% of the advance payments that property developers received for pre-sold housing in 2021. Property developers will not be receiving any cash upon the completion and delivery of presold housing units because they were paid in advance. Hence, without liquidating their other assets, homebuilders cannot repay the bailout financing. Consequently, only state financing can work here because, from the viewpoint of providers of this financing, this scheme de-facto means throwing good money after bad. The property industry in China is extremely fragmented. This makes bailouts difficult to organize and execute. There are officially about 100,000 property developers in China. The overwhelming majority of them are not state-owned companies. Plus, the two largest property developers, Evergrande (before defaulting) and Country Garden, had only 3.8% and 3.3% of market share respectively in 2020. The failure of homebuilders to complete and deliver pre-sold housing units could unleash a death spiral for them. In recent years, 90% of housing units have been pre-sold, i.e., buyers made advance payments/prepayments, often taking out mortgages (Chart 7, top panel). Witnessing the inability of developers to deliver on presold units, a rising number of people may decide to wait to buy. The largest source of developers’ financing – advance payments for pre-sold housing units – might very well dry up. This source has accounted for 50% of real estate developers’ total financing in recent years (Chart 7, bottom panel). In brief, a vicious cycle is possible. The lack of financing for homebuilders bodes ill for construction activity (Chart 8). Chart 7China: Housing Presales And Pre-Payments Are Critical To Developers Chart 8Lack Of Homebuilder Financing = Shrinking Construction Activity Chart 9Chinese Property Developers Are Extremely Leveraged Besides, property developers are very leveraged with an assets-to-equity ratio close to nine (Chart 9). They have grown accustomed to borrowing heavily to accumulate real estate assets. They have been starting but not completing construction (Chart 10, top panel). We have been referring to this phenomenon as the biggest carry trade in the world. The bottom panel of Chart 10 shows two different measures of residential floor space inventories held by property developers. One measure subtracts completed floor space from started floor space, and another one deducts sold floor space from started floor space. On both measures, residential inventories are enormous. In theory, they could raise funds by selling their real estate assets. However, if they all try to sell simultaneously, there will not be enough buyers, and asset prices will plunge, which could lead to a full-blown debt deflation spiral. The last time the real estate market was similarly distressed in 2014-15, the central bank launched the Pledged Supplementary Lending (PSL) facility. This was effectively a QE program to monetize housing. This was the reason why housing recovered strongly in 2016-2017. There is currently no such program up for discussion. On the whole, odds are that the current property market breakdown is structural, not cyclical. Financial markets – the prices of stocks and USD bonds of property developers – convey a similar message and continue to plunge (Chart 11). Chart 10Excessive Property Inventories Chart 11No Green Light From Property Stocks And Corporate Bond Prices Chart 12There Has Been No Recovery In China Without A Revival in Real Estate Without an improvement in the housing market, a meaningful business cycle recovery is unlikely in China. Chart 12 illustrates that all recoveries in the Chinese broader economy since 2009 occurred alongside a revival in property sales. The importance of the property market goes beyond its size. Rising property prices lift household and business confidence, boosting aggregate spending and investment. The sluggish housing market and falling house prices will impair consumer and business confidence. This, along with uncertainty related to the dynamic zero-COVID policy, will dent consumer spending and private investments. Finally, the upcoming contraction in Chinese exports will dampen national income growth. Taken together, the multiplier effect of stimulus in the upcoming months will be lower than it has been in previous periods of stimulus. There are two areas that will see meaningful improvement in the coming months: infrastructure spending and autos. BCA’s China Investment Strategy service discussed the outlook for auto sales in a recent report. Chart 13Green Shoots In China's Infrastructure Investment On the infrastructure front, there has been mixed evidence of an improvement in activity. The top and middle panels of Chart 13 demonstrate that Komatsu machinery’s operational hours and the number of approved infrastructure projects might be bottoming. However, the installation of high-power electricity lines has fallen to a 15-year low (Chart 13, bottom panel).   As we elaborated in last month’s report, the new financing/stimulus for infrastructure development will not result in new investments. Rather, it will by and large offset the drop in local government (LG) revenues from land sales this year. In short, there is little new stimulus for infrastructure beyond what was approved in the budget plan earlier this year. Bottom Line: The recovery in China will be U- rather than V-shaped, with risks tilted to the downside. Investment Recommendations Our bias is that the rebound in global risk assets could last for a few more weeks. The basis is that investor positioning in risk assets was very light when this rebound began. Plus, falling oil prices could reinforce the idea among investors that US inflation is no longer a problem. Looking beyond the next several weeks, the outlook for global and EM risk assets is dismal. Markets will realize that the Fed cannot halt its tightening with core inflation well above 4-5%. Hawkish Fed policy and contracting global trade will boost the US dollar and weigh on cyclical assets. We continue to recommend an underweight allocation to EM in global equity and credit portfolios. Consistently, we are also reluctant to chase EM currencies higher. EM local bonds offer value, as we have argued over the past couple of months, but for now we prefer to focus on yield curve flattening trades. We continue betting on yield curve flattening/inversion in Mexico and Colombia and are long Brazilian 10-year domestic bonds while hedging the currency risk. In addition, we recommend investors continue receiving 10-year swap rates in China and Malaysia.   Arthur Budaghyan Chief Emerging Markets Strategist arthurb@bcaresearch.com Strategic Themes (18 Months And Beyond) Equities Cyclical Recommendations (6-18 Months) Cyclical Recommendations (6-18 Months)

Informe especial

Executive Summary Iron Ore & Steel Prices: Facing Downward Pressure Global iron ore and steel supply is likely to grow faster than demand over the next six months. As a result, the prices of both metals will likely fall. Chinese steel output will likely rebound moderately in the absence of government-mandated steel production cutbacks. In the meantime, mainland steel demand will continue to contract because of its crumbling property sector. Global steel output excluding China will contract over the next six months on the back of weakening industrial demand for steel. Even though Chinese iron ore consumption may rise moderately over the next six months, its imports will not improve much because of robust growth in domestic iron ore production. Furthermore, global iron ore demand excluding China will decline as steel demand and output contract. In the intervening six months, global iron ore production growth will rise. This will lead to an oversupplied iron ore market.  Bottom Line: Both iron ore and steel prices will likely deflate over the next several months. Therefore, Chinese steel share prices as well as global mining and steel stocks have more downside.   China’s demand for iron ore and steel are key to their respective price outlooks because these metals account for about 70% of global iron ore imports and over 50% of global steel consumption. Considerable reduction in Chinese steel output (hence, demand for iron ore) and rising domestic iron ore supply have resulted in a contraction in Chinese iron ore imports since last June. In the meantime, domestic steel demand weakened sharply, primarily because of plunging property construction. The upshot has been lower domestic steel prices (Chart 1). This report evaluates the direction of iron ore and steel prices over the next six months. Chart 1Crumbling Property Sector: Lower Steel Demand Ahead Chart 2Iron Ore & Steel Prices: Facing Downward Pressure We expect Chinese steel output to rise in the absence of government-mandated production cuts and on positive profit margins. This will lift Chinese iron ore imports. In the meantime, Chinese steel demand will likely continue to contract. Thus, steel prices will continue falling over the next several months (Chart 2, top panel). For iron ore, an increase in Chinese imports will not be enough to offset contracting global demand. As a result, the price of iron ore will face downward pressure over the coming months (Chart 2, bottom panel). From The Chinese Steel Market… The Chinese steel market may experience an increasing oversupply over the next six months. Chinese Steel Supply Chinese steel production is likely to rise moderately in the next six months.  First, there are no government-mandated cuts in steel production currently in place. Chart 3Mandated Steel Output Cuts In 2021: Unlikely Repeat In 2022H2 Last June, Chinese authorities ordered steel mills to cut output from record levels in a bid to restrain carbon emissions. This resulted in a 15% year-on-year drop in Chinese crude steel1 output and a 10% year-on-year decline in Chinese steel products production during 2021H2 (Chart 3). In 2022Q1, to ensure smog-free skies in February as China hosted the 2022 Winter Olympic Games, some steel producers were again ordered to cut their production. As a result, the year-on-year decline of Chinese steel output and steel product output for 2022Q1 were at 10% and 5%, respectively. In 2022Q2, however, the picture is more of a mixed bad. While many small firms increased volumes, medium and large sized steel producers voluntarily chose to reduce their output. As a result, China’s steel output is remains in contraction. Further, tightness in electricity supply over the summer curbed any potential recovery in steel output. Over the next six months, we expect decreasing voluntary cuts and easing electricity supply will lift steel output moderately. Chart 4Steelmakers' Profit Margins: Low, Albeit Still Positive Second, overall profit margins for Chinese steel producers are still positive, albeit at a low level (Chart 4). Even at a very low profit margin, steel producers in China still tend to produce steel as much as they can to cover their very large fixed costs. In other words, if they do not produce, they will experience greater losses.  In addition, given deteriorating employment conditions in the broader economy, maintaining employment has become a major focus of local governments. The latter will guide state-owned enterprises (SOEs) – many steel mills are SOEs or government-affiliated – to raise output and employment. For now, the government has simply asked steel producers to cut their production voluntarily, rather than mandating cuts as authorities did last year and earlier this year. In brief, in the absence of government-mandated steel output reduction, some producers will opt to increase their output to cover their fixed costs and maintain/increase employment. Will the Chinese government demand mandated cuts again later this year? We believe the odds are low. Last year, the mandated cuts were the result of more aggressive emissions reduction targets, with a deadline at the end of 2025 for the Chinese steel sector. In February of this year, the authorities extended this deadline to 2030 to grant its steel sector the ability to reach peak emissions. This will allow a gradual output reduction instead of a sharp reduction in mills with high-emission steel-producing capacity. With such a deadline extension already in place, the government is unlikely to implement mandated steel output cuts again. Chinese Steel Demand Chinese steel consumption will likely continue to contract over the next six months. Chart 5 shows that 58% of Chinese steel consumption is from building and construction, which mainly comprises the property sector and the infrastructure sector. Based on our estimate, Chinese steel demand will decline about 3.8% over the next six months, mainly dragged down by the shattered property market (Table 1). Chart 5Chinese Steel Consumption Composition Table 1Chinese Steel Demand Growth Estimates Chart 6Property Market is in a Crisis The property sector is the largest steel consumer, accounting for about 35% of Chinese steel consumption. This sector is going through a crisis, and there are no signs of improvement yet. Property sales, new construction, and completion are all in a deep and unprecedented contraction (Chart 6, panels 1, 2, and 3). Even the commodity building floor space under construction entered contraction for the first time in at least the past two decades (Chart 6, bottom panel). Both central and local governments have implemented policies to revive the property sector since late last year. Following a wave of mortgage boycotts, the July 28 Central Politburo meeting demanded local governments to ensure those sold-but-unfinished housing projects to be completed. However, due to the extreme shortage of funding faced by real estate developers and the fragmented nature of this industry in China, it will take time to get the current property sector crisis resolved. Nonetheless, we expect supportive policies will work to some extent. We expect the year-on-year contraction in property construction to narrow to 10% over the next six months from about 13% in the past six months. Chart 7Infrastructure Sector: The Main Supportive Force for Chinese Steel Demand The infrastructure sector is another major source for Chinese steel demand (Chart 7). The sector contributes about 23% of Chinese steel consumption. Although the traditional infrastructure investment shows a solid 10% growth, we only assume 7% of growth in the sector’s steel demand. This is because, within the traditional infrastructure sector, two heavy steel consuming subsectors –railway and highway constructions – will register slower growth in their respective investments than overall infrastructure. Chart 8Steel Demand In the Machinery Sector: Likely to Remain In Contraction The 2016-2019 Boom: Only Sales Excavators And Cranes Hit A New High... Machinery production, the third largest steel consuming sector, will remain in contraction because of the depressed property market. Sales of major construction equipment – excavators, loaders, and cranes – have declined 36%, 23%, and 50% year-on-year in 2022H1 (Chart 8). With continuing weakness in the property market, we expect steel demand from machinery producers to be in a similar contraction (10%) over the next six months. Autos and electric appliances together account for about 7.3% of Chinese steel consumption. Weekly data shows Chinese auto sales are in a recovery phase (Chart 9). We expect the sector’s steel use to increase by 8% year-on-year over the next six months based on our projections from our research on the auto industry. Affected by the faltering domestic property market, the outlook for electric appliances is also dismal. The output of air conditioners, freezers, refrigerators, and washing machines is contracting (Chart 10). The expected contraction in global demand for consumer goods will ensure a continuous drop in their production in China, the largest world producer of white goods. We expect these sectors' steel consumption growth to improve from a 9% contraction in 2022H1 to a 5% contraction over the next six months. Chart 9Steel Demand From Auto Sales is Recovering Chart 10Steel Demand by Electric Appliances: Smaller Contraction Ahead Chart 11Steel Demand in Other Sectors: Will Likely Stay in Contraction Other sectors that consume steel include many industrial goods, such as civil steel ships and containers. The shipping industry has boomed during the past two years because of a global increase in goods demand. This also significantly increased demand for metal containers, and to a lesser extent, civil steel ships between 2020 and 2021 (Chart 11). As global trade volumes contract over the next six months, we expect steel consumption in these other sectors to contract by 3% over the same period. What about external demand for Chinese steel? Chinese steel products exports, which account for about 5% of the country’s steel products output, will grow moderately in the next six months. Historically, the Chinese government had provided a VAT rebate of around 13% to encourage steel exports. Last year, it removed such export tax rebates on various steel products in a bid to slow domestic carbon emissions. Chart 12Chinese Steel Exports: Moderate Growth Ahead However, this has not considerably reduced Chinese steel exports. Chinese exports of steel products only had a year-on-year contraction from January to April 2022, largely because of COVID-related shutdowns, and then experienced considerable growth during May-July of the same year (Chart 12). At the same time, Chinese imports of steel products have been contracting since last May. This pattern shows the strong global competitiveness of Chinese steel products. We expect moderate growth in Chinese steel products exports over the next six months, which will be much lower than last year’s growth. In 2021, Chinese steel products exports surged by 25% year-on-year, as steel exporters rushed to export their products to take advantage of the rebates before its removal. Bottom Line: Chinese steel supply is likely to exceed demand over the next six months. This will result in an oversupplied steel market in China, exerting downward pressure on steel prices. …To The Global Iron Ore Market Chart 13Chinese Steel Production: Largely Determines the Country's Iron Ore Imports Iron ore is mainly used in the steel-making process. Limited iron ore supplies within China mean that about 80% of the country’s iron ore demand are satisfied by imports. As a result, variations in Chinese steel production largely determine swings in Chinese iron ore imports (Chart 13). Based on our expectations of the Chinese steel market, we can provide our supply-demand analysis for the global iron ore market. Global Iron Ore Demand While rebounding Chinese steel output will lift the nation’s iron ore consumption, iron ore demand from the rest of the world will shrink materially. Net-net, global iron ore demand will weaken, albeit only marginally over the next six months. Steel production is declining in the world outside China. We expect such contraction will continue into early 2023, as the pandemic-triggered overspending on goods ex-autos reverses (Chart 14). In addition, in Europe, energy rationing and sky-high energy prices will likely lead to defunct mills as a response to reducing their output; hence, their iron ore consumption will tank. Given that Europe accounts for about 10% of world steel production and nearly 50% of its steel production is using electric furnaces,2 this will reduce global iron ore demand. Last year, global steel production excluding China increased by 13% year-on-year, the highest growth since 2011 (Chart 15). This is much higher than the average 2% growth during 2017-2019, reflecting the overconsumption of goods by advanced economies in 2021. Indeed, steel production has already declined for four consecutive months. We expect a year-on-year contraction of about 5% global steel production in the world excluding China over the next six months. Chart 14The World Outside China: Steel Output Will Continue Declining Chart 15Falling DM PMI Signals Weaker Steel Output in the World Outside China Scrap steel is one substitute for iron ore in the steel-making process, but, this time, there will be limited replacement from scrap steel in China. Tight supply of scrap steel and relatively high scrap steel prices will make iron ore more appealing than scrap steel as feedstock for Chinese steel producers over the next several months. Scrap prices are currently high relative to both steel product prices and imported iron ore prices (Chart 16). Chart 16Iron Ore Substitute in China: Limited Scrap Steel Demand in 2022H2 Chart 17China: Domestic Iron Ore Output is Rising Global Iron Ore Supply Global iron ore supply will rise slightly over the next six months. Chinese iron ore output is set to continue increasing as well (Chart 17, top panel). The authorities plan to boost domestic iron ore output by 6.5% per year until 2025. Profit margins for Chinese producers are currently at a multi-year high (Chart 17, bottom panel). This will encourage domestic iron ore production over the next six months.  Currencies in global major iron ore producing countries (Brazil, Australia and South Africa) have depreciated considerably. As a result, iron ore prices in these countries in local currency terms are currently still elevated. This will incentivize more iron ore production and exports by producers in these countries. Bottom Line: Global iron ore supply will increase slightly, while demand will contract slightly over the next six months. This will be negative for iron ore prices. Investment Implications Chart 18Global Mining Stocks and Steelmaker Stock Prices: More Downside Ahead Avoid Global Steel And Mining Stocks For Now Both iron ore and steel prices will likely deflate over the next six months. Hence, global mining stocks and steelmakers stock prices will experience more downside in the coming months (Chart 18). Global ex-China steel producers have benefited from strong steel demand in DM and from surging steel prices (Chart 15 above). As we expect that DM demand for consumer goods will contract over the next six months, steel prices will drop, weighing on global steelmakers’ share prices.  Concerning equity valuations, global mining and steel stocks trade at very low trailing P/E ratios. However, for highly cyclical stocks, such a low trailing P/E ratio is often a sign of peak profits. At peaks of cycles, share prices drop first, while EPS remains elevated, as it is a backward-looking variable. In fact, more often than not, buying these stocks when the P/E ratio is very high and selling them when the P/E ratio is very low has been a very profitable strategy. In short, a low P/E ratio for mining share prices and steel producers is not a reason to be long these stocks. The direction of both the global industrial cycle and steel and iron ore prices is what matters. On both counts, the outlook remains downbeat for now.   Ellen JingYuan He Associate Vice President ellenj@bcaresearch.com     Footnotes 1     According to the World Steel Association, crude steel is defined as steel in its first solid (or usable) form, including ingots, semi-finished products (billets, blooms, slabs), and liquid steel for castings. 2     The electric furnace is using electricity and scrap steel to produce crude steel. As Europe is facing energy constraint, this will likely affect European steel output greatly. Strategic Themes Cyclical Recommendations