Materials

Highlights China stands out as the most likely candidate to send negative shock waves through EM and commodities in 2018. Granted the ongoing policy tightening in China will likely dampen money growth further, the only way mainland nominal GDP growth can hold up is if the velocity of money…

Dear Client, Today we are sending you a two-part Special Report prepared by my colleague Billy Zicheng Huang of our Emerging Markets Equity Sector Strategy team, entitled “A Sector Guide To A-shares”. Part I of the report was published in September, and emphasized the key takeaways from MSCI…

Overweight After a very healthy start to the year, the S&P containers & packaging index has fallen back to where it started. Worries over hydrocarbon input prices, driven by hurricane-related supply constraints, combined with overcapacity concerns in containerboard have been the key…

Highlights The path of least resistance for steel, coal and iron ore prices is down over the next 12-24 months. China's "de-capacity" reforms in steel and coal will continue into 2018 and 2019, but the scale and pace of "de-capacity" will diminish. The Mainland's steel and coal output will…

Highlights Broad Chinese equity market performance since last month's Party Congress is consistent with our view that the pace of reforms over the coming year will not cause a meaningful deceleration in China's industrial sector. Stay overweight Chinese stocks. After accounting for…

Highlights Tipping points tend to occur when too many long-term value investors are uncharacteristically behaving like short-term momentum traders. Long IBEX35 versus Eurostoxx50 constitutes a good tactical trade. The underperformance of Spanish equities appears excessively pessimistic. Euro/…

Weak spots in the U.S. economy have become increasingly hard to find. That said, two standouts are non-residential construction and light vehicle production, both of which remain in contraction despite the overall economic expansion (second panel). Importantly, growth in both of these sectors…

Our market neutral trade long materials/short utilities has delivered much faster than we had anticipated, returning more than 6% since the August 21st inception. Three key factors explain the exceptional performance right out of the gate: the ongoing shift from defensives toward cyclicals,…

Overweight A neglected aspect of the catastrophe of Hurricane Harvey was the shutdown of nearly 40% of ethylene production, the key ingredient in plastics packaging for foodstuffs, still the largest customer for the containers & packaging index. While production is gradually coming back on…

Highlights We estimate total Belt & Road Initiative (BRI) investment will rise from US$120 billion this year to about US$170 billion in 2020. The size of BRI investments is about 47 times smaller than China's annual gross fixed capital formation (GFCF). Therefore, a slump in domestic…