Look Beyond

The world is big, and macro investment opportunities pop up where you least expect them.

Looking beyond the US and focusing on true global macro is an underrated and fruitful exercise.

So, let’s do that.

In this piece, we will cover the latest macro developments and discuss trading opportunities in Europe, China, Japan…and yes, ok, we will sneak in a quick word about US liquidity too – very important for global markets.

China - Opportunity or Bull Trap?

Let’s start from China: what about the reopening trade?

The Chinese Communist Party’s plan put in motion back in 2021 had as its first objective to clamp down speculative behavior in sectors that weren’t considered ‘’in line’’ with the CCP’s views for China: excessive animal spirits in the real estate and tech sectors were to be tamed.

And they were – a substantial deleveraging was achieved, which brings us to the second step.The Chinese reopening: bring back domestic consumption and steer growth where you want to see it.

So, where do we stand there?

Chinese official data is often to be taken with a pinch of salt, but here is an interesting take on PMIs:

The New Orders subindex just printed at multi-decade highs (orange), while the Exports subcomponent has rebounded but not nearly as much (blue): the Chinese reopening is real, but it’s been met by sluggish global growth and hence exports struggle to pick up.

Don’t trust Chinese official data?

Alternative data show how domestic flights are up 40% YoY, and a pickup in international flights should follow with holiday season and higher temperatures.

On top of it, China has pre-emptively stimulated in H2-2022 delivering a solid flow of credit to corporates.

As this interesting chart from Clocktower shows, once China credit creation picks up (purple) it’s only a matter of time before Chinese equities (blue) rally.

Chinese equities continue to look attractive over the medium term here, with stock indexes still well below the January highs and with a 10%+ potential upside based on broader macro data further reflecting the reopening trends in Q2 and supportive credit creation.

This view is reflected in our Macro ETF Portfolio, where…

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