December 15,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –Finally, the Fed raises rate
As expected, the Federal Reserve (Fed) raised the benchmark short-term interest rate by 25 bps for the first time in almost a year. With the U.S. economy reviving in a solid pace, we forecast four 25-bps rate hikes in 2017F.
The U.S. economy has been recovering steadily in 2016. The U.S. GDP grew at an annualized rate of 3.2% QoQ and 1.4% QoQ in 3Q16 and 2Q16. We believe the Fed will take the opportunity to increase interest rate in 2017 to maintain its economic recovery.
Expectation of the U.S. rate increase has already driven up the USD, accentuating the depreciative pressure on RMB. While the government is facilitating structural reforms, we expect PBOC to ease liquidity further and formulate more aggressive stimulus. China would maintain a stable growth in 4Q16 and 2017.
December 8,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –Stepid growth on persisting political and economic fragmentation
The "no" vote in Italian constitutional reform referendum is a fresh blow to the European Union (EU). We believe it may trigger short-term volatility in the financial sector but not another European banking crisis.
Political and fiscal fragmentations, as well as an ailing banking sector, have been dragging down the Eurozone; uneven growth among member countries also reflects a fragile recovery.
Eurozone's growth was steady at an annual rate of 1.7% in 3Q16; also unemployment has just fallen below 10% for the first time since 2009. However, unresolved issues over European banking sector and fiscal integration among member states will remain headwinds to further recovery. Hence, we project Eurozone's GDP to expand by 1.5% YoY for 2017F.
December 1,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –Shenzhen-Hong Kong Stock Connect to promote a more integrated stock market
The Shenzhen-Hong Kong Stock Connect, to be launched on December 5, 2016, is another milestone of China's further liberalization of its capital market and an important step in the country's financial market reform.
Along with the Shanghai-Hong Kong Stock Connect commenced in 2014, the mutual stock market access creates bilateral access to the stock market in Shanghai, Shenzhen and Hong Kong, allowing foreign investors to participate in PRC's A-share market and PRC investors to trade in the Hong Kong market.
For southbound trading, PRC investors will select stocks in technology, gambling, brokers, and conglomerates with international business exposure.
For northbound trading, overseas investors will prefer mid-/large-caps in fast-growth sectors including telecommunication, high-technology, food & beverages, and healthcare.
November 25,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –Stimulating growth through FAI
In the midst of an economic rebalancing, China will rely on investment to stabilize growth. Continuous urbanization and improving investment efficiency through high value-added investments will be the key drivers of the economy in 2017.
A combination of accommodative monetary and expansionary fiscal policies will help promote investment-led growth. China's economy will gather momentum and forward-looking economic indicators point to a modest acceleration in domestic demand.
FAI growth would stabilize between 9.0% and 11.0% in the coming quarters, provided that approved projects would commence on schedule and ongoing projects would proceed without major disruptions. With improved financing and supportive government policies, we believe 2016F/17F FAI growth would reach 9.0% and 10.2%.
November 18,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –China to fine-tune economic policies in 2017
China will continue to fine-tune its macroeconomic policies in 2017. Concurring with the country's structural rebalancing objectives, China's policy is characterized by prudent monetary easing and aggressive fiscal expansion.
Given the depreciation pressure of RMB and the need to revive economic momentum, PBOC is likely to maintain an accommodative stance by injecting more liquidity into the interbank market through reverse repo and medium-term lending facility (MLF) instead of employing radical interest rate and RRR cuts.
A proactive fiscal policy with an emphasis on stimulating domestic demand will be crucial for growth in 2017. Entering the second year of China's 13th Five-Year plan (2016- 2010), we expect the central government to ramp up infrastructure investments.
November 10,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen –Trump’s victory implies a new economic order
Trump's victory represents the desire for a non-status-quo economic and foreign policies. With Trump's various controversial proposals and unsure of the consequences of such policies, investor confidence has taken a dive, as reflected by turbulence across the financial market in Asia, Europe and the U.S. Similar to the Brexit vote in June, the election's impact on the financial market would be one-off.
The role of USD and strength of the U.S would come into question. We believe the USD index would stay volatile in medium-to-short term.
China would face unprecedented challenges in sustaining economic and trade ties with the U.S. Nonetheless, we believe direction of the bilateral trade relationship would stay unchanged in the short term.
November 3,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen – U.S. rate hike on hold
he Fed has kept the target range of the Fed fund rates between 0.25% and 0.5% in the latest meeting.
Concerns over financial market volatility, uneven global economic recovery, mild pricing pressures and the upcoming U.S. presidential election have delayed the rate hike.
A low interest rate environment continues to direct liquidity and capital flow into the Asian economies, supporting performance of their capital markets.
China’s economy will rebound further with the extended period of low interest rates. With China’s accommodative economic policies and impacts of credit-loosening measures on consumption and investment to be realized in 2H16, we expect economic growth to improve going forward.
October 28,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen – Navigating RMB’s “New Normal”
Persisting RMB weakness against the USD reflects divergence in monetary policies between the U.S. and other major economies, driving more investment to USD assets.
Brexit and upcoming U.S. presidential election, potential U.S. rate hike before year-end and continued liquidity injection by ECB and BOJ have sent the USD soaring and a host of other currencies tumbling.
Although bilateral CNY against the USD has been depreciating, RMB remains stable against a basket of global currencies. A wider and bidirectional floating range for RMB will become “new normal” in coming years. We believe gradual marketization RMB is an ongoing trend with wider range of fluctuation. Our year-end target for CNY is 6.82.
October 19,2016 Economic Acumen Commentary by CEBI Research Team
Economic Acumen – ‘China economy to stay upbeat in 3Q16’
China’s macro indicators for 3Q16 improved across the board on recovery in domestic demand.
China’s economy will continue to strengthen on a QoQ basis due to the delayed effects of loosening measures.
Economic policies in China will remain accommodative in 4Q16 and 1H17. More monetary easing through Reverse-repo, Medium-term Lending Facility (MLF), and proactive fiscal stimulus can be expected.
We expect China’s economic growth to remain stable in 2016/17.
