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Steen's Chronicle: China going counter-cyclical Steen's Chronicle: China going counter-cyclical Steen's Chronicle: China going counter-cyclical

Steen's Chronicle: China going counter-cyclical

Macro 8 minutes to read
Steen Jakobsen

Chief Investment Officer

Summary:  The global economy is headed into contraction, and the spotlight is on China's response.

It is a great honour to have Dr. Charles Su of CIB Research as guest columnist for this latest edition of Steen's Chronicle. Dr. Su will be a keynote speaker at Saxo's upcoming Gateway to China series of events to be held in Copenhagen on March 13, in London on March 20, and in Hong Kong on March 27.

Click here to sign up for this exclusive opportunity to learn how to unlock opportunities within the world’s second-largest economy. 

Since 2018, the global economy has moved towards a downturn while the supply chain realignment – of which the China/US trade talks are a major component – accelerates. For investors looking to forecast the coming changes, the Federal Reserve's apparent pausing of its quantitative tightening plans and the changes seen in the Chinese credit cycle are key factors.

In Dr. Su's attached presentation, he also notes that the World Trade Organization is facing 'judgment day' at the 2019 Japan G20 summit as the fractures within the present multilateral system of global trade make themselves more apparent.
Lower trade growth
Source: CIB Research
In terms of the China/US trade negotiations, a deal in which China purchases more US goods will not be without its costs; the question is, who among the country's present trade partners will feel the most pain? 
China goes counter-cyclical
Source: CIB Research
China's shift from deleveraging to counter-cyclical moves is a key component of our outlook for 2019 and 2020. With China and the Fed loosening policy, Dr. Su sees recession as unlikely over this timespan while also noting the possibility of outperformance among emerging market assets.

For a full copy of Dr. Su's presentation on China going counter-cyclical, please click here.

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  • Macro: It’s all about elections and keeping status quo

    Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

    Read article

  • FX: The rate cut race shifts into high gear

    As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

    Read article

  • Equities: The AI and obesity rally is defying gravity

    Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

    Read article

  • Fixed income: Keep calm, seize the moment

    With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

    Read article

  • Commodities: Is the correction over?

    Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

    Read article
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