Chart of the Week: China credit impulse
Head of Macro Analysis
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
Click here to download this week's full edition of Macro Chartmania.
Here and there, we hear that the market is too optimistic about the recovery and that next year many challenges, from vaccine delivery to wave of bankruptcies, remain that could seriously jeopardize the exit from the pandemic era. At Saxo, we don’t think we are wearing red-colored glasses when we say that the year 2021 should be marked by a strong global recovery driven by central bank liquidity and positive growth impulse from China. The below chart represents the evolution of China credit impulse which is basically the change in the growth rate of aggregate credit as a percentage of gross domestic product. This is certainly one of the most important indicators for investors looking to know where the global economy is heading into next year. It is worth watching it as it leads the global economy by 9 to 12 months. For the first time since the 2015 yuan devaluation, China credit impulse is running above 5% of GDP. To be precise, it was standing at 6.2% of GDP in Q2 this year, at the time of the global lockdown. Even if credit impulse is close to a peak for the downturn phase of this mini-cycle, the flow of credit from the worst period of the health crisis will continue to support the global recovery at least until the end of Q1-Q2 next year. The strong improvement in China credit impulse is one of the two reasons, along with the sharp increase in global central bank liquidity since the outbreak, that makes us optimistic about the economic recovery next year. It will not be linear, and there will certainly be difficulties, but it is safe to say as this chaotic year is about to end that the worst is probably behind us. In terms of investment decision, the strong push in credit from China should be good for risky assets (notably emerging and frontier markets) and contribute to the reflation narrative.
Quarterly Outlook Q2 2022
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Energy crisis could turn energy stocks into secular winnerWith long-term expected returns for the global energy sector close to 10%, we look at 40 stocks that could be set to cash in.
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.