23 Feb

China Is Stabilizing through Policy Support

WRITTEN BY OppenheimerFunds


Make no mistake, China is a controlled economy where growth can still be manufactured at will. Massive fiscal and monetary stimulus has China going through a “mini” boom with the pace of economic growth stronger and more broad based than what the markets expected. And as China goes, so goes the rest of emerging markets and commodity prices, at least for the first two quarters of 2017.

China Is Stabilizing through Policy Support

Don’t confuse a policy-driven cyclical rebound for a change in the long-term outlook. The secular issues in China of high savings rates, capital misallocation, and increasing debt loads are still intact. And these issues will assert themselves once the growth outlook starts fading in the second half of the year. Importantly, China’s debt problems are unlikely to be resolved with a massive credit crisis. The way the debt problem gets resolved over the long term is by the Chinese economy growing at a much more modest pace as the adjustment process from a manufacturing-based to a service/consumer-based economy continues.

China Is Stabilizing through Policy Support

Market Realist

China’s (FXI) economy grew 6.8% in the fourth quarter of 2016, boosted by higher government spending and bank lending. It was the first time in two years that the Chinese economy has shown an uptick in GDP growth.

However, China’s debt-to-GDP ratio rose to a whopping 277% at the end of 2016 from 254% the previous year. That could be a severe strain on the economy in the coming years. Also, it faces more pressure to cool its overheated housing market.

Another risk to the economy is the possibility of faster-than-expected U.S. (RWL) (RWJ) interest rate hikes. That could cause higher capital outflows and further stress China’s financial system.

The country’s exports could suffer another setback if U.S. (RWK) (RDIV) President Trump goes ahead with his proposed protectionist measures.

A hard landing of the Chinese economy could have a big impact on commodities and most emerging markets as it did in late 2015 and early 2016.

Latest articles

German chip maker Infineon Technologies has reportedly raised 1.55 billion euros (~$1.74 billion) in capital by selling its shares to fund its acquisition of Cypress Semiconductor (CY). Infineon has sold ~113 million new shares at 13.70 euros each.

As of June 18, Dunkin’ Brands (DNKN) was trading at $80.07, an 8.9% rise since reporting its first-quarter earnings on May 2. Also, DNKN was trading at a premium of 29.8% from its 52-week low of $61.69 and a discount of 1.6% from its 52-week high of $81.40.

19 Jun

Are Lower Oil Prices Weighing on ExxonMobil Stock?

WRITTEN BY Maitali Ramkumar

ExxonMobil (XOM) stock has fallen 7.1% in the second quarter so far. Let's review ExxonMobil's stock performance in comparison to oil price changes and equity market movements in the quarter.

19 Jun

As Facebook Unveils Libra, MSFT and CRM Join a Blockchain Group

WRITTEN BY Mayur Sontakke, CFA, FRM

On June 18, Facebook (FB) launched Libra, its own cryptocurrency. On the same day, CoinDesk published another piece of blockchain news that didn’t receive as much fanfare as Facebook’s Libra news. Was the timing a coincidence? We think not.

Uber Technologies (UBER) has picked Melbourne as another test site for its flying taxi service known as UberAir. The Australian city is the first international test site Uber has chosen for its flying taxi service. The addition of Melbourne brings the number of test locations Uber has picked for its UberAir service to three.

Lyft (LYFT) and Uber Technologies (UBER) are pushing back against California legislation that would require them to recognize their drivers as employees rather than independent contractors. The legislation would require companies like Lyft to give their drivers the compensation and benefits spelled out under California’s employment regulations.