Weekly Macro Themes - Remain bullish Chinese stocks
This week I covered the following topics:
1. China Macro: China’s economy (and housing market) remain mired in downturn, and deflation risk dominates vs inflation risk; anticipate further stimulus to help get the recovery back on track.
2. Chinese Stocks: Remain bullish Chinese stocks given cheap valuations, improving technicals, basing macro (albeit on-watch), chance of stimulus as a key catalyst, and still mostly bearish sentiment.
3. Chinese Bonds: Chinese government bonds look very expensive (thanks to deflation, declining growth, property downturn); at-risk of selloff if growth/property rebounds.
4. US Govt Bond Yields: Multiple short/medium-term drivers have pushed US government bond yields higher (helping turn treasuries into an undervalued and underappreciated hedge/diversifier).
5. Base Metals: Bullish industrial metals given strong thematic demand, under investment in supply, and cyclical swing factors that look likely to turn from headwind to tailwind.
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