EM by EM #2 – Don’t fight the Xi
Following the publication of my EM by EM debut piece, where I highlighted the attractive set-up for Brazilian sovereigns (which thus far have fared well), we now shift our focus across the Pacific to Beijing.
Positions in the bottom, key takeaways here:
- Chinese consumers are back with a vengeance after COVID. Pend-up savings and real incomes fuel the boom
- Industry production is steady but likely to suffer from weaker export demand than what the latest data would imply. If so the initial export boom is a bit of a red herring
- CCP successfully managed to avoid an overall systemic meltdown with the Evergrande/Real Estate complex crisis in the fall of 2021
- Should the global credit market once again take the Chinese real estate complex as a hostage, the CCP has plenty of macro-room to respond
At the Central Economic Work conference held at the end of last year, the CCP leadership made it clear that it planned to prioritize consumption-growth to drive the economy in 2023. By now it is evident that the CCP is committed to this plan. In short, it would be unwise to bet against Xi’s agenda for the remainder of the year:
Following the publication of my EM by EM debut piece, where I highlighted the attractive set-up for Brazilian sovereigns (which thus far have fared well), we now shift our focus across the Pacific to Beijing.
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