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Positioning Watch – Markets Still Favoring West Over East

We are starting to see the final signs that the Chinese frenzy is over for now, as briefings have been nothing but disappointments after the first round of stimulus proposals. It’s time to load up on US risk again, as it’s one of the only places on earth where growth is currently rebounding.
2024-10-17

Hello everyone, and welcome back to our positioning update.

The big theme in markets currently is how markets are responding, positioning-wise, to the dwindling momentum in Chinese equities, and which geographies that money is being moved to now that the China story is slowly but surely fading. Today’s briefing on the outlook for the property market was, once again, a disappointment, and it seems like China is boosting supply to solve a demand problem, likely because they are focusing more on their annual 5% GDP growth target than on solving the structural issues at hand.

We are starting to see the response from markets now, with the abnormal inflows into Chinese equity ETFs fading. Yesterday saw the first outflow since the first stimulus proposals a couple of weeks ago.

We have been fading the Chinese rebound story for some time and have now gone short on Hang Seng. It’s very tempting to add to that position at the current juncture, but the problem with trading China now (in either direction) is that you are extremely exposed to new headlines and briefings, with China now almost announcing a briefing every other day.

Chart 1: Chinese fund flows are fading fast now

We are starting to see the final signs that the Chinese frenzy is over for now, as briefings have been nothing but disappointments after the first round of stimulus proposals. It’s time to load up on US risk again, as it’s one of the only places on earth where growth is currently rebounding.

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