July, 22 2016 by lsr team

Our preliminary estimates show that Chinese GDP growth stabilised at 6% in Q2. Domestic demand growth slowed to 5% in Q2, but offset by net trade. With the improvement in activity momentum largely a result of policy stimulus, it is highly questionable whether the government’s growth target can be achieved without fresh stimulus to boost investment. More worryingly, despite the recent stabilisation in industrial profits, private fixed asset investment growth has remained weak. With the outlook of domestic demand souring, companies are under pressure to deleverage an...

May, 12 2016 by lsr team

Following a surge in new loans earlier this year, investors are concerned again about the sustainability of China’s debt. Severe producer price deflation and decimated profits show just how unproductive investment has been. The good news is that China’s total non-financial debt is still low compared to most advanced countries. However, China’s refusal to tackle zombie companies has caused a massive slowdown in productivity, compromising China’s ability to grow its way out of the debt problem…

December, 09 2015 by lsr team

Twelve months ago we said 2015 would be a year of ‘deceptive calm’. With the S&P 500 up 5% and US 10-year yields around 5bps higher, you could say our forecast was accurate. Markets spent much of the year in an anxious state, fretting about Greece, then China, then the risk of a synchronised global recession. In 2006 and 2007, LSR had a high conviction that a financial meltdown was about to wreak havoc on the global economy. This time around we stick with our 2015 theme ‘Keep Dancing’ but with no great conviction. Looking ahead to 2016, China...

October, 06 2015 by lsr team

The emerging market (EM) slowdown that started in 2011 and gathered pace after the taper tantrums of 2013 continues unabated. The two questions investors often asked over the last couple of years have been: are EMs heading for a 1990s-style crash and is the worst behind us? We have replied No to both, and the follow-up question has usually been ‘how much more pain is in store?’ This has been tough to answer. Our latest publication - LSR View looks at the extent of the adjustments that EMs still need to make by answering the following set of questions: 1) W...