McVEAN Trading & Investments, LLC
CHINA OUTLOOK APRIL 2, 2020
Michael Drury Chief Economist McVean Trading and Investments, LLC
Past Performance Is Not Necessarily Indicative Of Future Results.
0
CHINA LEADS THE GLOBAL MANUFACTURING China, Eurozone and US PMI 65
52.5
60
51 55
50 49.5
45
40 7/1/2012
48 7/1/2013
7/1/2014
Source: Markit Economics
7/1/2015 Eurozone
7/1/2016 US
7/1/2017 CHINA
Past Performance Is Not Necessarily Indicative Of Future Results.
7/1/2018
7/1/2019
Mar-20
1
AN EVEN SHORTER SHARPER SHOCK?
Past Performance Is Not Necessarily Indicative Of Future Results.
2
PREMIA CHINA ETFs OUTPERFORMED GLOBAL EQUITIES YEAR-TO-DATE; INDEXED
20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
Source: Bloomberg
-40.00% 1/1/2020
1/21/2020 NEW ECONOMY ETF
2/10/2020
BEDROCK ECONOMY ETF
MSCI WORLD
3/1/2020 MSCI Emerging Markets
Past Performance Is Not Necessarily Indicative Of Future Results.
3/21/2020 MSCI China
3
CHINESE EQUITIES / WORLD EQUITIES
Past Performance Is Not Necessarily Indicative Of Future Results.
4
MANAGING THE FREE FLOATING YUAN CORRUPTION CAMPAIGN CURRENCY BREAK OOPS
GREAT FINANCIAL CRISIS
EU CRISIS
SCHUMER
Souce: bloomberg
Past Performance Is Not Necessarily Indicative Of Future Results.
5
CHINA HOLIDAY MIGRATION INDEX
Source: Towardsdatascience.com
Past Performance Is Not Necessarily Indicative Of Future Results.
6
CHINA ECONOMIC RECOVERY INDEX
100
90
80
70
60
50
40
30
20 1/25/2020
2/4/2020
2/14/2020
2/24/2020
3/5/2020
3/15/2020
3/25/2020
2020 2019 Source: WeBank. (China Economic Recovery Index) is used to gauge the resumption rate of economic activity in China during COVID-19 outbreak. It is calculated by analyzing aggregated geolocation data. CERI of China is determined based on the CERI of 50 cities weighted according their GDP.
Past Performance Is Not Necessarily Indicative Of Future Results.
7
POSSIBLE CHINESE STIMULUS
• INCREASE DEFICIT FROM 2.8% OF GDP TO 3.5% VIA FORGIVENESS OF PENSION AND TAX CONTRIBUTIONS • ALLOW AN ADDITIONAL 1 TRILLION IN PROVINCIAL LOANS, WHICH EQUALS ROUGHLY 1% OF GDP
• REDUCE RESERVE REQUIREMENT ANOTHER 1%, WHICH GENERATES 1.1TRILLION YUAN IN LENDING (1.1% OF GDP) • REDUCE INTEREST RATES 20 MORE BASIS POINTS TO 2%. • WORLD BANK ESTIMATES 0.1% TO 2.3% REAL GDP GROWTH FOR ALL OF 2020 – DOWN FROM 5.8% ESTIMATE EARLIER
Source: McVean Trading & Investments, LLC Past Performance Is Not Necessarily Indicative Of Future Results.
8
CHINA COAL CONSUMPTION
Past Performance Is Not Necessarily Indicative Of Future Results.
9
NO2 LEVELS OVER CHINA
Source: Visualcapitalist.com Past Performance Is Not Necessarily Indicative Of Future Results.
10
CHINA IS OPERATING ELSEWHERE IS NOT
Past Performance Is Not Necessarily Indicative Of Future Results.
11
CHINA CAR SALES WERE REBOUNDING MONTHLY CHINA CAR SALES SEASONALLY ADJUSTED BY MCVEAN TRADING
32
28
24
20
16
12
8
4 1/31/2010
1/31/2011
1/31/2012
1/31/2013
Source: China Automotive Information Net
1/31/2014 3 MO AVG
1/31/2015
1/31/2016
1/31/2017
CURRENT MONTH
Past Performance Is Not Necessarily Indicative Of Future Results.
1/31/2018
1/31/2019
1/31/2020
Feb-20
12
AUTOS OPENED EARLIEST
DONGFENG HONDA IN WUHAN MARCH 15
Past Performance Is Not Necessarily Indicative Of Future Results.
13
CHINA: AUTO SALES GRADUALLY NORMALIZING
Past Performance Is Not Necessarily Indicative Of Future Results.
14
CHINA AIR TRAFFIC
Past Performance Is Not Necessarily Indicative Of Future Results.
15
CHINA: PROPERTY SALES BACK TO NORMAL
Past Performance Is Not Necessarily Indicative Of Future Results.
16
NINGBO PORT ARRIVALS FEBRUARY 21st VS MARCH 25th
February 21st
March 25th
Source: marinetraffic.com Past Performance Is Not Necessarily Indicative Of Future Results.
17
SHANGAI PORT ARRIVALS FEBRUARY 21st VS MARCH 25th
February 21st
March 25th
Source: marinetraffic.com Past Performance Is Not Necessarily Indicative Of Future Results.
18
CRUDE OIL 150
130
110
90
70
50
30
10
Souce: bloomberg
Mar-20 Past Performance Is Not Necessarily Indicative Of Future Results.
19
REST OF WORLD STIMULUS SHOULD HELP CHINESE EXPORTS
• US DOES $2.2 TRILLION IN STIMULUS = 10% OF GDP, ACCOUNTS FOR ~20% OF CHINESE EXPORTS • JAPAN ANNOUNCES $554 BILLION STIMULUS = 11% OF GDP, ACCOUNTS FOR ~10% OF CHINESE EXPORTS • EU WILL SPEND $825 BILLION ON STIMULUS = 4% OF GDP, ACCOUNTS FOR ~20% OF CHINESE EXPORTS
Source: McVean Trading & Investments, LLC Past Performance Is Not Necessarily Indicative Of Future Results.
20
BEIJING TRAFFIC
FEBRUARY 16th vs MARCH 22nd
Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.
21
SHANGHAI TRAFFIC
FEBRUARY 16th vs MARCH 22nd
Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.
22
GUANGZHOU TRAFFIC
FEBRUARY 16th vs MARCH 22nd
Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.
23
CHINA MONDAY TRAFFIC
Source: tomtom.com
Past Performance Is Not Necessarily Indicative Of Future Results.
24
CHINA WEEKEND TRAFFIC
Source: tomtom.com
Past Performance Is Not Necessarily Indicative Of Future Results.
25