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Quarterly Investment Review Letter 2016 Q1

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To help troubled borrowers, China’s government is embracing debt-for-equity swaps. But while such swaps will reduce the burden on indebted companies and avoid an abrupt deleveraging [bankruptcy], they will also load more stress onto bank balance sheets. Beijing will still eventually have to come up with a workable plan to recapitalize banks; this is not it.

– Long Chen, Gavekal Research, Apr 7, 2016

 

Growth is slowing, debt is rising, and the government is openly talking about “zombie companies” in key industries. This is today's China…

- Gavekal Dragonomics, Apr 5, 2016

 

The signals from Chinese policymakers are mixed. In recent months official rhetoric has taken a harsh turn, with praise for deleveraging and calls for money-losing “zombie” companies to be shut down. At the same time, officials are promising yet more infrastructure spending, and new data show a record surge in bank loans in January.

– Andrew Batson, Gavekal Research, February 17, 2016

 

Janet Yellen [March 29, 2016] confirmed that uncertainty over the global outlook was why the Federal Reserve scaled back expected interest rate hikes. But just what happened in the world to change her mind? Rather than slightly weaker global growth prospects, market turbulence is the more likely culprit—in particular the stress over China’s currency.

- Andrew Batson, Gavekal Research, March 30, 2016

 

While China negatively influences the US Fed outlook, the Monthly High Income and Strategic Dividend Bundle continue to climb their way to lead with 2.33 and 3.22 % YTD. We would be pleased to chat further.