Charts of the Week: Chinese stock rallies, Japan’s loose liquidity and Slowbalisation

This week’s charts cover the following data:

• Comparing Chinese bear markets and bouncebacks
• A decade plus of Slowbalisation
• Loose policy in Japan means central banks are adding liquidity again
• India is slowing down in our Nowcast
• Bond candlesticks show yields burning historically bright
• Banks tighten loan standards and that has implications for high yield
• Women in the workforce and C suite from Norway to Egypt
• Chinese tourists are slowly returning to Japan
• Fewer blizzards mean more Americans came to work
• PMIs suggest emerging markets will grow while developed markets stumble
• Macrobond webinar – China’s great reopening: assessing the prospects for Asia’s growth engine

Comparing Chinese bear markets and bouncebacks

China’s zero-Covid policy was tough on its equity market. As our chart shows, it was the worst bear market in recent memory, posting a maximum intra-year decline, or drawdown, of 46 percent from its peak that year.

However, steep declines by the MSCI China Index are not unusual. As the European sovereign debt crisis sideswiped markets around the world, the Chinese benchmark posted a maximum drawdown of 38 percent during 2011.

Amid US-China trade tensions during the Trump administration, the drawdown reached 33 percent. And in 2015, a period of market froth in China was followed by a 35 percent decline on recession concerns.

For investors gauging whether history endorses a bet on China’s reopening, there was a modest rebound after the 2011, 2015 and 2018 episodes, averaging 18 percent over 6 months and 23 percent over a year and a half. The MSCI China Index is already 30 percent above its October trough.

Tip: this chart allows for the change region function.

A decade plus of Slowbalisation

This chart tracks our globalisation barometer – as measured by the sum of exports and imports as a percentage of GDP.

Our chart starts in 1970, at the tail end of what can be considered the postwar era of reconstruction, international cooperation, Keynesian economic approaches and fixed exchange rates.

In about 1980, a trend towards economic liberalisation began. This second wave of globalisation, in green, was marked by growing access to cheap, deregulated labour in emerging markets and other innovations such as container shipping.

Since the financial crisis, globalisation looks more like “slowbalisation,” with the barometer in retreat. Tariffs are rising, environmental concerns are prompting consumers to seek locally produced goods, and countries are aiming to “reshore” industries at a time of heightened geopolitical tension.

Carbon taxes may be the next blow to globalisation, making shipping more expensive.

Loose policy in Japan means central banks are adding liquidity again

Last month, we wrote about Japan’s yield control policies. The central bank is an outlier globally – the last of its peers to maintain negative interest rates. Japan had recently surprised markets by widening the range of acceptable government bond yields, prompting speculation that a greater policy shift could follow.

But the Bank of Japan vowed to double down and keep buying bonds to keep yields low. As our chart shows, these purchases were recently bigger than the Federal Reserve’s quantitative tightening program.

This means that on a global basis, central banks are once again adding liquidity to global financial markets. This likely contributed to the rally across equity and credit markets in January.

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Macrobond news

Webinar: China’s great reopening: assessing the prospects for Asia’s growth engine

Are we on the cusp of a boom in tourism and trade as pent-up Chinese demand is unleashed? What is the outlook for economies intertwined with China, from Australia to Germany?

Our speakers examined whether Asia's biggest economy is likely to resume its role as the global growth engine – or whether headwinds like a deflating property bubble will weigh heavily on China and its trading partners.

WATCH REPLAY

Guest blog: Saudi Arabia must persist in its diversification drive

Dr. Said Al Shaikh, a professor at the Kingdom’s University of Business and Technology and former chief economist at a major bank, says the nation’s Vision 2030 plan is key to build employment in non-oil sectors.

READ MORE

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