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Christopher Wood christopher.wood@clsa.com +852 2600 8516<br />
conference include larger-scale tax and fee cuts for corporations and an increase in the issuance of<br />
special-purpose local government bonds.<br />
Figure 18<br />
OECD Composite Leading Indicator<br />
102<br />
(DI)<br />
101<br />
100<br />
99<br />
98<br />
97<br />
96<br />
95<br />
Jan 04<br />
Jul 04<br />
Jan 05<br />
Jul 05<br />
Jan 06<br />
Jul 06<br />
Jan 07<br />
Jul 07<br />
Jan 08<br />
Jul 08<br />
Jan 09<br />
Jul 09<br />
Jan 10<br />
Jul 10<br />
Jan 11<br />
Jul 11<br />
Jan 12<br />
Jul 12<br />
Jan 13<br />
Jul 13<br />
Jan 14<br />
Jul 14<br />
Jan 15<br />
Jul 15<br />
Jan 16<br />
Jul 16<br />
Jan 17<br />
Jul 17<br />
Jan 18<br />
Jul 18<br />
Source: OECD<br />
Nonetheless, it remains important to understand the sheer scale of deleveraging which has seen<br />
China bank asset growth running below nominal GDP growth since June 2017. At the risk of<br />
belabouring the point, GREED & fear will repeat the key data point. China depository corporations’<br />
asset growth has slowed from 15.8% YoY in November 2016 to 6.8% YoY in November 2018,<br />
compared with nominal GDP growth of 9.6% YoY in 3Q18 (see Figure 19).<br />
Figure 19<br />
China bank asset growth and nominal GDP growth<br />
28<br />
24<br />
(%YoY)<br />
China depository corporations' asset growth<br />
Nominal GDP growth<br />
20<br />
16<br />
12<br />
8<br />
4<br />
Jan 07<br />
May 07<br />
Sep 07<br />
Jan 08<br />
May 08<br />
Sep 08<br />
Jan 09<br />
May 09<br />
Sep 09<br />
Jan 10<br />
May 10<br />
Sep 10<br />
Jan 11<br />
May 11<br />
Sep 11<br />
Jan 12<br />
May 12<br />
Sep 12<br />
Jan 13<br />
May 13<br />
Sep 13<br />
Jan 14<br />
May 14<br />
Sep 14<br />
Jan 15<br />
May 15<br />
Sep 15<br />
Jan 16<br />
May 16<br />
Sep 16<br />
Jan 17<br />
May 17<br />
Sep 17<br />
Jan 18<br />
May 18<br />
Sep 18<br />
Source: PBOC, CEIC Data, National Bureau of Statistics<br />
Meanwhile, to GREED & fear, the above evidence of a global slowdown, combined with the growing<br />
prospects of America converging with that trend, has a silver lining for Asia and other emerging<br />
markets. That is because it raises the prospects of not only an end to Fed tightening but also an end<br />
to US-dollar strength, given the continuing negative correlation between a strong dollar and Asian<br />
and emerging markets. The correlation between the US Dollar Index and the MSCI Emerging<br />
Markets has been a negative 0.92 since the beginning of 2017 (see Figure 20).<br />
Thursday, 3 January 2019 Page 10
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