Monthly Perspectives
For important disclosures, refer to the Disclosure Section, located at the end of this report.
n
No
vem
be
r2
01
2
October has been a positive month for risky
assets. However, the S&P 500 had its first negative
month since May. Euro and US financial stocks
show a robust performance since the beginning of
the year.
The world economy maintains a trend-like growth.
Balance sheet repair, de-leveraging and structural
adjustment (mainly in Europe) are key headwinds.
Emerging economies show growth below the high
rates of the past decade. Nonetheless, recent
economic data in the US and China have looked a
bit better. In China, growth seems to be stabilizing
due to accelerated government infrastructure
spending and better exports.
The 2012 US Presidential Election outcome could
be viewed by markets as a signal for the direction
of policy in some important areas. An adverse
shock is still the possibility that politicians in
Washington will not be able to reach an agreement
on matters of taxation and spending. That would
send the US and probably the global economy
into a new recession. However, if the current level
of uncertainty subsides with a successful
resolution of the US fiscal challenges ahead,
growth could be boosted.
Europe remains a laggard. Fiscal retrenchment,
structural adjustment, and banking sector
weakness, particularly in the peripheral
economies, are the sources of stagnation or even
recession.
On the subject of earnings, the Q3 2012 earnings
season has been poor, with many companies
missing revenues estimates.
Besides the 57th US Presidential Election, two
other important political events will be held in
November: the Communist Party Congress and
the Catalonia regional elections.
October’s Highlights
Asset Performance Review – October 2012• October was a positive month for risky assets. Commodities were an important exception;
• The ECB’s bond buying program continued to support gains in peripheral markets (equities and fixed
income markets). The Greek Athex index rose 8.4%;
• The S&P 500 fell -1.8%, down for the first time since May;
• Core government bonds had a moderately negative month in October.
Source: Bloomberg
Asset Performance Review – YTD 2012• Spanish and Chinese equities are the worst performing assets within our selection;
• Greek equities have produced a YTD performance that is not too different with the performance seen
in the Dax;
• Euro and US financial stocks show a robust performance since the beginning of the year;
• Brazilian equities are barely positive YTD. The Real exchange rate has depreciated.
Source: Bloomberg
80%
90%
100%
110%
120%
130%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2009 2010 2011 2012F 2013F 2014F 2015F 2016F 2017F
General Government Balance and Debt (% GDP)
General Government Balance (% GDP) (LHS)
General Government Debt (% GDP) (RHS)
2%
4%
6%
8%
10%
12%
14%
16%
18%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1998 2000 2002 2004 2006 2008 2010 2012
Unemployment rate (%)
Portugal
Euro-zone
Portugal: Programme is still broadly on track• Portugal’s fifth troika
review: GDP growth
projection has been kept
at -3.0% for 2012.
Economic prospects for
2013 have been
downgraded from 0.2% to
-1.0%;
• Portugal’s budget for 2013
will allow it to meet the
deficit targets set by the
troika. However, public
resistance to austerity
seems to be growing. The
economic downturn
should continue (see
chart);
• The long-end of the
Portuguese government
curve shows an impressive
performance this year.
Source: INE and European Commission Source: Bloomberg
Source: IMF Country Report, October 2012 Source: Eurostat
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
70
75
80
85
90
95
100
105
110
02 03 04 05 06 07 08 09 10 11 12 13
Portuguese EC Economic Sentiment
Indicator & GDP
EC Economic Sentiment Indicator (LHS) GDP (% y/y, RHS)
2%
4%
6%
8%
10%
12%
14%
16%
18%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jan-12 Apr-12 Jul-12 Oct-12
10-year Government Bond Yields (%)
Portugal
Italy
Spain
0%
1%
2%
3%
4%
5%
6%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Spanish Central Government Borrowing
(% of GDP)
2011
2012
Spain: Economic and fiscal outlook remains poor• GDP fell by -0.3% in Q3. This
marks the fourth consecutive
quarter of falling GDP and puts
the level of GDP 5.6% below its
2008 peak (see chart);
• The country still lacks a banking
system that can actively support
Spain’s economic restructuring;
• Spain’s recent budget intends to
deliver a deficit of 4.5% of GDP
in 2013. However, GDP growth is
expected at -0.5% y/y, which is
probably optimistic;
• The pressure on Spain to enter a
programme – and hence trigger
the ECB’s bond buying plan –
has been eased by the drop in
government bond yields (see
chart);
• Moody’s confirmed Spain at
Baa3, but kept the sovereign on
Negative outlook.
Source: European Commission and INESource: Bloomberg
Source: Spanish Central BankSource: INE, INE, ISTAT and Central Statistics Office of Ireland
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
Spanish Government Bond Yields (%)
2-year 5-year 10-year
-6%
-4%
-2%
0%
2%
4%
6%
8%
70
80
90
100
110
120
00 01 02 03 04 05 06 07 08 09 10 11 12 13
Spanish GDP & EC Economic
Sentiment Indicator
EC Economic Indicator (LHS)
GDP (%y/y, RHS)
-3.5%
-2.5%
-1.5%
-0.5%
0.5%
1.5%
65
75
85
95
105
115
1998 2000 2002 2004 2006 2008 2010 2012
Euro-zone EC Economic Sentiment
Indicator & GDP
EC Economic Sentiment Indicator (LHS) GDP (%y/y, RHS)
Euro-zone: ECB prompts a period of relative calm
• Activity in Q3 was
probably more resilient
than initially expected;
• Nonetheless, business
and consumer surveys
points to a weak
outlook for Q4;
• The German and French
indices are also at low
levels;
• Euro-zone
unemployment rate
reached a new record
high (11.6%) in
September;
• German unemployment
registered its sharpest
monthly increase since
July 2009, leaving the
unemployment rate at
6.9%.
Source: European Commission and Eurostat
7%
8%
9%
10%
11%
12%35
45
55
65
2005 2007 2009 2011
Euro-zone Unemployment rate
& PMI Composite
Euro-zone PMI surveys Composite (LHS)
Unemployment rate (rev order; RHS)Source: Markit and Eurostat
Source: Finance Ministers
0
10
20
30
40
50
60
70
80
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12
Probability of a Country Leaving the Euro (%)
By end 2012 By end 2013 By end 2014
Source: Intrade
0
10
20
30
40
50
60
70
80
90
0
500
1,000
1,500
2,000
2,500
86 88 90 92 94 96 98 00 02 04 06 08 10 12
Housing Starts & NAHB Homebuilders' Index
NAHB Housing Index (Asv. 4m, LHS)
Housing Starts (000s Annualised, RHS)
0
50
100
150
200
250
300
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
Change in Non-Farm
Payroll Employment (000s)
Change in Payroll Employment Three Month Average
-30%
-20%
-10%
0%
10%
20%
30%
0
20
40
60
80
100
120
07 08 09 10 11 12 13
Consumer Confidence &
Capital Goods Orders
University of Michigan Survey of Consumer Confidence Sentiment
US Capital Goods Shipments Nondefense Ex Aircraft Y/Y NSA
US Economy: Still sluggish but stable• The resurgence in the
NAHB index points to
continued growth in
residential construction
spending;
• A faster consumption
growth offset a slower
investment growth;
• The fall in mortgages
rates has supported
mortgage refinancing
and reduced monthly
loan payments;
• Once the media begins
to focus on the fiscal
cliff negotiations, will
households become
more aware of the
potential increase in
tax rates at the start of
2013?
Source: U. of Michigan Survey Research Center and US Census Bureau Source: Bureau of Labor Statistics
Source: Bureau of Economic Analysis Source: US Census Bureau and National Association of Homebuilders
5%
6%
7%
8%
9%
10%
11%
12%
13%
3.9%
4.0%
4.1%
4.2%
4.3%
4.4%
2005 2006 2007 2008 2009 2010 2011 2012 2013
China: Unemployment Rate and GDP
Urban Registered Unemployment Rate (LHS) GDP (y/y, RHS)
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
28
33
38
43
48
53
58
63
2006 2008 2010 2012
China: Exports and PMI New Export Orders
NBS PMI New Export Orders (LHS, 3-month lead) Exports (% y/y, RHS)
5%
10%
15%
20%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
2005 2006 2007 2008 2009 2010 2011 2012 2013
China: Industrial Production and
PMI Orders to Inventory ratios
New Orders to Stocks of Finished Goods Inventory Ratio % (NBS) (LHS)
New Orders to Inventories of Raw Materials Ratio % (NBS) (LHS)
Industrial Production (y/y, RHS)
40
45
50
55
60
40
45
50
55
60
2009 2010 2011 2012 2013
China: manufacturing PMIs
NBS PMI
Markit PMI
China: Is the economy gaining traction ?• NBS manufacturing PMI
rose to 50.2 in October
(see chart). It seems the
economy has stabilized;
• The components of new
orders and new export
orders showed further
gains. The corporate
sector’s de-stocking
process could be close to
an end;
• On the external front, the
recovery in export growth
to 9.9% y/y was
encouraging (see chart);
• Q3 GDP growth was 7.4%
y/y. Premier Wen
commented on the likely
achievement of the
government’s target of
7.5% real GDP growth this
year with confidence.
Source: National Bureau of Statistics of China and BloombergSource: National Bureau of Statistics of China
Source: National Bureau of Statistics of ChinaSource: National Bureau of Statistics of China
95
100
105
110
115
120
125
95
100
105
110
115
120
125
Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12
MSCI World Consumer Discretionary and
Staples Indices (LC)
Consumer Discretionary Consumer Staples
Dec. 2011 = 100
10
15
20
25
30
35
88 92 96 00 04 08 12
S&P 500: P/E Market Multiples
Trailing P/E
NTM P/E
51
37
28
1619 17
8 72
-1
12 11 1115 14
Jun
-10
Se
p-1
0
De
c-1
0
Ma
r-1
1
Jun
-11
Se
p-1
1
De
c-1
1
Ma
r-1
2
Jun
-12
Se
p-1
2
De
c-1
2
Ma
r-1
3
Jun
-13
Se
p-1
3
De
c-1
3
S&P 500 Quarterly EPS Growth (% y/y)
Central bank action drove the rally. Earnings are still a concern• The equity rally continues to be
mainly explained by multiple
expansion (see chart). Tail risks
have been reduced after central
bank action. Expanding
multiples may also imply better
growth ahead. Recent economic
data in the US and China have
looked better;
• Relative to long-term averages,
forward P/Es don´t seem to be
expensive (see chart);
• Earnings revision in the US and
Europe have a negative bias. In
the US, Q3 2012 earnings are
expected to be down q/q and
y/y. According to consensus
forecasts, Q3 2012 should be
the trough (see chart). Earnings
growth is expected to accelerate
next year in the US (12.7%) and
in Europe (12.1%).
Source: Bloomberg Source: Bloomberg
Source: Standard and PoorsSource: Standard and Poors
-0.8
-0.4
0.0
0.4
0.8
1.2
2007 2008 2009 2010 2011 2012
Cumulative Estimated Flows to Long-
Term Mutual Funds ($tn)
Equity
Bonds
$112
$113
$114
$115
$116
$117
$118
$119
$24
$25
$26
$27
$28
$29
$30
$31
Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12
S&P 500 Bottom-up Operating
Estimates Over Time
Q3 2012 Est. (LHS)
Q4 2012 Est. (LHS)
2013 Est. (RHS)
10%
15%
20%
25%
30%
35%
40%
45%
50%
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
CBOE S&P 500 Volatility Index
10%
20%
30%
40%
50%
60%
10%
20%
30%
40%
50%
60%
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13
AAII US Investor Sentiment Readings
AAII Bull Index AAII Bear Index
Flows into bonds and out of equities continues
• Despite the current low yield
environment, funds continue
to flow out of equities and into
bonds (see chart) ;
• Sentiment indicators suggest
investors are modestly bullish
(see chart);
• Investor sentiment remains
cautiously positive;
• Volatility in equity indices
continue to trend lower (see
chart);
• Lower tail risks mean lower
risk of a systematic shock.
Idiosyncratic risk is now more
important, which increases the
benefit to stock picking;
• Earnings could be a challenge
for US Equities, especially if
the fiscal cliff headwinds are
confirmed.
Source: Bloomberg Source: Bloomberg
Source: Standard and PoorsSource: ICI
0%
5%
10%
15%
20%
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
Portugal-Germany Gov.
Bond Yield Spread
10-year
2-year
1%
2%
3%
4%
5%
6%
7%
8%
1%
2%
3%
4%
5%
6%
7%
8%
Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12
Government Bond Yields
Italy 2-year Italy 10-year
Spain 2-year Spain 10-year
50
100
150
200
250
300
50
100
150
200
250
300
2009 2010 2011 2012
Coporate Spreads: Investment Grade
US IG Corp
EU IG Corp
Spread (bp) Spread (bp)
Credit still benefit from favorable demand-supply technicals
• Credit spreads are a low levels
(see chart). Is further
compression possible? With
valuations not particularly
attractive, return is likely to
come mostly from receiving
the coupon. The risk-return
trade-off looks less attractive.
But, equities need growth
(economic and earnings) to
outperform;
• With low yields across fixed
income, equities seem
increasingly attractive on a
relative yield basis;
• European periphery sovereign
yields have fallen because of
the ECB;
• Periphery yields are probably
already priced for much of the
expected ECB buying.
Source: Bloomberg Source: Bloomberg
Source: BloombergSource: Bloomberg
0
100
200
300
400
500
600
700
0
200
400
600
800
1000
1200
1400
2007 2008 2009 2010 2011 2012
Coporate Spreads:
Europe HY and Asia IG
EU HY Asia Ex-Japan IG Corp
S&P 500 Earnings Update: Q3 2012 as of November 2, 2012• 379 companies have reported (c.80% of total
market cap);
• According to Bloomberg, 71% of companies
reporting have beaten earnings estimates and 28%
have missed estimates. The average EPS surprise
has been 4.07%;
• Revenues disappointed. According to
Bloomberg, only 41% of companies beat sales
estimates, while 59% of companies missed
sales estimates;
• Implications for Q4 2012 have been negative,
with many companies lowering EPS guidance.
DJ Europe 600 Earnings Update: Q3 2012 as of Nov. 2, 2012• According to Bloomberg, 218 companies have
reported Q3 results. The European earnings
season has been weak so far. 53% of companies
reporting have beaten estimates and 45% have
missed;
• On sales, 49% of companies reporting have beaten
estimates and 51% have missed estimates;
• According to Bloomberg, the average sales
surprise has been -2.08%;
• Consensus expects 2012 earnings growth to
be -2.6%. Since the beginning of the year,
consensus expected growth has been revised
down by more than 12 percentage points.
• In November, Eurogroup / EcoFin
meetings will be held (Nov 12th).
No significant measures are
expected to be announced;
• Three important political events
should be highlighted: the 57th US
Presidential Election (Nov 6th), the
Communist Party Congress (Nov
8th) and the Catalonia regional
elections (Nov 25th);
• The Catalonia regional elections
are a key political event in Spain. It
could have an influence on the
timing of the country request for
help;
• The ECB (8th), the BOE (8th) and the
BOJ (20th) will have policy
meetings this month;
• The money supply / new loans
report is a key indicator for China
and will be released Nov 10th.
What we are watching this month:World Calendar
Date Region Event
05-Nov-12 US ISM Non-Manufacturing
06-Nov-12 US Presidential Election
06-Nov-12 Australia RBA monetary policy meeting
07-Nov-12 Euro-zone European Commission Releases Economic Growth Forecasts
07-Nov-12 Greece Greek vote on structural reforms
07-Nov-12 Euro-zone ECB's Draghi speeks at Wirtschaftstag 2012
07-Nov-12 Euro-zone Chancellor Merkel meets MPs in EU parliament
08-Nov-12 China Communist Party Congress
08-Nov-12 Euro-zone ECB Governing Council Policy Meeting and press conference
08-Nov-12 UK Bank of England MPC Meeting
08-Nov-12 Japan Machinery orders
08-Nov-12 Asia Korea, Indonesia and Malaysia monetary policy decisions
09-Nov-12 China CPI and PPI
09-Nov-12 US U. of Michigan prelim. consumer confidence
10-Nov-12 China Monetary data and trade balance
11-Nov-12 Greece Greek parliament votes on austerity measures
12-Nov-12 Euro-zone Eurogroup and Ecofin Meetings
13-Nov-12 Portugal Bank of Portugal releases Autumn Economic Bulletin
13-Nov-12 Euro-zone Zew Survey
14-Nov-12 US Advanced Retail Sales
14-Nov-12 Iberia General Strike in Spain and Portugal
15-Nov-12 Euro-zone GDP
16-Nov-12 US Industrial Production
19-Nov-12 US NAHB Housing Market Index
19-Nov-12 Euro-zone European Union Foreign Ministers meet in Brussels
20-Nov-12 Japan BoJ Target Rate
20-Nov-12 US Housing Starts
21-Nov-12 Europe PMI Manufacturing
22-Nov-12 China HSBC Flash Manufacturing PMI
23-Nov-12 Germany IFO Survey
25-Nov-12 Spain Catalonia Regional Elections
27-Nov-12 US Durable Goods Orders
27-Nov-12 US S&P/Case Shiller Home Price Index
27-Nov-12 US FED's Beige Book
29-Nov-12 US GDP
30-Nov-12 Euro-zone Unemployment rate
Republican
; 53
Democrats
; 47
Current political groups at the
Senate
0
20
40
60
80
100
0
20
40
60
80
100
Abr Mai Jun Jul Ago Set Out Nov
Implied probability, percent Implied probability, percent
Democrats retain Senate majority
President Obama Reelected
Republicans retain House majority
US elections: Status quo
outcome is the most likely…• … and is probably priced into stock prices;
• The 2012 election will have potential policy
outcomes on three areas:
o The resolution of the fiscal cliff;
o The reform of entitlement programs and
the tax code; and
o The leadership of the Federal Reserve.
• A divided government seems to be the most
likely outcome (see chart) ;
• Congress will need to once again increase the
debt ceiling, avoiding a potential government
shutdown in February or March;
• Romney has indicated that he would seek to
replace Fed Chairman Ben Bernanke when his
term expires in early 2014;
• All three of the major ratings agencies have
indicated they will reassess their rating over the
next year or so. Fiscal reform enacted by the
Congress in the next year will probably be
decisive.
Source: Intrade
Republican
; 243
Democrats
; 192
Current political groups at the
House of Representatives
Source: Fincor Source: Fincor
85
90
95
100
105
110
115
Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11
The Fiscal Cliff negotiation vs.
Equity markets
Nasdaq 100
S&P 500
Base 100 = Jan 2011
50
52
54
56
58
60
62
0
50
100
150
200
250
300
Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11
The Fiscal Cliff negociation vs. Economic data
US Non Farm Payroll, m/m change (LHS) US Manufacturing PMI (RHS)
US Elections: What impact
should we expect?• The mid-2011 debt ceiling crisis episode was
associated with a negative economic impact,
falling equity prices and a rally in Treasury
securities (see charts);
• Under a total gridlock scenario (i.e. no
agreement), asset values will suffer, especially
risky assets;
• The most likely outcome is still that most of the
fiscal cliff is averted. However, if there´s a
difficult negotiation, short-term volatility could
increase and uncertainty should dampen
sentiment;
• Higher uncertainty usually leads to a flight to
safe havens, particularly US Treasuries;
• The government cannot go on running high
budget deficits indefinitely. Beyond the fiscal
cliff, equity markets will probably focus on
whether credible and sustainable fiscal reforms
are put into place to address long-term
structural imbalances.
Source: Bureau of Labor Statistics and Institute for Supply Management
Source: Bloomberg
-100
-80
-60
-40
-20
0
20
40
60
80
100
Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12
Citigroup Economic Surprise Index - China
China: 18th Communist Party
Congress – Leadership transition• The formal transition of leadership at the
national level occurs in two key steps:
o The 18th National Congress of the Chinese
Communist Party (Party Congress) in
November 8th: The new leaders will be
formally introduced, including the
Politburo Standing Committee (PSC);
o The 12th National People’s Congress,
probably in March 2013: Where the
transition of the Executive will take place.
A new President and Premier will be
appointed (from the PSC). The new
economic policy will start to be
implemented.
• The fifth generation of leaders comes to power
at an important moment. After being able to
maintain a rapid economic growth, the Chinese
economy faces important challenges, including
income inequality, structural imbalances and
rising costs.
Senior leaders to be elected
National Party Congress National People's Congress
Politburo NPC Standing Commitee
Politburo Standing Committee President/Vice President
General Secretary of the Party Supreme Court President
Secretaries of the Secretariat Procurator-General
Central Military Commission (Party) Central Military Commission (State)
Central Disciplinary Commission Premier/Cabinet Ministers
Source: Xinhua
Source: Bloomberg
65
70
75
80
85
90
95
100
105
2004 2005 2006 2007 2008 2009 2010 2011 2012
Industrial Production (excl. Construction)
Dec. 2004 = 100
Greece is close to generate the €13.5bn of savings
demanded by the troika• We approach the November 12th Eurogroup meeting,
the likely date on which euro-zone finance ministers
will make a decision on the next tranche of Greece’s
loan;
• Labor reforms have proved the most controversial
issue for the three-party coalition;
• Fiscal austerity should continue to hammer GDP
growth (see chart). Debt dynamics seems to be
unsustainable. The Government raised the public
debt to GDP ratio forecast to 192% in 2014, far higher
than the forecast in the original bail-out programme.
Political consensus will probably be necessary for
Greece to have some sort of haircut on its official-
sector debt;
• Nonetheless, August’s Greek industrial production
figures showed an annual growth rate of 2.6% (see
chart). This was the first annual rise recorded since
2008. Are structural reforms and wage reductions
that have taken place over the last few years finally
bearing some fruit?
Source: IMF
Source: Eurostat
-2%
0%
2%
4%
6%
8%
10%
12%
14%
-2%
0%
2%
4%
6%
8%
10%
12%
2004 2006 2008 2010 2012
Euro-zone credit to private sector and
M3 growth rate
Euro-zone Credit to Private Sector (LHS) M3 Annual Growth Rate (RHS)
-80
-60
-40
-20
0
20
40
60
2003 2005 2007 2009 2011 2013
ECB Bank Lending Survey and Loan Demand
Lending to Firms Consumer Credit Mortgage Lending
Demand rising
Demand falling
Eurowatch: Eurogroup meeting (Nov. 12th) and ECB’s Governing
Council Meeting (Nov. 8th)• After last week’s Eurogroup teleconference call,
the euro-zone finance ministers have asked for
“remaining issues” to be resolved between Greece
and the troika;
• Greece is expected to run out of cash by mid-
November. The Eurogroup will probably give a
decision on the next tranche of the country’s loan
on November 12th;
• Can we expect some progress on Spain? Catalonia
will held regional elections on November 25th. This
is an important political event for Spain.
Additionally, there’s still some political stigma
attached to asking for a bailout, particularly in
relation to a probable involvement of the IMF;
• The ECB is likely to remain on standby this month.
The announcement of its Outright Monetary
Transactions programme is still supporting market
sentiment. However, we should focus on whether
the statement shows any shift in tone on the risks
to the outlook for growth and inflation.
Source: ECB
Source: ECB
400
600
800
1000
1200
1400
1600
1800
Jan-12 Mar-12 May-12 Jul-12 Sep-12
Baltic Dry Index
China GDP (% y/y, RHS)
6%
7%
8%
9%
10%
11%
12%
-70%
-30%
10%
50%
90%
130%
170%
210%
2002 2004 2006 2008 2010 2012
China Real GDP vs. China Equities
Shanghai Stock Exchange Composite Index (% y/y, LHS)
China GDP (% y/y, RHS)
Charts we are watching
• Recent data seems to point to better China
macro ahead. September data releases
suggested that the impact of policy easing
measures adopted since April have started to
push aggregate demand. Chinese equities are
showing some signs of improvement. China is
decisive to the outlook for the materials global
sector (metals and mining stocks).
• The Baltic Dry Index has recently improved. It
could suggest a better outlook to global trade.
Latest export data in Korea and Taiwan
inflected higher, though from low levels. This
also hints of global growth stabilizing.
Nevertheless, the fiscal cliff is a risk to growth
and market sentiment. Are investors
underestimating that risk ?
Source: Bloomberg
Source: Bloomberg
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