ab 28 August 2024 Global Research and Evidence Lab China Economic Perspectives Home Destocking Debate and Property Forecast Downgrade Economics China Where are we now in the property downturn? China's property activities have not bottomed since the unprecedented sharp downturn in 2021. The decline in urban housing prices has accelerated since H2 2023 amid elevated inventory pressure, weighing on household home purchase intention, consumption confidence and local government finances. China has eased property ...

Investment Rating - The report indicates a neutral investment rating with the BofA Bull & Bear Indicator at 6.2, suggesting a balanced market sentiment [29]. Core Insights - The report highlights a structural shift back to a 5% inflation environment, driven by factors such as globalization reversal, low debt, and demographic changes, indicating the beginning of a commodity bull market [3][10]. - It notes that China is increasingly relying on exports as domestic consumption slows, with retail sales growing only 3% annually since 2020 compared to 13% in the previous decade [3][10]. - The report emphasizes the importance of monitoring US hiring trends, as historical data shows that a decline in private sector job share below 40% often precedes a recession [3][4]. Summary by Sections Market Performance - Year-to-date performance shows gold at 22.4%, stocks at 15.4%, and cryptocurrencies at 14.3%, with cash and government bonds yielding minimal returns [2]. - The report notes significant inflows into cash ($24.5 billion) and bonds ($20.7 billion), while equities saw inflows of $13.7 billion [6][18]. Economic Indicators - The report suggests that if the ISM manufacturing index exceeds 49, it could lead to a rise in long-term bond yields, indicating better opportunities in Q4 [2][8]. - The ratio of new orders to inventories is highlighted as a leading indicator for ISM manufacturing PMI, with expectations of an ISM reading of 52 by October 2024 [8][14]. Sector Analysis - The report indicates that the financial sector experienced the largest inflow in six weeks, while utilities faced the largest outflow in ten weeks [7][18]. - It also notes that BofA private clients are reallocating their investments, with significant purchases in REITs and financials while trimming positions in T-bills [7][22]. Global Trade Dynamics - China’s GDP growth is reported at 5%, but domestic growth is sluggish, with consumer confidence at all-time lows [10]. - The report discusses the impact of trade restrictions on global imports, particularly in key industries like electric vehicles and steel, which could limit deflationary pressures [3][10]. Commodity Outlook - The report asserts that commodities are expected to outperform bonds in the coming years, with total returns for commodities significantly higher than those for long-term U.S. Treasuries over the past four years [10][26]. - It emphasizes that the current commodity bull market is just beginning, with annualized returns projected between 10-14% [10].

Investment Rating - The report indicates a positive outlook for the U.S. economy, with expectations of a 50 basis point rate cut by the Federal Reserve in September, contingent on upcoming employment data [7][8]. Core Insights - The U.S. economy is showing signs of robust consumer spending, with real consumer spending increasing by 0.4% in July and an upward revision of 2Q GDP growth to 3.0% from 2.8% [3][4]. - Business spending remains cautious, with nominal shipments of nondefense capital goods declining for three consecutive months, indicating a potential slowdown in business investment [4][5]. - The core PCE price index, the Fed's preferred inflation measure, rose only 0.16% month-over-month in July, suggesting moderating inflation risks [2][9]. - The personal saving rate has dropped to 2.9%, nearing post-COVID lows, raising concerns about future consumer spending sustainability [9][11]. - The labor market shows signs of cooling, with payroll gains expected to be modest at 150,000 for August, maintaining the unemployment rate at 4.3% [6][41]. Economic Growth and Consumer Spending - The report revises the 3Q GDP growth estimate to 1.5%, up from 1.3%, reflecting stronger consumer spending forecasts [3]. - Consumer confidence has improved slightly, with the Conference Board index rising to 103.3 in August from 101.9 in July [11][50]. Business Investment and Employment - Equipment spending forecast for 3Q has been raised to 5.0% from 1.0%, driven by strong aircraft shipments and capital goods imports [5]. - Business sentiment remains cautious, as indicated by downbeat regional Fed surveys, suggesting potential challenges ahead for business investment [4][6]. Housing Market - Housing data remains weak, with pending home sales declining 5.5% month-over-month in July, reaching an all-time low [11][60]. - The report anticipates a significant drop in real residential investment for 3Q, revised down to -10% from -5% [12]. Labor Market Dynamics - The labor market differential from the consumer confidence survey has decreased, indicating a growing perception of job scarcity [45]. - Job openings in the JOLTS report are expected to remain stable, with a slight increase anticipated for August [26][28]. Inflation and Consumer Behavior - The core PCE inflation rate remains above the Fed's target at 2.6% year-over-year, but recent trends suggest a moderation in inflationary pressures [2][61]. - The report highlights a disconnect between consumption and income growth, with real disposable income growth slowing [9][61]. Trade and International Factors - The nominal goods and services trade balance widened to -$80.1 billion in July, reflecting a significant increase in the goods deficit [23]. - The report notes that service imports may receive a boost from payments related to the Paris Olympics, impacting the trade balance [23].

Investment Rating - The report does not explicitly state an investment rating for the industry [1]. Core Insights - The report highlights a significant decline in cash equity turnover and derivatives activity in the Hong Kong market, with a 36% decrease in cash total turnover compared to the previous year [2]. - The Southbound Stock Connect flows have shown a cumulative total of $428.67 billion since inception, with a year-to-date flow of $57.90 billion, indicating ongoing interest from foreign investors despite recent fluctuations [7][19]. - The report notes a decrease in margin trading balances and a negative trend in Northbound flows, suggesting cautious sentiment among investors [11][19]. Summary by Relevant Sections Cash and Derivatives Market - Cash total turnover in Hong Kong is reported at $10.1 billion, down 22% from the previous year, while futures turnover has decreased by 30% to $15.2 billion [2]. - The total open interest for futures has also declined, with a 16% drop in comparison to the 12-month average [2]. Stock Connect and Foreign Flow - Northbound turnover from Shenzhen and Shanghai has seen a decline, with Northbound turnover as a percentage of total A-shares turnover showing a downward trend [4]. - Southbound turnover has also decreased, reflecting a cautious approach from Hong Kong investors towards mainland stocks [4]. Market Performance - The report indicates that the CSI 300 index has experienced a 2.7% decline in July 2024, while the CSI 500 index saw a more significant drop of 4.9% [11]. - The overall market sentiment appears to be bearish, with various indices showing negative performance over the past months [11][21]. Fund Flows - Equity and hybrid fund issuance has decreased significantly, with only 8 billion CNY issued in July 2024 compared to higher figures in previous months [11]. - The report notes a negative trend in margin purchases, indicating a reduction in leveraged trading activity [11]. Derivatives Positioning - The report highlights a decline in open interest for options across major indices, suggesting reduced speculative activity in the derivatives market [12][13].

ab 26 August 2024 Global Research and Evidence Lab US Equity Strategy Earnings Brief 2Q24: August 26 NVDA (6.6% of S&P 500 market cap) reports earnings on Wednesday. EPS is expected to grow 137% (vs. 462% in 1Q24, and expectations of 76% in 3Q24). Reported earnings have beaten estimates for the past 5 quarters. 90.2% of the S&P 500's market cap has reported. 2Q expectations are for revenues to grow 5.1% and EPS by 11.3%. Growth among groups varies significantly, as shown in the table below (a blend of conse ...

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The report highlights significant changes in futures positions among various market participants, indicating a shift towards flattener positions in the back end and steepener positions in the front end [5][22][19] - There were notable inflows in equities, particularly from private investors, with Japan and the Caribbean being the top Treasury buyers in June [1] - Large commercial banks saw an increase in deposits and cash assets, while their holdings in UST/Agency and MBS also rose [42] Summary by Sections CFTC Non-Commercial Futures Positions - Non-commercials removed $20.6 billion in the front end and added $5.6 billion in the back end, resulting in a total of $26.2 billion of a flattener position [5][9] - The breakdown of front-end positions included SOFR (-$2.4 billion), TU (-$2.1 billion), and FV (-$2.1 billion) [9] Traders in Financial Futures - Asset managers put on $8.8 billion of a steepener position, increasing their net longs in FV contracts to the highest level in six months [2][16] - Leveraged funds added $9.0 billion of a steepener position, increasing their net shorts in TY contracts to the highest level in six months [2][19] Primary Dealer Positions - Dealers added $2.7 billion in the front end and $22.3 billion in the back end, resulting in a total of $19.6 billion of a flattener position [22][26] - Dealers decreased their net shorts in TY contracts to the lowest level in six months [26] Large Commercial Bank Positions - Deposits increased by $45.7 billion, and cash assets rose by $6.3 billion, with UST/Agency holdings increasing by $18.0 billion and MBS holdings by $16.4 billion [42] Foreign Central Bank Positions - Foreign Central Bank UST holdings decreased by $16.9 billion, while Agency/MBS holdings decreased by $0.4 billion [47]

ab 30 August 2024 Global Research and Evidence Lab APAC Economic Perspectives Asia by the Numbers (August 2024) Downgrading China's GDP growth forecast to 4.6% in '24 and 4.0% in '25 Despite new easing measures in July, China's property downturn has persisted. Given lingering inventory pressures, we downgraded our property market forecasts, and expect sales, new starts, and investments to continue falling in 2025, albeit at a slower rate. The weakness in property activities and prices has further weighed on ...

Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Policy Research Working Paper 10900 Long-Term Growth Prospects in Peru Leveraging the Global Green Transition and the Reforms Needed to Become a High-Income Country Daniel Barco Bledi Celiku Paulo Chávez Arthur Mendes Steven Pennings Elena Resk Development Research Group & Macroeconomics, Trade and Investment Global Practice September 2024 Public Disclosure Authorized Policy Research Working Paper 10900 Abstract This pape ...

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Investment Rating - The report does not provide a specific investment rating for the industry analyzed Core Insights - The study reveals that higher conflict exposure does not significantly impact firm profits, as it leads to reductions in both sales and total costs, indicating a decrease in overall economic activity despite stable profits [3][29] - The analysis utilizes longitudinal firm-level data from 91 countries between 2006 and 2019, focusing on the effects of conflict exposure on various firm outcomes [3][7] - The findings suggest that firms in countries with low-quality bureaucracy experience more pronounced negative effects from conflict exposure compared to those in countries with high-quality bureaucracy [9][29] Summary by Sections Introduction - The report highlights the prevalence of conflict and political violence affecting over 1.7 billion people globally, with significant economic activity continuing under such conditions [7] - It emphasizes the shift from macroeconomic to microeconomic analyses of conflict's effects on firms [7] Data - The primary data source is the World Bank Enterprise Survey (WBES), which includes information from approximately 180,000 firms across 148 countries, focusing on privately owned firms in the formal sector [12] - The study constructs a firm-specific measure of conflict exposure based on the number of political violence events within a 20 km radius of each firm's location [15] Empirical Strategy - The report employs a fixed-effects model to estimate the impact of conflict exposure on firm outcomes, including sales, total costs, and profits [20] - The identification strategy assumes that conflict events near a firm's location are uncorrelated with any latent determinants of its economic performance [20] Results - Increased conflict exposure leads to a significant reduction in median sales by 2.8% for a one-standard-deviation increase in conflict events [21] - Conflict exposure results in a significant reduction in total production costs, primarily due to diminished availability of inputs rather than lower input prices [22] - The null effect on profits indicates that firms adjust their production costs in response to reduced sales [23] Mechanisms - Conflict exposure reduces a firm's access to raw materials and intermediate inputs, particularly imported ones, leading to decreased output [31] - The analysis shows that conflict exposure results in a shift towards employing more unskilled workers, thereby reducing total labor costs [32]