Chinese Takeaway: A Global investors initial thoughts

Chad Slater

Ellerston Capital

The last 2 days have seen a change in tack from the Chinese Government. Other writers on this site have noted the contradictory problems that had emerged for them of holding up the exchange rate in the face of capital outflows, which was leading to reserve selling and contractionary monetary settings, offsetting the 'good' they were trying to do from rate cuts. This move ticks a lot of boxes from their perspective: 1) Australian investors underestimate how much the Chinese want to be in the SDR inclusion. One hurdle was lack of market pricing, which can be argued to have changed; 2) it enables them to stimulate the export sector and stop deflation; and 3) the currency moving lower at some point will reduce the need to draw down reserves, so they can cut rates. Implications for the world? US rates to rise less than before; not so great for European equities/exporters; probably good medium term. For more information, please read here: (VIEW LINK)


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Co Head Global Equities (ex-Asia)
Ellerston Capital

Chad co-founded Morphic Asset Management in 2012. As a stock picker Chad is also a generalist but has strong regional knowledge of Europe and the Americas. He has also been awarded the CFA Charter.

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