The Road Ahead
Comment of the Day

October 08 2020

Commentary by Eoin Treacy

The Road Ahead

Thanks to a subscriber for this report from KKR which may be of interest. Here is a section:

In fact, China is responding to these changes in corporate behavior using a variety of techniques, including becoming a larger and more powerful domestic economy that relies on its own production (what President Xi Jinping calls “domestic circulation”). In the current environment China may also better leverage its higher interest rate curve (both real and nominal) to try to attract capital to support this more permanent shift towards a consumption economy. A more stable currency outlook is also helping. Our bottom line: Expect a heightened rivalry across multiple facets of the relationship, including some decoupling. However, given the absolute size of the opportunity in China, now is actually the time to think through different ways to harness China’s growth in thoughtful, risk-adjusted fashion, particularly investments that reward long-term, patient capital. Specifically, we think that further implementation of domestic circulation as a policy will lead to the rise of more domestic corporate leaders, and as a result, more – not less – corporations will look to find ways to serve this emerging consumption base.

Eoin Treacy's view

China’s golden week ends today and the market opens back up tomorrow. Over the last month there have been significant announcements about investments in infrastructure, boosting the consumer economy and championing the green energy movement. These points all likely to become actionable in the 4th quarter.

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