November update on global liquidity
As regular readers of the Linchpin blog will know, I am presently upbeat about China’s prospects and consequently for other economies in Southeast Asia. Our friends at CrossBorder Capital have released end October data on money and credit flows, which corroborates this picture. While global liquidity is still about neutral (48 on a scale of 0 to 100), and China’s a bit higher than average, capital flows are heavily skewed towards China and Southeast Asia. We think this is safe haven money which fled in 2015/6, and is now being invested into these economies as returns on investments improve again. The combination of adequate liquidity and strong capital flows is quite bullish for these equity markets, at least for the time being.
Other trends remain in place: the Eurozone and the UK are at the top of the liquidity cycle while the US looks very late in the cycle. Given domestic Japanese liquidity remains low, the strength of the Japanese stockmarket seems to be because it is increasingly in the Chinese orbit. However, we are less positive about the Japanese market than some commentators right now, particularly after its post-election rise.
If you would like to read CrossBorder’s update, which represents the most timely macro-economic data available, it is available for purchase here.