Macquarie Research, Director’s Cut - Slowing growth the bigger risk

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Director’s Cut
Slowing growth the bigger risk
For much of the year Paul Cavey has said China’s monetary tightening resulted
in greater downside risks to growth than the upside risks to inflation. He now
thinks we are near the tipping point in terms of the actual data showing this.
In terms of inflation, the May CPI is high at 5.5%, but Paul estimates month-onmonth
seasonally adjusted inflation is basically flat. He thinks this is good news
given industrial production growth slowed in April.
Looking forward, Paul thinks there is still the possibility of one more rate hike in
China, but that’s not certain. On Monday, he said the official rhetoric of
policymakers was still focused more on the upside risks of inflation than the risks
of slowing growth. But if the current trends continue that debate is likely to flip,
allowing the reversal of monetary tightening he has been anticipating.


Highlights
 Rebecca Hiscock-Croft expects the Federal Reserve to maintain loose
conditions, but not add to them further, in the coming months.
 Edward Firth likes Barclays (BARC LN), arguing at 0.75 tangible book, the
current valuation discounts all the possible bad news, and more.
 Clive Wiggins says the reaction to Toyota’s (7203 JP) guidance, while
understandable, underestimates the recovery potential.
 Michael Sohn urges us not to miss a good accumulation opportunity in
Korean tire maker, Hankook Tire (000240 KS).
 Chi Chow argues WTI crude prices are likely to remain at a discount to other
sweet crude grades for at least the next two years.
 Garry Pinge remains negative on Li & Fung (494 HK) saying economic
incentives will drive more companies toward direct sourcing.