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Stocks versus flows

Weekly investor research

21 October 2013

China continues to confound those who predict a hard landing. In Q3, China grew 7.8% yoy, FX reserves set a new all-time high, and the Chinese currency appreciated to the strongest level since 1993. China’s trade surplus was substantial, but smaller than last month. While markets tend to focus on flow variables – such as trade balance numbers – it is the stock variables – such as the level of FX reserves – that really matter. Stocks show that Emerging Markets (EM) are strong. By contrast, developed economies are extremely weak. Political fragilities only exacerbate the weakness.

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