Christian Lazaro’s Post

In our newest analysis, AXE Securities delves into pivotal global market movements, including China's substantial support for the housing sector, South Korean banks' overseas investment hurdles, and the interplay of oil prices with US inflation concerns. This comprehensive blog post provides essential insights for professionals navigating the complex financial landscape. Join the discussion and share your thoughts. Link: https://lnkd.in/dtDNKQH7 #Finance #GlobalMarkets #EconomicInsights

Financial interdependence can be weaponized, but it is inevitable given the entrenched pattern of trade imbalances. The “balance of financial terror” is more subtle than meets the eye, and evolved substantially since 2008. Brilliant insights from Brad Setser Ifri - Institut français des relations internationales The link between financial self-reliance and geopolitical power has long been debated. The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage. Many in the United States (US) are concerned about indebtedness to its primary strategic rival, and the risks posed by a sudden Chinese withdrawal from US financial markets. US policymakers actively sought to encourage China’s top leadership not to withdraw financing from the market for US Agency securities in the run-up to the global financial crisis. Yet China also sees risks in this unbalanced financial relationship. Chinese policymakers have expressed concern about the domestic political consequences of losses on either their Treasury or Agency holdings and actively have sought to diversify China’s reserves – including by substituting the risk of lending to developing economies for the visibility associated with large holdings of Treasuries in US custodians. China increasingly worries that its dollar holdings and the dollar’s global role increase its vulnerability to potential financial sanctions. Both parties thus worry about the possibility that financial interdependence can be weaponized yet find it hard to extricate themselves from the inevitability of financial interdependence absent a clean break from an entrenched pattern of trade imbalances.

China's securities regulator is resorting to charm tactics to regain investor confidence and maintain stock market momentum after a slower economic growth pace. This follows a significant market rally earlier in 2024. Officials are urging financial institutions to support the economy through lending and highlighting their commitment to market reforms. #China #StockMarket #CharmOffensive #EconomicGrowth #InvestorConfidence #MarketMomentum #MarketReforms #FinanceSolutions

Power and Financial Interdependence The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage, BRAD SETSER writes. Many in the United States are concerned about indebtedness to its primary strategic rival, and the risks posed by a sudden Chinese withdrawal from US financial markets. US policymakers actively sought to encourage China’s top leadership not to withdraw financing from the market for US Agency securities in the run-up to the global financial crisis. Yet China also sees risks in this unbalanced financial relationship. Chinese policymakers have expressed concern about the domestic political consequences of losses on either their Treasury or Agency holdings and actively have sought to diversify China’s reserves – including by substituting the risk of lending to developing economies for the visibility associated with large holdings of Treasuries in US custodians. China increasingly worries that its dollar holdings and the dollar’s global role increase its vulnerability to potential financial sanctions. Both parties thus worry about the possibility that financial interdependence can be weaponized yet find it hard to extricate themselves from the inevitability of financial interdependence absent a clean break from an entrenched pattern of trade imbalances.

In our newest analysis, AXE Securities delves into pivotal global market movements, including China's substantial support for the housing sector, South Korean banks' overseas investment hurdles, and the interplay of oil prices with US inflation concerns. This comprehensive blog post provides essential insights for professionals navigating the complex financial landscape. Join the discussion and share your thoughts. https://lnkd.in/dFbwYYfy #Finance #GlobalMarkets #EconomicInsights

Highly recommend a read of this informative piece by Brad Setser outlining the "balance of financial terror" between the US and China. It includes a very helpful history of Chinese reserve managers' footprint in the US Treasuries and (often overlooked) Agencies markets, and helps to show that Chinese overseas Belt and Road lending has been as much about reserve diversification as "debt trap diplomacy." Abstract below: "The link between financial self-reliance and geopolitical power has long been debated. The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage. Many in the United States (US) are concerned about indebtedness to its primary strategic rival, and the risks posed by a sudden Chinese withdrawal from US financial markets. US policymakers actively sought to encourage China’s top leadership not to withdraw financing from the market for US Agency securities in the run-up to the global financial crisis. Yet China also sees risks in this unbalanced financial relationship. Chinese policymakers have expressed concern about the domestic political consequences of losses on either their Treasury or Agency holdings and actively have sought to diversify China’s reserves – including by substituting the risk of lending to developing economies for the visibility associated with large holdings of Treasuries in US custodians. China increasingly worries that its dollar holdings and the dollar’s global role increase its vulnerability to potential financial sanctions. Both parties thus worry about the possibility that financial interdependence can be weaponized yet find it hard to extricate themselves from the inevitability of financial interdependence absent a clean break from an entrenched pattern of trade imbalances." https://lnkd.in/eKh_wn2K

https://lnkd.in/gMYV7Njf Anticipating this, the Chinese are planning to initiate another $1.4 Trillion fiscal Stimulus packages to Ease the liquidity conditions in the Broader economy . It will attract capital flows for playing in the Market

Very interesting paper by Brad Setser on "Power and Financial Interdependence" between the United States and China: "The unbalanced Sino-American trade relationship has created asymmetric financial ties which generate potential sources of leverage for both parties and will not quickly disappear. Absent a clarifying major crisis, it will be difficult to definitively determine which party has greater leverage." https://lnkd.in/eftssGTy

China's market shake-up: Regulator reshuffle aims to stabilize faltering economy. Will new measures restore investor confidence? Dive into the strategic shifts shaping China's financial landscape. https://lnkd.in/eHSGratg #MarketInsights #RegulatoryChanges

“The final geopolitical element is the development of macro policies and the economic environment in China and Japan but in each for different reasons. With China, we worry that the country could end up exporting deflation if its current stimulus program does not yield sufficient growth, which would be a negative for Germany and emerging markets as they exhibit the high levels of trade with China. With Japan, the tail risk would be a disorderly move away from its negative interest rate policy. A strong, sharp appreciation in the yen could lead to an unwind of foreign assets by Japanese investors. This profitable carry trade has existed for many years, and its unwind could potentially trigger higher yields in global core rate markets and bear steepening of yield curves.” https://lnkd.in/e98VpY4v