If you’re a regular reader, you already know the story on EM equities – they’ve posted gains for eight consecutive months (the longest streak since 2004) and the ETF (EEM) has outperformed the S&P ETF for six consecutive months (the longest streak of outperformance since February 2005).
Heisenberg regulars also know that the yuan is in the midst of a truly historic run. Last month was the best month for the onshore yuan since it was revalued and the offshore yuan was up for a 13th consecutive day on Friday, tying a record.
Well given all of the above, you might surmise that Chinese equities have been along for the ride – and you’d be right. As in “big league” right. The SHCOMP is riding a three-month win streak and now sits at its highest levels since January 2016.
But where things get really remarkable is when you look at the MSCI China. It rose for the eighth consecutive month in August. That’s only happened two other times in history:
(Goldman)
Now admittedly, “2” is a small sample size, but it’s worth noting that if “2” works for you in terms of historical precedent, then the chances that your returns over the next three months will be positive are, as Goldman dryly puts it, “unfavorable” – where “unfavorable” means zero.
(Goldman)
With the Party Congress on the horizon, the yuan rapidly strengthening against the dollar, and Beijing working overtime to keep capital flight under control and court international investors, will this time be different?
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Yep. As I wrote earlier, the week of Sept 4 is a turning point in our model for numerous models. Pay attention.