NN IP: Der Welleneffekt

Economic Outlook

 Policy inconsistency forces China to weaken its currency.

The ultimate goal of the Chinese authorities to let the yuan depreciate is in our view to allow for more of a decoupling between US and Chinese monetary conditions. Although the consequences in the short term are uncertain, this could well be a positive development in the medium to long run.   Read more

Asset Allocation

Yuan devaluation has substantial ripple effects in markets.

Following the surprise devaluation of the yuan, markets have been focusing on all areas that are sensitive to a shifting China outlook. Near-record underweights in EM equities and commodity-related sectors are consensus and many of these assets have reached oversold levels.    Read more

Fixed Income

Spread products suffer in recent turbulent market environment.

Investment Grade paper (IG) has recently outperformed over High Yield (HY), while EUR credit has performed better than USD paper, both in IG and HY. The devaluation of the yuan adds to negative sentiment toward the EMD block within Spread products.   Read more

Equity Strategy

China’s currency action may have released forces that are difficult to control.

The surprise move by the People’s Bank of China to devalue the yuan had a significant impact across markets. Higher uncertainty hurts risky assets.  Read more