China Outlook - Michael Drury

McVEAN Trading & Investments, LLC

CHINA OUTLOOK APRIL 2, 2020

Michael Drury Chief Economist McVean Trading and Investments, LLC

Past Performance Is Not Necessarily Indicative Of Future Results.

0

CHINA LEADS THE GLOBAL MANUFACTURING China, Eurozone and US PMI 65

52.5

60

51 55

50 49.5

45

40 7/1/2012

48 7/1/2013

7/1/2014

Source: Markit Economics

7/1/2015 Eurozone

7/1/2016 US

7/1/2017 CHINA

Past Performance Is Not Necessarily Indicative Of Future Results.

7/1/2018

7/1/2019

Mar-20

1

AN EVEN SHORTER SHARPER SHOCK?

Past Performance Is Not Necessarily Indicative Of Future Results.

2

PREMIA CHINA ETFs OUTPERFORMED GLOBAL EQUITIES YEAR-TO-DATE; INDEXED

20.00%

10.00%

0.00%

-10.00%

-20.00%

-30.00%

Source: Bloomberg

-40.00% 1/1/2020

1/21/2020 NEW ECONOMY ETF

2/10/2020

BEDROCK ECONOMY ETF

MSCI WORLD

3/1/2020 MSCI Emerging Markets

Past Performance Is Not Necessarily Indicative Of Future Results.

3/21/2020 MSCI China

3

CHINESE EQUITIES / WORLD EQUITIES

Past Performance Is Not Necessarily Indicative Of Future Results.

4

MANAGING THE FREE FLOATING YUAN CORRUPTION CAMPAIGN CURRENCY BREAK OOPS

GREAT FINANCIAL CRISIS

EU CRISIS

SCHUMER

Souce: bloomberg

Past Performance Is Not Necessarily Indicative Of Future Results.

5

CHINA HOLIDAY MIGRATION INDEX

Source: Towardsdatascience.com

Past Performance Is Not Necessarily Indicative Of Future Results.

6

CHINA ECONOMIC RECOVERY INDEX

100

90

80

70

60

50

40

30

20 1/25/2020

2/4/2020

2/14/2020

2/24/2020

3/5/2020

3/15/2020

3/25/2020

2020 2019 Source: WeBank. (China Economic Recovery Index) is used to gauge the resumption rate of economic activity in China during COVID-19 outbreak. It is calculated by analyzing aggregated geolocation data. CERI of China is determined based on the CERI of 50 cities weighted according their GDP.

Past Performance Is Not Necessarily Indicative Of Future Results.

7

POSSIBLE CHINESE STIMULUS

• INCREASE DEFICIT FROM 2.8% OF GDP TO 3.5% VIA FORGIVENESS OF PENSION AND TAX CONTRIBUTIONS • ALLOW AN ADDITIONAL 1 TRILLION IN PROVINCIAL LOANS, WHICH EQUALS ROUGHLY 1% OF GDP

• REDUCE RESERVE REQUIREMENT ANOTHER 1%, WHICH GENERATES 1.1TRILLION YUAN IN LENDING (1.1% OF GDP) • REDUCE INTEREST RATES 20 MORE BASIS POINTS TO 2%.

• WORLD BANK ESTIMATES 0.1% TO 2.3% REAL GDP GROWTH FOR ALL OF 2020 – DOWN FROM 5.8% ESTIMATE EARLIER

Source: McVean Trading & Investments, LLC Past Performance Is Not Necessarily Indicative Of Future Results.

8

CHINA COAL CONSUMPTION

Past Performance Is Not Necessarily Indicative Of Future Results.

9

NO2 LEVELS OVER CHINA

Source: Visualcapitalist.com Past Performance Is Not Necessarily Indicative Of Future Results.

10

CHINA IS OPERATING ELSEWHERE IS NOT

Past Performance Is Not Necessarily Indicative Of Future Results.

11

CHINA CAR SALES WERE REBOUNDING MONTHLY CHINA CAR SALES SEASONALLY ADJUSTED BY MCVEAN TRADING

32

28

24

20

16

12

8

4 1/31/2010

1/31/2011

1/31/2012

1/31/2013

Source: China Automotive Information Net

1/31/2014 3 MO AVG

1/31/2015

1/31/2016

1/31/2017

CURRENT MONTH

Past Performance Is Not Necessarily Indicative Of Future Results.

1/31/2018

1/31/2019

1/31/2020

Feb-20

12

AUTOS OPENED EARLIEST

DONGFENG HONDA IN WUHAN MARCH 15

Past Performance Is Not Necessarily Indicative Of Future Results.

13

CHINA: AUTO SALES GRADUALLY NORMALIZING

Past Performance Is Not Necessarily Indicative Of Future Results.

14

CHINA AIR TRAFFIC

Past Performance Is Not Necessarily Indicative Of Future Results.

15

CHINA: PROPERTY SALES BACK TO NORMAL

Past Performance Is Not Necessarily Indicative Of Future Results.

16

NINGBO PORT ARRIVALS FEBRUARY 21st VS MARCH 25th

February 21st

March 25th

Source: marinetraffic.com Past Performance Is Not Necessarily Indicative Of Future Results.

17

SHANGAI PORT ARRIVALS FEBRUARY 21st VS MARCH 25th

February 21st

March 25th

Source: marinetraffic.com Past Performance Is Not Necessarily Indicative Of Future Results.

18

CRUDE OIL 150

130

110

90

70

50

30

10

Souce: bloomberg

Mar-20 Past Performance Is Not Necessarily Indicative Of Future Results.

19

REST OF WORLD STIMULUS SHOULD HELP CHINESE EXPORTS

• US DOES $2.2 TRILLION IN STIMULUS = 10% OF GDP, ACCOUNTS FOR ~20% OF CHINESE EXPORTS • JAPAN ANNOUNCES $554 BILLION STIMULUS = 11% OF GDP, ACCOUNTS FOR ~10% OF CHINESE EXPORTS • EU WILL SPEND $825 BILLION ON STIMULUS = 4% OF GDP, ACCOUNTS FOR ~20% OF CHINESE EXPORTS

Source: McVean Trading & Investments, LLC Past Performance Is Not Necessarily Indicative Of Future Results.

20

BEIJING TRAFFIC

FEBRUARY 16th vs MARCH 22nd

Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.

21

SHANGHAI TRAFFIC

FEBRUARY 16th vs MARCH 22nd

Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.

22

GUANGZHOU TRAFFIC

FEBRUARY 16th vs MARCH 22nd

Source: tomtom.com Past Performance Is Not Necessarily Indicative Of Future Results.

23

CHINA MONDAY TRAFFIC

Source: tomtom.com

Past Performance Is Not Necessarily Indicative Of Future Results.

24

CHINA WEEKEND TRAFFIC

Source: tomtom.com

Past Performance Is Not Necessarily Indicative Of Future Results.

25