【英文】瑞信报告：全球股票策略报告：新冠病毒（39页）

Housing remains absolutely central to the Chinese economy, especially so as the economy has  transitioned from investment-led growth towards consumption-driven growth. The concern we  have is that property in China has looked like a bubble for a long time. Among our concerns,  mortgage rates are triple rental yields, 73% of new homes are second or third properties and  the increase in credit in China has been the fourth-biggest of any country over a 10-year period,  with all other such episodes tending to be followed by a crash.  If the virus-related ban on viewings causes a working capital problem and emergency presales,  then property prices could start to decline. We have for a long time believed that a collapse in  property prices would bring an NPL crisis in its wake (around half of collateral is real estate  related) and as well a sharp decline in growth (with property being half of household wealth) and  government income (with real estate being around a quarter of tax revenues). We would note that the property developers need to pay back $270bn worth of debt over the  next two years, some of which is denominated in foreign currency. In the event of a cash crunch,  there could be fire sales of property in order to meet these financing needs, and this dynamic  could be the catalyst for the credit bubble apparent in the data to see a disorderly outcome.

The US economy has shown itself to be something of an island in difficult global circumstances.  Through the trade war, the US economy continued to deliver relatively steady growth averaging  around 2%, even as growth rates in many of its trading partners in both EM and DM slowed  sharply. In part that reflects the relatively closed nature of the US economy, where goods and  services exports are worth only around 12% of GDP, as well as the proactive policy stance of  both monetary and fiscal policymakers.  However, under a risk scenario, we would note the following challenges: there are some signs  of weakening leading indicators, though lagging indicators remain strong (explaining the current  strength in US macro surprises); corporate confidence is clearly fragile, and seems likely to  decline further; further dollar strength would not only weigh on GDP growth at the margins, but  in particular weighs on US EPS growth, given that 45% of sales come from overseas. Taking  each point in turn: Some softening in lead indicators Last week saw US composite PMI new orders decline to the lowest level since the series began  in 2009, a level consistent with zero GDP growth. Weakness in job openings on the JOLTS  data points to a 2ppt decline in employment growth, which would be consistent with -0.6% YoY employment growth. We highlighted earlier that other lead indicators are painting a significantly  different picture.