China & COVID
China is trying to move away from COVID-0. That’s sensible, as containment with Omicron isn’t possible given the R0 of the virus, without recurring, harsh lockdowns.
That reopening story is driving markets, at the moment, and commodities, however it is not clear to us, in absence of a highly vaccinated elderly population, that it can work. Looking at the flow of daily case cases below, you can see how the China data stacks up.
The current outbreak is absolutely one to worry about. We think China reopens, but as people get sicker, and the numbers grow larger, they will likely return to “self-selected” lockdowns, as opposed to state mandated ones.
We aren’t 100% sure (or even 90%, or 70%) sure where such a tipping point “might be”. We think we’ll hear about it, in the form of hospitals overrun, or morgues filling up, and we’ll have to go off those kinds of cues.
For us, we are inclined to fade commodity price strength, given that backdrop.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.