Market Views

GLOBAL CREDIT BULLETS | Monday, 22 May 2023

China – Weaker data, weaker currency
China’s data is slowing, as weaker PMIs, credit data and inflation disappoint the reopening narrative for now. In addition, capital outflows continue, and investors remain hesitant to invest amid a weakening macro picture, potentially easier monetary policy and ongoing geopolitical tensions. USDCNH broke through 7.0 last week, opening the door for further CNH weakness up to 7.30 and for potential PBoC action, either through lower rates or currency interventions.

Markets – Recession is the new consensus
Investor sentiment remains bearish, as EPS growth expectations are near the lows, cash allocations remain elevated and China optimism fades, according to BofA’s Global Fund Manager survey. Despite slowing, US hard data has continued to hold up well, while surveys like Empire Manufacturing or NY Fed Services Business Activity have turned more negative. In this environment, we see value in financials with healthy fundamentals, resilient corporate sectors like communications, and EM sovereign debt for economies which have room to cut rates amid high real rates.

Algebris Investments’ Global Credit Team

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