China’s slowing credit growth
China is another risk and warrants close monitoring. The world’s second-largest economy is experiencing a sustained slowing down in credit growth. This is significant for a number of reasons.
Our analysis shows a slowdown in credit growth traditionally has a strong lead of around 12 months or so on production growth both in China and globally. As a result, we expect global momentum to slow in 2019 under the weight of higher US rates and tighter China credit. A further escalation of the trade war would add to these headwinds.
Australia’s leading indicators are consolidating the recent lift in momentum with concerns about the trajectory of housing the main medium-term concern. If the global risks that are building in 2019 were to escalate this would add to the headwinds from housing.
Pulling these strands together we continue to hold a broadly neutral position to most asset classes. However, if the storm clouds that are gathering were to intensify more, a defensive position would be justified.
ANZ investment strategy − September 2018