The late September spike in Chinese equities was very much a trading rather than an investment move and, having pulled back, is now consolidating. We do not see the authorities trying to boost consumer spending by encouraging borrowing, rather that these latest measures are about providing liquidity and thus allowing the housing market to clear at lower prices. More interesting is the medium term efforts to make savings more productive by building a proper capital market, replacing cash for savers and bank loans for companies with pension funds and capital markets. This looks like the start of that process and we suspect there will thus be a focus on long term investing, solid dividends and well regulated corporate bond and equity markets for savers.

The latest moves by China have been mis-interpreted as a 'Bazooka' by the same analysts that got over excited about a Fed 'Pivot'. Stimulative monetary policy is neither needed nor appropriate in the world's two largest economies. Rather this is Chinese authorities continuing their creative destruction of the speculative element of the housebuilder bubble and facilitating the market clearing at lower prices, Far more important is the next phase of stabilising the stock market to form a base for building a Capital Market with Chinese characteristics. We don't trust the spike, but those that can invest in China should have it back on their radar

While western policy makers try and 'simulate growth' by fixing prices - of money, energy or the exchange rate - emerging economies like China are pursuing policies of creative destruction, allowing industries to boom and then deliberately collapsing part of them when their purpose has been served. The Property developers were the latest example. Focusing on the 'destruction' rather than the 'creative' side of the policy means the west is constantly seeing China in crisis. When it isn't.

Recency bias might lead us to think that the weakness in October was all about Gaza, but there were clear signs of fragility already appearing in bond markets as the mark to market impacts of the bond bear market continue to lead to forced selling, particularly in Japan. The key to stability is for cash to move out along the bond curve in fixed income even though we would not expect cash rates to fall much. however, the narrative will likely turn to slowdown to support the bond narrative, and we suspect the cash pile destined for equities will go to high quality dividend yield stocks offering the prospect of quality compound real returns. We thus expect a flip in Asset Allocation - from Long Duration Equities and short duration bonds, to Long Duration Bonds and Short duration equities

With an upcoming Camp David meeting with US 'allies' in Asia and the BRICS meeting in South Africa, the narrative on China was always going to take a more negative tone. Investors need to recognise that while in the short term narrative managers may dominate, in the longer term cash flows count. China's troubles are not new, but nether are they anywhere near as bad as presented; exports are slowing, but still 40% up on pre Covid levels, while GDP growth is still 3x the US and 10x Europe. China offers both opportunities and threats, but what it doesn't offer is the opportunity to ignore it.