Standard Chartered’s head of greater China research, Stephen Green (not to be confused with outgoing chairman of HSBC), is a former journalist and researcher with the international think-tank Chatham House. This background has equipped him with investigative and communication skills to flesh out a compelling narrative on the fallout of China’s growth-at-all-costs policy this year.
Capitalizing on his Mandarin language skills and Shanghai base, Green has doggedly researched the murky business of local governments tapping Chinese commercial banks to finance infrastructure projects.
In Green’s March 2010 view, the crisis follows the following course: part one: the local governments’ debt builds up; part two: central government oversight and tougher regulations kick in while local officials fight for projects’ completion and, thus, political dilemmas take centre stage; and part three: the central government is forced to recapitalize the banking system.
Since end-2009, many sell-side researchers have sounded the alarm over the build-up of debt and off-balance sheet vehicles used by local Chinese governments. But Green’s analysis has been boosted by on-the-ground voices – through published question and answer sessions with local and state policy-makers, bankers and urban specialists in June – and original data on real estate property values in so-called ‘tier 1’ and ‘tier 2’ cities.
IN THE SPOTLIGHT
Despite not clinching this award, Morgan Stanley is nevertheless worthy of note for its bullish calls on Asian growth. When researchers downgraded China’s growth left, right and centre in July as the government signalled the start of a tightening cycle, Morgan Stanley held firm and stuck to its bullish 10% plus estimate.
The position also highlights how it accommodates divergent views – unlike JP Morgan and Goldman Sachs that promote a homogenous in-house view – as Stephen Roach, Morgan Stanley Asia chairman, continues to sound the alarm over China’s growth trajectory.
(Meanwhile, Morgan Stanley has long argued controversially – against the market gyrations – that there is no nationwide Chinese property bubble, and any distortions in prices will be met by firm policy action.)
Morgan Stanley was one of the first research operations correctly to predict India’s turbo-charged growth trajectory and reformist path upon the election in May 2009 that reinforced the Indian National Congress Party’s hold on power. And in June 2009 Morgan Stanley called for Indonesia to be included in the Bric (Brazil, Russia, India, China) grouping. Perhaps the researchers are too sanguine on Chinese real estate prospects – but investors have appreciated the quality and depth of their pan-Asia research operations over the past year.