Stability, security and self-reliance were overarching themes from China’s twice-a-decade leadership reshuffle. With few details disclosed on near-term supporting policies, we remain cautious on the Chinese market.

Our stress tests show the Chinese banking sector as a whole can absorb shocks from a severe downside scenario, but mid-sized banks and contagion pose potential risks.

Following strong double-digit profit growth in FY2021, we expect Chinese banks will be less profitable this year as COVID-19 lockdowns continue to disrupt China’s economy.

In the absence of immediate and substantive policy easing at the national level, we believe that the sector could pose a serious risk to the government’s GDP growth target in 2022.

The Bank of Canada embarked on a swift tightening path, but secular forces still weigh on the longer-run interest rate outlook.

The Fed could give the economy a powerful boost by maintaining the mix of assets on its balance sheet.

The Fed has another lever to pull to ease monetary policy, one that could increase savings rates and create more disposable income.

In our view, a combination of positive macroeconomic factors is likely to keep prepayment speeds higher than the market projects.