Michael Howell isn’t interested in hype. He’s watching flows.
And what the founder of Crossborder Capital sees in those flows is a story that’s been quietly building: money is shifting out of the US and into Asia. Not because the dollar has collapsed or the US economy has hit a wall, but because liquidity conditions now favour emerging markets, especially those plugged into China’s revival.
“There’s no big move out of the dollar,” Howell told The Monetary Matters Network. “What you’re seeing is a rebalancing. US assets have outperformed massively. Now, global portfolios are trimming exposure and rotating.”
That shift, he argues, is not just cyclical. It’s expected. The US economy was “shooting the light bulbs out” for years, but growth has slowed. In contrast, the rest of the world, particularly Asia, is stabilising and picking up. “It’s no surprise that international markets are outperforming. This is normal. And it’s showing up in the data.”
At the centre of this rotation is China. According to Howell, the People’s Bank of China has already injected over 10 trillion yuan into its money markets in the first half of the year, around A$2.2 trillion in today’s terms. “They’ll probably need to do the same again,” he said. “But this is a great start.”
China’s heavy stimulus is reviving trade and commodities. “If the PBOC keeps pushing the gas pedal, you’ll see shipping pick up, the supply chain moving again, and emerging markets rallying,” Howell explained. “That’s what’s happening. It’s not just Wall Street rising. Emerging markets are running harder.”
For India and Southeast Asia, two regions closely tied to China’s supply chain and increasingly to its consumer base, this is timely. “A weaker dollar makes it easier for other central banks to ease. That’s exactly what they’re doing. And 80 percent of the central banks we monitor, nearly 100 of them, are easing right now.”
Howell sees this as a classic phase of the liquidity cycle. He divides the market into four stages: calm, speculation, turbulence and rebound. “We’re in calm-to-speculation. That’s when emerging markets and commodities usually lead.”
His models point to another six to nine months of liquidity growth, driven not only by China’s stimulus but also by changes in the US Treasury’s funding strategy. “They’re issuing more short-term paper, which increases liquidity by definition,” Howell said. “And banks are buying it. That’s monetisation.”
The result is what he calls monetary inflation, where asset prices respond more to financial conditions than real economic growth. “You want hedges against that. Real assets, gold, good equities, Bitcoin. Fixed income isn’t a hedge. It’s the opposite.”
But which equities?
“Emerging markets. They’ve lagged for years. Now they’re catching up,” Howell said. “I’d be looking more at Asia. China, obviously. But also the markets tied into that story — India, Vietnam, Indonesia. These are the economies that will benefit if the Chinese stimulus lifts global demand.”
Howell points to recent moves in the MSCI Emerging Markets Index as early confirmation. “These markets are moving. And they have room to run. US equities might still go up, but the bigger gains will be in emerging markets.”
He’s especially bullish on China, provided investors can set aside geopolitical noise. “Very bullish, if you can ignore the politics,” he said. “The last time the PBOC did this kind of stimulus, Chinese equities had a big bull run. We’re seeing the same setup now.”
But investors shouldn’t wait for the all-clear. “These things move slowly, until they don’t. You want to be in before the move becomes obvious.”
Even the yuan, long considered a controlled currency with little upside, is now part of the story, just not in the way most expect. “Don’t look at yuan versus US dollar,” Howell said. “Look at yuan versus gold. That’s where the devaluation is happening. China is printing to weaken its currency against real assets, not paper currencies.”
He sees this as a mirror of Western investors turning to Bitcoin. “Asia’s doing it in gold. We’re doing it in crypto. It’s the same instinct, to protect against monetary inflation.”
There’s also a broader point here. Emerging markets, especially in Asia, have learned how to ride liquidity cycles. “They’ve built stronger reserves, deeper financial markets. And when China pumps liquidity, they benefit first.”
But Howell, who has tracked liquidity cycles for decades, offers a gentle warning.
“This won’t last forever. The liquidity cycle bottomed in late 2022. It’s been rising since. But our models show it peaks in early 2026. That’s when refinancing walls start to hit. A lot of debt, public and private, comes due. That’s when the game changes.”
Until then, the flows are the story. And right now, they’re heading east.
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