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Pacific Basin Market Overview June 2013
by Team of Nomura Asset Management,
Equity markets in Asia ended generally lower in the second quarter of 2013 due to concerns over the U.S. Federal Reserves apparent shift towards a more balanced monetary policy stance following Chairman Bernankes statements suggesting a tapering of its asset purchase program.
Whitney George on 2Q13: Stocks Continue to Look More Appealing Than Fixed Income
by Whitney George of The Royce Funds,
In addition to detailing what sectors currently look attractive to him from a valuation standpoint, Co-CIO, Managing Director, and Portfolio Manager Whitney George discusses three stocks that exemplify his approach, the current case for active small-cap management, why stocks look more attractive than fixed income, and his opinions on the markets decline in late June.
Accessing Myanmar's Growth
Did you know that in the first half of the last century, Myanmar had twice the GDP per capita of China? What a difference a few decades and government policies make, as China is ten-fold the size of Myanmar today, according to UBS Research. The change in wealth between the two nations is a prime example of how government policies can have a tremendous effect on a countrys growth.
The Asian Giant Stampeding into Gold
In this environment, gold should remain attractive. However, as the West flees the precious metal, another set of gold buyers has come forward with the aim to preserve wealth. Take a look at the chart below which shows total gold production compared to the gold deliveries on the COMEX and the Shanghai Gold Exchange.
The Free-Trade Charade
The negotiations to create a free-trade area between the US and Europe, and another between the US and much of the Pacific (except for China), are not about establishing a true free-trade system. Instead, the goal is a managed trade regime managed, that is, to serve the special interests that have long dominated trade policy in the West.
Getting Back to Normal
Though markets were whipsawed by the announcement, the Feds plan to step aside and allow normalization is a good thing.
The primary risk to hedge is now economic growth and the strong equity returns it tends to produce not financial Armageddon. While risks in Europe and China persist, U.S. fundamentals look relatively strong. Its not too late for investors to move away from defensive positioning and back toward a standard allocation.
The 2013 Mid-Year Geopolitical Update
At mid-year, we customarily publish our geopolitical outlook for the second half of the year. This list is not designed to be exhaustive. As is often the case, a myriad of potential problems in the world could become issues in the second half of the year. The lineup listed below details, in our opinion, the issues most likely to have the greatest impact on the world. However, we do recognize the potential for surprises which we will discuss throughout the year in upcoming weekly reports.
Let's Barbecue It...
by Blaine Rollins of 361 Capital,
Equity investors finished June with the first down month in 8 for the S&P500. Bond investors took a Tommy Boy two by four across the face. And yes, it did leave a mark. Two months ago the "Great Rotation" from bonds to equities was nowhere to be seen. Today the panic out of fixed income funds is happening at the highest levels seen since 2008. As we noted last week, inflection points in major rotations are volatile, scary, and unpleasant. This helps to explain the seven 100 basis point moves in the S&P500 in the month of June, which marks the most volatility in 12 months.
Stay the Course as Mixed Signals Move Markets
Traders stampeded out of gold, emerging markets and bonds this month, setting record monthly outflows in June. Ever since the Federal Reserve hinted in May that signs of a stronger economy could allow for a slowdown of stimulus, markets have protested the news.
Short-Term Pain, Long-Term Gain
by Richard Gao of Matthews Asia,
Chinas economy has seen plenty of headwinds recentlyweak exports numbers, slower growth in both services and manufacturing and a weak recovery of corporate earnings despite rapid credit growth. Chinas equity markets have performed weakly too and have been extremely volatile. But much of the recent volatility has less to do with sagging growth and much more to do with a cash crunch and tight liquidity in Chinas banking system. What is going on?
Stay the Course As Mixed Signals Move Markets
We maintain that gold is in extremely oversold territory and mathematically due for a reversal toward the mean. Yet when gold prices plummet, fear takes over and some investors forget the fundamental reasons to own gold: Gold is a portfolio diversifier and a store of value. It is a finite resource with increasing global demand.
Investment Bulletin: Global Equity Strategy
by Team of Bedlam Asset Management,
For the first five months of the year the global portfolio enjoyed a net gain of 21.0%, 350 basis points better than the index, edging ahead further in May. Recent smoke signals from the Federal Reserve Bank implying - subject to a wide range of get-out clauses that less money might be put into the system, have caused market hysterics. Bond investors have rightly been stampeding out, ending a 32-year old bull market. Its longevity had caused dangerous complacency and overexposure, especially to illiquid and expensive emerging market debt through open-ended vehicles.
Sock Puppet Kabuki; Nikkei Today Parallels Dot-Com Bust
by Peter Schiff of Euro Pacific Capital,
The Japanese stereotype of excessive courtesy is being confirmed by the actions of prime minster Shinzo Abe who is giving the world a free and timely lesson on the dangers of overly accommodative monetary policy. Whether or not we benefit from the tutorial (Japan will surely not) depends on our ability to understand what is currently happening there.
Asia Brief: China's Energy Demand
China has the worlds largest unconventional gas reserves, but these so far remain untapped despite its growing demand for energy. China is now trying to follow the example of the US, and the government has set aggressive targets for unconventional gas production. As the demand for transportation fuels grow over the next decade, this gas could be a major contributor to meeting that need.
A Toast to Change
by Hardy Zhu of Matthews Asia,
In China, there is a distilled white liquor that is as revered as wine is in France. Known as Chinas national wine, maotai, or "baijiu" in Chinese, has been celebrated for thousands of years. Having such a high-end branded white spirit on your banquet table is seen as a sort of status symbol or the hallmark of an auspicious occasion, such as a wedding or formal dinner. As recently as last year, some bottles were commanding more than US$300 each, with prices rising partly from the strong demand related to government and business sector events.
End of Quantitative Easing Tapers Asian Returns? Part I
by Robert Horrocks of Matthews Asia,
Historically Asian markets have done well in periods of a weaker U.S. dollar and faster growth, so lowering peoples growth expectations and causing them to bid up the U.S. dollar is about the worst combination for Asian equities historically. And I do not think that Asias relation to global markets has changed significantly enough to nullify this past relationship. However, there are reasons to think that the effects on Asias equity prices may be a little more muted this time.
End of Quantitative Easing Tapers Asian Returns? Part II
by Teresa Kong of Matthews Asia,
While yields have come off their historical lows in the U.S. and Asia, there is substantially more room for rates to continue to rise. In terms of credit spreads, we have seen investment grade and high yield spreads widen. We believe that spreads will have some room to widen given a repricing of risk across the globe.
Help Clients Fill the Income Void
Affluent investors all over the world just arent getting what they want from their income investments, according to Legg Masons recently released Global Income Survey. Yet there is good news: most say they want to become more knowledgeable about income investing, and theyre eager for financial professionals to point out fresh opportunities.
Submerging Markets: What the Emerging Market Selloff is Telling Us
Investing at its most basic level is about one thing: the return you seek on your investment and the risk you take to get that return. I often emphasize that the biggest risk to investors is volatility, because its the occasional shakiness of markets or market segments that causes investors (whether they manage their money or have someone else do it for them) to react emotionally instead of logically. That plays out every day in markets around the world.
A Sweet Find on an African Adventure
The heart of Africa has been beating strong in recent years due to elevated commodity prices and resilient domestic demand, despite the global economic slowdown. Among the sub-Saharan African countries, Sierra Leone was the fastest growing country last year, according to the World Bank. Its economy experienced growth that is as rare today as Fancy Red diamonds. GDP increased a whopping 18 percent.
The Evolution of Emerging Market Corporate Bonds for U.S. High-Grade Fixed-Income Investors
Emerging market (EM) investment-grade corporate bonds are an important and growing segment of the core ?xed-income universe. These bonds have evolved to be more like U.S. investment-grade corporate bonds than high-yield or traditional emerging market debt (EMD) securities. This sector has demonstrated favorable risk, return, and diversi?cation bene?ts in the context of a broad market ?xed-income portfolio. Todays ?xed-income investors must have a framework for evaluating new opportunities subject to prudent risk management
Global Small Cap Investing: Unconstrained Opportunities
by Blake Pontius of William Blair,
Equity asset allocations have become more global in recent years as investors have sought to reduce the long standing home country bias in their portfolios. Further propelling this trend has been the growing aversion to traditional asset class structures and indeed, conventional asset class definitions, in the aftermath of the 2008-2009 global fi nancial crisis. Against this backdrop, global equity strategies have continued to garner asset fl ows in Europe and have slowly begun to gain traction in the U.S. after years of tepid demand.
Japan's Crossroads
by Jesper Madsen of Matthews Asia,
The tone on investing in Japan has changed. In the six months leading up to May 22, the Tokyo Stock Price Index rose 66% in local currency terms, prompting investors to ask themselves the unthinkablewhy have I not allocated more to Japanese equities? During the same time the yen depreciated about 20%, giving Japans exporters some much-needed breathing room. However, while the financial markets have given the nod of approval to the economic policies of Prime Minister Shinzo Abe, or Abenomics, Japan may possibly be missing a learning opportunity.
Pacific Basin Market Overview May 2013
by Team of Nomura Asset Management,
After a positive start, many Pacific Basin Markets ended the month lower amid concerns that the Federal Reserve (Fed) will soon begin to gradually scale back its quantitative easing measures by reducing the pace of central bank asset purchases. The MSCI AC Asia Pacific Free Index including Japan decreased by 4.8% while the MSCI AC Asia Pacific ex Japan Free Index closed 4.3% lower in May. (All performance figures are based on MSCI indices in U.S. dollar terms with dividends included unless otherwise stated.)
China's Services Revolution
by Sherry Zhang of Matthews Asia,
Historically, China has focused on infrastructure and heavy industries at the expense of the service sector. Two years ago, service industries in China, such as hospitality, advertising, insurance and tourism, contributed a mere 43% of the countrys GDPwell below that of more developed economies like the U.S. and U.K, which saw nearly 80%. This month Sherry Zhang takes a look at the more balanced growth China will need in order to continue its economic trajectory over the next decade.
Cyclical Stocks Appeal After Defensive-Led Rally
by Vadim Zlotnikov of AllianceBernstein,
This years equity market rally was initially led by defensive stocks, as macroeconomic concerns persisted despite improved risk appetite. With valuations in these sectors looking stretched and cyclically oriented stocks starting to rebound in May, is a bigger shift starting to unfold?
Bond Realities: The Changing Landscape for Fixed Income and the Death of the Agg'
by Andrew Johnson of Neuberger Berman,
Earlier this year Andrew A. Johnson, Neuberger Berman?s Chief Investment Officer for Investment Grade Fixed Income, led a series of discussions with institutional clients about the state of the fixed income market and key ideas in approaching opportunistic fixed income investing in the current environment. Here, Mr. Johnson has adapted, and elaborated on, the concepts described at those meetings.
How Asia's Growth Transitions and Policy Experiments Are Shaping the Global Outlook
Our view is that Chinese GDP growth will downshift, averaging 6%-7.5% for the next five years as net exports and investment are reaching their limits. In Asia, Japan is perhaps the economy closest to the T-junction described in PIMCOs global secular outlook: The destination of Japans journey looks increasingly uncertain, with multiple potential outcomes that could stabilize or destabilize the global economy and markets.
Emerging Markets Mid-Year Pulse Check
Global economic growth hasnt been terribly inspiring so far in the first half of the year, but many investors have nevertheless been inspired to pour more assets into the equity markets, some of which have surged to record highs. As we hit the mid-year point, now seems like a good time to take a pulse check of emerging markets and assess our prognosis.
Is College Overrated?
by Vivek Tanneeru of Matthews Asia,
Obtaining a college degree in Asia, like elsewhere in the world, is a middle class dream. It is often considered a ticket to increased employment opportunity. But recently there has been some evidence to suggest that this is not always the case.
The Risk of Government Policies and the Rationing of Retirement
by Jason Hsu of Research Affiliates,
In late April, a group of leading economists and investment practitioners assembled in La Jolla, California, for Research Affiliates 2013 Advisory Panel. Our theme this year touched on two topics that have been front-and-center in recent public debates: the risk of government intervention and the potential rationing of retirement.
Asia ex-Japan: Outlook and recent trends
Andrew Mattock, Fund Manager, Pan Asian Equities, reviews Asia ex-Japan markets year to date and touches on some recent trends in the region. He notes Southeast Asia markets have had a strong start to the year while in contrast, north Asia markets have been flat or down year to date. Andrew explains that the rationale for investors going into Southeast Asia more aggressively, relative to North Asia, is the exposure of North Asian companies and economies to both the industrial production cycle in China and also weak export growth coming out of the global economy.
Wounded Heart
by Bill Gross of PIMCO,
Joseph Schumpeter, the originator of the phrase creative destruction, authored a less well-known corollary at some point in the 1930s. Profit, he wrote, is temporary by nature: It will vanish in the subsequent process of competition and adaptation. And so it has, certainly at the micro level for which his remark was obviously intended. Once proud, seemingly indestructible capitalistic giants have seen their profits fall short of everlasting and exhibited a far more ephemeral character.
The Gold Bull vs The Paper Tiger
Thats all, folks. One look at the headlines will tell you the gold bull market is officially over: the stock market is booming, a modest recovery of the US economy is underway, and the dollar is dominating the forex. Time to sell your bullion and get back into US stocks!
Just One Day Out of Life
by Michael Han of Matthews Asia,
During my visit to Korea a few weeks ago, a hot debate over an alternative holiday system caught my attention. When a holiday falls on a weekend in Korea, it is not generally observed by businesses on the prior or subsequent weekday. However, the government has recently sought to change this despite strong opposition from interest groups and the business sector.
And That's the Week That Was
by Ron Brounes of Brounes & Associates,
All good things must come to an end (hopefully just temporarily). After a nice month-long weekly winning streak, stocks gave back some ground as investors over-analyzed Fed comments and worried about future monetary policy. (The stimulus will end at some pointthats not necessarily a bad thing.) Japan took the over-analysis the hardest as its market suffered a serious setback, though the rally for the year had been significant and some watchers expected a pullback at some point (just not all in one day).
Sri Lanka's Victory
by Teresa Kong of Matthews Asia,
Sri Lanka has begun to reap the fruits of peace. By diverting resources that were previously spent on its military toward things like infrastructure, tourism and education, its economy has experienced solid growth. As our small car sat in traffic on the main road leading to the Colombo airport, my driver told me about the newly planned highway scheduled to open later this year. The Colombo-Katunayake Expressway, he said, would reduce my 1.5-hour trip to about 20 minutes. More importantly, I thought, we wouldnt be driven off the road by rickshaws referred to locally as tuk-tuks.&#
Bifurcation Blues
Bifurcation. A very technical sounding word. It merely means ?a division into two parts?, which is what we are witnessing in many areas related to investment, both macro and micro. And it is exhibiting to value investors those areas to avoid and the most attractive to embrace. And giving rise to a wide range of disparate opinions among economic and investment professionals as to what outcomes are likely. Needless to say, we have our own strong views.
ING Fixed Income Perspectives May 2013
How do you like them apples? By pointing out some Excel blunders in the data of Harvard economists Reinhart and Rogoff, a UMass-Amherst grad student appears to have gotten their number and in the process discredited their seminal work touting the merits of austerity. Though Good Will Hunting fans may be amused to see a couple of Harvardians get their comeuppance, you don?t need the titular character?s wicked smarts to deduce that harsh government spending cuts may not be the best way to pick up your economy.
Asia Brief: China's Car Fleet The Largest in the World?
Car sales in China have grown rapidly since 2009 and it is on course to outstrip the US in terms of the size of its car fleet by the end of this decade. This presents a major challenge to the Chinese government, which must balance its peoples happiness and political stability with economic development in an environment which has already been compromised. The momentum of demand for new passenger vehicles is likely to make air quality worse and Beijing has introduced emissions and efficiency standards to address the problem.
Results 3,851–3,900
of 4,280 found.
