Archive for the ‘Europe’ Category
2012 – The Year Where It Happens
What happens? Actually, there are cross roads in 2012 for a lot of the economies. Back in 2011, it was said it will be a year of 2 halves. Now in 2012, that is being brought up again. I do think volatility will be lesser in 2012 as compared to 2H 2011.
U.S.
The economy has probably picked up speed in the last few months and will grow moderately in 2012, staving off the need for additional stimulus from the Federal Reserve, a Reuters poll in December. Payrolls rose 200,000 in December, double the gain in November. A weekly measure of consumer confidence ended 2011 at a five-month high. And manufacturers reported their business in December grew at the fastest pace in six months. Companies added 1.64 million employees in 2011, the best year for the American worker since 2006, after a 940,000 increase in 2010. Even with the gains, little headway has been made in recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009. GDP grew 1.8 percent last year, according to the median forecast of economists surveyed by Bloomberg News.
Even though the jobless rate dropped to 8.5 percent, it is still very high. And the massive US$15.17 trillion debt is slowing rolling into the world’s concern. In 2012 GDP is estimated to expand by as much as 2.5 percent.
China
A fast growing economy always have numerous threats that surfaces. For China, the threat of inflation retreated somewhat with authorities considering lowering interest rates for the first time since 2008. China’s home prices fell for a fourth month in December, something the government hoped for in addressing a possible property bubble. Hard landing probability lowered with small manufacturing growth from China. However, there appears larger and not so visible signs of trouble. Local government debt through investment and financing platforms have attracted borrowings of conservatively estimated 10 trillion Yuan. The funds are used for infastructural and property projects and the key concern now is repayment.
To meet their commitments local governments need to generate income from land sales, which is fuelling unrest in the world’s second largest economy as residents increasingly complain that land is being unlawfully seized. A recent downturn in China’s housing market will also weigh on the finances of cities and provinces that had planned to pay off debt by selling land at high prices. Corruption allegations against local governments’ methods to raise money and pay debts have culminated in protests, another source of roadblock for economic growth.
Market Updates October 2010
I have decided to put forth my thought on portfolio strategy first
For clients with substantial portfolio, will look into entering the US market as a diversification. I believe US market is in a better place now, but returns of US market will likely be lower than growth markets. (note: a market need not be in a good place, lesser risk more upside to rally, as can be seen previously). US equity has been in the overbought region. As shown below, the S&P 500 index has been trading within the red zone (between 1 and 2 standard deviations above the 50-day) for some time now. It seldom goes above 2 standard deviations and everytime over the last 10 years it reach, it pulls back.
I still favour Asia and emerging markets, especially some of the less mentioned regions like Indonesia, Brazil, South Korea and South East Asia. I favour markets with good domestic consumption and commodities driven mix. It does seem like the markets are very correlated nowadays.
For fixed income I favour Asian emerging market bonds and high yield bond market. Lower risk fixed income will go to SGD, AUD money markets, countries more developed but stable.
Commodities have run up quite a lot and I believe it is a long term story. Pretty hard to reach a convincing conclusion about outperforming equity markets now.
May – A Volatile Month With 2 Tales To Tell
May has been a volatile month. Europe’s sovereign debt risks and tensions in Korean Peninsular weighs down heavily on the financial markets while economic data has shown that the recovery is underway.
Speculation and intense debate on 2 issues, whether Greece will be forced to default and whether Euro will lose some of its weaker member countries has died down a little. However, things are still not certain a month after attacks lead to a trillion dollar bailout package. Euro skeptics say the forced spending cuts and tax increases will scuttle a recovery before it takes hold. The fiscal austerity measures will be a big drag on growth. Spain lost its AAA credit grade at Fitch Ratings, dropping one step to AA+ to a “stable” outlook.
A Greece default?
You will have heard me mention the Greek sovereign debt problem before. In February, this issue has been weighing down the markets somewhat pending a response from European Central Bank. Last Thursday, a serious contagion forced ECB to response seriously with a huge EUR750 billion safety net to arrest the fiscal crisis and stop the turmoil from spreading to the other 15 nations that use the euro.
Bank of America – Europe Bailout
Markets have been really volatile last 2 weeks due to this issue, other issues like China’s property prices and inflation do not help in calming the market. Main story goes, after the drop last week, traders and investors gave positive response and the markets for fixed income, equity and Euro rebounded on Monday, a day after hard fought European lifeline.
The Whole Issue with Greece (Advance)
Greece and her budget problems has been in the news for some time now. The issued started way back in 1999.
Greece, which had an increasing budget deficit (where spending is higher than income) that cause it to fail the criteria for joining the single European currency in 1999, joined the euro in 2001. Member nations must keep deficits at less than 3 percent of GDP and trim national debt to less than 60 percent of GDP under the pact.
