Monday, 19 January 2015

10 things I have learnt from day one of the Asian Financial Forum

What were my leading thoughts from day one of the Asian Financial Forum - self-styled to bring together some of the most influential members of the global financial and business community to discuss developments and trends in the dynamic markets of Asia - which this year has the secondary title of 'Asia: sustainable development in a world of change'?

As always for me the audience participation voting provides critical intelligence and potential guidance on investment opportunities - sometimes of course on a contrarian basis!

1. Ahead of the Chinese 2014 GDP print (link here) it was fascinating to see the anchoring of 2015 expectations around the 7% level, albeit with a greater downside potential minority view.


Even though I continue to believe that microeconomics matter just as much as macroeconomics (a view shared below) the reality is that the headline GDP statistics remain influential for short-term sentiment. 


2. So what are the risks in the world then if it is not apparently headline Chinese GDP growth?  In a very tight poll - itself showing that there is not real consensus on this matter - divergent central bank policies just edge it ahead of geopolitics and lower energy/commodity prices.  I would agree with this: the likelihood of volatility and the impact of this was hugely influential in my 15 Macro Thoughts for 2015 write-up (link here).


3. But are investors optimistic still? Akin to the voting themes seen for the Chinese GDP poll above there has been a slight downward bias in voting preferences. Plenty for stock pickers to go for I would say (just as in 2014)...


4. So the best region to invest in around the world then?  Perhaps unsurprisingly given the location China was the most popular (and usefully stretched its lead over the US versus last year's poll too)...and even after the dramatic performance of the Shanghai bourse during the latter half of 2014.  Of course the contrarian in me noted the low scores for Western Europe, Japan and Russia all geographies at the margin for 2015 I would argue offer better opportunities.  


5. So taking this optimism about China into account, what could pose a threat?  Local government debt / shadow banking and then the property sector:


What strikes me about the above is the trend in the voting however, specifically the rise in concerns towards the property sector (which feeds into local government debt levels of course).  Anything which inhibits the rise of the Chinese consumer is going to have an impact and property has that overspill potential whilst shadow banking is more a function of a financial system still in evolution.

6. RMB convertibility remains tomorrow's ('within 5-10 years') story.  I would agree with this.  Following on from the above continuing microeconomic evolution of the financial sector remains the key: 


7. Interesting that falling oil prices were perceived by more attendees to have a mixed view than a positive one...I guess it depends where you come from but to me lower energy prices are a positive for the consumer economy...


8. ...although over the next five years classic consumer products were amongst the least preferred with healthcare and e-commerce much more liked.


I need to look into healthcare more but consistently it has been the most loved-up sector around the world.  The contrarian aspects of consumer/agriculture strike me as more interesting...

9. Stalemate appears the 'norm' for the outlook for Russia and the West.  I still see a political rapprochement with Europe as being sensible for both sides.  As noted above Russia is unloved and from an equity investment opportunity interesting. 


10. It had to be a net 'yes' surely in lowly regulated Hong Kong...but the gap was smaller than I thought.  Supply side reform is all about liberation from regulation...! 



2 comments:

  1. Great angle on the topics board, thx for sharing!

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  2. A great macro-led conference. The best in Asia? I have yet to find an akin one better...

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