Monday, 7 September 2015

A few macro and related thoughts today

A few macro and related thoughts today...

G20 – Finance ministers and central bankers from the Group of 20 nations pledged to “refrain from competitive devaluations” after a two-day meeting in Ankara. That’s the first time the G-20 has used such language since 2013. Meanwhile the PBoC head noted: “At present, the exchange rate of the renminbi against the dollar is stabilising, the correction in the stock market is already mostly over and the financial markets show hope for stabilising.” Finance ministers and central bankers supported China’s argument that changes to its state-managed currency peg last month were a step towards a more market-determined exchange rate. The sole dissenter was Aso of Japan, who said the Chinese presentation was not detailed enough.  G20 talking shop soon be forgotten about in my view...

Talking about China...

China edges down 2014 growth rate by 0.1% on a statistical revision.  Largest deduction from China output in 2014 growth downgrade: financial services. Will make this year's H1 boom look bigger, H2 bust smaller.  So far no huge negative volatility in the Chinese bourse despite two closed days.


Moody's Investors Service says that listed Chinese banks will face rising operating pressure over the next 1-2 years, as China's economic growth slows, and as the banks' interest margins narrow further on the government's monetary easing policies and deregulation of interest rates. Moody's conclusion was based on the banks' results for the half-year ended 30 June 2015 (1H 2015).  What has happened since?!

China did flash a death cross as per Zero Hedge



Meanwhile in Hong Kong's shops: 

Greece - polls showed the former ruling leftwing party Syriza running neck and neck with the centre-right New Democracy party barely two weeks before the snap ballot (link here). Meanwhile noteworthy that Tsipras is trying to improve how he is perceived as he hails Eurozone's plans for Greek debt. Back in January he was asking for cancelling of 50% of Greek debt.  The power of a bailout…. 

Brexit – Mail on Sunday reported a poll that found 43% would vote for Brexit vs 40% that wanted to stay (undecided 17%).  Shift from last poll which showed 37% leave and 45% stay.  Also apparently 22% of those who voted to stay could switch if the ‘migrant crisis gets worse’

Oil – some chat about a mega Russia-Saudi deal: “Kremlin energy tsar says OPEC may have to ditch its low-price policy within months. But Russia needs to cut output quietly too” (link here). 

Italy reform / Ambrosetti conference – some positivecomments about European change for once!

'All the executives said there was much more to be done to bring Italy's growth in line with the rest of Europe, tackle stifling bureaucracy and corruption, speed up the justice system, cut taxes and keep control of tottering public finances.  But the overall atmosphere was in sharp contrast to last year's gloomy discussions over the crisis and impatience at the lack of progress, and an internal poll showed 69 percent of participants had an excellent or good assessment of Renzi'

Interesting European chart.  Italy needs all the reforms noted above, Portugal remains the most exposed: 



Lack of inflation in the world via this updated chart from @Callum_Thomas: 



Global valuation / div yield – interesting next few years await.  In my view this chart is very consistent with a more stock picking focus: 


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