Financial Markets
The sharp spike in HIBOR will be short lived. The RMB "carry trade" has been largely unwound. The RMB will not experience the intense selling as seen in the past year. H shares are still trading at substantial discounts to A shares, which will inevitably continue to draw domestic investors. Strategically, H shares remain a better bet than their domestic counterparts.
A playable pair trade opportunity has emerged on the back of shifting capital spending patterns: long communications equipment/short machinery.
We put the odds of an oil-production freeze agreement between OPEC and Russian officials next week in Algiers at slightly better than a coin toss.
Are negative yields on $10 trillion of global bonds a sure sign of a bubble? The answer is no... and yes.
The fiscal spending impulse in China is still positive but receding. The nation's productivity and potential GDP growth are bound to decline due to a rising role of government in capital and resource allocation. Hence, cyclical stabilization could well be overwhelmed by a structural slowdown. Another bubble is forming in China, this time in the corporate bond market. The amelioration in Korean and Taiwanese exports is due to the technology sector/semiconductors, and does not reflect broad-based improvement in global trade.
This week, we are introducing a new investment benchmark index that includes all the countries and sectors that we regularly cover in our research, and a detailed recommended portfolio that fully reflects our market views.
Consumer products stocks are likely to move to an even larger valuation premium before the cyclical outperformance phase ends.
The secular bond bull market is over. Safety is in a bubble. The shift from monetary to fiscal easing is the most likely candidate to prick the bubble in safety.
In this piece we revise our yield portfolio to increase its resilience to interest rate shocks.
We extracted the key factors driving currency returns; these variables approximate the dollar, EM spreads, and commodities. Any currency's sensitivity to these factors can be estimated, offering a great degree of flexibility for investors to generate trade ideas. Based on our macro views, this approach recommends being short commodity currencies and being long the dollar. The BoJ, BoE, and Riksbank are also covered.