undervalued asset classes - emerging market equity, Asia ex-Japan equities, emerging market debts, US and global high-yield bonds and European asset-backed securities.
overvalued assets - government bond asset classes such as those from Germany, Japan, the UK and the US.
- HSBC Global Asset Management
July 30, 2016
July 26, 2016
Investment strategies in Asia if Trump triumphs
Nomura highlights some investment strategies to adopt if Trump makes it to the White House.
1) FX strategy
Direct risks to foreign exchange in Southeast and South Asia are likely to be less severe than in Northeast Asia, says Nomura.
In Asia, Nomura recommends being short Chinese yuan and Korean won, and long Indonesian rupiah and Malaysian ringgit.
“We believe the impact on IDR and MYR would be more contained, given robust growth, relatively favourable political and policy developments and bond inflows into both countries,” Nomura says.
2) Rates strategy
Nomura believes a Trump victory is likely to make central banks shift their bias further towards easier-for-longer policies.
“In such an environment we expect investors to focus on high-quality carry trades where an idiosyncratic domestic story is favourable for local rates,” Nomura says.
This would benefit rates market in Korea, India, Malaysia and Australia, while Hong Kong and Singapore are likely to underperform US rates.
“As far as trade recommendations are concerned, we believe receive 3yr MYR NDIRS; long 7yr MGS; long 7yr IGB; receive AUD 2yrfwd1yr IRS; receive KRW 3yr; and receive THB 5yr positions would perform,” says Nomura.
“We would express our view of HKD and SGD rate underperformance via pay HKD 5yr vs USD 5yr and pay SGD 2yr vs USD 2yr positions,” it adds.
3) Equity strategy
If Trump becomes president, Nomura says “an initial negative reaction in equities” is likely, but the longer term impact on equities beyond that is unclear.
China, Korea and the Philippines are likely to be most affected, followed by India, Singapore and Indonesia in the next group, and the least impact seen in Thailand and Malaysia.
“Specifically, we would expect our Asia Arms Race basket (rising risks of confrontation in the region), defensive stocks in Thailand and Malaysia (markets least impacted), and higher-yield stocks (to the extent that a Trump presidency contributes to lower global yields) to outperform,” says Nomura.
“Longer-term, downsides to growth and rising uncertainty in policy would imply a further flattening of our expected trend for Asian equities over the next 12-24 months,” Nomura adds.
1) FX strategy
Direct risks to foreign exchange in Southeast and South Asia are likely to be less severe than in Northeast Asia, says Nomura.
In Asia, Nomura recommends being short Chinese yuan and Korean won, and long Indonesian rupiah and Malaysian ringgit.
“We believe the impact on IDR and MYR would be more contained, given robust growth, relatively favourable political and policy developments and bond inflows into both countries,” Nomura says.
2) Rates strategy
Nomura believes a Trump victory is likely to make central banks shift their bias further towards easier-for-longer policies.
“In such an environment we expect investors to focus on high-quality carry trades where an idiosyncratic domestic story is favourable for local rates,” Nomura says.
This would benefit rates market in Korea, India, Malaysia and Australia, while Hong Kong and Singapore are likely to underperform US rates.
“As far as trade recommendations are concerned, we believe receive 3yr MYR NDIRS; long 7yr MGS; long 7yr IGB; receive AUD 2yrfwd1yr IRS; receive KRW 3yr; and receive THB 5yr positions would perform,” says Nomura.
“We would express our view of HKD and SGD rate underperformance via pay HKD 5yr vs USD 5yr and pay SGD 2yr vs USD 2yr positions,” it adds.
3) Equity strategy
If Trump becomes president, Nomura says “an initial negative reaction in equities” is likely, but the longer term impact on equities beyond that is unclear.
China, Korea and the Philippines are likely to be most affected, followed by India, Singapore and Indonesia in the next group, and the least impact seen in Thailand and Malaysia.
“Specifically, we would expect our Asia Arms Race basket (rising risks of confrontation in the region), defensive stocks in Thailand and Malaysia (markets least impacted), and higher-yield stocks (to the extent that a Trump presidency contributes to lower global yields) to outperform,” says Nomura.
“Longer-term, downsides to growth and rising uncertainty in policy would imply a further flattening of our expected trend for Asian equities over the next 12-24 months,” Nomura adds.
July 15, 2016
8 market predictions for 2H2016
2H2016 in eight predictions by DBS Chief Investment Officer Lim Say Boon
1) Brexit will not break the EU but it will be negative for European stocks.
2) The global economy will continue to struggle and a corporate earnings recession will spread.
3) A decline in US corporate earnings will inevitably take the Standard and Poor’s 500 Index down with it.
4) The Bank of Japan will have to unleash further stimulus because a strengthening yen is bad for the economy and corporate earnings.
5) China will continue to ease.
6) Asia ex-Japan stocks will outperform global equities because their dividend yields are higher.
7) Lim is negative on the US dollar and believes that commodities and gold will rise, given the global central banks are in easing mode.
8) Bonds will continue to outperform equities.
1) Brexit will not break the EU but it will be negative for European stocks.
2) The global economy will continue to struggle and a corporate earnings recession will spread.
3) A decline in US corporate earnings will inevitably take the Standard and Poor’s 500 Index down with it.
4) The Bank of Japan will have to unleash further stimulus because a strengthening yen is bad for the economy and corporate earnings.
5) China will continue to ease.
6) Asia ex-Japan stocks will outperform global equities because their dividend yields are higher.
7) Lim is negative on the US dollar and believes that commodities and gold will rise, given the global central banks are in easing mode.
8) Bonds will continue to outperform equities.
July 09, 2016
On wealth inequality
Why do people complain about wealth inequality so much? The rich earned their money, the poor shouldn't take it just because they can't get a job.
Gary Leverich writes:
There’s a really valid question that’s the cornerstone of the real argument.
What is the responsibility of a wage earner earning an income, regardless of income?
The next question is:
What is the responsibility of an individual earning money based on the efforts of others?
Here’s the thing. NOBODY has ever gotten rich without the efforts of others.
So, when you’re rich, what is your responsibility to those that helped you get there?
It’s a simple question with a complex answer. An answer that I’m not sure about myself.
The United States fought a war in the 1860’s over the concept that those that work for your benefit should have rights and freedoms just like you.
In the 1980’s, Ronald Reagan introduced the idea of “Trickle Down Economics”.
The idea supposed that if you allowed those with the capacity to get rich, the ability to get richer, that money would trickle back down into the economy. The economy would be boosted, and everybody would benefit, from the poor to the middle class, back to the rich.
It doesn’t work. Not even a piece of it. All that happened was the rich got richer and the poor got poorer. We have 35 years of evidence that it absolutely doesn’t work. So why are we still doing it?
Enter political rhetoric now. If we tax the rich higher, and give that money to the poor, the rich will just take jobs overseas and America will suffer. Yet, all these things the rich say they’ll do if a redistribution of wealth is enacted has already happened. They did it under Trickle Down Economics despite having incentives not to do it.
They can’t have their slave labor in the U.S. anymore so they happily move those jobs to countries that do. I guess the child below should be happy the American billionaire is willing to pay them 10 cents an hour. While the child is not dangling from a tree, do you really care if he does? Not if you buy any of the brands of clothing that utilize child labor in it’s production.
We have a responsibility to ALL people of the world. Not just the rich. And those that have 99% of the world’s wealth DO have a duty to all those that helped get them to that 1%. That money does NOTHING to help the economies of the world as it sits in bank accounts accumulating more wealth, propped up by fuzzy math/numbers and flaky inflated markets with no real sense of true worth.
That money needs to be reinvested into the global community. Not just reinvested for the sake of making more money on top of the money that already exists by inflating markets, creating economic bubbles and destroying livelihoods while you’re considered “Too big to fail”.
When bad decisions hold no consequences for a certain segment of society, you have a really big problem with that society. Bad decisions allow for social, and economic mobility. When you bail out those that make bad decisions, you eliminate the ability of those that make good decisions to take their place. Then you have those “Too big to fail” giants creating legislation that keeps those with good ideas and good decisions from being able to succeed and fully flesh out those ideas.
The system is broken. Really broken.
The problem is the rich make the rules. It’s the Golden Rule - He who has the gold makes the rules. Then when their actions are questioned they devolve the argument into “We’re being attacked by the poor.”
But, the poor by their definition is anybody that’s trying to find access to their hordes of wealth. This includes other millionaires and even billionaires.
So, the real problem isn’t the poor. It’s the hoarding of wealth for the sake of hoarding wealth and to just have it. It’s about not giving back to those that have allowed you to ascend to that place.
Just giving money to the poor is a bad idea. It doesn’t work. It’s why I’m against minimum wage hikes. Throwing money at poverty doesn’t work. But reinvesting into local communities and economies so businesses, infrastructures, and most importantly great ideas can grow does work, and letting the best ideas, practices and decisions win shouldn’t seem like such an outlandish idea.
Yet, that’s exactly what the current wealthy are claiming.
July 03, 2016
Top Malaysia stock picks for 2H2016
Top Malaysia stock picks for 2H2016 from Public Invest:
Axiata Group Bhd, AMMB Holdings Bhd, Genting Plantations Bhd, SKP Resources Bhd, LBS Bina Group Bhd, Chin Hin Group Bhd, TDM Bhd, Uzma Bhd, Cypark Resources Bhd and Hock Seng Lee Bhd
Top 3 preferred sectors - power, property, plantations
Axiata Group Bhd, AMMB Holdings Bhd, Genting Plantations Bhd, SKP Resources Bhd, LBS Bina Group Bhd, Chin Hin Group Bhd, TDM Bhd, Uzma Bhd, Cypark Resources Bhd and Hock Seng Lee Bhd
Top 3 preferred sectors - power, property, plantations
July 01, 2016
Can human civilization now do away with competition?
Haven’t we reached a stage where competition among humans is detrimental to our quality of life and even existence?
We, as in all humans in all countries of the world, should now cooperate on distributing our abundant wealth and resources, rather than having it end up mostly in the hands of a few.
We, as in all humans in all countries of the world, should now cooperate on distributing our abundant wealth and resources, rather than having it end up mostly in the hands of a few.
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