Global Investing

Strong dollar, weak oil and emerging markets growth

October 17, 2014

Many emerging economies have been banking on weaker currencies to revitalise economic growth.  Oil’s 25 percent fall in dollar terms this year should also help. The problem however is the dollar’s strength which is leading to a general tightening of monetary conditions worldwide, more so in countries where central banks are intervening to prevent their currencies from falling too much.

Steroids, punch bowls and the music still playing: stocks dance into 2014

November 21, 2013

Four years into the stock market party fueled by a punch bowl overflowing with trillions of dollars of central bank liquidity, you’d think a hangover might be looming.

Why did the market get the Fed and ECB so wrong?

November 15, 2013

To err once is unfortunate. To err twice looks like carelessness.
One of the great mysteries of 2013 will surely be how economists, investors and market participants of all stripes so spectacularly misread two of the biggest central bank policy set-pieces of the year.
The first was the Federal Reserve’s decision in September not to begin withdrawing its $85 billion-a-month bond-buying stimulus, the second was the European Central Bank’s decision in November to cut interest rates to a fresh low of just 0.25 percent.
The Fed’s decision on Sept. 18 not to “taper” stunned markets. The 10-year Treasury yield recorded its biggest one-day fall in almost two years, and the prospect of continued stimulus has since propelled Wall Street to fresh record highs. (See graphic, click to enlarge)

Bernanke Put for emerging markets? Not really

September 23, 2013

The Fed’s unexpectedly dovish position last week has sparked a rally in emerging markets — not only did the U.S. central bank’s all-powerful boss Ben Bernanke keep his $85 billion-a-month money printing programme in place, he also mentioned emerging markets in his post-meeting news conference, noting the potential impact of Fed policy on the developing world. All that, along with the likelihood of the dovish Janet Yellen succeeding Bernanke was described by Commerzbank analysts as “a triple whammy for EM.” A positive triple whammy, presumably.

‘Peace-ing’ together the world…

September 21, 2013

If only it were this easy.

 

The United Nations General Assembly begins its annual meeting next week with the overhang of chemical weapons diplomacy in Syria and a diplomatic dance over Iran’s nuclear aspirations (and the distrust by much of the West of Tehran’s intentions). That creates a tantalizing prospect of the two, U.S. President Barack Obama and Iranian President Hassan Rouhani, taking a face-to-face spin together on the global stage.

Russian stocks: big overweight

September 18, 2013

Emerging stocks are not much in favour these days — Bank of America/Merrill Lynch’s survey of global fund managers finds that in August just a net 18 percent of investors were overweight emerging markets, among the lowest since 2001. Within the sector though, there are some outright winners and quite a few losers. Russian stocks are back in favour, the survey found, with a whopping 92 percent of fund managers overweight. Allocations to Russia doubled from last month (possibly at the expense of South African where underweight positions are now at 100 percent, making it the most unloved market of all) See below for graphic:

Turkey’s central bank — a little more action please

August 20, 2013

In the selloff gripping emerging markets, one currency is conspicuous by its absence — the Turkish lira. But this will change unless the central bank adds significantly to its successful lira-defensive measures.

South Africa may need pre-emptive rate strike

July 17, 2013

Should South Africa’s central bank — the SARB – strike first with an interest rate hike before being forced into it?  Gill Marcus and her team started their two-day policy meeting today and no doubt have been keeping an eye on happenings in Turkey, a place where a pre-emptive rate hike (instead of blowing billions of dollars in reserves) might have saved the day.

“Contrarian” Deutsche (a bit) less bearish on emerging stocks

July 2, 2013

For an investor in emerging equities the best strategy in recent years has been to take a contrarian stance, says John-Paul Smith at Deutsche Bank.