The Great Debate UK

from Global Investing:

What fund managers think

Photo

Bank of America-Merrill Lynch's monthly poll of around 200 fund managers had a few nuggets in the June version, aside from the usual mood-taking.

Gold is too expensive.  A net 27 percent of respondent thought it overvalued, up from 13 percent in May. Then again, the respondents to this poll have reckoned gold is too pricey since September 2009.

The fall in the euro should be tailing off. A net 14 percent reckon the single currency is still overvalued, but that is way down from the net 45 percent who thought so in the May poll.

BP is good for pharma. The net percentage of fund managers who remain overweight in energy stocks plunged to 7 percent in June from 37 percent in May as oil has continued to spill into the Gulf of Mexico.  The stock beneficiaries have been "dividend friendly" utilities, telecoms and pharmaceuticals.

Pranab Bardhan on the economic rise of China and India

In its May economic outlook, the Organisation of Economic Cooperation and Development projected upward growth outlooks for BRIC countries Brazil, Russia, India and China — the world’s four largest emerging economies.

Strong growth in those economies is helping to pull other countries out of recession, the OECD said. The Paris-based organisation projects that China’s GDP growth will exceed 11 percent for 2010, and anticipates that India’s real GDP growth will be 8.3 percent. Russia‘s GDP growth is expected to be 5.5 percent, and Brazil‘s is projected at 6.5 percent. By comparison, the OECD projects that the Euro area will see 1.5 percent real GDP growth, while the UK will see a 2.2 percent growth.

Resilience in the luxury market amid downturn

Photo

Ben Hughes- Ben Hughes is deputy CEO and global commercial director at the Financial Times. The opinions expressed are his own. -

Last month Italian luxury fashion house Fendi unveiled a handbag made of python leather and dipped in 24-carat gold. Price? A cool $36,000.

from The Great Debate:

Goodbye America, Hello China? Think again

For the growing number of Americans who see China heading for inevitable global dominance, nudging aside the United States, a brief walk down memory lane helps put long-term predictions into perspective.

Not so long ago, Japan was seen as the next (economic) number 1. American executives studied the 14 management principles of The Toyota Way, developed by the automobile manufacturer that grew into the world's biggest car maker and is now recalling millions of defective vehicles.

from The Great Debate:

Tightening underway, Fed a passenger

A tightening in financial conditions is under way but its principal architect won't be the Federal Reserve.

Far from it, the Fed will be pinned down by powerful disinflationary, perhaps even deflationary, forces, making it very unlikely to be willing to raise interest rates any time soon.

from The Great Debate:

At least U.S. has Japan to fall back on

(James Saft is a Reuters columnist. The opinions expressed are his own)

The bad news for holders of U.S. debt, in case you missed it, is that China has sold so many Treasuries that it is no longer America's leading lender.

The worse news is that there is a new creditor-in-chief, and it is Japan, an aging country with its own government debt bubble to contend with.

from Breakingviews:

First Shanghai IPO of 2010 is an encouraging flop

Shanghai has had its first new issues disaster. XD Electric fell 1.4 percent on its first day of trading. That might not sound so bad, until you consider that Chinese initial public offerings in the last six months rose an average 80 percent on their first day. It might be a welcome sign that China's stock market investors are become more discerning.

XD Electric, the first IPO of 2010, suffered from two headwinds. One was a general market pull-back on fears China will begin monetary tightening. The Shanghai Composite Index has fallen 5 percent since the electrical equipment maker priced its shares a week ago, with heavy equipment firms down 8 percent. XD Electric was priced at the top of its indicated range, a 26 percent price-to-earnings premium to the market. Taking that into account, XD Electric's performance is not as bad as it looks.

from Breakingviews:

China needs fertilizer more than steel

China needs fertilizer more than steel. If the Middle Kingdom's industrialization follows the course of other nations, per capita demand for infrastructure like concrete and steel will peak long before meat consumption.

This may explain why mergers and acquisitions activity in the agriculture sector has become so hot. For example, miner Vale just agreed to buy Bunge's Brazilian fertilizer assets for $3.8 billion.

from Breakingviews:

Chinese short-selling will be no bear’s picnic

Hedge funds watching China's markets are licking their lips at what they see as the best shorting opportunity since Enron. But while plans to allow short-selling are imminent, this won't be a bear's picnic. Beijing's plans to allow two-way equity bets will give foreigners little chance. Borrowing individual stocks will be tricky, even for locals.

After many countries such as the United States and UK put more severe restrictions on short-selling, China is taking the contrarian view. The short-selling regime has been three years in the making. The goal is to allow investors to express a different view on the market, and prevent market valuations getting overly stretched.

from Breakingviews:

Cash, not China, is Google’s biggest problem

Cash, not China, is Google's  biggest conundrum. More precisely, where should the search giant point its gusher of greenbacks?

The online advertising market recovery and increasing efficiency pushed free cash flow up 44 percent to $2.5 billion in the fourth quarter. Adding that to the company's $24 billion cash hoard doesn't make sense -- but giving it to shareholders does.

  •