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Saga of Financial Markets

Fri12152017

Last updateSat, 29 Jul 2017 12am

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How QE exit would impact bond?

Ben Bernanke, Fed chairman, last month said that bond purchases designed to hold down interest rates could slow in coming months as the US recovers, a shift that could have far-reaching consequences for US debt markets, perhaps signalling a turning point in the 30-year bull market for bonds. US 10-year government bonds rose from 1.6% at the start of May to 2.1% on May 31.  Anyone investing in bond funds lost money in May!  US funds that invest in higher-rated bonds with average maturities of under 10 years lost an average 1.8% in May, making their worst performance since the depths of the financial crisis in October 2008.  PIMCO Total Return Fund, with AUM of $293 billion, run by Bond King – Bill Gross, lost 2.2% in May, making it one of the worst performers in May.

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Why It Might be Time to Look at European Equities

Since the market low in March 2009, European stocks have performed very well, considering the problems in the region were far worse than anywhere else.  Indeed, over the past 12 months European markets have outperformed other regions, with the exception of the US. In fact, banks and investment houses such as, Morgan Stanley, JPMorgan, Coutts (the private bank) are overweighting Europe if not begin to overweight Europe.

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What is Driving US Stock Indexes Rallying?

On 2013-05-17 (Friday), S&P 500 index closed at a reocrd of 1,66747, its 16th record close of the year; Dow Jones Industrial Average closed at 15,354.40, its 21st record of the year and Nasdaq Composite have made a nearly unchecked 16-17% gain for the year!  It is worth noting that not just the indexes stretching for the stratosphere – more than half the stocks on the S&P 500 touched new 52 week highs, with 141 of those occurring on Friday alone and another 128 companies reached new 52 week highs earlier in the week!

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Warning: Investors are rushing to Japan market

Many investors are now ‘rushing’ into Japan market and in a big way!  Mutual and exchange traded funds investing in Japanese shares attracted record inflows last week. So far this year almost as much money has gone into Japanese mutual funds as in the best two full years of the last decade.  Some label these monies as ‘dumb’ money as they are late to the party.

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How the Emerging Market Debt evolved?

Emerging Market (EM) Debt, with market size of US$ 12 Trillion, is an asset class where more and more investors are considering an allocation to it.  Last year, 2012, EM attracted US$94.4 billion of inflows.  Since 2008, US$260 billion was channelled to EM Debt.  Year-to-date till end Feb 2013, US$18 billion was recorded.  US$10 billion went to local currency bond, US$4 billion to EM Corporate Funds and US$4 billion to Hard Currency EM Funds.  Since the early 2000, the absolute  levels of EM debt have declined and the amount of the debt  that is US dollar denominated is now less than 25% of the total debt outstanding.

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