Saga of Financial Markets


Last updateSat, 29 Jul 2017 12am

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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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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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Dawn of ‘Crexit’?

Last week, the VIX fell to 13.22, the lowest intraday level since June 2007; European shares rallied to 22-month highs…There are ‘signs’ that investors are confident that good times will continue…According to Bernanke, the worst thing the central bank to do would be ‘to raise interest rates prematurely” – low rates are going to be with us for a long time as there is no alternative (TINA). Deutsche Bank suggests 2013 could spell the ‘dawn of the post-crisis era”.  Really?

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The Great Rotation Story

The last time S&P 500 hit 1,500 was 2007-05-03, thereafter it hit the peak at 1565 on 2007-10-10.  Then, it fell by 56.8% and reached the bottom at 676 on 2009-03-09.  5 years later, on 2013-01-25, it broke 1,500 closed at 1502!  Now they said the recent bull is attributed to the Great Rotation play – people are selling bonds and buying equities…and reason for the Great Rotation is bonds are ‘overvalued’ and equities are ‘undervalued’, as such investors are selling low-return bonds and buy stocks, driving share prices up. Add a comment

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If Obama wins…Gold price will skyrocket?

A survey by Barclay found that, if Obama wins, equities will sell off (the opposite under Romney) but it would be shortlived as uncertainty is removed as Obama’s victory would have dovish Fed Chairman Ben Bernanke remain in place – boosting gold (bad for dollar); a Romney victory would be dollar-positive (bad for gold).

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