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Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008

Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008

Video commentary for June 18th 2018

Eoin Treacy's view
A link to today's video is posted in the Subscriber's Area.

Some of the topics discussed include: US Dollar resurgent against just about all currencies but Asian and commodity currencies are breaking downwards, MSCI emerging markets breaks downwards, Euro/US Dollar carry trade is helping increase the difference in performance between the two markets, agricultural commodities volatile, industrial resources steady and oil is firm,



Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008
This article by Yumi Teso for Garfield Clinton Reynolds, and Adam Haigh for Bloomberg may be of interest to subscribers. Here is a section:

“It’s not a great set-up for emerging markets,” James Sullivan, head of Asia ex-Japan equities research at JPMorgan Chase & Co., told Bloomberg TV from Singapore.

“We’ve still only priced in about two thirds of the U.S. rate increases we expect to see over the next 12 months. So, the Fed is continuing to get more hawkish, but the market still hasn’t caught up.”

While many emerging-market investors and analysts have praised Asian economic fundamentals, pointing to world-leading growth rates and political stability, some are starting to raise red flags as global liquidity starts to shrink. The Bloomberg JPMorgan Asia Dollar Index sank to a 2018 low on Monday, extending two weeks of declines after the Fed and European Central Bank both took steps toward policy normalization.

Yet some still remain optimistic. Bank of America Merrill Lynch expects some of the regional currencies including the baht and the Philippine peso to appreciate slightly by the end of the year, a research note sent Monday showed. Six of 10 best- performing emerging currencies so far this year are in Asia, led by the ringgit’s 1.2 percent advance and the Chinese yuan’s 1.1 percent gain.

Eoin Treacy's view
By tightening monetary policy after leading the world in easing, the USA is effectively exporting its monetary policy to the rest of the world. More than few of the more troubled emerging markets have had to move aggressively to support their currencies but continued selling pressure suggests they probably have more work to do to shore up investor confidence. Continues in the Subscriber's Area.

 


Bonds Reflect Diverging Growth Prospect
This article by Mohamed A. El-Erian for Bloomberg may be of interest to subscribers. Here is a section:

For the first time in a very long while, the Fed’s decision was slightly more hawkish than I had been expecting. The anticipated 25 basis-points hike in the most-watched policy rate and the openness to another hike as soon as September were accompanied by a change in projections (albeit involving just one of the key “dots”) that raised the Fed’s baseline signal for 2018 to four rate hikes from three.

The next day, the ECB took over from the Fed in exerting systemic market influence. It incorporated in its announcement an unanticipated addendum related to the path of interest rates in 2019. Mario Draghi, the president of the ECB, provided an unexpectedly dovish addition to the bank's plan to reduce its monthly purchases under its quantitative easing program after September and, if the data support it, stop buying bonds entirely at the end of December. At a news conference, Draghi said the soonest the next rate hike could occur would be after the middle of next year.

Taken together, these developments added up to a greater widening of the policy differential between the Fed and ECB than had been expected by markets. This was amplified by data suggesting that U.S. economic growth continues to pick up, while Europe is hitting a soft patch, if not decelerating to a lower path.

The growth and policy differentials could widen further in the months to come, putting fully in play two notions that markets had excessively embraced last year: a synchronized pick up in global growth and more correlated central bank policies in the new era of quantitative tightening.

Economic developments in the next few months are likely to highlight more and more that U.S. growth is a major outlier in the advanced world. The U.S. is benefiting from policy actions that fuel three simultaneous and interrelated engines: higher consumption, underpinned by a strong labor market; greater business investment, supported by relatively strong balance sheets; and increased government spending, including on account of tax cuts.

Eoin Treacy's view
The relative outperformance of Wall Street versus Europe is a clear indication of where investors see value and that has been evident since at least 2013. Economists might only be catching up to that conclusion now but it has been clear to anyone looking at charts which markets were likely to offer the best returns for years.




Le Divorce Investment themes for the post-Transatlantic world
This report by Vincent Deluard for INTL Fcstone may be of interest to subscribers. 

Eoin Treacy's view
A link to the full report is posted in the Subscriber's Area.

There is a realistic possibility that the USA could become energy independent and is in fact already an exporter of oil and natural gas. The widening of the Panama Canal and receding ice around the North Pole have created new shipping lanes that did not exist a decade ago. Meanwhile if the USA is an exporter it has a reduced need to secure supply channels from the Middle East and we are already seeing greater ambivalence towards active engagement in that region.



Long-term themes review May 16th 2018

Eoin Treacy's view
FullerTreacyMoney has a very varied group of people as subscribers. Some of you like to receive our views in written form, while others prefer the first-person experience of listening to the audio or watching daily videos.

The Big Picture Long-Term video, posted every Friday, is aimed squarely at anyone who does not have the time to read the daily commentary but wishes to gain some perspective on what we think the long-term outlook holds. However, I think it is also important to have a clear written record for where we lie in termsSubscriber's Area. of the long-term themes we have identified, particularly as short-term market machinations influence perceptions.

Here is a summary of my view at present - continues in the 



The 49th year of The Chart Seminar

Eoin Treacy's view
If you have an interest in attending an online Chart Seminar please contact Sarah and we will arrange times based on the time zones of those who wish to attend. I envisage holding our first online seminar in late May or early June.

There will be another Seminar in London in November and I am in initial discussions with a potential partner about organising a New York Seminar.

If you would like to attend or have a suggestion for another venue please feel to reach out to Sarah at [email protected] 

The full rate for The Chart Seminar is £1799 + VAT. (Please note US, Australian and Asian delegates, as non EU residents are not liable for VAT). Subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates.


Eoin's personal portfolio April 11th 2018

Eoin Treacy's view
One of the requests subscribers have asked for most over the last few years has been to have an easy way to find what positions I have open at any given time. Therefore, I repost this section on a daily basis and the title will always include the date of my most recent trade. Continues in the Subscriber's Area.

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