We have been suggesting for a little while that the RELATIVE performance of the USA equity market is peaking. We have favoured Japan and now increasingly China and Hong Kong too. We still avoid Thailand, Indonesia, India and Malaysia for a number of different reasons. Vietnam is interesting and a favoured destination for FDI but hard to buy. The best way to play that may be through HK listings such as LUKS Group (HK:366).
This week we revisit a topic we first spoke of when the great Trump Trade War was very much in its infancy. That is the future of global trade and industry and, more importantly, what this means for Australia. The recent moves made by regulators in the US (including blocking off of Tencent and forced sale of TikTok) have brought many of our broader predictions, perhaps unfortunately, to a reality.
This morning the potential for the imposition of import duties on Australian wine by China has made it incumbent upon our government to formulate nuanced policy in an increasingly hostile and uncertain world. What does this mean for Australian investments? What is our world likely to look like over the next decade? These are the fundamental questions we seek to answer this week.
By no means do I follow the Eugene Fama line of thought and insist that markets are fully efficient nor consistently rational. However, just maybe, the current situation isn’t as irrational as one might imagine judging by the headlines, some of which include the S&P hitting all-time highs, the ASX not factoring in the full impact of the economic lockdown, recovering close to 35% from its lows, and all this despite quite possibly the worst growth numbers since The Great Depression.
This week we continue to explore the global financial system as it currently stands and how we have come to this position. In particular, I shall focus on the USD as the reserve currency, the Eurodollar market and how money is actually created. The goal being that by the end of this part of the series, the readership will be able to understand how the rise or fall in the USD can end up impacting credit growth in seemingly far flung or unrelated economies like China and Australia. Why, when the latest round of monetary stimulus was put in place, the Fed included dollar swap lines to central banks around the world, including Australia, to keep the system on stable footing.
Markets & Commentary
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TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.