In today’s briefing:
- Japanese Equities Underpinned by BoJ and Buybacks, but Longer-Term Issues Persist
- A Q2 Global Market Review
- Macro Watch – Why Surveys Struggle to Get Anything Right in This Environment
- Afc Vietnam Fund Update – 30th June 2023
- Is the Bidenomics Electoral Focus a Contrarian Economic Indicator?
- Second Order China RMB Weakness
- Sri Lanka Is Bouncing Back – AFC on the Road – Sri Lanka
- TPW Advisory July Monthly: The Great In Between
- CX Daily: Proposed Biden Curbs Could Starve Chinese Tech of Early Funding, Expertise
Japanese Equities Underpinned by BoJ and Buybacks, but Longer-Term Issues Persist
- Continued monetary accommodation by the Bank of Japan (BoJ) and hype about corporate governance improvements are the main reasons for the uptrend in equity prices.
- Unlike the late-1980s, forward P/E multiple valuations have not become completely divorced from the real economy due to the proliferation of value companies, although the Buffet Ratio is elevated.
- Value companies will benefit the most from the Tokyo Stock Exchange’s directive to boost their valuations via an improved return on equity, but buybacks can only help in the short-term.
A Q2 Global Market Review
- A review of the relative performance of global equities shows preliminary signs of faltering U.S. leadership.
- Japan is slowly gaining and showing constructive signs of revival.
- Anecdotal bottom-up indications of a Chinese cyclical rebound could spark a rally in China-sensitive stocks around the world,
Macro Watch – Why Surveys Struggle to Get Anything Right in This Environment
- The spread between surveys and the reality is all-time-wide due to inflation
- When will soft data turn into realiable indicators again ?
- We find credit data to be a game-changer and credit is not looking pretty in Europe – especially not in France.
Afc Vietnam Fund Update – 30th June 2023
- In June, the VN-Index showed a robust increase of 3.87% in USD terms to reach 1,120.2 points, accompanied by a significant improvement in market liquidity.
- However, our fund slightly underperformed against the index, gaining 2.6% to reach a NAV of USD 3,205, according to internal estimates.
- The month of June brought several positive developments that supported the market.
Is the Bidenomics Electoral Focus a Contrarian Economic Indicator?
- President Joe Biden’s focus on his economic record based on Bidenomics may be a contrarian economic signal in the current environment of elevated recession risk.
- While indicators show a mixed picture, equity risk is high.
- Investors should find better clarity from the results and guidance from Q2 earnings season.
Second Order China RMB Weakness
- Yesterday, the People’s Bank of China fixed the CFETS Basket to be stronger than expected in a survey.
- State banks intervened to support offshore CNH.
- However, the strength of CNY is starting to wear off as industrial profits data were announced this morning to be at minus 18.
Sri Lanka Is Bouncing Back – AFC on the Road – Sri Lanka
- Ruchir Desai, co-fund manager of the AFC Asia Frontier Fund, travelled to Colombo from 19th-21st June 2023 to meet with policymakers and various Sri Lankan companies, some of which the fund is invested in.
- On my last visit to Sri Lanka in November 2022, my key takeaway was that the economy and stock market had bottomed out as inflation and interest rates had peaked, and the country was on the verge of gaining approval for an IMF (International Monetary Fund) loan.
- Fast forward to June 2023: inflation has reduced significantly, benchmark interest rates have been cut by 250 basis points, and the IMF has disbursed the first tranche of its loan to Sri Lanka.
TPW Advisory July Monthly: The Great In Between
- We remain zeroed in on the multiple transitions we see occurring across risk assets and economies. We focus on 5 transitions in this monthly:
- From rate hikes to rate cuts – from a finished Fed to a just getting started EM cutting cycle – inflation is a DM not EM problem
- From monetary to fiscal policy – aka from the Fed to Bidenomics & its EU equivalent
CX Daily: Proposed Biden Curbs Could Starve Chinese Tech of Early Funding, Expertise
- Investment /: In Depth: Proposed Biden curbs could starve Chinese tech of early funding, expertise
- Summer Davos /: Global debt crisis requires China, U.S. to put aside their differences, economist says
- Law /: New law sets out China’s foreign relations goals, response to national security threats
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