In today’s briefing:
- US Banking System: Repeat of 2008 Unlikely as Fed Separates Balance Sheet from Interest Rate Policy
- What USD Weakness Mean For Asset Returns
- Managing Risk in SME Lending: A Perspective for Institutional Investors
- Interpreting the Zweig Breadth Thrust Buy Signal
- AFC Vietnam Fund March 2023 Report
US Banking System: Repeat of 2008 Unlikely as Fed Separates Balance Sheet from Interest Rate Policy
- High losses on banks’ mortgage backed securities (MBS) portfolios are not due to degrading credit quality, but rising interest rates and high inflation that could impact bank lending standards.
- Swift action by the Fed and Treasury to guarantee all bank deposits should limit the economic fallout stemming from recent events in the banking system.
- The Fed’s balance sheet will be deployed to ensure future financial stability, while the federal funds rate will be the chosen tool to fight inflation.
What USD Weakness Mean For Asset Returns
- The USD Index is on the verge of breaking long-term support. If it does, it would have multiple implications for asset class returns:
- It would be bullish for gold and non-U.S. equities over U.S. equities.
- It would be bearish for the near-term economic outlook and commodity prices.
Managing Risk in SME Lending: A Perspective for Institutional Investors
- Institutional investors increasingly pursue SME loan portfolios for enhanced returns, diversification, and uncorrelated returns.
- However rising interest rates, inflation, and market volatility necessitate reassessing risk management strategies in such portfolios due to potential negative impacts on SME performance and loan repayment ability.
- Effective risk management in SME lending by institutional investors requires thorough due diligence, comprehensive risk models, stress testing, regular monitoring, communication with the external managers, and adaptability to market changes.
Interpreting the Zweig Breadth Thrust Buy Signal
- The market flashed an extremely rare Zweig Breadth Thrust buy signal on Friday.
- At first glance, it appears to be an excitingly bullish development, or a “what’s the credit limit on my VISA card” buy signal, but we have doubts.
- We believe that despite the potential excitement generated by the ZBT buy signal, the U.S. equity market remains in a holding pattern.
AFC Vietnam Fund March 2023 Report
- March was certainly another eventful month! Silicon Valley Bank’s collapse and Credit Suisse’s forced sale has put financial markets in their worst state of panic since the global financial crisis of 2008.
- But given that Vietnam’s banks are mainly focused on the domestic economy and more traditional in nature, the Vietnamese stock market was less affected.
- The VN-Index increased by +3.9% in March and the NAV of our AFC Vietnam Fund closed the month +1.8% at an NAV of USD 2,900, according to internal estimates.
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