Posts Tagged inflation
The Trends And Shape Of The World’s Economic And Financial Markets in 2013…Part 3 –10 biggest events and industry trends
Posted by jeffreyyap in China, Economics, Equity Market, Fixed Income Market, Global, Hong Kong, Money, Strategy, United States, Words of Wisdom, World on January 8, 2013
This is the 3rd and final part of my overview of the trends and shape of this year’s global economy and financial markets. The 10 biggest investment trends that are likely to be feature and standout in 2013 are as follows:
1. China will become more global and powerful than before
2. The world would start to re-focus on emerging markets but frontier markets will be the most talk about
3. In 2012 it all about global government debt and currency but in 2013 country, sector and company picks would be back in vogue
4. Equities will see more inflows than bonds in the 2nd half of 2013
5. Commodities prices will rise, talk of global inflation will be back and so will the speculation of end of quantitative easing
6. Geo-political risk will pick up led by domestic dissatisfaction with income gap and low growth
7. The talk of hard landing in China and fallout of Europe fails to happen
8. Investors and corporates start to gear-up again
9. Technological advancement will be key driver of productivity instead of cost management
10. The new era of tech bubble will start to build as cheap money chase innovations/dreams and hopes
Before i moved into the long waited sectoral views for those that miss the Part 1 and 2 earlier on you can review it with the links below
Given what has been said thus far, we are in a new era of which Mohamed El-Erian says a new normal. In his context he refers to the global economy from financial and political perspective. I look at it more from a microscopic level, what would it mean to our day-to-day life and it is the day-to-day activities of the seven billion people in the world which will shape the world’s economy.
Some of you have probably read this week, many countries in the world faced one of the worst winter in many decades and as i said in part 1 of this analysis extreme weather is something we should all start to get use to. As a result of extreme weathers, urbanisation will speed up even more and as a result create more demand for urban homes. What would be implications? This would leave fewer people farming for crops for example.In a similar deduction, cities with moderate weather such as Hong Kong, Sydney, and Singapore will attract more affluent professionals and businessmen to house their families.
The industrial sectors which will see most technological advancement this year would be robotics, green energy and online commercialisation. There are many successful stories in 2012 on retail automations. This was helped partly by the growth in smart phone usage and mobile technology. I am sure many of us have noticed the use of Iphone in order taking in restaurants, Ipad usage for browsing of products in shops etc. The year of 2013 is the year of robotics with rising cost of labour and shrinking pool of cheap labour. Robotics is the way forward to maintain or increase productivity globally. On green energy, given the extreme weather and governments pressure to contain inflation and pollution with rising population green energy has to be the sector of focus for most large nations. Cost of production came down substantilly in recent years and the commercial viability is slowly becoming reality. Online commercialisation is another key theme this year. In 2013 we will see more people purchasing songs (not CDs) tv series (not DVDs) clothing (not shops), services (not in person). Have you used online personal trainers and dieticians? Is it coming our way big time. Consider this; will you learn to play golf from Tiger Woods and soccer from Lionel Messi online if they were available? Answer would be yes no matter how impersonal it may be. This wall of awkwardness is coming down EVERYWHERE.
Sectors which i like in terms of investment this year are as follows:
1. Retail Sector – Companies with mega brands with huge brand value as Porter’s five forces are less prominent these days. Companies using technology to reach global consumers with rising income in an aging population. Look at most of the countries where there is aging population which sector continue to flourish? Retail!
2. Green energy - solar, wind and water will prove to be winning sectors with potential rising crude oil price and technological advancement and governments backing globally to support this sector in 2013
3. Property - I am not a big fan of developers. Nevertheless, given the whole world is getting more centralized than before – seen the rise in density in global cities lately?? I like companies with good portfolio of investment properties as consumption growth and rising replacement cost would make these companies attractive. Look for those with huge landbank and solid properties in prime location
4. Healthcare – In here i am talking about pharmaceutical industry which produces drugs, vaccines, supplements for this growing aging global population. I am talking about companies that make technological breakthrough in terms of medical machinery Have you seen doctors and nurses in hospitals holding the latest IPhone and Samsung Galaxy but hospitals still running on old medical equipments?
5. Banks – As the number of players shrunk the survivors post Lehman with global franchise will do good in this less borderless world. I am talking about those facilitating cross border financing and investment business not propriety trading here..
6. Services - Education, Social Network, Nursing and Retirement homes are some of the services which will see an increase in importance. Everyone would want their child to go Harvard, MT, Oxford or Cambridge. Everyone would want feel connected through Facebook, Twitter or LinkedIn. Everyone would hope their retirement home is like staying in Fourseasons or Mandarin. If anyone can achieve that kind of stigma or following the world its their oyster.
Hong Kong’s Latest Economic Indicators – What Does It Tell Us? – Part 2
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Hong Kong, Money, Offshore RMB, Strategy, Words of Wisdom on November 18, 2012
The current disparities between growth (+1.3%), deposit rates (zero!), inflation (5%) and property prices (20%) in Hong Kong its like watching a race between a hamster, tortoise, horse and cheetah! As mentioned in part 1 of this topic, the reason why there is inflation and upward pressure in monetary value of certain services and assets in Hong Kong is largely due to the demand from external factors. Similar to my analogy of Hong Kong resembling a shopping mall, most of the key products and services are targeted at serving/providing to foreigners (in a good way) The 3 key areas of growth for Hong Kong in this decade comes from the financial, property and luxury consumer sector which is largely targeted at foreigners (foreigner buying up luxury apartments, foreign companies raising IPO, foreign tourist buying up luxury products etc.)
Ok then you must be thinking what is different this time compare to 10 years ago? It is the HKD peg. Chinese Yuan and other Asian currencies have appreciated over 20% against HKD in the past 5 years and this trend is likely to continue with the quantitative easing in the west. The HKMA and Financial Secretary have denied the peg has brought about inflation? Look at 10 years Hong Kong Government Bond Yields 0.46%?! This is largely due to inflow of money and the result of increase in monetary base from defending the peg. 10 yrs yield at 0.46 while inflation is 10x of that??
Why are they in denial?They are just afraid to say it because given how well the peg has served Hong Kong, no one is going to change the peg, be it someone in HKMA, government or even the PBOC and the Chinese Government. One must also know this the HKD peg served as a good indicator for China on liquidity flow so why remove that….But something has to be done if we were to see a fairer race among the people in Hong Kong than the one we currently have. The peg can stay but for the sake of Hong Kong people who is reading, you should take your money out of the bank and move it into RMB, buy some equities or fixed income investments and last YOU mustn’t sell your property. If you don’t own a property in Hong Kong means you are short and the peg will kill you…If one decide not to do anything of such, they better make sure he/she gets a work in this mall or else you would be poorer even though the country continues to prosper….
Hong Kong’s Latest Economic Indicators – What Does It Tell Us? – Part 1
Posted by jeffreyyap in China, Hong Kong, Money, Strategy, Words of Wisdom on November 17, 2012
Hong Kong announced on Friday its Gross Domestic Product grew 1.3% year-on-year in the third quarter, similar to the 1.2% growth seen in the second quarter. The data also unveiled the underlying consumer price inflation stands at 4% in the third quarter. Residential Flat prices from June to September rose by over 6% (in just 3 months!).
These data must look rather bizarre for general public as well as economists and financial professionals. Here is another observation, China Daily reported this “Hong Kong‘s Causeway Bay has dethroned New York‘s Fifth Avenue as the world‘s most expensive retail area, as luxury brands retailers such as Burberry, Salvatore Ferragamo and Gucci compete for limited prime space in the city to court big spenders, particularly mainland tourists.
The average annual rent at Causeway Bay, the prime retail district on Hong Kong Island, surged 34.9 percent to $2,630 per square foot at the end of June from a year ago, beating the $2,500 price tag of Fifth Avenue in New York‘s Manhattan district, which has occupied the top spot for 11 consecutive years, according to estimates by commercial real estate consultant Cushman & Wakefield Inc.”
So why is this happening? This is because the economy has become more dependent on China and Global Spending (just imagine Hong Kong as a large Shopping Mall) hence even though growth been rather weak, inflation continue to rise especially in areas which supply goods and services to this large global shopping mall. In this shopping mall, you have bankers that provide credits, salesperson to serve customers, lawyers to document/advise the process and doctors to cure those that gotten sick while shopping,
This is the state of the Hong Kong’s economy. It is debateable whether it is good or bad but one thing is for such we need a good mall management team (the government!) to guide the people of Hong Kong to equip themselves to work in this mall. No shopping mall survive without makeover and enhancement and quality control. It is time for the government to start working on these or else it would turn into an unloved mall with little patrons just like those malls in Hong Kong which none of us patronise anymore…
Risk Asset Cooled ahead of Hurricane Sandy? Opportunity to buy for 2013!
Posted by jeffreyyap in China, Equity Market, Fixed Income Market, Strategy on October 29, 2012
Running up to the US election and Chinese leadership change and now Hurricane Sandy, risk assets have pulled back last few days. I believe this week would be the best time to add risk assets to your portolio if you have miss the boat earlier. Global inflation have started to pick up and fund flows have move out of money market funds in search of yields and returns as US and China economic data points to further recovery. Right now many global investors has parked cash in low yielding fixed income instruments such as government bonds. Once global economy picks up slighlty and QE being withdrew from the system money will chase for higher return assets and given low valuation in the equity and credit space, we will see a long and sustain run up in the Risk assets in 2013.
