Nikko Am Evolving Markets report -September 2014

Nikko AM’s Global Investment Committee (GIC) met on 26 September and chose a relatively positive global-macro scenario, implying an increased overweight stance on global equities.

Primarily, we believe that the G-3 economies will move steadily ahead and that US monetary conditions, although moving towards tightening, will remain very accommodative (with the Bank of Japan (BOJ) and European Central Bank (ECB) being even more so), allowing equity markets to move higher.

In this edition, we also update some of our Abenomics guideposts on corporate profitability, wealth effects and inflation trends. We continue to suggest that Abenomics, while not perfect, is working well, especially for corporate profits, with perhaps the most compelling recent news being the progress towards a major corporate tax cut, which is more a bazooka than an arrow, in our view.

Click here to read the report.

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Amit Lodha, Portfolio Manager of the Fidelity Global Equities Fund – “I expect global economic growth to remain muted in 2012, with a continued and marked divergence between developed world and emerging market growth. The sovereign debt issues in the eurozone are far from resolved and the political intervention and consensus needed to stem the crisis will take time to materialise.

“Meanwhile, I expect the European economy to enter into recession on the back of constrained bank lending and austerity measures. The policy response from the European Central Bank (ECB) will dictate the length and depth of the recession, and its socio-economic implications.

“My outlook for the US is more positive. Housing starts have begun to rise from an all-time low as ultra-low interest rates are starting to incentivise buying rather than renting, and the backlog of foreclosed properties is starting to clear. Meanwhile, emerging markets continue to offer significant long-term growth potential. India, Indonesia and Thailand should benefit from inflation peaking in 2012. While a planned leadership change in China should be positive as the current government has undertaken sufficient policy tightening to create leeway for the new policymakers to settle-in.

“On the corporate front, balance sheets the world over are in excellent shape. This could support capital expenditure and merger and acquisition activity. This will benefit sectors such as technology, late cycle industrials and investment banks.

“During this low growth environment, my focus is on quality franchises with strong balance sheets, which do not rely on banks for funding. I look for companies that own assets where supply and demand is tight, sell products that all of us need on a daily basis, or are doing something truly innovative, which gives them pricing power.”

Nick Price, Portfolio Manager Emerging Markets – “Within the region of Emerging Europe, Middle East and Africa (EMEA), we are blessed with companies that can grow regardless of the economic landscape.

“Without a doubt, the outlook for developed economies remains poor and the pains of the financial crisis in the eurozone are likely to be felt for some time. Consequently, we expect a degree of stock market volatility in our markets in the year ahead, but believe the long-term case for investing in the region remains as strong as ever.

“We are currently avoiding most Central European and Middle Eastern stocks as it will probably take some time before their overarching macro situations are resolved. Instead, we are buying into those businesses participating in the unappreciated African consumer and those miners involved in gold and silver production, as they should continue to do well.

“Global economic growth is expected to moderate in the new year as domestic activity in many countries eases and Western export markets weaken. However, emerging market valuations are attractive, especially in places like China and Russia. And while global markets may remain volatile in the near term, the growth potential for equities in the developing world significantly outweigh those offered by cash, debt and stocks in the more advanced economies.

“Despite the negative headwinds, we continue to find several interesting opportunities ranging from Asian smartphone component production to Russian oil and gas supply, to Nigerian beer consumption – all stories that have yet to be fully appreciated by the market. Therefore, we are positive over the long-term outlook, but remain fairly cautiously positioned until we see some sort of resolution to the current European crisis.”

This document is issued by FIL Responsible Entity (Australia) Limited ABN 33 148 059 009, AFSL No. 409340 (“Fidelity Australia”). Fidelity Australia is a member of the FIL Limited group of companies commonly known as Fidelity Worldwide Investment. This document is intended for use by advisers and wholesale investors. Retail investors should not rely on any information in this document without first seeking advice from their financial adviser. This document has been prepared without taking into account your objectives, financial situation or needs. You should consider these matters before acting on the information. You also should consider the Product Disclosure Statements (“PDS”) for respective Fidelity products before making a decision whether to acquire or hold the product. The relevant PDS can be obtained by contacting Fidelity Australia on 1800 119 270 or by downloading from our website at www.fidelity.com.au. The issuer of Fidelity’s managed investment schemes is FIL Responsible Entity (Australia) Limited ABN 33 148 059 009. Details about Fidelity Australia’s provision of financial services to retail clients are set out in our Financial Services Guide, a copy of which can be downloaded from our website at www.fidelity.com.au. © 2012 FIL Responsible Entity (Australia) Limited. Fidelity, Fidelity Worldwide Investment and the Fidelity Worldwide Investment logo and F symbol are trademarks of FIL Limited.

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• Confused about where the economy is heading? You’re in good company, with the boffins from the Reserve Bank also seemingly scratching their collective heads about where things are going. Earlier in the year the policymakers appeared confident that the economy would rebound strongly after the floods and cyclones and flagged the risk that this stronger growth would prompt the Bank to lift interest rates to keep inflation under control. But the economy hasn’t bounced as the Reserve Bank expected, reducing the inflation risk.
• So where did the Reserve Bank go wrong? Essentially it under-estimated the “new conservatism” mood that has taken hold among Australia’s consumers. The Bank thought – with jobs relatively plentiful and wages rising –that consumers would start spending again. But a raft of negative influences swamped the strong labour market outcomes, causing people to either save or just leave the dollars in their pockets.
• Not only are people still feeling the effects of the global financial crisis, but there have been the unprecedented floods across Australia, earthquakes in Japan and New Zealand, proposed carbon and mining taxes and the sharp increase in the cost of living such as higher food, electricity, gas and water prices.
• So where do we go from here? Well the positives are still out there. The global economy is still recording above trend growth, led by China and India. Incomes in Australia are being boosted by higher commodity prices. Mining companies are also pushing ahead with key projects. And the job market still generally remains in good shape. So it still seems more than likely that the domestic economy will pick up pace over time. And that means that interest rates are still more likely to rise rather than fall – but it may take a little longer than expected. And it depends whether any new factors come from left field to delay the process even further.
• The big mistake has been to assume that all the extra money coming into Australia was going to be spent. Miners are funnelling the extra dollars into new projects, many of which are capital, rather than labour intensive. Mining still accounts for a relatively small portion of our economy. Sure, the Aussie dollar has gone up, and that means more people are travelling offshore and buying foreign goods. But that doesn’t help our businesses. And while the rising share prices and higher dividends from our resource companies boost compulsory superannuation accounts, most can’t access the savings for decades.

The week ahead

• Investors are constantly trying to build a picture on the economy. Some pieces are big, others small, but each piece is useful. In Australia, some of the smaller pieces of the puzzle are provided in the coming week. Overseas,the focus is on the larger pieces of the puzzle including the latest economic growth figures from China.
• In Australia, the week kicks off with the May housing finance figures on Monday. The number of loans rose by 4.8per cent in April, but it was only the first gain in four months. And while the number of loans could have risen as much as 6 per cent in May, it probably has more to do with refinancing than loans to build new homes. As such it won’t suggest that stronger housing activity lays ahead.
• On Tuesday NAB issues its latest business survey. Both confidence and business conditions remain weak. And judging by recent surveys by Sensis and ACCI, little change in the soft readings is expected. Also on Tuesday the Reserve Bank releases the latest data on credit and debit card lending. Debit cards are favoured at present as consumers prefer to use their own money to buy goods. It would be good if the Reserve Bank started to provide the break-up between domestic and overseas purchases. If card purchases lift, but the dollars are going abroad,then this is hardly positive for Australian retailers.
• On Wednesday the latest consumer confidence figures are issued. With uncertainty about the carbon tax pervading, the latest sentiment figures are unlikely to be positive. On the same day lending finance data is released together with the “Modeller’s Database.” The lending data covers housing, business, personal and lease loans, so the figures provide a good guide to activity in the banking and finance markets. The “Modeller’s Database” includes the latest estimates on private sector wealth. You may not believe it, but Australians have never been wealthier.
• And on Thursday the Bureau of Statistics will provide some greater detail on the labour market such as state and demographic trends and figures on the number of hours worked.
• In the US, the first piece of market-moving economic data is issued on Tuesday in the shape of the latest trade data. The US has a major budget deficit and it also has a significant and persistent trade deficit. Investors aren’t too worried about the trade deficit just yet, but it’s important to note that the deficit remains large even with the weaker US dollar and soft US economy – factors serving to boost exports and constrain imports. A trade deficit near US$44 billion is expected in May. Also on Tuesday minutes of the June 21/22 Federal Reserve meeting are released, so more insights into policymaker thinking will be revealed.
• On Wednesday, Federal Reserve chairman, Ben Bernanke, delivers his semi-annual testimony on the economy.This statement takes on huge importance – Bernanke needs to be sufficiently upbeat on the economy without over-doing it to ensure that confidence and economic momentum is maintained. Also data on import and export prices is released on Wednesday together with the monthly budget figures.
• On Thursday in the US, data on retail spending, business inflation (producer prices) and new claims for unemployment insurance are released. Retail sales are stronger than in Australia and analysts tip a 0.2 per cent lift in non-auto sales. Business inflation is now “normal” with a 0.2 per cent lift in core prices (excludes food and energy) expected for June.
• And on Friday in the US, consumer sentiment, consumer prices and industrial production figures are releases with the Empire State survey thrown in for good measure. Economists tip a 0.2 per cent lift in core inflation and 0.4 percent rise in production. Overall these figures, together with those from earlier in the week, should confirm that the US economy is emerging from its “nap”.
• In China, the monthly download of key economic data occurs on Friday. As well as figures on production and spending, the June quarter economic growth figures are issued. Economists estimate that annual growth slowed a touch from 9.7 per cent to 9.4 per cent.

Sharemarket

• US earnings season kicks off on Monday. As is traditional, Alcoa gets the proceedings underway with analysts expecting earnings of US35 cents a share, up from US13 cents a share last year. Of the 27 other companies scheduled to report over the week, YUM! Brands issues its report on Wednesday with JP Morgan Chase and Google on Thursday and Citigroup on Friday.
• US earnings have been strong over the past year but the effects of the Japanese tsunami, the Greek debt crisis and the slowdown of the US economy will be influences on the results and outlook statements for companies during the earnings season. Overall Brown Brothers Harriman is tipping earnings of Standard & Poor’s 500 companies to be up 13.6 per cent on a year ago.

Interest rates, currencies & commodities

• The semi-annual testimony from the US Federal Reserve chairman, on-going debt woes in Europe, the start of US earnings season and Chinese economic data should be the key influences on financial markets in the coming week. Overall, we are tipping strength, not weakness, with the Aussie holding near US107 cents and commodity prices generally higher over the week.

The post Investor Signposts: Week Beginning July 10 2011 appeared first on AdviserVoice.

The value of ASX-listed stocks, as measured by the All Ordinaries Index, fell 2.7% during June 2011. Many other major markets also fell during the month including Hong Kong down 5.4%, the US down 1.8%, the UK down 0.7%, and Singapore down 1.2%. In contrast Japan was up 1.3%. Over the course of financial year 2011 (FY11), the All Ordinaries rose 7.7% following a rise of 9.5% in the previous financial year. Market volatility was slightly lower in FY11 (0.6% average daily movements compared to 0.8% in FY10). The rise in Australian equity valuation lagged behind many other major markets with the US up 28.1%, the UK up 20.9%, Hong Kong up 11.3%, and Singapore up 10.0%. This relative performance, in large part, reflected the strong rise in the Australian dollar over the financial year: 26.0% higher against the US dollar, 14.4% higher against the yen and 6.1% higher against the euro. Market conditions helped underpin continued strong secondary equity market trading and a further increase in initial public offering (IPO) activity during FY11. Secondary capital raising activity remained healthy in FY11, although lower than FY10 and well down on the record levels seen during FY09.

Measures of volatility in the Australian equity market were generally restrained during June:

• Current volatility (as measured by the average daily movement in the All Ordinaries Index) was 0.7% in June (May 0.8%).
• Expected future volatility (as measured by the S&P/ASX 200 VIX) rose on average in June to 19.6(compared to 18.4 in May).

Volatility in US markets (S&P 500 Index) rose sharply in June with average daily movements of 0.9% (0.6% inMay). Expectations of future volatility in the US also rose during June.

The value of daily cash market trading in June was steady compared to the previous month’s performance, with an average traded value of $5.3 billion a day. Activity in interest rate futures contracts continued its upward trend, with trading during the June expiry month in the four main contracts (3 and 10 year bonds, 90 day bank bills, and the 30 day cash rate) creating a daily average record of 525,536 interest rate futures contracts traded.

Listings and capital raisings

• In June 2011 there were 13 new listings, 63% higher than the 8 in the previous corresponding period (pcp). There were 160 new listings in FY11, up 72% on 93 in FY10.
• Total listed entities at the end of June 2011 were 2,247, up 3% on the 2,192 a year ago.
• There was $3.3 billion of initial capital raised in June 2011, compared to $226 million in the pcp.
• Secondary capital raisings in June 2011 increased slightly, with $1.6 billion raised, compared to $1.5 billion in the pcp. There was also $1.1 billion of other capital raised, including scrip-for-scrip, in June 2011.
• Total capital raised in June 2011 amounted to $4.9 billion, up 186% on the $1.7 billion raised in the pcp.
• For FY11, total capital raised is down 18% on FY10, with capital raised from IPOs $29.4 billion and from secondary raisings $33.7 billion.

Trading – Cash markets (including equities, interest rates and warrants trades)

The All Ordinaries Index closed at the end of June at 4659.8 points, a fall of 2.7% over the course of the month. Theindex has fallen 3.9% in the calendar year-to-date but was 7.7% higher than a year ago.

• Total cash market trades for June 2011 were 12.8 million, up 8% on the pcp. Total trades for FY11 were 144.3million, up 9% on the pcp.
• Average daily trades for June 2011 of 610,193 were 8% higher than the pcp. Average daily trades for FY11 were570,440, up 9% on the pcp.
• Total cash market traded value was $111.2 billion in June 2011, up 2% on the pcp. The average daily value traded was $5.3 billion in June 2011, also up 2% on the pcp. Total value traded for FY11 was $1.3 trillion, down 1% on the pcp, corresponding to an average daily value of $5.3 billion, down 1% on the pcp.
• In June 2011 the average value per trade was $8,681, down 6% on the pcp of $9,266. The percentage of traded value crossed was 24% (28% pcp).

Trading – Financial derivatives markets

• There was a continuation of very strong trading activity in the benchmark interest rate contracts in June (an expiry month), including record monthly volume in:
  • 30 day cash rate futures (885,640 contracts), 8% higher than the previous record set in May 2011.
  • 90 day bank bill futures (2,879,948 contracts), 7% higher than the previous record set in August 2007.
  • 3 year treasury bond futures (5,365,381 contracts), 15% higher than the previous record set in March 2011.
• Volatility in the short end of the yield curve drove activity in the 30 day interbank futures and 90 day bank bill futures as the market’s view on future changes in the official cash rate by the RBA changed. At the beginning of the month, market expectations were for another 25 basis points increase in the official cash rate by mid next year. However,with economic data signalling a weaker domestic economy and concerns over the euro debt crisis deepening,market expectations turned to the probability of a rate cut in the second half of 2011.
• Equity derivatives volume (excluding the ASX SPI 200) for June 2011 was 16.2 million contracts. Measuring volumes on the prior contract size in order to allow for a meaningful comparison, results in equity derivatives volume (excluding the ASX SPI 200) for June 2011 of 2.5 million contracts. This represents a 26% increase in total volumes compared to the pcp, with a daily average of 118,559 contracts, up 26% on pcp. Total volumes for FY11(based on the prior contract size) were 23.1 million contracts corresponding to an average daily volume of 91,495contracts, both up 7% on the pcp.
• Total futures and options on futures contracts volume (excluding equity derivatives and CFDs) for June 2011 was a record 13.6 million, up 71% on the pcp, with a notional value of $6.6 trillion. Average daily contracts volume during June 2011 of 616,781 was also up 71% on the pcp. Total volumes for FY11 were a record 98.0 million contracts,corresponding to an average daily volume of 382,687 contracts, both up 29% on the pcp.
• A total of 5,937 ASX CFD trades were transacted in June 2011, comprising a volume of 15.3 million contracts. The total notional value of all CFD trades for June was $204.2 million, a decrease of 26% on the pcp, while the value of CFD open interest at the end of June was $87.1 million, a decrease of 27% on the pcp. Total ASX CFD trades in FY11 were 92,905, down 25% on FY10, comprising 176.5 million contracts, up 15%, and with a notional value of $3.5 billion, down 4%.

Trading – Energy and agricultural derivatives markets

• A total of 10,776 Australian electricity futures and options contracts were traded in June 2011, a decrease of 28% on the pcp. Total open interest was 46,360 contracts at the end of June 2011.
• The ASX grain futures and options market traded 33,518 contracts (670,360 tonnes) during the month, up 42% on the pcp. Open interest at the end of June 2011 of 108,774 futures contracts represents 2.17 million tonnes of Australian grain and oilseed. The total volume traded for FY11 was 483,273 contracts (9,665,460 tonnes), a record year representing 24% growth on FY10.

ASX CLEARING CORPORATION

Clearing

All on-market trades (equities and derivatives markets) are novated by ASX’s two central counterparty clearing subsidiaries, ASX Clear and ASX Clear (Futures), which act as counterparties to those trades and replace bilateral counterparty exposures.

• Total margins (including additional margins held against stress testing exposures and concentrated large positions)averaged $3.0 billion during June 2011 (including excess cash collateral but excluding equity securities lodged in excess of the margin requirement), with cash margins lodged averaging $2.5 billion.
• There were intra-day margin calls made on four separate days in June 2011 totalling $4.6 million compared to $2.9million of intra-day margin calls in May 2011.

ASX SETTLEMENT CORPORATION

ASX Settlement

There were no disruptions to the completion of batch settlement in the equities market during June 2011.

• Total equity settlement delivery fail rate averaged 0.65% per day during June 2011, a small increase on the 0.5% rate for May 2011.

Austraclear Settlement

There were no disruptions to the Austraclear settlement sessions during June 2011.

• The levels of total debt holdings in Austraclear decreased over the course of June by $14.7 billion to $1.2 trillion. During June electronic certificates of deposit decreased by $6.9 billion, treasury bonds decreased by $5.1 billion,semi-government bonds decreased by $3.6 billion and corporate bonds decreased by $3.5 billion. Treasury notes increased by $4.3 billion and all other holdings increased by $0.1 billion in total in June.

A separate ASX Compliance activity report for June 2011 has also been released today.

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Australian Institutional Specialist Hired to Head Sydney Office

The Sydney office will be managed by Australian Ian Webber, Director, Institutional Investments (Australia & New Zealand), who joined Artio Global in June of 2011. Mr. Webber has extensive experience providing investment solutions to institutions, most recently as Co-Head of Australia/Head of Sales and Marketing for AXA Rosenberg Investment Management. He also served as Director, Institutional Business for Salomon Smith Barney/Citigroup Asset Management. He holds a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia and a Bachelor of Economics from the University of Newcastle.
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Tony Williams, Chief Operating Officer of Artio Global said, “We believe that we offer a well-differentiated and compelling perspective on global investing that will resonate with Australian investors. Ian’s background and experience working with local institutions provides a strong base for us to make inroads into this important market.”
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Artio has offices in New York, Los Angeles, Toronto and London. The Sydney office will be part of the firm’s strategy to increase its distribution into Asia. “We have been looking to expand our global network and Australia, with its appetite for a variety of strategies and large pool of superannuation capital is a logical early opportunity,” concluded Mr. Pell.

For more information, please visit www.artioglobal.com.

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In the US, the Obama administration is ploughing a lonely furrow, the only major country in the world to be easing fiscal policy this year.

On the other side of the world, China faces a completely different set of problems. Its economy grew by 9.7% in the first three months of the year, only a fraction slower than the 9.8% in the last quarter of 2010. Chinese inflation, at 5.4%, is higher than it has been in nearly three years.

For the first time, the Chinese government has indicated that it will allow its currency to appreciate against the dollar in a bid to increase the country’s purchasing power in international markets and prevent prices from spiralling out of control. In the meantime, it has imposed price curbs from home appliances to food and pharmaceuticals.

Against these very different economic backcloths, it is unsurprising that investors remain undecided about whether to back the emerging or developed market horses this year.

In the short-term the conditions for US equities look more favourable than they do in the key developing markets with monetary policy deliberately behind the curve of an increasingly healthy economy.

Longer-term, investors in search of sustainable economic growth remain much more likely to find it east and south of Suez than in the debt-burdened old world. Even if, as expected, China’s growth rate pulls back to a less super-charged 5-6% a year in the medium term, the rest of us will look on enviously.
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Over the last 17 or so years since data has been compiled for the emerging markets and comparisons with the US’s S&P 500 have been possible, the two have marched to completely different drumbeats but ended up in the same place.
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During the 1990s when the US was developing an infatuation with technology, media and telecoms, the developing world was in crisis and its equity markets in aggregate did nothing for 10 years.  Then while the US endured its own “lost decade” emerging markets took off. During the financial crisis, the two have moved more or less in lock step.
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What lessons can be drawn from this and what does it mean for anyone trying to decide where to put their money today? The key point is that valuations matter. When emerging markets started their massive outperformance of the developed world in 2003 their shares were on average about half as expensive (in price to book value terms). At the top of the market in 2007 they stood at a 20% premium on the same basis. Developed market shares underperformed from 2000 because they started out at a silly price.
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Fast forward to today and there’s not a lot to choose between the two in terms of valuation. Emerging market shares are priced at about twice the value of their underlying assets while the world as a whole is at 1.9 times.
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If picking winners over a 20 year timeframe is impossible, and anyway might end up in a dead heat, the only sensible thing may be to make sure you have a bit of everything.

The post East or West – Where to Invest? appeared first on AdviserVoice.

• Inflation still creeping higher. China’s annual inflation rate rose from 5.3 per cent to a 34-month high of 5.5 per cent in May. But the result was only slightly above expectations centred on a result near 5.4 per cent. And the CPI grew by just 0.1 per cent in the month after a similar rise in April.
• Food inflation – which has been the main driver of the recent higher inflation readings – fell by 0.3 per cent in May after falling by 0.4 per cent in April. Annual food inflation lifted from 11.2 per cent to 11.7 per cent.
• Business inflation (producer prices) was steady at 6.8 per cent in May.
• China’s industrial production grew at a 13.3 per cent annual pace in May – slightly above expectations. Retail sales were 16.9 higher than a year ago – slightly below expectations.

 

What does it all mean?

• China’s policy makers continue to make good progress in restraining inflation without derailing the expansion. While the annual inflation rate was the highest in almost three years in May, prices edged just 0.1 per cent higher in the month. At the same time, production and retail spending continue to expand at solid double-digit annual rates, indicating that the expansion remains solidly on course.
• You never seem to win when it comes to analysing Chinese economic data. Either one group will declare that growth is unsustainably strong while another group is quick to declare that the expansion is in trouble. But in the latest month there should be few complaints about the data. It is clear that policy makers are winning their battle with inflation while the economy is expanding at a pace that most would regard as sustainable.
• Victory is never fully achieved against inflation so Chinese policy makers will need to vigilantly tracking key indicators over the coming months.
• There isn’t a pressing need for the Chinese central bank to either lift interest rates or raise bank reserve requirements again. Now is a time of watching rather than a time for new action. But no doubt the central bank policymakers hold the same level of doubt about the accuracy of Chinese indicators as do analysts in the West. So complacency won’t be an issue for the People’s Bank – vigilance will definitely be maintained.

What do the figures show?

• The annual rate of consumer price inflation rose from 5.3 per cent to 5.5 in May. The May result was marginally above forecasts centred on a result near 5.4 per cent. Over the month inflation rose by 0.1 per cent in May after a similar increase in April.
• Food prices rose by 11.7 per cent over the year to May (11.2 per cent in April) while non-food prices rose by just 2.9 per cent (2.7 per cent in April). Over the month, food prices fell by 0.3 per cent after falling by 0.4 per cent in April while non-food prices rose by 0.2 per cent.
• Producer prices (business inflation) rose by 0.3 per cent in May to stand 6.8 per cent higher than a year ago (unchanged from April). The annual rate of producer price inflation has eased from a 30-month high of 7.3 percent in March.
• Industrial output expanded at a 13.3 per cent annual pace in May, down from 13.4 per cent in April but above forecasts centred on 13.2 per cent. Production is still well off the highs of 20.7 per cent annual growth in January/February 2010.
• China’s urban fixed asset investment, such as spending on roads and power plants, grew at a 25.8 per cent annual pace in May, ahead of consensus forecasts (25.2 per cent) and up from 25.4 per cent in April.
• Retail sales grew at 16.9 per cent annual rate in May, down from 17.1 per cent in April but close to market forecasts, centred on 17.0 per cent annual growth.

Data released earlier in the month:

• China’s trade surplus widened in May but fell short of expectations. The trade surplus rose from US $11.42billion in April to US$ 13.1 billion in May but fell short of forecasts centred on a result near US$18.6 billion. Exports were up 19.4 per cent on a year ago (consensus +21.0 per cent) while imports were up 28.4 per cent (consensus+22.5 per cent).
• China’s M2 money supply grew at a 15.1 per cent annual rate in May, down from 15.3 per cent in April and short of forecasts centred on 15.4 per cent growth. New Yuan loans totalled 551.6 billion yuan in May, down from 739.6 billion in April. Outstanding loan growth slowed from an annual pace of 17.5 per cent to 17.1 per cent in May.

What is the importance of the economic data?

• China’s National Bureau of Statistics releases its monthly economic statistics around the middle of each month. Quarterly GDP data is released around the 16th of January, April, July and October. China is Australia’s largest trading partner and changes in the Chinese economic have major implications for the Aussie economy.

What are the implications for interest rates and investors?

• Domestic investors have reacted positively to the latest batch of Chinese economic data. The Aussie dollar rallied and losses on the sharemarket narrowed.
• The Reserve Bank would be encouraged by success achieved by China over inflation and further signs that economic expansion is on a more sustainable footing.

The post CommSec: China’s inflation dragon is being tamed appeared first on AdviserVoice.

Click to view the full research paper Central Bank Watch

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ETFs and exchange-traded commodities (ETCs) invest in a portfolio of securities, providing investors with diversification in a single transaction. They can be bought and sold on exchange just like shares.

The expanding range of ETFs and ETCs allows investors to gain exposure to Australian companies, overseas stocks, listed property, currencies and precious metals, including gold.

Tony Hunter, ASX Head of Education, said: “The new ASX courses explain the essentials of investing in ETFs and explain how ETFs traded on ASX work.“The courses are offered free and require no registration on the asx.com.au website. Users will find clear and easily understood information with practical exercises to reinforce learning.

“The self-paced nature of ASX online courses means investors can work through the courses sequentially or just select the topics that interest them.

”The seven short courses available cover:

• Introduction to ETFs – an overview of ETFs, their features, risks and benefits;
• What are ETFs? – a detailed course on the structure and strategy of ETFs;
• Buying, holding and selling ETFs;
• Domestic ETFs – ETFs over Australian sharemarket indices;
• International ETFs;• Exchange-traded commodities; and
• Synthetic ETFs and currency ETFs.

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ETFs were first offered for trading on ASX over certain S&P/ASX indices in August 2001. The sector has since grown strongly and now provides Australian investors with greater opportunity to diversify and internationalise their portfolios. The total suite available on ASX now stands at 55 with a combined market capitalisation of $5.1 billion,growing by 39% in the 12 months to 31 December 2010. For detailed information on the online courses click to view.

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“Our success comes from a focus on companies successfully executing growth strategies,” said John Robertson of E.I.M. Capital Managers.

“But from the beginning we also had a strong belief we were investing in a cyclical industry.  We expected to confront extreme volatility from time to time and positioned the portfolio to cope.

“We could not avoid the volatility in the market in 2008 and 2009 but our portfolio comprised stocks that could survive, recover and thrive,” said John Robertson.

In choosing stocks, E.I.M. searches for companies with the following characteristics:

• a resource base sufficient for long-life operations
• potential for growth
• a technically robust operational plan
• the necessary people and expertise
• a low cost structure

E.I.M. remains committed to the idea of having a portfolio positioned for volatility and continually stress tests its investment opportunities against the possibility of a major cyclical downturn.
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“We do not know when it will happen but history says we would be extraordinarily naïve to assume that after hundreds of years the cycles have suddenly disappeared,” said Mr Robertson

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