Seventeen years after Hong Kong’s “return” to China, we are about to witness another momentous watershed for these two economies. The Shanghai-Hong Kong Stock Connect is slated to take effect on October 13, “a bilateral program giving investors holding accounts with Hong Kong brokers access to stocks listed on the Shanghai market and Chinese investors access to the Hong Kong market”. Kairos analyst Moreno Tatangelo, based in London, explains the details and outlook of this groundbreaking new program.
In the last few weeks, Kairos managers met several New York-based operators and had an interesting debate with them on some of the most pressing scenarios for the economic and financial community.
During these exchanges, what emerged in the first place was a markedly more positive view of emerging market trends, particularly owing to a less pronounced slowdown of the Chinese economy: while it failed to meet the government's target, China's 6 percent growth rate was enough to allow many other emerging markets to grow.
China’s bright prospects outnumber the dark spots on various fronts as it takes a more constructive stance to the market’s cyclical area. This is, in a nutshell, the impression of certain Kairos managers after a series of meetings with about thirty local Chinese managers in recent weeks.
The quantitative easing policies currently starring in the strategies of major central banks worldwide have been having, and will continue to have, a determinant impact on financial market performance. Massive liquidity, combined with a situation of substantial financial repression, is giving rise to trends and prospects that are very much on Kairos managers’ radar and which they are carefully considering as they work out the company’s investment fund management strategies.
"We are relatively optimistic on the prospects of American companies and on the overall economic trend in general; the present economic phase is one of growth, but the growth rate is not so fast as to raise strong concerns over interest rates, at least not in the short term." These were the words of Michele Gesualdi of the Kairos management team while discussing the US economic and market outlook.
“We expect to see a lateral movement in terms of the compression of spreads and a marginal drop in rates over the next few months on international financial markets. This is nothing revolutionary on a market that is, all things considered, fairly stable, the result of dynamics that have already played a large part over the past three years”. This is how Kairos manager and bond specialist Rocco Bove sees the current scenario.
Upon his return from a trip to Asia where he met with several local operators, Michele Gesualdi, manager of the Kairos multi-manager team, puts the situation on the continent’s two main economies into focus. He reports, “First, when we talk about China, we must say that there is a need to let go of a dogmatic approach and market indices. Local managers continue to be very pragmatic and are concentrating on the growth areas connected to the new economy.
Livio Dalle, Kairos Partners Senior Portfolio Manager, reports on the performance of the personalized wealth management service showing excellent results in recent months. “We are in line with the returns targets we had set at the start of 2014,” begins Dalle. “These results were achieved despite a difficult June due to the poor performance of markets, characterized by many correlation and sector inefficiencies.
After years of difficulties, macroeconomic figures in Japan are showing definite improvement: GDP grew at an annualized rate of 6,7% in the first three months of the year, the YoY inflation rate in April came to 3,4% and the labor market is robust. Indeed, unemployment is now at 3,6%, various companies are hiring part-time workers with open-ended contracts and bonuses have risen by 5-10% even for small to medium-size companies.
“The new monetary policy measures promise to lead us into unexplored territory. While we certainly consider the ECB’s plans to take a new approach important, we need not assume that equities - whose current prices, among other things, only partially reflect the Italian economic scenario - will benefit from the overall macroeconomic context”.