The document provides an overview of the global business environment in August 2015. It discusses the economies of key regions:
- The US economy saw growth in the first half of 2015 driven by consumer spending and low oil prices, though federal spending declined. Household debt levels remained stable while delinquencies decreased slightly.
- The EU recovery remains fragile despite measures like ECB bond purchases. Second quarter GDP growth of 0.3% missed targets as France stagnated and other major economies saw slower growth.
- Other topics covered include expectations for the timing of US interest rate rises, high stock valuations, trade balances of various countries, and the impact of sustained low oil prices on the global economy.
This monthly briefing highlights how the world economy is struggling to gain momentum, emerging economies facing policy dilemma in trying to stabilize currencies and the G20 meeting making a call for new measures to lift growth and create jobs.
For more information:
http://www.un.org/en/development/desa/policy/wesp/wesp_mb.shtml
Do you or your users need information on the South's unemployment, housing and more? We’ll share strategies to enhance expertise with finding essential resources about these timely topics. (Sponsored by GLA GIIG.) Presented at GaCOMO12 by Patricia Kenly and Bette Finn.
This monthly briefing highlights how the world economy is struggling to gain momentum, emerging economies facing policy dilemma in trying to stabilize currencies and the G20 meeting making a call for new measures to lift growth and create jobs.
For more information:
http://www.un.org/en/development/desa/policy/wesp/wesp_mb.shtml
Do you or your users need information on the South's unemployment, housing and more? We’ll share strategies to enhance expertise with finding essential resources about these timely topics. (Sponsored by GLA GIIG.) Presented at GaCOMO12 by Patricia Kenly and Bette Finn.
Ivo Pezzuto - "FED BITES THE BULLET - Implements First Rate Hike in Nearly a ...Dr. Ivo Pezzuto
The US Federal Reserve finally bites the bullet, increasing the
FFR – a key short-term interest rate – by quarter of a per cent.
With this, the regulator has clearly signaled that it might take
similar actions in future, if need arises, to take the economy
towards full recovery.
We live in an interconnected world and geopolitical developments in Ukraine and Syria are bound to add volatility in global geopolitical environment and influence small and large economies around the world.
Further, the economic environment is undergoing an unusual shift, through unorthodox and new policy making in Japan, US and Europe.
In such a situation small sized GCC economies, which are also dependent heavily on commodity prices and transit of goods, should exercise caution, and not get swayed by the rosy pictures stock markets around the world are painting.
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Please note that our risk-based benchmark (cross-asset allocation calibrated to a given C-Var), our tilted portfolio (with tactical overlay exposures implied by the market views expressed above), as well as the corresponding main characteristics (usual statistics, risk contributions, backtests…), are available only for our subscribers.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Skirting the Abyss: From Economic Downturn to Financial Crisis to Long-term M...Llinlithgow Associates
We came right up to the edge of the economic abyss after a year of an accelerating economic downturn and have managed to avoid it but are not out of the woods yet. The risks of a double-dip are growing but the likelihood of a weak recovery and poor job creation is high. A key problem is and was the financial crisis and credit market collapse which has created major lingering problems that will be with us for years. Beyond that a two-decade over-accumulation of debt, drastic declines in Savings and under-Investment have created long-term problems for getting back to sustainable long-term growth. Here we survey the current state of the economy, wade thru the details of the Financial crisis, especially the role of Synthetic Structured Debt and the business performance of the Finance Industry. Then we roll forward to examine the long-term damages created, how we need reduce private debt and what our prospects for reduced long-term growth are. Or, given the decisions to invest in our future and address broader policy problems, how we can return to a path of longer-term high growth and prosperity.
While equity and commodity markets have recovered, it is an almost consensus view that already tepid global economic growth in H2 2015 likely weakened furthered in Q3 and shows few signs of recovering near-term,
Governments, lacking in both leadership and fiscal-reflation headroom, have passed the buck to central banks struggling to hit multiple growth, inflation and financial stability targets.
However, talk of global recession let alone economic collapse is somewhat overdone and I reiterate my long-held view that the global growth story is a cause for concern, not panic (17 December 2014).
Ivo Pezzuto - "FED BITES THE BULLET - Implements First Rate Hike in Nearly a ...Dr. Ivo Pezzuto
The US Federal Reserve finally bites the bullet, increasing the
FFR – a key short-term interest rate – by quarter of a per cent.
With this, the regulator has clearly signaled that it might take
similar actions in future, if need arises, to take the economy
towards full recovery.
We live in an interconnected world and geopolitical developments in Ukraine and Syria are bound to add volatility in global geopolitical environment and influence small and large economies around the world.
Further, the economic environment is undergoing an unusual shift, through unorthodox and new policy making in Japan, US and Europe.
In such a situation small sized GCC economies, which are also dependent heavily on commodity prices and transit of goods, should exercise caution, and not get swayed by the rosy pictures stock markets around the world are painting.
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Please note that our risk-based benchmark (cross-asset allocation calibrated to a given C-Var), our tilted portfolio (with tactical overlay exposures implied by the market views expressed above), as well as the corresponding main characteristics (usual statistics, risk contributions, backtests…), are available only for our subscribers.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Skirting the Abyss: From Economic Downturn to Financial Crisis to Long-term M...Llinlithgow Associates
We came right up to the edge of the economic abyss after a year of an accelerating economic downturn and have managed to avoid it but are not out of the woods yet. The risks of a double-dip are growing but the likelihood of a weak recovery and poor job creation is high. A key problem is and was the financial crisis and credit market collapse which has created major lingering problems that will be with us for years. Beyond that a two-decade over-accumulation of debt, drastic declines in Savings and under-Investment have created long-term problems for getting back to sustainable long-term growth. Here we survey the current state of the economy, wade thru the details of the Financial crisis, especially the role of Synthetic Structured Debt and the business performance of the Finance Industry. Then we roll forward to examine the long-term damages created, how we need reduce private debt and what our prospects for reduced long-term growth are. Or, given the decisions to invest in our future and address broader policy problems, how we can return to a path of longer-term high growth and prosperity.
While equity and commodity markets have recovered, it is an almost consensus view that already tepid global economic growth in H2 2015 likely weakened furthered in Q3 and shows few signs of recovering near-term,
Governments, lacking in both leadership and fiscal-reflation headroom, have passed the buck to central banks struggling to hit multiple growth, inflation and financial stability targets.
However, talk of global recession let alone economic collapse is somewhat overdone and I reiterate my long-held view that the global growth story is a cause for concern, not panic (17 December 2014).
Wat zijn de reacties van de Papoea's van West Papoea op de komst van het evangelie door missie en zending? Hoe is evangelie en de strijd voor vrijheid en mensenrechten verbonden? Een Papoea perspectief
This article about study of current situation of economy and pandemic impact ob global economy. How long it will take to recover with the quote of GDP growth and Service PMI of key nations.
This article about study of current situation of economy and pandemic impact on global economy. How long it will take to recover with the quote of GDP growth and Service PMI of key nations.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
1Introduction My name is Yinan Hong. I am your port.docxaryan532920
1
Introduction
My name is Yinan Hong. I am your portfolio manager from Trailblazer
Investment Advisors. I am a CFA charter holder, equipped with sufficient financial
knowledge. I will help my customers manage their wealth and try my best to gain??
as much as possible. There are three objectives for my clients, Sam and Amy
Kratchman who have recently inherited … and have current savingswith
$1,100,000(on an after-tax basis) inheritance. The first one is having enough money
for their life after retirement at age 65. The second objective is raising college tuition
for their two children. The last one is to buy a beach house with newfound inheritance.
Ending summary
Economic Analysis
2014
GDP Growth
The economic recovery of United States in 2014 became a light brightspot in
global economy after the 2009 recession. The low price level do you mean low infl?
If so that isn’t really a great thing at the current time, decreasing unemployment rate,
better development of the what is the estate?estate and manufacturing industry made
the economy continuously recover although at a much lower rate than prev recoveries.
However, some important indexes like the investment of the real estate, income of
amy kratchman � 2016/10/16 12:32 PM
已设置格式: ⾏行行距: 1.5 倍⾏行行距
2
residents residents?, manufacturing have not reached to the same level as it performed
before the recession in 2014 – true – but RE was performing very well and is a strong
area of growth in 14. The percentage change in Real Gross Domestic Product in 2014
increased in the former three quarters and then decrease in the Q4.not true
In the first quarter, the change of GDP was 2.1% not correctnegative growth1.
The most important factor was the abominable weather. The personal consumption
expenditures for nondurable goods decreased because 1what is this? the inconvenient
of buying your table (footnoted) does not imply a decrease. The Gross private
domestic investment decreased 6.6% because of the huge lower equipment
investment1. The exports decreased extremely and the imports increased. They all led
to the negative growth.
Figure12 : CCI Index in 2014
The GDP growth reached to 4.0% in the second quarter. By analyzing the
components that affected overall GDP growth, personal consumption expenditures
1http://bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=2013&903=1&9
06=q&905=2016&910=x&911=0
2 FactSet
3
and gross private domestic investment played an important role in this significant
growth. Consumption contributed 2.56% change in GDP. After the severe weather,
the private inventory investment, exports, fixed investment, and non-federal
government spending increased.this is a rebound in pretty much all areas However, 5%
more imports negatively impact GDP and offset those positive contributors.
Purchasing Managers’ Index (PMI) also ...
The U.S. government has pushed up against its federally mandated debt ceiling and cannot borrow more unless the ceiling is raised. What can we expect in the coming weeks? Our market update provides some insights.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
http://pwc.to/1h2k2l4
Après cinq années de crise, de récession et de croissance décevante, nous pensons que les pays développés peuvent maintenant approcher de la "vitesse de libération" nécessaire pour une reprise durable.
Similar to Global Business Environment August 2015 (20)
1. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 1
Research: Prodeep Mookerjee AUGUST 2015
Contents
The Global Picture .................................................................................................................................. 2
The US Economy..................................................................................................................................... 2
Rate Rise Expectations: ...................................................................................................................... 3
Stock Valuations ................................................................................................................................. 3
Shiller Analysis.................................................................................................................................... 4
Trade Balance..................................................................................................................................... 4
The EU Economy..................................................................................................................................... 5
European Economic Forecast; Winter2015........................................................................................ 6
The China Factor..................................................................................................................................... 6
Global Market Valuations................................................................................................................. 10
Growth in Volume of World Merchandise Trade and real GDP 2007 – 16P.................................... 11
Cheap Oil .............................................................................................................................................. 12
"Lower For Longer" Consensus ........................................................................................................ 12
Oil Consumption Estimate Increased ............................................................................................... 13
Global Supply Falls on Lower Non-OPEC Production ....................................................................... 13
Oil Glut to Persist Into 2016 ............................................................................................................. 13
OPEC Keeps Pedal to the Metal........................................................................................................ 13
Is a Price Slump to $30 ahead?......................................................................................................... 13
The information contained in this paper is for general guidance only. You should neither act, nor refrain from action, on the basis of any
such information. The research and analysis has reference to secondary sources and entails reasonable endeavours to ensure that the
information presented is correct. This information cannot however be assured as accurate or complete. The use of secondary sources has
minimal potential for negatively impacting the demand or purpose of the original works.
2. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 2
Research: Prodeep Mookerjee AUGUST 2015
The Global Picture1
The US Economy
The 1st
Quarter Started well. The financial news was surprisingly rosy: record trade surpluses in
China, positive surprises in Europe, the best run of new jobs added to the U.S. economy since the
1990s, and the gift that keeps on giving to consumers everywhere, low oil prices. The 2nd
Quarter
increase in real GDP mainly reflected an increase in consumer spending. Spending on both durable
goods, notably motor vehicles and parts, and nondurable goods increased. Spending on services,
mainly household services, also increased. Exports, state and local government spending, and
residential fixed investment also contributed to the rise in real GDP.
These contributions to the increase in real GDP were partly offset by decreases in federal
government spending, inventory investment, and business investment. In addition, imports—a
subtraction in the calculation of GDP—increased.
Household debt in the US was unchanged at $11.85 trillion for the second quarter of 2015. Increases
in auto loan debt and credit card balances offset a decline in mortgage debt to leave total
borrowings of U.S. households roughly unchanged in the second quarter. As of June 30, 5.6% of
outstanding debt was in some stage of delinquency, compared with 5.7% in 2015Q1. Of the $668
billion of debt that is delinquent, $471 billion is seriously delinquent.
1
www.bloomberg.com/businessweek
3. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 3
Research: Prodeep Mookerjee AUGUST 2015
Rate Rise Expectations:
Interest rates “act on financial valuations the way gravity acts on matter: The higher the rate, the
greater the downward pull. That's because the rates of return that investors need from any kind of
investment are directly tied to the risk-free rate that they can earn from government securities. So if
the government rate rises, the prices of all other investments must adjust downward, to a level that
brings their expected rates of return into line. Conversely, if government interest rates fall, the move
pushes the prices of all other investments upward.”—Warren Buffett
Recent “conventional wisdom” is that the Fed may delay its first anticipated rate hike from Sept. to
either Dec. or 1st quarter 2016 and that it may only be 10-15 basis points.
Stock Valuations
In a CNBC interview earlier this year (April 23rd), Warren Buffett expressed his view that stocks
aren't "too frothy". However, both the "Buffett Index" and the Wilshire 5000 variant suggest that
today's market is indeed at lofty valuations, now well above the housing-bubble peak in 2007.
The recent divergence between the S&P and
margin debt levels is also notable. But rather
than interpret it as a sign that market
sentiment is getting frothy, Erin Gibbs, S&P
Capital IQ's equity chief investment officer,
says it's actually a good sign. "We definitely
see that sentiment starts to turn first, and
then we see the market go down," Gibbs said.
"I'd be more worried about margin debt being
lowered and seeing a downtrend than seeing
new highs. New highs don't concern me."
"It's one of those things, like the put/call ratio, that's
only the tip of the iceberg," said Dennis Davitt of
Harvest Volatility Advisors. "Plus, I only know what I
have in my pocket. If I start trading based on what I
think other people have in their pocket, and then
what am I really doing? I'm no longer investing, I'm
speculating."
“I cannot tell you
when it will rumble
but eventually it will
rumble again.”
Hans-Jörg Vetter,
CEO of Landesbank
Baden-Württemberg
31 Mar 2015
4. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 4
Research: Prodeep Mookerjee AUGUST 2015
Shiller Analysis
Source: Guru Focus
The highest peak for the regular P/E was 123 in the first quarter of 2009. The P/E was high because
earnings were depressed. With the P/E at 123 in the first quarter of 2009 it would lead one to
interpret the level as a bad time to buy stock. On the other hand, the Shiller P/E was at 13.3, its
lowest level in decades, correctly indicating a good time to buy stocks. It is over 26 today.
Trade Balance
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of
Commerce, announced that the goods and services deficit was $43.8 billion in June, up $2.9 billion
from $40.9 billion in May, revised. June exports were $188.6 billion, $0.1 billion less than May
exports. June imports were $232.4 billion, $2.8 billion more than May imports.
The June increase in the goods and services deficit reflected an increase in the goods deficit of $2.9
billion to $63.5 billion and a decrease in the services surplus of less than $0.1 billion to $19.7 billion.
Year-to-date, the goods and services deficit increased $1.6 billion, or 0.6 percent, from the same
period in 2014. Exports decreased $33.4 billion or 2.9 percent. Imports decreased $31.8 billion or 2.2
percent.
Country Data: The June figures show surpluses, in billions
of dollars, with South and Central America ($3.5), OPEC
($0.7), and Brazil ($0.6). Deficits were recorded, in
billions of dollars, with China ($29.0), European Union
($13.9), Germany ($6.8), Mexico ($5.4), Japan ($5.2),
Canada ($3.1), South Korea ($2.3), Italy ($2.2), France
($1.7), India ($1.6), Saudi Arabia ($0.5), and United
Kingdom ($0.2).
The balance with Canada shifted from a surplus of $0.2
billion in May to a deficit of $3.1 billion in June. Exports
decreased $1.1 billion to $23.0 billion and imports
increased $2.2 billion to $26.2 billion.
The deficit with Mexico increased $1.3 billion to $5.4
billion in June. Exports increased $0.1 billion to $20.0
billion and imports increased $1.4 billion to $25.5 billion.
5. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 5
Research: Prodeep Mookerjee AUGUST 2015
The EU Economy
The first quarter was encouraging across the Eurozone. The head of the European Central Bank,
Mario Draghi, announced a massive, €1 trillion bond-buying program on
22nd
Jan 2015. The ECB will buy €60 billion in bonds every month until
September 2016 and maybe longer.
And stocks surged: the Stoxx Europe 600 was up 16%; Italy’s FTSE MIB
index up 22%; and Germany’s DAX also up 22%, the sharpest quarterly
gain since Q2 2003. Since January 2012, in a little over three years, the
DAX has nearly doubled.
Somewhat disappointing Eurozone numbers for the 2nd
quarter
demonstrate the fragility of the region’s recovery despite cheap oil, a
weaker euro and mass bond-buying by the European Central Bank.
Gross domestic product in the Eurozone increased 0.3 per cent,
undershooting analysts’ estimates of a modest 0.4 per cent, as France’s
economy stagnated and Germany, Italy and the Netherlands grew less
than expected. Data from Germany indicate that companies in the
Eurozone’s economic powerhouse remain reluctant to invest, regardless
of record low interest rates.
The Yuan devaluation has created uncertainly in the markets but both
the Euro STOXX 50 and FTSEurofirst remain up around 10 percent since
the start of 2015, as economic stimulus measures from the European Central Bank have helped to
prop up the region's stock markets.
Morgan Stanley equity strategists say investor sentiment could be further boosted if investors
interpreted China's yuan devaluation as a precursor to more action from Beijing to bolster China's
economic growth.
ECB support to the European economy, struggling with high unemployment and slow growth, is
doing for Europe what the US QE programme did for the US. And it's not just the charts that look
good. European stocks pay big dividend yields. The Dow Jones Euro STOXX 50 Index, the "Dow Jones
Industrial Average of Europe", yields 3.2% today. The index is made up of 50 blue-chip stocks across
12 European countries. They include multinationals like British consumer-goods firm Unilever,
French health and beauty product company L'Oréal, and Belgian beer-maker Anheuser-Busch InBev.
The 30 stocks in the U.S. Dow Jones Industrial Average – for comparison – have an average dividend
yield of 2.3%. Plus, lots of bonds and bank accounts in Europe pay near-zero interest rates. Others
have negative rates. The comparatively high yields in Euro stocks will attract fund managers and
individual investors searching for income.
6. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 6
Research: Prodeep Mookerjee AUGUST 2015
European Economic Forecast; Winter2015
http://ec.europa.eu
“GDP growth in the EU remains sluggish. Sputtering investment has so far prevented a broader and
more robust acceleration of domestic demand. Amid challenging global conditions, the fall in crude
oil prices should provide a welcome boost to growth.
Several important shifts are under way in the global economy. Falling oil and commodity prices are
redistributing income from commodity-exporting countries to commodity-importing ones on a
massive scale. Strong GDP growth in the US has fuelled expectations of monetary-policy divergence
among major advanced economies, which has already provoked large adjustments in bilateral
exchange rates. The economic prospects of emerging markets are also diverging; and the factors
that led to the extraordinary growth of global trade in the early 2000s appear to have weakened.
The friction that occurs as these shifts take place creates a number of vulnerabilities in the global
economy. Financial asset prices continued to rise substantially in 2014 but appear vulnerable to a
change in risk appetite. The expected tightening of the US Fed’s monetary stance may trigger
adjustments in global capital flows. The resilience of commodity-exporting countries will be tested if
commodity prices remain low. Geopolitical risks have not abated. All in all, the global outlook is
clouded by the risk that economic prospects around the world will diverge further and by the
potential for volatile incidents in capital markets.
The easing of the EU’s fiscal policy stance from consolidation to neutral is appropriate for the EU as a
whole, but the lack of differentiation among countries reduces its benefits. Public finances would
also be much more supportive of long-term growth if expenditure were more focused on
investment. The EU Investment Plan and the Commission’s guidance on the application of the
Stability and Growth Pact provide a framework that must now be put into practice. Whether and
how we reform our labour and product markets today will determine our chances for resource-
efficient growth in the long run. These policy areas are intertwined and must be addressed
simultaneously. “
The China Factor
Aug 20 2015, 03:23 ET: Seeking Alpha
Chinese shares sunk
back into the red
today as traders
weighed the level
of state support for
equities amid
concern a slowing
economy and
weaker yuan will
spur capital
outflows.
7. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 7
Research: Prodeep Mookerjee AUGUST 2015
The pressures in the mainland are also spilling across the region, with Hang Seng officially entering a
bear market during the session. The index has now dropped more than 20% from a high reached in
April.
In yuan news: The IMF signalled the renminbi won't be added to its basket of reserve currencies for
at least another year, despite many analysts seeing confidence in China's new pricing regime.
Shanghai -3.4%; Hang Seng -2.4%
16 August 2015: http://www.wsj.com/
As part of Beijing’s strategy to support its stock market since early July, regulators have taken steps
to discourage selling pressure and limit the ability of investors to bet against the market with short
sales, including by selling stock-index futures.
Chinese financial-market regulators have never been comfortable
about allowing investors to profit from bad news. That philosophy
has been in evidence this week following devaluation of the yuan by
China’s central bank, which said the move was part of a strategy to
make the exchange rate more market-oriented even though the
monetary authority also appears to have worked behind the scenes
to keep its currency from falling too fast.
The Chinese regulatory drive against short selling comes months
after CSI 300 Index Futures emerged as the world’s most actively
traded stock-index futures product, topping activity in futures on the
U.S.’s S&P 500 index. A boom in Chinese stock trading that took hold
late last year fuelled activity in futures as more professional investors
joined the rally and also executed relatively complex strategies that
included futures.
8. G L O B A L B U S I N E S S E N V I R O N M E N T U P D A T E P a g e | 8
Research: Prodeep Mookerjee AUGUST 2015
However, so far this year, CSI 300 futures have retained their crown as the most widely traded
stock-index futures globally. But average daily volumes in July have slumped more than 40% from a
peak of 3.2 million contracts on June 29.
It should be noted that the declining trend in trading volume of E-mini S&P 500 futures has
significance for discretionary traders who use market-breadth indicators specifically as trading tools
that signal when to buy and sell.
China Expansionism
Source: http://www.nytimes.com/2015/07/26
China is aggressively asserting its economic clout to win diplomatic allies, invest its vast wealth,
promote its currency and secure much-needed natural resources. It represents a new phase in
China’s evolution. As the country’s wealth has swelled and its needs have evolved, President Xi
Jinping and the rest of the leadership have pushed to extend China’s reach on a global scale.
China’s currency, the renminbi, is expected to be anointed soon as a global reserve currency, putting
it in an elite category with the dollar, the euro, the pound and the yen. China’s state-owned
development bank has surpassed the World Bank in international lending. And its effort to create an
internationally funded institution to finance transportation and other infrastructure has drawn the
support of 57 countries, including several of the United States’ closest allies, despite opposition from
the Obama administration.
Even the current stock market slump is unlikely to shake the country’s resolve. China has nearly $4
trillion in foreign currency reserves, which it is determined to invest overseas to earn a profit and
exert its influence. China’s enormous overseas spending has helped it displace the United States and
Europe as the leading financial power in large parts of the developing world. Here’s where China has
the most influence, based on its share of foreign investment since 2005.
Oil has been on the leading edge of this investment push. Energy projects and stakes have
accounted for two-fifths of China’s $630 billion of overseas investments in the last decade.
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While China has substantial funds to withstand serious financial shocks, its overall health matters.
When China swoons, the effects are felt worldwide, by the companies, industries and economies
that depend on the country’s growth.
The managing director of the International Monetary Fund, Christine Lagarde, has commended
China’s efforts to engage globally through investment and trade, as well as to enact economic
reforms. It “is good for China and good for the world — their fates are intertwined,” she said in her
keynote address at an economic development conference this spring in Beijing.
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Global Market Valuations2
2
Guru Focus
Past Max
Current
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Growth in Volume of World Merchandise Trade and real GDP 2007 – 16P3
3
www.wto.org
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Cheap Oil4
OPEC reported on 12th August that its production is at a three-year high. The US Energy Information
Administration simultaneously revised its oil price and US oil production outlook downward for this
year and next. The third major report in the week was published by the International Energy Agency
(IEA), which forecasts global oil demand rising at its fastest rate in five years in 2015.
Despite this rise in demand, lower oil prices and spending cuts will continue to "take a toll" on non-
OPEC producers, the agency said.
"Lower For Longer" Consensus
“Oil’s plunge below $50 barrels a day from triple digits a year ago has seen demand react more
swiftly than supply...Against this backdrop, many participants in the oil industry have adopted a new
mantra – ‘lower for longer’,” the IEA said.
Global oil demand this year will rise at more than twice the pace last year as low oil prices catalyse
consumption in the US and economies recover, the agency noted.
"Global oil demand in 2015 is expected to grow by 1.6 M/bpd, up 0.2 M/bpd from our previous
report and the fastest pace in five years, as economic growth solidifies and consumers respond to
lower oil prices," the agency said. Additionally, "Persistent macro-economic strength" supports
above-trend growth of 1.4 M/bpd next year.
But although world demand is projected to rise, the IEA said that world oil supply also continues to
grow at "breakneck speed" - currently standing at 2.7 M/bpd above a year earlier – despite the fall in
oil prices.
4
http://oilprice.com/
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Oil Consumption Estimate Increased
Global oil consumption will expand by 1.6 M/bpd in 2015 to average 94.2 M/bpd, the IEA said. The
agency also raised its estimate for oil consumption in 2016, forecasting growth of 1.4 M/bpd to total
95.6 M/bpd - representing an increase of 400,000 bpd from the previous report.
Global Supply Falls on Lower Non-OPEC Production
The IEA noted that global oil supply dropped almost 600,000 bpd last month, "mainly on lower non-
OPEC output." The agency sees the growth rate of non-OPEC oil supply as continuing to decline into
next year.
"As lower prices and spending cuts take a toll, non-OPEC supply growth is expected to slow sharply
from a 2014 record of 2.4 M/bpd to 1.1 M/bpd this year, and then contract by 200 kb/d in 2016."
"While a drop in costs and efficiency improvements will help to offset some of the spending cuts,
output is likely to take a hit soon. As such, non-OPEC supply growth is expected to decelerate
through the end of the year and decline in 2016 – with the US hardest hit."
Oil Glut to Persist Into 2016
Global oversupply will average 1.4 M/bpd in 2H15, exerting pressure on available storage capacity,
before easing to approximately 850,000 bpd next year, the IEA projected. The production surplus in
2Q15 was the highest in 17 years- at 3 M/bpd, it said.
The IEA forecasts that record inventories will continue to "pile up," even as consumption growth
doubles this year and non-OPEC supply contracts in 2016 for the first time since 2008. Stockpiles will
not be diminished until 4Q16, or possibly even later, if sanctions on Iranian oil are rescinded, the
report said.
"Our latest forecast shows stronger-than-anticipated demand and non-OPEC supply growth swinging
into contraction next year. While a rebalancing has clearly begun, the process is likely to be
prolonged as a supply overhang is expected to persist through 2016 - suggesting global inventories
will pile up further."
OPEC Keeps Pedal to the Metal
The IEA says that OPEC supply, and particularly "muscular pumping" from Saudi Arabia and Iraq
would continue to increase, to 30.8 M/bpd in 2016, up 1.4 M/bpd on this year "due to a stronger
demand outlook and stalling non-OPEC supply growth."
OPEC maintained production near a three-year high at 31.79 M/bpd last month, as record Iraqi
output helped offset a pullback by Saudi Arabia, the report said.
The agency increased estimates for the amount of oil needed from OPEC next year by 600,000 bpd
to 30.8 M/bpd. This is still approximately 1 M/bpd lower than current production.
Significantly, Iran could raise output to 3.6 M/bpd from roughly 2.9 million currently “within
months” of sanctions being rescinded, the IEA said.
Is a Price Slump to $30 ahead?
WTI crude slumped over 4% on 19th
August with U.S. supply build of 2.6M barrels, sending prices to
levels not seen since early 2009. Some analysts see oil futures set to fall into the $30s per barrel
range; crude futures fell -1.5% to $40.21/bbl.