Dec 18 2019 0
The promising view on the American economy. The liquidity gap in China. Indian heat wave and WeWork. All of that will be covered in our daily forex trading strategy report today. These are the most important events of the forex market on December 18th.
The most wonderful time of the year
While many investors are still skeptical about the US-China trade agreement and worried about the sustainability of US economic expansion, the "bull" (growth) market is seizing. control. Because the Bank of America Corp's financial stress index fell to a low level in May, high liquidity stocks became safer, resulting in smaller price volatility. Cheaper stocks are rising and money is flowing into emerging markets again. The US labor market is in a healthier state and the Federal Reserve has decided to adopt a peaceful policy. All of this motivated JPMorgan Chase & Co. inviting new price increases and promoting Bank of America Corp to the "melted" project in the next quarter. In a year when the value of defending assets skyrocketed, Wall Street is now putting more riskier assets behind to celebrate the festive season. "In the next 6 months, you should have a more positive view," said Francois Savary, chief investment officer of Prime Partners SA.
The liquidity lesson in China
In China, the liquidity panic is about to check the bond market once again. Soon, government bond investors in China will seek reassurance from the central bank when there is plenty of cash in the financial system. Why? Because according to Guotai Junan Securities Co., the whole country will witness a "liquidity gap" of 2.8 trillion yuan (US $400 billion) in January 2020, largely due to people across the country. Cash will be withdrawn for the Chinese New Year holiday. That means bond traders expect the central bank to unlock the budget to avoid panic due to the sudden change in liquidity like in October, when the 10-year bond yield was on. spike most in 6 months.
It's unclear exactly what analysts expect the People's Bank of China to do, but no one calls for a major net liquidity cut or a standard rate cut, because Beijing won't want to risk it. The risk of increasing inflation is when the consumer price index has been high for 7 years. Also, while the economy is growing at the slowest pace since the 1990s, November data is more encouraging - and if you look at the first-stage trade deal signed with the United States - then Beijing has even less reason to provoke a more stimulating measure. All of that means that by January of next year, the rise in Chinese government bonds will hardly last.
Indian heat wave
Asset managers in India are outperforming their global rivals this year as domestic capital managers benefit from tectonic changes in savings from gold and real estate. until stocks, bonds. Reliance Nippon Life Asset Management Ltd. and HDFC Asset Management Co. have shares doubling in 2019. They are the third and fourth best performing companies among 36 companies with a market capitalization of at least US $2 billion. Retail investors have flocked to mutual funds after the government banned high-value currency transactions in 2016 by damaging profits from gold and assets. Moreover, although total assets have more than tripled to US $382 billion in the past five years, only 1.5% of them are Indians, suggesting that the journey to growth is even higher. very long. And passive investment comes from US regulators with tapering fees being held in India.
WeWork has collected $1.75 billion in new financial assistance, with the help of Goldman Sachs. The fundraising prompted the release of a mountain of cash for the struggling company and the new credit line was the first hurdle removed by SoftBank in its commitment to finance $5 billion in debt to WeWork as part of bailout.
At this stage, the move will release about $800 million in cash that WeWork has set aside to meet previous credit line covenants. "We are delighted that WeWork and SoftBank Group Corp have signed a commitment letter with Goldman Sachs. We will not be required to send any assets," said Ms. Erin Clark, a spokesman for WeWork. Although Goldman has pledged to provide capital, they are still in the process of taking care of parts of the loan to other investors.