Archive

Re-fixing the Yuan

One of the biggest losers from the recent flare up in trade tensions between the U.S. and China was the Yuan. In response, the PBOC lowered its official Yuan mid-point to USD 6.8649 to minimize further currency weakness. However, this has led to a widening spread between the onshore (CNY) and offshore (CNH) exchange rate, […]

Buying safer assets

Despite a strong recovery in stock prices this year, inflows into equity ETFs and mutual funds have remained uneven. At the same time, inflows into products that track bonds have been resilient. This suggests that weak global growth, trade war concerns, and worries about earnings have weighed on investor sentiments, even as the S&P 500 […]

Understanding the curves

Crude oil has rallied by nearly 40% year-to-date. However, this recovery was arguably driven by temporary geopolitical factors (supply outages in Iran & Venezuela), which is reflected by a steadily rising front-end of the futures curve. In contrast, the long-end of the curve, which reflects the long-term outlook of both supply and demand has remained […]

Cry for Argentina

Argentina’s peso has fallen massively vs. the dollar since last year. Tight monetary policy has been insufficient to arrest  inflation, currently rising at 55% YoY. The main issue driving the risk off move in Argentina is the fact that the pro-reform President Macri is losing ground in polls ahead of October elections to the resurgent […]

The healthcare debate

Pharmaceutical (PBL) stocks continue to face headwinds as mounting political pressure on drug pricing gains momentum. With drug prices already falling at 1% YoY, reports of key lawmakers coming to a bipartisan agreement aimed at increasing competition from cheaper generics should further weigh on drug prices. However, health care service providers (HES) will continue to […]

Stressed, financially

From earnings results we have seen so far, 2018 was a good year for U.S. banks’ net-interest margins (NIMs), which were buoyed by the Fed’s four rate hikes. Despite this, Financials have under performed Utilities as yields have fallen. More recently, the under performance of Financials has been even greater than what the falling yields […]

Easing in India

The RBI came out yesterday with its second consecutive rate cut as economic growth starts to cool amid the ongoing general elections. The political desire for stimulus is understandable in the investor community, especially at a time when the rupee has stabilized and inflation is low. While we expect some rupee weakness to return, the […]

Stay positive?

Despite a strongly rebounding U.S. equity market this year, Tuesday’s U.S. consumer confidence print came in much worse than expected, missing the mark by the widest margin since 2015. The survey data tends to follow the equity market, which makes this divergence another sign of weakening U.S. consumption growth. Unless more is done by policy […]