Author Topic: AAUC (AA UNION CAPITAL) - Attractiveness of FAANG group grows after setback  (Read 271 times)

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Offline DjlakhanyTopic starter

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One issue that would also start to gain more attention is the ability of the People’s Bank of China to channel liquidity to small businesses, which have been perennially credit starved and thus have the greatest scope of enjoying a productivity boost from a capital injection. Thus far, success has been in short supply.





Calmer European politics


Eurozone growth is expected to remain above potential in 2019, thanks in part to the still-loose monetary conditions. We expect political stress to calm down to some extent. The exit of Britain from the European Union (EU), slated for 29 March 2019, should not do much harm to either side if handled wisely. In Germany, the ongoing political realignment is unlikely to cause instability as the influence of the extreme parties remains limited. Meanwhile, we believe that Italy and the EU will ultimately find a compromise over the country’s budget deficit while reaffirming Italy’s euro membership. The impact on Asia will likely be via EUR/USD, as outlined above.


Emerging markets rebalancing


Emerging markets (EM) entered the financial crisis with fairly healthy balance sheets. After 2008, cheap USD funds induced EM, especially corporations thereof, to substantially boost their foreign currency borrowing. Yet with the costs of USD liquidity rising in 2018 as a result of a more hawkish Fed, stresses emerged and some EM currencies suffered severe setbacks. At the end of 2018, there were indications that internal and external balance was being restored, in part with the support of the International Monetary Fund. If that process continues in 2019, EM can recover and global investors would benefit. For Asia, the rebalancing process will likely have less of an impact than what happens with global growth. Nevertheless, the stability that an orderly rebalancing brings will benefit Asian economies, especially those still in the EM space.


Tech and healthcare innovations


Technology stocks have been the dominant drivers of global equity markets over the past decade. The MSCI World IT sector has outperformed the overall market by approximately 200% since March 2009. Social media, online shopping, and the ever-more advancing handheld devices have taken the world by storm. An important question for investors is whether growth in this sector will continue to remain this strong with the emergence of new areas of focus such as virtual reality and artificial intelligence. A second key sector that is likely to influence the fate of equity markets is healthcare with investors keeping an eye on gene therapy and other innovative treatments.


Both of these two sectors have great relevance for Asia, where growing investment in mobile network infrastructure and rising disposable incomes have seen mobile penetration and usage growing sharply. Many parts of Asia are also seeing fairly acute graying of their respective populations and demand for healthcare services in those areas is likely to see strong sustained growth. With 2019 quite likely to see increased fiscal spending in a range of infrastructure (especially in China), mobile communications and healthcare in the region are likely to be meaningful beneficiaries.


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