https://www.scmp.com/rss/272652/feed en https://assets.i-scmp.com/static/img/icons/scmp-meta-1200x630.png https://www.scmp.com The huge and puzzling gap between China’s great long-term economic growth and the terrible performance of its stock market is significantly explained by politics. A new study finds a strong link between political connections and initial public offerings in China, one which is doing the average investor no favours. Hong Zhou and Guoping Li of Beijing’s Central University of Finance and Economics find in a paper that 74 per cent of private firms which get to list under mainland IPO rules are... https://www.scmp.com/business/markets/article/1908021/politics-blame-china-stocks-lost-decades?utm_source=rss_feed https://www.scmp.com/business/markets/article/1908021/politics-blame-china-stocks-lost-decades?utm_source=rss_feed Mon, 01 Feb 2016 02:22:05 +0000 Wars don’t always end with treaties; developments at the European Central Bank show how the war on low inflation may end when the loser declares victory and goes home. ECB chief Mario Draghi on Thursday vowed a strong defence of the bank’s 2 per cent inflation target, a goal it and other central banks have been signally unable to meet. Giving a nod to both dropping energy prices and to continued falls in market-based measures of inflation expectations, Draghi, speaking after the ECB left... https://www.scmp.com/business/article/1904787/maybe-central-banks-will-declare-victory-and-go-home?utm_source=rss_feed https://www.scmp.com/business/article/1904787/maybe-central-banks-will-declare-victory-and-go-home?utm_source=rss_feed Mon, 25 Jan 2016 00:40:39 +0000 A British exit from the European Union wouldn’t just weaken the economies of both parties, but might mark a significant step back from globalisation. Embedded in that idea is the prospect of the partial unwinding of a number of forces that for decades have increased economic growth and the returns enjoyed by investors. British financial markets have suffered a drubbing since the start of this year as polls narrowed on the outcome of a promised “Brexit” referendum which is now seen happening as... https://www.scmp.com/business/global-economy/article/1902741/brexit-and-bitter-fruit-de-globalisation?utm_source=rss_feed https://www.scmp.com/business/global-economy/article/1902741/brexit-and-bitter-fruit-de-globalisation?utm_source=rss_feed Tue, 19 Jan 2016 00:30:00 +0000 Remember how China and the weakening yuan was a problem for the US Federal Reserve and then, just as suddenly, wasn’t? Well, it is again. The yuan looks set to continue to weaken, which will not only put pressure on other emerging and Asian economies but also act as an additional deflationary force in a world with little inflation to spare. That may undermine inflation in the United States, impairing the Fed’s ability to raise interest rates. Riskier assets like equities will not enjoy a world... https://www.scmp.com/business/markets/article/1898990/yuan-chinas-currency-us-federal-reserves-problem?utm_source=rss_feed https://www.scmp.com/business/markets/article/1898990/yuan-chinas-currency-us-federal-reserves-problem?utm_source=rss_feed Fri, 08 Jan 2016 00:49:08 +0000 Just as turkeys are opposed to Christmas on culinary grounds, so investors in risky assets like junk bonds are forever and always against interest rate hikes. There are several plausible reasons why the Federal Reserve, expected to lift rates from zero on Wednesday, might weeks ago have signalled a delay, but a bit of a sell-off in higher-yielding corporate bonds does not qualify. Lucidus Capital Partners, a high-yield credit fund, said on Monday it would give investors back US$900 million it... https://www.scmp.com/business/article/1891407/dithering-over-time-fed-raise-rates-here?utm_source=rss_feed https://www.scmp.com/business/article/1891407/dithering-over-time-fed-raise-rates-here?utm_source=rss_feed Tue, 15 Dec 2015 22:00:57 +0000 The good news about Japan is that its economy is doing OK, in absolute terms, given the number of working-age people who live there. The bad news is the number of people, of working or any age, is dropping. The even worse news, longer term, is that debts don’t fall with population, they only get harder to pay back across a smaller base. Japan fell into its fourth recession in five years, with the economy shrinking at an 0.8 per cent annual clip in the quarter to September. That performance looks... https://www.scmp.com/comment/insight-opinion/article/1880125/japans-doing-ok-demographic-bomb-ticking?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1880125/japans-doing-ok-demographic-bomb-ticking?utm_source=rss_feed Wed, 18 Nov 2015 04:31:35 +0000 Appeals to reform the “culture” of banking, most recently by New York Federal Reserve president William Dudley, amount to an abrogation of responsibility and a counsel of despair. Kicking off a closed-door, yes closed-door, meeting of regulators and bankers on cleaning up finance in New York last week, Dudley argued that “context largely drives conduct” while at the same time reiterating calls for a cultural change led from within the industry. This is partly true but fundamentally... https://www.scmp.com/business/banking-finance/article/1877467/cleaning-stockyards-banking?utm_source=rss_feed https://www.scmp.com/business/banking-finance/article/1877467/cleaning-stockyards-banking?utm_source=rss_feed Tue, 10 Nov 2015 10:52:34 +0000 Active fund managers' skill in timing bear markets may be enough to balance their costs and other shortcomings. That's the upshot of a new paper, but before you get too excited, the implication may simply be for investors to be more or less indifferent to the active versus passive debate. Unless, of course, you think you can predict bear markets, in which case you are likely already an active investor, as well as being a seer. Numerous studies have indicated that active managers produce worse... https://www.scmp.com/business/markets/article/1875884/active-funds-earn-keep-barely-bear-markets?utm_source=rss_feed https://www.scmp.com/business/markets/article/1875884/active-funds-earn-keep-barely-bear-markets?utm_source=rss_feed Thu, 05 Nov 2015 04:16:18 +0000 For years in America an argument has been made that the US Federal Reserve has unsuccessfully tried to fill a fiscal stimulus-shaped hole with monetary policy. In Asia, notably in China and Japan, the deficit that monetary policy is trying and failing to bridge is demographic: a people-shaped hole. This was amply illustrated in China when the Communist Party announced last week it would scrap its longstanding one-child policy just days after the mainland’s central bank moved to cut interest... https://www.scmp.com/business/global-economy/article/1875554/monetary-policy-and-asias-people-shaped-hole?utm_source=rss_feed https://www.scmp.com/business/global-economy/article/1875554/monetary-policy-and-asias-people-shaped-hole?utm_source=rss_feed Wed, 04 Nov 2015 03:43:19 +0000 This US earnings season the data from the frontline is about to confirm the broader economic narrative: things aren't so great. How that plays out in financial markets and whether we begin to see meaningful contagion is perhaps the more interesting question. US companies have begun their quarterly ritual of reporting earnings, and though we are early in the process, already the themes may be emerging: lower revenues, profit margins under pressure and a fondness among companies to blame the... https://www.scmp.com/business/markets/article/1866888/us-company-earnings-sing-economys-blues?utm_source=rss_feed https://www.scmp.com/business/markets/article/1866888/us-company-earnings-sing-economys-blues?utm_source=rss_feed Tue, 13 Oct 2015 05:51:35 +0000 Global warming is a source of unprecedented deep risk for investors, with no easy answers. Like wars or confiscation, global warming may be best thought of as a source of "deep risk", a term coined by investor William Bernstein to describe those risks, unlike a cyclical stock market crash, from which an investor may not be able to recover. Bank of England Governor Mark Carney on Tuesday urged insurance companies and others to get out in front of those risks, arguing that "once climate change... https://www.scmp.com/comment/insight-opinion/article/1863147/burning-question-how-does-global-warming-affect-investors?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1863147/burning-question-how-does-global-warming-affect-investors?utm_source=rss_feed Thu, 01 Oct 2015 05:15:30 +0000 The Federal Reserve appears to be reacting to events outside its control rather than setting the agenda in financial markets. The Fed’s decision to delay raising interest rates at its September meeting, tied in part to concerns over China, unsettled investors, leading some to conclude that not only was the world’s most powerful rate setter hard to predict but that it was far less able to counter changes in market sentiment. In past years the Fed, whatever its other struggles in balancing... https://www.scmp.com/comment/insight-opinion/article/1862323/fed-losing-market-power-taking-not-making-prices?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1862323/fed-losing-market-power-taking-not-making-prices?utm_source=rss_feed Tue, 29 Sep 2015 05:20:24 +0000 Relatively scarce labour may in the next decades reverse some of the huge trends of the last three: rising inequality, and falling real interest rates and wages. The upshot for asset markets may be equally profound, challenging the central place government bonds hold at the core of investment portfolios as well as the value of equities. The rise of China, the integration of the global economy and the opening of the economies of Eastern Europe have coincided with, and likely driven, rising... https://www.scmp.com/business/global-economy/article/1860360/demographics-challenge-inequality-and-asset-values?utm_source=rss_feed https://www.scmp.com/business/global-economy/article/1860360/demographics-challenge-inequality-and-asset-values?utm_source=rss_feed Tue, 22 Sep 2015 08:30:00 +0000 There’s a roughly one-in-three chance the US Federal Reserve increases interest rates later this month and, guess what: the stock market won’t like it. Friday’s selloff in the Dow Jones industrial average of 272 points, or 1.66 per cent, was analogous to a three-year-old threatening to run away from home. What comes later, as the Fed hike dawns on the market’s young mind, is an old-fashioned “throw your toys out of the playpen” tantrum. The market will do this, of course, because it has the... https://www.scmp.com/business/global-economy/article/1856017/tantrums-tipped-when-fed-raises-rates-so-get-it?utm_source=rss_feed https://www.scmp.com/business/global-economy/article/1856017/tantrums-tipped-when-fed-raises-rates-so-get-it?utm_source=rss_feed Mon, 07 Sep 2015 08:48:57 +0000 With the payroll numbers pointing to a September Fed rate rise, investors appear to have moved into a new stage of their grief over losing zero interest rates. Before there was denial - "They’ll probably even wait until 2016, because China and Greece, and emerging markets, and ... and ... and China." Now, along with a dollop of anger, we get bargaining - "Sure, they will raise interest rates but only once this year and maybe not eventually very high at all." If the market continues to follow the... https://www.scmp.com/comment/insight-opinion/article/1847975/stages-grief-us-interest-rate-increases-loom?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1847975/stages-grief-us-interest-rate-increases-loom?utm_source=rss_feed Mon, 10 Aug 2015 00:30:05 +0000 The market seems to be betting that the Federal Reserve is going to steal a page from China’s playbook. But unlike China, which is trying to put off the inevitable by, among other things, banning some executives from selling stock for six months, investors are now betting that the Fed has shelved any interest rate rise until 2016. Following ructions in Greece and China, and having digested Wednesday’s release of the Federal Open Market Committee's June meeting minutes, investors at the Chicago... https://www.scmp.com/business/markets/article/1835612/us-fed-may-be-less-patient-market-believes?utm_source=rss_feed https://www.scmp.com/business/markets/article/1835612/us-fed-may-be-less-patient-market-believes?utm_source=rss_feed Fri, 10 Jul 2015 02:30:15 +0000 Concentrate on savings when you are young, but worry more about making the right asset allocation as you get closer to retirement. That’s the finding of a new paper from investment firm Research Associates. Broadly speaking, there are two principal ways to amass a capital sum: one is to put money aside, the other to invest it cleverly. Alas, far more ink, effort and blood is spilled trying to beat the market than in trying to get people to simply save early and often. There are many reasons for... https://www.scmp.com/comment/insight-opinion/article/1818297/save-while-young-fret-over-asset-allocation-old-age?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1818297/save-while-young-fret-over-asset-allocation-old-age?utm_source=rss_feed Mon, 08 Jun 2015 01:28:43 +0000 Call it status anxiety, call it greed or just call it clever momentum trading, but the fear of missing out is an under-appreciated force in financial markets. No one likes to miss out on a good thing, especially when they see their friends, neighbours and rivals cashing in, a phenomenon three-card-monte dealers have long understood. There are (at least) two markets right now which show meaningful signs of attracting capital in substantial part because of this fear: China’s stock market and... https://www.scmp.com/comment/insight-opinion/article/1814405/fear-missing-out-driving-force-markets-china-silicon-valley?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1814405/fear-missing-out-driving-force-markets-china-silicon-valley?utm_source=rss_feed Mon, 01 Jun 2015 03:34:08 +0000 Activist hedge funds, on the whole, do good work, but the best results come from those with the deepest pockets. A new study, looking at the performance of activists, who buy shares and then push companies to change strategy, shows continued strong results on interventions from 2008 through mid-2014. Activists have fought many high profile battles recently with incumbent management, notably Nelson Peltz and his Trian Fund Management, which is currently seeking four board seats at DuPont. The... https://www.scmp.com/comment/insight-opinion/article/1781665/activists-hedge-funds-actually-good-investors?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1781665/activists-hedge-funds-actually-good-investors?utm_source=rss_feed Thu, 30 Apr 2015 08:00:15 +0000 As US company earnings rise and major stock market indices hit new heights, two small problems remain: revenues are static and the trajectory of earnings growth is slipping. The tech-heavy Nasdaq closed Thursday at 5,056, its first close above its previous record high since March 2000, while the S&P 500 briefly topped its previous record high set last month only to close five points shy at almost 2,113. Both got a boost from ongoing reports on first-quarter earnings, which have risen despite... https://www.scmp.com/comment/insight-opinion/article/1778519/us-company-shares-rally-revenue-flat-and-earnings-seen?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1778519/us-company-shares-rally-revenue-flat-and-earnings-seen?utm_source=rss_feed Tue, 28 Apr 2015 02:00:00 +0000 One hundred years is a long time to be a lender to Mexico, as those who remember the 1980s, a decade during which it was mostly in default, will tell you. One hundred years is arguably an even longer time to hold euros, a flawed single currency with a short history and a non-minimal chance of a changing line-up, not in decades but potentially, considering Greece, in a matter of months. That’s what makes Mexico’s highly successful offering last week of ¤1.5 billion (HK$12.4 billion) of debt due... https://www.scmp.com/business/economy/article/1768392/100-years-mexico-and-euro-risk-investors-contemplate?utm_source=rss_feed https://www.scmp.com/business/economy/article/1768392/100-years-mexico-and-euro-risk-investors-contemplate?utm_source=rss_feed Fri, 17 Apr 2015 04:51:20 +0000 As with so many illnesses, focus only on deflation as a state and you will end up more likely to get it and to mis-treat it when it happens. Scarred by the lessons of the Great Depression, where an exceptional and self-reinforcing deflation, or general fall in prices, took hold, central bankers have fought signs of it since the financial crisis with everything they have. This ignores several truths, some of them argued in a recent study by the Bank for International Settlements on deflations... https://www.scmp.com/business/global-economy/article/1757391/focus-deflation-ignores-several-truths?utm_source=rss_feed https://www.scmp.com/business/global-economy/article/1757391/focus-deflation-ignores-several-truths?utm_source=rss_feed Mon, 06 Apr 2015 02:54:35 +0000 Individual investors have been cutting back on cash in portfolios, the exact reverse of what Warren Buffett has been doing at Berkshire Hathaway. Who do you think has got it right? Cash at Berkshire Hathaway stood at just over US$55 billion at the end of June, a record high and 21/2 times the level Buffett had said in the past he liked to keep on tap to meet extraordinary claims at his insurance businesses. It was also up more than 50 per cent year on year. Buffett's green pile was in sharp... https://www.scmp.com/comment/insight-opinion/article/1578303/buffett-builds-us55b-green-pile-individual-investors-cut?utm_source=rss_feed https://www.scmp.com/comment/insight-opinion/article/1578303/buffett-builds-us55b-green-pile-individual-investors-cut?utm_source=rss_feed Thu, 21 Aug 2014 02:17:39 +0000 China's economy is rebalancing. Unfortunately, it is changing a lot like the United States did in 2006 and 2007, with a sudden slowdown in real estate. That was perhaps inevitable, but it raises some familiar risks - a chain reaction of real estate losses, debt defaults and a sudden slowdown in growth. The costs for the rest of the world could be high, particularly in places like Brazil and Australia that have prospered by feeding China's formerly insatiable appetite for raw materials. Growth of... https://www.scmp.com/business/economy/article/1498465/china-builds-rebalancing-weakness-real-estate?utm_source=rss_feed https://www.scmp.com/business/economy/article/1498465/china-builds-rebalancing-weakness-real-estate?utm_source=rss_feed Sun, 27 Apr 2014 20:43:27 +0000 Gorge on Halloween candy, Thanksgiving turkey and risk: the Fed has declared an early and extended holiday. The US Federal Reserve left policy unchanged at its meeting on Wednesday, maintaining its US$85 billion per month schedule of bond buying and making only a few changes to the accompanying statement. The Fed said it wanted to see more data before making any changes to policy while noting that the recovery in housing has slowed and inflation remains below target. With no meeting until... https://www.scmp.com/business/money/markets-investing/article/1344500/fed-inaction-greases-path-equities-and-other-risky?utm_source=rss_feed https://www.scmp.com/business/money/markets-investing/article/1344500/fed-inaction-greases-path-equities-and-other-risky?utm_source=rss_feed Thu, 31 Oct 2013 07:11:34 +0000