Tag Archives: chinese

Market Strategies For 2015 And 2016

Market Strategies For 2015 And 2016 | Seeking Alpha Seeking Alpha ‘ + ”; $(‘header’).insert({ before: element }); _bindEvents(); Effect.BlindDown(‘ipad_beta_promo_container’, { duration: 0.5 }); } } function _bindEvents() { var closeBtn = document.querySelector(‘#ipad_beta_promo_container #close_promo_ipad’); if (closeBtn) { closeBtn.addEventListener(‘click’, function () { createCookie(‘hide_ipad_promo’, 1, 1); Effect.BlindUp(‘ipad_beta_promo_container’, {duration: 0.5}); Effect.BlindUp(‘keep_fixed’, {duration: 0.5}); Effect.BlindUp(‘close_promo_ipad’, {duration: 0.5}); }); } } add_ipad_promo_if_needed(); })(); 1. Market outlook for rest of the year; expectations for 2016; what were the main surprises in 2015? Expect a dive on 16th December, when the Fed announces its rate hike. The Bank of New York Mellon (NYSE: BK ) reckons that during Fed tightening cycles since 1946, every time the Fed has raised rates, the market has gained three per cent over the following 12 months after this “lift-off”. ( Financial Times , 10th December, 2015, p. 21). Then expect a year-end rally on account of portfolio managers wanting to improve their annual performance. Surprises: The market crash of September AND the way that the Chinese government tried to halt it with its interventionist policies. 2. Investment strategy; where to find opportunities; how to separate winners from losers How to separate winners from losers: use our Economic Clock®! Winners where there is an excess supply of money, or outlook of an excess supply of money. Losers: where there is an excess demand for money, or outlook of an excess demand for money. INVESTMENT STRATEGY The winners are Europe, Japan, the US and China: the first two have an excess supply of money; the US has a tiny excess supply of money and an improved earnings outlook (courtesy of an excess demand for goods). China will have an excess supply of money once the Central Bank loosens. This is not happening currently: indeed, when the Central Bank supports the RMB exchange rate, it buys RMB and sells dollars. But it then removes these RMB from circulation, so they are not part of money supply any more. SECTOR WINNERS are clearly soft commodities on account of a bad weather outlook. SECTOR LOSERS remain the industrial commodities: over-investment based on China euphoria are at the root of these losses. 3. Japan outlook; Abenomics and BOJ policy A winner – for all the wrong reasons. Her Economic Time® will continue being that of an excess supply of money and an excess supply of goods. Abenomics is dead in the water: that’s because the third arrow got bent by politicians unwilling to reform. Thus, like everywhere else, the Central Bank is left to pick up the pieces. 4. China markets; weak data signalling stimulus soon? Policy response is likely in the first quarter of next year . Indeed, the weaker RMB will help importers raise margins; but I remain doubtful whether the weak RMB can lift increasingly sophisticated exports. 5. Commodity rout; how long will it go? Oil prices See the Investment Strategy of question two above. Industrial commodities will continue suffering on account of a global excess supply of goods. Oil prices: Have nothing to do with our beloved demand/supply approach. Instead, they are all driven by politics of Saudi Arabia not wanting to accommodate Iran’s desire to produce 1 million barrels of oil/day. My guess is that everyone will scramble for market share, meaning that that excess supply of oil gets exacerbated. The good news is that this represents a massive tax cut for the consumer. 6. A Fed rate hike seems more likely this month. What’s your take? I guess “yes”; but this really depends on what the FOMC decides to focus on. If it is the US economy, then a rate hike is probable. But if it switches the floorboards again and decides to focus on China and on what the World Bank as well as the IMF are pronouncing, then all bets are off. I’ll believe that future rate hikes will take place gingerly, a bit like walking on egg shells.

5 ETF Outperformers With 20% Plus Gains Year To Date

It was a tough year for the U.S. markets, as most of the major benchmarks are struggling to register healthy gains this year. Several concerns, including sluggish global growth, a dramatic slide in oil prices and a stronger dollar, continued to hurt the performances of the benchmarks throughout the year. Though many of the ETFs followed the overall trend of the market movement, some of them took recourse to an alternative path. Major Lingering Concerns The continuing plunge in oil prices is one of the major concerns this year. The absence of a justifiable motive to reduce oil production from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries, including Russia, and weak global demand continued to weigh on oil prices. Moreover, the fact that Iran will start exporting oil next year when international sanctions are lifted, and a lower-than-expected fall in the U.S. production raised further concerns. Separately, global growth worries, including that in the world’s second-largest economy, dampened investor sentiment throughout the year. A flurry of dismal Chinese economic data released over the period increased concerns that the economy might fail to reach its 7% target this year. Though GDP growth in the third quarter for the U.S. was revised upward in the latest estimate released by the Commerce Department, the overall economic picture remained disappointing. Another main concern that had a negative impact on markets is the strengthening dollar. A stronger dollar dragged down the earnings performance of the major companies with significant international exposure. Also, strong labor market conditions and a slow upward movement of inflation rate raised the prospects of a lift-off this month, which further had a negative impact on investor sentiment. 5 ETFs Bucking the Trend Despite these concerns, some of the ETFs performed impressively to register solid returns and gained investor attention this year. In this section, we have highlighted 5 ETFs that returned at least 20% in the year-to-date frame and are poised to end the year on a positive note. Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) This fund provides exposure across 101 securities by tracking the SME-ChiNext 100 Index. Nearly 25.5% of total assets are allocated to the top 10 holdings. Sector-wise, Information Technology takes the top spot at 32.8%, while Industrials and Consumer Discretionary take the next two positions. CNXT has amassed $56.5 million in its asset base, while it sees moderate volume of around 125,000 shares a day. The ETF has an expense ratio of 0.66%, and has a Zacks Rank #3 (Hold). It returned 42% in the year-to-date frame. WisdomTree Japan Hedged Health Care ETF (NYSEARCA: DXJH ) This fund follows the WisdomTree Japan Hedged Health Care Index, holding 57 stocks in its portfolio. The product is largely concentrated in the top 10 firms that collectively make 61.6% of the basket. The ETF has been able to manage $22.9 million in its asset base, and is lightly traded with more than 14,000 shares per day. It charges 48 bps in annual fees and expenses. DXJH has a Zacks Rank #1 (Strong Buy) and returned 37.8% in the year-to-date frame. ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) This fund provides exposure across 81 securities by tracking the Poliwogg Medical Breakthroughs Index. Nearly 39.2% of the total assets are allocated to its top 10 holdings. Sector-wise, Biotechnology takes the top spot at 74%, with the rest of the assets invested in Pharmaceuticals. SBIO has amassed $169.5 million in its asset base, while it sees moderate volume of around 149,000 shares a day. The ETF has 0.50% in expense ratio and has a Zacks Rank #2 (Buy). It returned 26.7% in the year-to-date frame. First Trust DJ Internet Index ETF (NYSEARCA: FDN ) This fund follows the Dow Jones Internet Composite Index, holding 41 stocks in its portfolio. The product is largely concentrated in the top 10 firms that collectively make 61% of the basket. The ETF has been able to manage $4.9 billion in its asset base, and is moderately traded with more than 598,000 shares per day. It charges 54 bps in annual fees and expenses. The ETF has a Zacks Rank #2 (Buy) and returned 24.8% in the year-to-date frame. PowerShares NASDAQ Internet Portfolio ETF (NASDAQ: PNQI ) This fund provides exposure across 94 securities by tracking the Nasdaq Internet Index. Nearly 61% of the total assets are allocated to its top 10 holdings. Sector-wise, Internet Software % Services takes the top spot at 56%, while Internet & Catalog Retail takes the next position. PNQI has amassed $260.8 million in its asset base, while it sees light volume of around 24,000 shares a day. The ETF has 0.60% in expense ratio and has a Zacks Rank #2 (Buy). It returned 22.7% in the year-to-date frame. Original Post

Managements Leading Companies Off A Cliff

By Tim Maverick The quickest and surest way for investors to lose money is to invest in companies where the management is, to put it politely, incompetent. Numerous instances exist throughout history. But we’re perhaps seeing the worst example ever, and it’s from the global mining industry . The level of incompetence being displayed is simply astonishing. Chinese Steel Collapse China has the world’s biggest steel industry, producing half of all steel. Crude steel output there soared more than 12-fold between 1990 and 2014. But now, thanks to overcapacity, the Chinese steel industry has shifted into reverse in a big way. Prices have fallen by nearly 30%. Steel rebar prices in China on the Shanghai Futures Exchange are at all-time record lows. Rebar prices are down 30% this year alone. As losses continue to mount for the industry, even Xu Lejiang, Chairman of giant steelmaker Shanghai Baosteel, said that the industry’s output will collapse by a fifth in the not-too-distant future. Forecasts are for a drop in production of at least 23 million metric tons (mmt) over the next year. The China Iron and Steel Association is in general agreement. It says that output probably permanently peaked in 2014 at 823 mmt. In effect, we’ve seen peak steel. Iron Ore Dreams That’s bad news for the major iron ore miners – Vale S.A. (NYSE: VALE ), Rio Tinto PLC (NYSE: RIO ), and BHP Billiton (NYSE: BHP ). China will cut back on its imports of iron ore, a key ingredient in steelmaking. The evidence is already there. The Baltic Dry Index, which includes ships that carry ore, hit its all-time low on November 20 at 498. Iron ore itself hit an all-time low – spot pricing began in 2008 – about a week ago at $43.40 per metric ton. Logic would dictate the miners cut back production. So does Economics 101. But the managements at the big three continue to live in a fairy tale. They continue clinging to their forecast – that Chinese steel output will rise 20% over the next decade – like drowning men to a life preserver. In fact, Rio Tinto still forecasts that annual Chinese steel production will hit a billion tons by the end of the decade. So the three blind mice (iron ore miners) continue raising output, using a scorched earth policy to eliminate the competition. In fact, next year, Vale will open the world’s largest iron ore mine (Serra Sul in Brazil). And the iron ore sector isn’t alone. Other mining segments – including copper, zinc, and nickel – continue to produce as if there’s no tomorrow. How to Spot the Bottom Eventually, the long nightmare for shareholders in mining companies will end. So how do you spot the signs that a bottom is coming and brighter days are ahead? Output cuts will help. But if Company A cuts its production, the dreamers at one of the big three miners will simply raise their output even more. A true signal will be the removal of one of these totally incompetent management teams. That should start the ball rolling towards real change. I then expect the big miner that made the change to finally say “uncle.” And I don’t mean just deciding to finally cut back on output. I mean throwing in the towel completely, walking away from a segment like iron ore, and permanently shutting down production. If a permanent shutdown doesn’t occur, miners will be in the same boat as shale oil producers. As soon as the price blips up a few dollars, a flood of supply hits the market. A commodities version of Sisyphus, if you will. That may happen sooner rather than later. In iron ore, for example, the price is quickly approaching the break-even level for some of the big miners. This is despite falling freight, oil, and currencies helping to lower miners’ costs. Until the permanent shuttering of mines occurs, the sector will remain in its downward spiral. Original Post