Vietnam Markets
I saw a great headline this week that read ‘American investor earns VND1,000 billion from Vietnam’s HOT stock’. The twist is brilliant suggesting that Vinhomes share is a ‘hot’ stock. Perhaps we should come at this from the correct perspective and give it the correct headline.
My headline would have been ‘Fund manager exits Vinhomes stock on slowdown of Vietnam property market,’ which is the real story to consider here. Not that some US based fund manager made a profit of 43 million USD. It is the exit that is the important fact. Why? you should be asking yourself.
The VN Index is trading today at 1,333 so a continued downward trend albeit very slightly down over the last couple of weeks. I stand by my opinion that the VN Index will remain under pressure throughout the rest of 2021.
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The Big Story This Week
Has to be Evergrande. China’s biggest real estate company has a real issue as the worlds most indebted developer. Payments are coming due and there is a real fear in the markets that default may be on the way causing a mass sell-off to mitigate exposure and risk in the markets. It claims to own more than “1300 projects in more than 280 cities in China”
The knock-on effect is hitting all markets and all sectors. Especially in the metals sector with a fear of lowering steel prices. Shares of metals and iron-ore have lately been under massive pressure as the world’s biggest consumer attempts to limit its steel output.
And the ramifications for China’s financial system could also be dire, given the firm owes money to around 170 national banks and dozens of other financial companies, sparking fears of a credit crunch. Although Standard & Poor, the independent ratings agency stated they feel that his is manageable in the case of default. I would point out that it was S&P who totally got it wrong during the Lehman’s story years ago. Take from that what you will.
But we may well know by Thursday when their first payments come due. Watch this space! My gut tells me that they will fulfil their responsibilities to buyers and investors. Is it ‘too big to fail?’. But Evergrande will certainly need restructuring. Currently the price is down from 20 plus to 2.20 in trading today.
WHATS GOING ON IN JAPAN?
Japanese shares fell on Tuesday tracking a sell-off on Wall Street, as fears of a potential default by Chinese developer Evergrande Group drove investors out of equities, though losses were capped as traders scooped up cheap stocks. (see below)
There’s a good story in Japan markets today with Daiichi Sankyo rising incredibly well and one to watch. Their vaccine can cut deaths by 70% and is 8.86% today. Will probably continue its rise.
The love hate relationship with Cryptos continues.
So, we have seen another ridiculous volatile move in Bitcoin with a 10% drop-off, over-night. This really is the most ridiculous of asset classes in existence with no stability and no way to price it. Speculation at its finest, and only for those willing to lose what they stake.
It is interesting to see that Coinbase folded under regulation authority pressure and is stopping its plans to launch a lending program that would provide users the ability to earn interest on lent assets. That would have been a great choice for the longer-term holder. And tells me the SEC has little intention of allowing cryptos to rise. Compare that to other assets such as stocks where lending has been allowed for decades. You can lend out stocks you own which usually get picked-up by short-sellers as they have to legally be able to ‘cover’ their positions even when going ‘short’.
Where is the fairness that it is allowed in stocks but the SEC threatens to sue Coinbase, if they went ahead with its lending program? Tells you all you need to know about the SEC’s true mindset about crypto’s and its near term relationship.
Listening to the head of the SEC a week ago, you would think that the regulatory authorities wanted to assist cryptos by clarifying regulations which would pave the way for wider use. But its just hot air in my opinion. They have been banging that same drum for years now with an expected crypto ETF proper, to have been released as early as 2013. That’s 8 years of continuous blah, blah, blah fed to the markets that an SEC regulated fund would be released.
The continued narrative is that regulation will be forthcoming, but you can pretty much guarantee that many more suns will have risen and set before we ever see that. Bit coin is trading at 42k plus change as we speak.
ENERGY
Gas prices are becoming a major issue especially coming into the winter months. Europe is in dire straits with gas costs rising to the levels they are. YoY, gas prices are over double and European Governments are going to have to give billions out in aid to assist households.
Not what you need in a post pandemic economic recovery period and will almost certainly now lead to overall inflation.
Another argument to decarbonizing the energy sector overall and going greener, quicker. Look for green stocks that will benefit….
OTHER MARKET NEWS
CURRENCIES – MONETARY POLICIES
- On Monday (20.09) sterling dropped against the US dollar, coming in at $1.36. Currency traders have focused on the energy crisis updates in the UK and the upcoming BoE monetary policy meeting later this week.
- The euro fell, trading around $1 .17 (-0.1796) against its US counterpart on Monday (20.09). The single currency hit a 1-month low as the firm sentiment surrounding the US dollar and chatter around the Fed’s QE tapering weigh on its trading value.
- The US Dollar Index (DXY) soared on Monday (20.09), coming in at 93.39. Analysts at MUFG Bank suggested that the index could strengthen if the Fed‘s post-meeting report, due to be released on Wednesday, signals a shift in monetary policy.
STOCK MARKETS
- On Monday (20.09), the Hang Seng Index in Hong Kong lost 3.32a. Markets in mainland China, Japan and South Korea were closed on Monday for holidays.
- The FTSE 1 00 fell by 1.436 (6,870.25). In Germany, the DAX 30 retreated by 2.1 096 (1 5,165.1 5) while, in France, the CAC 40 lost 2.1796 (6,427.20).
METALS
- The price of gold retreated on Monday (20.09) reaching $1,753 per ounce. I suggest that the Federal Reserve’s upcoming monetary policy meeting and decision regarding tapering will likely have an effect on gold prices.
OIL
- Oil prices dropped on Monday (20.09) with the WTI crude price coming in at $71.1 2. The US oil and gas rig count rose to its highest level since April 2020, however 2396 of U.S. Gulf of Mexico crude output, or 422,078 barrels per day, remains shut.
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