China/Hong Kong
The China and Hong Kong markets rebounded strongly this week, mainly attributable to the Thursday gain of 6.7 percent in MSCI China Index. The People’s Bank of China announced a 50 basis points cut of the reserve requirement ratio (RRR) from Dec. 5, which is the first RRR cut since the 2008 global financial crisis.
Coupled with a slightly-stronger-than-expected Purchasing Managers’ Index (PMI) of 49 for November, it temporarily buoyed the sentiment of the global equity markets. Mirae Asset’s portfolio is largely unchanged over the week.
In the past week, the Indian markets picked up despite a depreciating rupee and a bulging fiscal deficit.
Inflation concerns are being eased by a good monsoon and bumper crops. The base effect of last year will play out strongly from December and inflation should no longer be a problem to reckon with in the near term.
The government has been pulling itself out of inaction by passing the bill on foreign direct investment in the retail sector. One can expect further positive moves from the government, which should boost sentiment in the market.
Internationally, people will look out for moves from Europe. Germany will likely stick to its hard stance of not being in favor of euro bonds. Lower GDP numbers from the U.S. have added to global concerns.
In Mirae Asset’s portfolio, the firm continues to be defensive in its stance and will stick to good consumer and pharmaceutical names. It has started nibbling at some industrials and bank names, which present good long-term stories at reasonable valuations.
The developed markets’ economies remain the focus for global investors in the near-term. The Chinese economic activity indicators for November will be released this week, and markets will verify if these indicators are following the recent PMI’s trend and if the likelihood of a hard landing is really getting stronger.
In Brazil, the GDP and consumer price index (CPI) will be released on Tuesday and will provide better information regarding the perspectives for the growth in the third quarter as well as the confirmation of the downward trend in inflation figure.
On Dec. 8, the Copom Minutes for November will be released and will be important to verify Copom’s point of view with the European Crisis and their forecast of the Brazilian macro indicators.
This report is provided by Mirae Asset Financial Group