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Yuan's Plunge Marks End of Chinese Stability for Global Economy
SFGIX PRASX TRAMX all getting clobbered. ...I'll be doing some buying in October and nearer to year's end. I want someone to tell me to buy ITUB which is Itau Unibanco ADRs. 52-week low, just now. Biggest bank in South America. Big presence.
Interesting how the different funds handle this situation. Our World & EM Equity sleeve, YTD:
MAPIX 8.8% Mathews Asia Dividend ANEFX 8.3% American Funds New Economy SMCWX 8.3% American Funds Smallcap World QUSOX 4.5% Pear Tree Polaris Foreign Small Cap CWGIX 3.5% American Funds World Growth & Income SFGIX 3.2% Seafarer Overseas Growth & Income GPROX 2.6% Grandeur Peak Global Reach ARTGX 1.2% Artisan Global Value Investor WAFMX -4.5% Wasatch Frontier Emerging
SFGIX PRASX TRAMX all getting clobbered. ...I'll be doing some buying in October and nearer to year's end. I want someone to tell me to buy ITUB which is Itau Unibanco ADRs. 52-week low, just now. Biggest bank in South America. Big presence.
I also ran a year-to-date chart for these funds. The funds generally appeared to reach their 2015 peaks on about 5/24/15. Using that as the start date, the funds with the largest YTD gains have generally showed the largest losses since 5/24/15. Also, that general relationship appears to have held since the recent China currency event began....the bigger the YTD gains the bigger the recent losses. (The 2 frontier market funds are continuing to march to their own tune this year.)
Here is the link to the chart (I couldn't get the image to come through):
@davfor- Thanks for all of that work- your chart is certainly very interesting.
Here's a formatting tip: When dealing with a ponderous and awkward url such as that one, try using the url widget (when commenting, it appears in the header bar: the next to the last icon). In your text entry, include a short title, such as "Link to my chart", select (ie: highlight) that text, click on the url icon, and simply paste the url into the little box that appears. (That's a working link to your chart, as an example.)
@Old_Joe No problem. Your original post got me to wondering how my foreign funds have been behaving. It was simple to insert the fund symbols into the chart. I will try to figure out your method for creating links to unwieldy urls.
Fortunately, I have gotten rid of my EM fund and out of Matthews entirely. The Chinese are not to be trusted and this yuan debacle as I call it is proof. The govt is trying to calm the fears but they were the ones who pulled the trigger. All the currencies in Asia have taken a hit.
The slowdown in China will continue and part of that is the steady migration of business to India. Foxconn is starting to move over to India. 1.2 million workers employed at Foxconn. That's got to hurt.
This may be the start of the end of the China mfg. miracle.
@JohnChisum, Concur with your assessment on China. Greatly reduced my EM allocation since January and now mainly through Seafare G&I, SFGIX. Lately there has been considerable discussion on how China's low labor cost advantage is disappearing and the factories are moving to Vietnam, India (as you pointed out) and other parts of SE Asia. I hope India's infrastructure has improved enough to support high tech manufacturing given their antiquated electrical grids.
This Week In Energy: The Growing Threat From China By Evan Kelly Oilprice.com Posted on Fri, 14 August 2015 18:58 The move to devalue the yuan was aimed at providing a jolt to Chinese exports. But a more pessimistic take on the move is that China’s economy is starting to raise some red flags. The grip that the central government has had on the economy appears to be slipping. The Chinese government has carefully crafted a reputation of control, backed up by two decades of phenomenal growth.
Presiding over such a period of unprecedented economic expansion has created an aura of invincibility and inevitability. But the economy is starting to appear fragile, with high levels of provincial debt, an inflated stock market, and growing unease about environmental pollution that could force the government to pullback on growth. To make matters worse, the port city of Tianjin suffered a massive explosion this week that killed dozens of people and spewed toxic chemicals into the air. The incident is emblematic of China’s growth-at-all-costs model, which is starting to run its course as people become fed up. That is the backdrop for the currency move this week, and the devaluation sent a shock through the oil markets. Oil demand has been growing, but not quick enough to soak up extra crude supplies. A weaker Chinese currency will make oil comparatively more expensive, so could knock Chinese oil demand down a bit, a bearish development for oil
Optimists that believe in an oil price rebound are becoming harder and harder to find. Forecasts should always be taken with a grain of salt, but a survey of 10 investment banks shows a growing pessimism among market analysts. The survey, conducted by the Wall Street Journal, finds that the average among the 10 banks predicts that oil prices will remain below $70 until late 2016. “The heart of the matter is simple: There is too much oil,” the global head of oil research at Société Générale SA told the WSJ. “We are now forecasting significantly more global oversupply than previously, in both 2015 and 2016, which will continue to weigh on prices.” http://oilprice.com/Energy/Energy-General/This-Week-In-Energy-The-Growing-Threat-From-China.html Oil dips further, Nymex crude under $42 a barrel Published: Aug 17, 2015 1:13 a.m. ET Oil slipped further into negative territory in Asian trade on Monday as the market remained under selling pressure, with U.S. oil prices dropping below the $42 a barrel mark.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU5, -1.36% traded at $41.88 a barrel, down $0.62 in the Globex electronic session. October Brent crude LCOV5, -1.28% on London’s ICE Futures exchange fell $0.64 to $48.55 a barrel.
“We have concerns about crude fundamentals and prices in [the second half of 2015] and 2016,” Morgan Stanley said in its weekly report. Nymex oil futures have fallen for the last seven consecutive weeks, losing 28.73% of their value. Last week it touched a fresh six-year low of $41.35 a barrel in intraday trading. Bearish data included an increase in the U.S. oil-rig count by two in the latest week to 672, marking the fourth consecutive week of increases.
U.S. oil companies are expected to get approval to trade oil with Mexico, in a move that market observers are calling a milestone in loosening a four-decade ban on selling U.S. crude overseas and which may help support oil prices. Amid potential new oil supply from Iran and OPEC’s high production, an oil price below $40 a barrel is increasingly possible should bearish sentiment escalate further, economist Barnabas Gan of OCBC Bank said. http://www.marketwatch.com/story/oil-dips-further-nymex-crude-under-42-a-barrel-2015-08-17-11031345?dist=lbeforebell
1. For an interesting and slightly different take on many aspects relating to the Chinese currency policy change, here is video commentary on the matter from Andrew Foster, CIO of Seafarer Funds:
1. For an interesting and slightly different take on many aspects relating to the Chinese currency policy change, here is video commentary on the matter from Andrew Foster, CIO of Seafarer Funds:
Thanks for the link. I like how Mr. Foster clarified that the yuan was not intentionally devalued by the Chinese, but rather allowed it to be driven by the market, and the depreciation of the currency followed. This could further the possibility of the acceptance of the yuan to be included as a reserve currency by the IMF. The decision as to whether the yuan would be included as a reserve currency was supposed to be made this October, by it may be pushed back to September of 2016. If it does become a reserve currency, I wonder how much a move there will be away from the US dollar, sending treasury yields up, particularly if China's economy stabilizes during that time.
Comments
P/E is 7.2. http://news.morningstar.com/all/ViewNews.aspx?article=/DJ/TDJNDN201508044402_univ.xml And M* rates it a "4" out of 5 in terms of good striking price.
MAPIX 8.8% Mathews Asia Dividend
ANEFX 8.3% American Funds New Economy
SMCWX 8.3% American Funds Smallcap World
QUSOX 4.5% Pear Tree Polaris Foreign Small Cap
CWGIX 3.5% American Funds World Growth & Income
SFGIX 3.2% Seafarer Overseas Growth & Income
GPROX 2.6% Grandeur Peak Global Reach
ARTGX 1.2% Artisan Global Value Investor
WAFMX -4.5% Wasatch Frontier Emerging
S&P 1.3% Just for comparison- not a benchmark
I hope the best for Brazil but it would just seem to be a mess that could easily get worse.
MAPIX 8.8%
ARTJX 7.6%
FMIJX 5.4%
SGOVX 4.9%
MEASX 1.0%
WAFMX -4.5%
I also ran a year-to-date chart for these funds. The funds generally appeared to reach their 2015 peaks on about 5/24/15. Using that as the start date, the funds with the largest YTD gains have generally showed the largest losses since 5/24/15. Also, that general relationship appears to have held since the recent China currency event began....the bigger the YTD gains the bigger the recent losses. (The 2 frontier market funds are continuing to march to their own tune this year.)
Here is the link to the chart (I couldn't get the image to come through):
quotes.morningstar.com/chart/fund/chart.action?t=SGOVX®ion=usa&culture=en-US&dataParams=%7B%22zoomKey%22%3A11%2C%22version%22%3A%22US%22%2C%22showNav%22%3Atrue%2C%22defaultShowName%22%3A%22name%22%2C%22mainSettingId%22%3A%22main%22%2C%22navSettingId%22%3A%22nav%22%2C%22benchmarkSettingId%22%3A%22benchmark%22%2C%22sliderBgSettingId%22%3A%22sliderBg%22%2C%22volumeSettingId%22%3A%22volume%22%2C%22defaultBenchmark%22%3Afalse%2C%22id%22%3A%22FOUSA00EHO%7CF00000PIM6%7CF00000NDHS%7CFOUSA02UNV%7CFOUSA05UG0%7CF00000JTUY%22%2C%22type%22%3A%22FO%7CFO%7CFO%7CFO%7CFO%7CFO%22%2C%22name%22%3A%22XNAS%3ASGOVX%7CXNAS%3AMEASX%7CXNAS%3AWAFMX%7CXNAS%3AARTJX%7CXNAS%3AMAPIX%7CXNAS%3AFMIJX%22%2C%22qsType%22%3A%22USA%3ASGOVX%22%2C%22baseCurrency%22%3A%22USD%22%2C%22defaultBenchmarks%22%3A%5B%22%22%2C%22%22%5D%2C%22chartType%22%3A%22growth%22%2C%22startDay%22%3A%2205%2F24%2F2015%22%2C%22endDay%22%3A%2208%2F12%2F2015%22%2C%22chartWidth%22%3A955%2C%22SMA%22%3A%5B%5D%7D
Here's a formatting tip: When dealing with a ponderous and awkward url such as that one, try using the url widget (when commenting, it appears in the header bar: the next to the last icon). In your text entry, include a short title, such as "Link to my chart", select (ie: highlight) that text, click on the url icon, and simply paste the url into the little box that appears. (That's a working link to your chart, as an example.)
Regards- OJ
The slowdown in China will continue and part of that is the steady migration of business to India. Foxconn is starting to move over to India. 1.2 million workers employed at Foxconn. That's got to hurt.
This may be the start of the end of the China mfg. miracle.
Other parts of EM are not improving or stabilizing. Many will face bankruptcy.
rediff.com/business/slide-show/slide-show-1-special-eleven-11-countries-that-can-soon-go-bankrupt/20140826.htm
By Evan Kelly Oilprice.com
Posted on Fri, 14 August 2015 18:58
The move to devalue the yuan was aimed at providing a jolt to Chinese exports. But a more pessimistic take on the move is that China’s economy is starting to raise some red flags. The grip that the central government has had on the economy appears to be slipping. The Chinese government has carefully crafted a reputation of control, backed up by two decades of phenomenal growth.
Presiding over such a period of unprecedented economic expansion has created an aura of invincibility and inevitability. But the economy is starting to appear fragile, with high levels of provincial debt, an inflated stock market, and growing unease about environmental pollution that could force the government to pullback on growth. To make matters worse, the port city of Tianjin suffered a massive explosion this week that killed dozens of people and spewed toxic chemicals into the air. The incident is emblematic of China’s growth-at-all-costs model, which is starting to run its course as people become fed up.
That is the backdrop for the currency move this week, and the devaluation sent a shock through the oil markets. Oil demand has been growing, but not quick enough to soak up extra crude supplies. A weaker Chinese currency will make oil comparatively more expensive, so could knock Chinese oil demand down a bit, a bearish development for oil
Optimists that believe in an oil price rebound are becoming harder and harder to find. Forecasts should always be taken with a grain of salt, but a survey of 10 investment banks shows a growing pessimism among market analysts. The survey, conducted by the Wall Street Journal, finds that the average among the 10 banks predicts that oil prices will remain below $70 until late 2016. “The heart of the matter is simple: There is too much oil,” the global head of oil research at Société Générale SA told the WSJ. “We are now forecasting significantly more global oversupply than previously, in both 2015 and 2016, which will continue to weigh on prices.”
http://oilprice.com/Energy/Energy-General/This-Week-In-Energy-The-Growing-Threat-From-China.html
Oil dips further, Nymex crude under $42 a barrel Published: Aug 17, 2015 1:13 a.m. ET
Oil slipped further into negative territory in Asian trade on Monday as the market remained under selling pressure, with U.S. oil prices dropping below the $42 a barrel mark.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU5, -1.36% traded at $41.88 a barrel, down $0.62 in the Globex electronic session. October Brent crude LCOV5, -1.28% on London’s ICE Futures exchange fell $0.64 to $48.55 a barrel.
“We have concerns about crude fundamentals and prices in [the second half of 2015] and 2016,” Morgan Stanley said in its weekly report.
Nymex oil futures have fallen for the last seven consecutive weeks, losing 28.73% of their value. Last week it touched a fresh six-year low of $41.35 a barrel in intraday trading. Bearish data included an increase in the U.S. oil-rig count by two in the latest week to 672, marking the fourth consecutive week of increases.
U.S. oil companies are expected to get approval to trade oil with Mexico, in a move that market observers are calling a milestone in loosening a four-decade ban on selling U.S. crude overseas and which may help support oil prices.
Amid potential new oil supply from Iran and OPEC’s high production, an oil price below $40 a barrel is increasingly possible should bearish sentiment escalate further, economist Barnabas Gan of OCBC Bank said.
http://www.marketwatch.com/story/oil-dips-further-nymex-crude-under-42-a-barrel-2015-08-17-11031345?dist=lbeforebell
http://www.seafarerfunds.com/video/2015/08/changes-to-chinese-currency-policy/
2. So, what effect do people think this will have on something like MAINX? Late last week, NAV action suggested it was getting sick over this.
Thanks for the link. I like how Mr. Foster clarified that the yuan was not intentionally devalued by the Chinese, but rather allowed it to be driven by the market, and the depreciation of the currency followed. This could further the possibility of the acceptance of the yuan to be included as a reserve currency by the IMF. The decision as to whether the yuan would be included as a reserve currency was supposed to be made this October, by it may be pushed back to September of 2016. If it does become a reserve currency, I wonder how much a move there will be away from the US dollar, sending treasury yields up, particularly if China's economy stabilizes during that time.