1. August saw US-China trade tensions escalate with several rounds of retaliatory actions following US President Donald Trump’s announcement early in the month of new tariffs on Chinese goods. The United States also formally labeled China as a currency manipulator after the Chinese renminbi depreciated to above seven per US dollar for the first time since 2009. These events sparked a broad and deep selloff in Chinese equities as well as global stock markets. However, we believe that China’s economy may be better able to absorb the trade issues than the market fears.

2. ͏Social unrest in Hong Kong, which entered its third month in August, has been adversely affecting key business areas in the city. A deterioration in the retail, hospitality and real estate sectors as well as a reduction in tourist arrivals has resulted in sharp share price corrections in related companies. Although retailers have been especially impacted, it is important to note that some companies have substantial operations in neighbouring markets such as mainland China, which continue to contribute to earnings. Valuations have also become more attractive with decent dividend yields, which are particularly appealing in an environment of low interest rates.

3. The Mexican economy has been buffeted by weaker-than-expected data and bouts of uncertainty. In the second quarter, gross domestic product (GDP) (on a year-on-year basis) contracted for the first time since the 2009 economic crisis. While we expect the volatility in financial markets to continue in the interim amid uncertainty about policies the newly elected administration will pursue, we believe the financials and consumer discretionary sectors remain attractive.

‹ Previous2019-09-26Next ›