In This Week’s Issue…

by Alexander Kalis Managing Partner & Head of Investments at Milltrust International

Jerome Powell has been nominated by President Donald Trump as the next chair of the U.S. Federal Reserve, a move deemed to bring continuity to Janet Yellen’s policies. Here is everything you need to know about his selection and what to expect.

In the UK, the Bank of England has taken the decision to raise interest rates from 0.25% to 0.5%, the first rise in over a decade. The Bank has also officially predicted 75,000 jobs will leave the City of London on Brexit. However, it says there are opportunities from Brexit such as providing financial services for emerging markets across the Middle East and Asia including China and India.

In Asia, Milltrust China manager Fang Zheng highlights two main takeaways from China’s 19th Party Congress of the CPC: Stability and Reform.

In India, at 22 times the projected earnings for FY18, Indian stocks are now trading at a 34 per cent premium to their 10-year average of 16.5, making it the most expensive market in the world. Yet for FIIs, there is still reason to be bullish as the government’s `pro-growth’ stance has caused a strategy shift among foreign money managers.

In Southeast Asia, Indonesian shares have reached their all-time highs with the country’s economy looking set to beat expectations, boosted by a potential pickup in investment in 2018. Indonesia is entering a year of politics but any ‘seismic’ political events’ within the next two years is not expected to disrupt the trajectory of the Indonesian economy.

In Singapore, the MAS announced that the economy was on path to recovery, and would see steady growth in 2018. This view is supported by Milltrust’s ASEAN manager.

Meanwhile, the Philippines remains a puzzle for most investors and economists, given its dynamic economy – the fastest growing in ASEAN – but its equally uncertain policies. The country is now at a critical juncture in its economic and political development.

Moving on to Latin America, President Michel Temer survived yet again another corruption investigation in Brazil. However, concerns are starting to emerge over his platform of structural reforms, seen as key to curb growth of public debt and boost long-term economic growth.

In Mexico, preliminary estimates are indicating that the economy likely shrank for the first time in more than four years during the third quarter, after severe batterings from earthquakes and hurricanes in September. Meanwhile, credit rating agency Fitch has said that a US withdrawal from the North American Free Trade Agreement (NAFTA) will lead to even slower growth for Mexico’s economy.

In the Middle East, some have disputed the IMF’s budgetary 2018 break-even point calculation of $70 per barrel for Saudi Arabia. Regardless, with oil hovering at around $53.72 a barrel, Gulf crude producers are still overspending despite good initial efforts in breaking their break-even prices. Meanwhile, Saudi Arabia has come under pressure for granting more rights to its first robot citizen than to women.

Finally, Russia has climbed the World Bank’s Ease of Doing Business rankings to 35th place, just one place below Japan and ahead of almost a dozen EU member states including Italy and Belgium. This has not stopped Facebook from releasing Russia’s US election-meddling posts, targeted both liberals and conservatives on hot-button issues and attempting to sow discord during election.

We hope you enjoy this issue.

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