In This Week’s Issue…
by Alexander Kalis Managing Partner & Head of Investments at Milltrust International

In 2017, we saw the consolidation of China’s power and influence globally, and of Communist Party leader Xi Jinping’s power nationally. This year, the party will try to use this to tackle some of its biggest economic hurdles such as financial risk, environmental pollution and maintaining social cohesion.

Reforms are taking place at a fast pace, across numerous industries. China’s H-share reforms, announced by China’s security regulator late last month, allowing Hong Kong-listed mainland companies to trade locked-up equity on the open market is expected to boost stock prices and liquidity in the territory, but immediate upside is likely to be limited. In the long term though, full circulation of H-shares is expected to be positive for China’s offshore equity market overall. Not only will it better align shareholders’ interests, but it will also attract more high-quality Chinese domestic companies to list in Hong Kong.

Yesterday, US bond markets took a hit following a report that China could trim its U.S. Treasury holdings, reminding the United States that Beijing is its banker, as China is the biggest holder of U.S. Treasuries. China’s foreign exchange regulator publicly refuted the Bloomberg report on Thursday, but the jolt to markets may have been designed as a warning to Washington, which is clashing with China over trade and other issues.

Finally, it is worth mentioning that China has a great wall of debt coming due with 4 trillion yuan of bonds that must be repaid this year by Chinese companies.

Further afield, India was set to regain the position of fastest growing economy in 2018 with growth expected to accelerate to 7.3% in the year, according to the World Bank’s Global Economic Prospects India. It will be a few notches better than China, but miles ahead of other major economies.

Source: World Bank, 10 Jan 2018

Although India may be the world’s fastest growing economy, regional disparity remains a serious challenge in the country however, as illustrated in India’s 36 states and union territories by net state domestic product map below.

Source: Forbes, 10 Jan 2018

On the Korean peninsula, in a sign of warming relations between the two countries, the North Koreans will be crossing the border to attend next month’s Winter Olympics. Whether that brings them closer to the negotiating table with the U.S. is anyone’s guess however.

In Southeast Asia, bright lights have returned to Bangkok’s streets, and many Thais are starting to smile again.The country emerged from 12 months of mourning for the beloved King Bhumibol Adulyadej in October, and it looks like consumers are starting to spend once again. Whether or not the optimism applies for the long-term economic outlook of Thailand, however, is another matter.

Source: Nikkei Asian Review, 7 Jan 2018

In Indonesia, online retail is truly blossoming. Despite having low rankings of internet and ecommerce penetration rates, a report from Research and Markets showcased that Indonesia’s online retail market has been the biggest in the region due to its hefty population. The Indonesian archipelago could offer a booming market for online shopping; and current projections say it will reach $130 billion by 2020.

In Singapore, it looks like it will be a good year for the property sector with Singapore topping Morgan Stanley’s 2018 ASEAN property market growth forecasts, with 8% price increases and close to 50% presales growth expected for the country.

In Latin America, Brazil was one of the top performers in emerging markets in 2017. But sentiment was briefly rattled after Michel Temer, the unpopular president, failed to pass an overhaul of the country’s generous pension system, which is seen as crucial to restore fiscal health. Congress is expected to vote on pension reform next month. In the meantime, Brazil remains priced for perfection in the eyes of investors and elections this year are seen to retain the country’s recent reform drive.

Source: Financial Times, 11 Jan 2018

Meanwhile, Mexico may be on the verge of a perfect storm as it enters a new year fraught with multiple perils and few opportunities. Three dark clouds threaten Mexico’s future in 2018 in particular: Donald Trump’s tax overhaul, the possible end of Nafta and a presidential election that may introduce an era of turmoil and uncertainty for the economy and Mexican society at large.

In the Middle East, the UAE oil minister said OPEC was committed to supply cuts through 2018, adding that 2018 will be the year oil markets become balanced.

In Saudi Arabia, rumours of the impending introduction a new tax on expatriate salaries in Saudi Arabia have been scotched by government authorities following a building social media campaign on the matter.

In Qatar, still under Saudi-led blockade, the country is seeking international arbitration to resolve the situation.

Finally, in South Africa, African National Congress leader, Cyril Ramaphosa, is seriously confident that land reform can be sustainable and beneficial to the country, expressing: “Land expropriation will turn SA into a garden of Eden”.

We hope you enjoy this issue.

 

Click here to read.

Click here to subscribe.