Live Markets: Playing the long Chinese game
01/12/2020 10:29
* European Stoxx 600 up 0.8%
* Basic material, auto and bank stocks lead gains
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PLAYING THE LONG CHINESE GAME (1025 GMT)
The nay sayers for buying Chinese stocks spin a familiar
yarn.
Complicated entry quotas, dominance of retail investors and
regulatory suspicion are the usual reasons cited by global money
managers for not investing in China's gigantic markets.
But advisory firm Willis Towers Watson says the time has
come for investors to consider Chinese equities as a stand-alone
allocation, rather than part of global or emerging market
strategies, so that they can reap the full benefits of
diversification and excess returns the market offers.
Foreign holdings as a percentage of total market
capitalisation stands at an abysmally low 2.4% compared to 16.2%
for India and nearly a third for Korea.
Though the bulk of onshore market trading activity is
dominated by retail punters which is evident from the boom and
bust type momentum strategies in play, institutional investors
who can take a longer-term view and focus on fundamentals stand
to benefit.
The analysis from Willis Towers Watson shows that savvy
active managers investing in China can outperform the benchmark
more easily than on other markets over most time horizons.
The so-called "alpha" or excess returns over market
performance for China-focused managers is also significantly
more than the median emerging market focused manager, Willis
Towers Watson argues.
(Saikat Chatterjee)
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OPENING SNAPSHOT: A RISK-ON START (0828 GMT)
European stocks start the month in an upbeat mood as strong
Chinese macro data is boosting risk sentiment across global
financial markets.
It seems we are in a typical risk-on day after yesterdays’
fall, when investors took some profit off the table as equities
closed their best month ever.
The STOXX 600 index .STOXX is up 0.6%, with banks and
basic materials leading gains up 2.3% and 2%, respectively,
while auto stocks are up 1.7%.
Shares in Unicredit CRID.MI are down 5% following reports
that CEO Jean Pierre Mustier will step down in April next year
after clashing with the bank's board over strategy.
Vogo ALVGO.PA stocks are up 14% after Vogo/Skillcell
consortium announced positive feedback from French health
regulator for their Covid-19 test.
Aryzta ARYN.S and Ipsen IPN.PA stocks are respectively
up 4% and 2% after first quarter results and mid-term outlook.
(Stefano Rebaudo)
*****
BULLS CHARGE INTO DECEMBER
After the best November ever, world stocks are heading into
the last month of the year in an upbeat mood, with Asian bourses
adding more than 1% and higher European and U.S. futures. BofA's
mid-month survey had revealed a lot of cash on fund managers'
books; clearly some is being deployed.
Especially so, now given brighter signals on the growth
front: China's Caixin survey showed factory activity accelerated
at the fastest pace in a decade. That comes on top of official
figures revealing activity growing the fastest in three years.
Japanese factory activity moved closer to stabilisation too,
coming in at a forecast-beating 49. But recovery remains patchy,
India's recovery faltered, prompting firms to cut jobs for the
eighth month straight.
Meanwhile, U.S. manufacturing activity is weakening, surveys
suggested on Monday and all eyes will be on the Institute for
Supply Management poll which is predicted to slow to 58 versus
last month's 59.3.
Fed chair Jerome Powell is to testify to Congress today but
his comments were already published; as expected he highlighted
the extraordinary uncertainty overhanging the outlook -- lets
not forget lawmakers have 10 days to avert a government
shutdown, similar to what happened in Dec 2018.
Some job reshuffles at the top echelons of Italy's UniCredit
CRDI.MI . Its CEO Jean Pierre Mustier will step down next April
after clashing with the board over strategy. It also named
outgoing Lloyds LLOY.L CEO António Horta-Osório as its next
chairman urn:newsml:reuters.com:*:nL8N2IG2JF urn:newsml:reuters.com:*:nL8N2IH0Q5
In other company news, Bayer BAYGn.DE announced a
placement of Elanco ELAT.N shares for $1.6 billion.
urn:newsml:reuters.com:*:nFWN2IG14Y The company's proposed $648 million to settle
class-action litigation in the United States has been rejected
by a federal judge urn:newsml:reuters.com:*:nL1N2IH02G.
Here is what markets will look at on Tuesday:
* Fed officials Brainard, Daly and Evans speak; Powell
testifies
to Congress
* Australia central bank left policy on hold
* OPEC is to reconvene on Thursday; oil prices down
* German unemployment, final PMIs
* US ISM manufacturing
(Sujata Rao and Stefano Rebaudo)
*****
EUROPE IN THE BLACK, BUT IN A CAUTIOUS MOOD (0628 GMT)
The European stock futures are opening in the black, but
investors seem more willing to take some profit off the table
after equities closed their best month ever.
Risk-appetite increased across the board as it seems we are
stepping into a risk-free 2021 but part of the good news has
been priced in, including an effective vaccine and its expected
positive economic impact.
Asian stocks are higher after China's factory sector
accelerated at the fastest pace in a decade in November,
according to a business survey. urn:newsml:reuters.com:*:nZUN000BNQ
(Stefano Rebaudo)
*****
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