China – A stronger start to 2017

Posted on | by Leon Hinde | Leave a Comment on China – A stronger start to 2017

The Chinese government suggests there’ll be  no hard landing. China’s financial system is generally stable and there are no systemic risks.  Adding, that the government has enough policy tools to handle any risks.

China’s fiscal revenue and expenditure saw faster growth in the first two months of 2017, driven by an improved economy and higher spending on social welfare, official data showed yesterday.

Fiscal revenue rose 14.9% Y/Y to 3.15 trillion yuan (US$456 billion) in January and February, accelerating from 4.5% in 2016, according to data from the Ministry of Finance.

The ministry attributed the revenue pickup to positive trends in the Chinese economy, citing improvement in industrial activity, company profits, foreign trade and resident consumption.

The government is increasing policies to curb property price inflation within major cities and stem broader capital outflows from the Chinese economy. We continue to see these two issues as risks that may yet be underappreciated by the markets.

Chart – IZZ ETF (China Large Cap)

 

 

 

 

ETF Watch: Resource Fund, QRE

Posted on | by Todd | Leave a Comment on ETF Watch: Resource Fund, QRE

Since posting multi-year highs in mid-January, share prices for resource giants BHP and RIO  have pulled back over 10%.

Over the last week, both shares have traded in a “higher low” pattern which has triggered a buy signal from our proprietary Algo engine.

With general market pricing appearing to be at, or near, full value, we are cautious about buying these names outright.

However, Investors looking to capture gains in the Australian resource sector without having to pick one stock can buy the BetaShare Resource Exchange Traded Fund (ETF).

The code is QRE, it’s made up of 10 Australian resource companies and is current paying a yield of 3.9%.

Of the 10 companies that make up the fund, BHP, RIO and Woodside Petroleum  make up 52% of the weighting.

Contact us for more information on QRE, or the other ASX-based  ETFs we are currently following.

Chart – QRE (ETF)

Index Rebalance

Posted on | by Leon Hinde | Leave a Comment on Index Rebalance

S&P ASX Index Rebalance – March Quarter

There were two changes in the ASX50 with Aristocrat (ALL) and Fortescue Metals (FMG) added and Coca Cola (CCL) and Seek (SEK) removed.

Macquarie Atlas (MQA) & Evolution Mining (EVN) added to the ASX100 with Sirtex (SRX) and Blackmores (BKL) removed.

There were no changes in the ASX200.

Washington H Soul Pattinson (SOL) added to the ASX300.

Chart – ALL
Chart – FMG

Follow The FED Dot Plots

Posted on | by Todd | Leave a Comment on Follow The FED Dot Plots

The US Federal Reserve will make their decision on interest rates this Thursday at 5 am, Sydney time.

An adjustment of 25 basis point to 1% for the Fed Funds target is now priced into the market.

As such, equity investors will be focused on the forward guidance about the pace and trajectory of US rates  into 2018, and beyond.

This forward guidance will come in form of the FED’s “Dot Plots.” The dot plots are essentially a graphic reflection of where the FED members believe interest rates will be trading out until the year 2020.

For most equity investors, the key data will be how many rate hikes are expected to occur in 2017. When the FED raised the FED Funds target in December, the dot plots showed a consensus of three rates hikes during 2017.

The risk to the  US equity market is that the FED dots plots are revised higher to include an additional rate hike for 2017.

If that’s the case, it’s reasonable to expect US stock indexes to trade lower, the USD to trade higher and US Treasury yields to continue to firm.

Chart – Dow Jones