Written by Agency.Asia
Some hangovers are shorter than others!
Whilst we believe it's still too early for the next party to start, there is little doubt that there are signs emerging in major economies that the exuberant stimulus packages that governments have pumped into the world's economies are having the desired effect - to keep consumers spending at a time when business expenditure is being curtailed on many fronts. The question that remains is will this short term stimulus convert into a longer term cure for the worlds ailments and help provide for a freeing up of the worlds credit markets. In our view it's still too early to tell with any certainty as the signals are still mixed.
The recent rally has seen a huge number of companies raising future funding by way of equity capital raisings which clearly gives an indication about how the corporate see the near future. As many of the financials and industrial companies move to sure up their balance sheets in coming months, the commodity stocks and prices are being led higher by positive news on Factory orders and Manufacturing out of China that have shown more positive results over the last three months. Whilst many Asian markets are now factoring in a strong earnings recovery next year, investors are still entering the market cautiously in fear of a secondary pullback and the prospect of earnings disappointments.
With the announcement of the US governments intervention to take a 60% equity stake in General Motors, effectively nationalising the US automotive industry, one begins to ponder the "free trading" of the world's most powerful economy and the messages that sends to other countries and industries globally. Having failed to respond to the needs of the US consumer and being completely trumped and out marketed by the likes of huge Asian manufacturers like Toyota, Honda and Nissan, the likely response to a nationally funded and supported car producer could have far reaching ramifications beyond the shores of the US and indeed outside of the automotive industry that will leave many questioning the benefits of globalisation. To this end the Asian automotive manufacturers and part makers will be having a serious look at the competitive landscape and alternate markets as this saga evolves.
Gold's recent rally is being well supported as the $US continues its depreciation against most major currencies and some astute investors fear what inflationary risks lie ahead. It appears to many that the safe haven of gold may still be a hangover cure worth storing for the time being as the unwind and subsequent restructure of major economies and industries continues. Going long Gold, Oil and Tamiflu seem like trends that may continue for the near future. We will continue to take all three ....and the odd Bloody Mary.
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