Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Downgrade distracts from key issues
The anticipated US debt downgrade has occurred with S&P cutting America’s
long-term credit rating to ‘AA+’ due to political risks and a rising debt burden.
As we highlighted two weeks ago, one of the key impacts of a US downgrade
would be an increase in risk aversion. In broad terms, this should see bonds
outperform equities, developed markets outperform emerging markets, large
caps outperform small caps and defensives outperform cyclicals.
Typically, you would also see a US dollar rally in a rising risk environment, which
tends to also lead to a sell-off in commodities. In this case however, we could
see US dollar weakness and a relatively good performance from commodities.
This is because the weakness in US growth is driving speculation the Fed will
engage in another asset buying program, a QE3. And the next meaningful signal
on the direction of US rates is likely to come at the Jackson Hole meeting of the
Fed later this month.
All that said, the US downgrade is like the rising of the debt ceiling in that it
distracts attention from the key issues of slowing global growth and the much
more critical sovereign debt issues facing Europe. As these more important
issues are yet to run their course, we continue to favour a defensive strategy,
albeit one where we also look to buy quality companies leveraged to strong
global trends such as the rising consumption of luxury goods in China.
The defensive stock picks that stand out in the Macquarie Marquee buy lists
globally are: Tesco (TSCO LN) and Electricite de France (EDF FP) in Europe;
QR National (QRN AU) in Australia; and Boardwalk REIT (BEI-U CN) in
Canada. With telecoms generally outperforming in volatile markets, we would
also add Verizon (VZ US), MTN Group (MTN SJ) and Taiwan Mobile (3045
TT) to this list, noting they all offer forward dividend yields over 5%.
Market volatility has kept rising after the US debt ceiling was increased
due to concerns over sovereign debt and growth in the US and Europe
… but volatility so far remains below the heights seen in mid-2010
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Downgrade distracts from key issues
The anticipated US debt downgrade has occurred with S&P cutting America’s
long-term credit rating to ‘AA+’ due to political risks and a rising debt burden.
As we highlighted two weeks ago, one of the key impacts of a US downgrade
would be an increase in risk aversion. In broad terms, this should see bonds
outperform equities, developed markets outperform emerging markets, large
caps outperform small caps and defensives outperform cyclicals.
Typically, you would also see a US dollar rally in a rising risk environment, which
tends to also lead to a sell-off in commodities. In this case however, we could
see US dollar weakness and a relatively good performance from commodities.
This is because the weakness in US growth is driving speculation the Fed will
engage in another asset buying program, a QE3. And the next meaningful signal
on the direction of US rates is likely to come at the Jackson Hole meeting of the
Fed later this month.
All that said, the US downgrade is like the rising of the debt ceiling in that it
distracts attention from the key issues of slowing global growth and the much
more critical sovereign debt issues facing Europe. As these more important
issues are yet to run their course, we continue to favour a defensive strategy,
albeit one where we also look to buy quality companies leveraged to strong
global trends such as the rising consumption of luxury goods in China.
The defensive stock picks that stand out in the Macquarie Marquee buy lists
globally are: Tesco (TSCO LN) and Electricite de France (EDF FP) in Europe;
QR National (QRN AU) in Australia; and Boardwalk REIT (BEI-U CN) in
Canada. With telecoms generally outperforming in volatile markets, we would
also add Verizon (VZ US), MTN Group (MTN SJ) and Taiwan Mobile (3045
TT) to this list, noting they all offer forward dividend yields over 5%.
Market volatility has kept rising after the US debt ceiling was increased
due to concerns over sovereign debt and growth in the US and Europe
… but volatility so far remains below the heights seen in mid-2010
No comments:
Post a Comment