The Beacon
The Beacon Weekly Market Update 31 October 2012
Driven by Exogenous Factors By Mikio Kumada, CIIA Economic and corporate news will not be in short supply in coming days and weeks, but markets are liable to be driven by exogenous factors for a while. The US general election will be held on 6 November, to be followed by the Chinese Communist Party congress, which starts on 8 November. Hurricane Sandy may also temporarily boost market volatility.
US citizens will elect their next president on 6 November, along with the House of Representatives, and one-third of the Senate. Despite a noteworthy improvement in some economic data in the US since mid-September, various opinion polls and the relatively weak stock market suggest that President Barack Obama's chances of reelection have diminished recently. With three different outcomes widely considered as most likely, political events, rather than economic news, may influence short-term mood swings in the stock market in the near future. The generally expected US electoral scenarios For the record, the most-cited scenarios are three: 1) Status quo – i.e. President Obama is reelected, the Republicans keep control of the House, while the Democrats keep the Senate. This scenario would presumably not facilitate a quick compromise on future fiscal policy, which means that concerns over the looming “fiscal cliff” should remain a headwind for a while. 2) Republican sweep – challenger Mitt Romney wins the election, and Republicans gain full control of Congress. This outcome could boost market sentiment by making a coherent, probusiness economic policy more likely. This view, however, might be based on the political preferences of many influential market participants, rather than historical precedent. The latter suggests that the stock market, on average, tends to perform better after a Democratic victory, or an incumbent’s reelection. 3) A Romney victory, combined with the status quo of a divided Congress. This could postpone any compromise on the fiscal issues until after 20 January, when the new president is actually sworn into office. Its impact on the market, many assume, would be similar to the impact of the first scenario – perhaps temporarily worse. For completeness' sake, we note that a Democratic sweep is considered so unlikely that hardly any analysts have bothered to speculate about how markets might react. Be it as it may, we prefer to refrain from betting on a specific political outcome, and maintain a moderately defensive overall investment positioning for now. Power transition in China with many unknowns Political news will probably continue to dominate even after the US election, as the Chinese Communist Party’s 18th congress will begin on 8 November. This event is likely to confirm the key personnel changes at the top of the world’s second-largest economy. Specifically, Xi Jinping and Li Keqiang are expected to emerge as the leaders that will take over the presidency and premiership, respectively, when the National People’s Congress convenes in March 2013. Until recently, markets appeared to associate positive developments with this anticipated outcome, such as continued economic reforms and measures to stimulate the economy. This is evident by the rally of Hong Kong-traded Chinese shares in recent months. However, for now, we maintain an element of caution on this matter because the domestic Chinese Ashares market does seem to fully share this optimistic vision (see page 2). At the very least, mainland markets seem to signal that there might still be some political hurdles left between now and March 2013. Hurricane Sandy’s potential impact adds another wild card Lastly, global markets may also be affected by the aftermath of Hurricane Sandy, which shut down business activity in the Northeastern US on Monday and Tuesday, including trading on US capital markets. Even if the actual damage from this calamity remains rather limited in macroeconomic and hopefully also in humanitarian terms, the storm has already distorted global market performance to a certain degree. Needless to day, this natural phenomenon may also significantly impact the US election by giving President Obama the opportunity to prove himself as a crisis manager – an opportunity that does not come without risks, of course. In such an environment, price moves in either direction can be quite volatile, without containing much information about the actual trend. This rather unusual mix of exogenous, noneconomic factors that influence the market at present is another reason we believe that our moderately defensive general investment position, with its carefully selected exposure to some growth assets, remains appropriate for the time being.
LGT Capital Management, Schützenstrasse 6, CH-8808 Pfäffikon, Phone +41 55 415 92 11, Fax +41 55 415 94 80, [email protected], www.lgt-cm.com. The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. 1/4
Market View Selected Benchmarks
Asset Class (reference) Equities (S&P 500)
View
Previous
Bonds (US Treasury 10y)
Quote 1411.94
Trading-Range ca. 1400 - 1500
Trend/comment Consolidation continues
1.73%
ca. 1.5% - 2.5%
Sideways, manipulated by policy
Bonds (Germany 10y)
1.48%
Currencies (EUR/USD)
$1.30
WTI Crude oil/bbl
$85.84
ca. 1.0% - 2.0% Sideways ca. $1.28 - $1.32 Sideways ca. $85-105
Sideways, downward pressure
International investors price in an optimistic vision of China The Hang Seng China Enterprises Index, which represents the mainland Chinese H-shares traded in Hong Kong, has performed remarkably well since early September, rallying by 13% (for more performance comparisons, see table on page 3). Many international investors seem to be reallocating funds from the US and other markets to a market that had been underperforming for a while. It can also be explained by possible expectations of positive economic developments and proclamations after the Communist Party’s congress starts on 8 November. Hong Kong Stock Exchange Hang Seng China Enterprises Index
20 day moving average / 20 Tage gl. Durchschnitt
12000 11500 11000 10500 10000 9500 9000
8000
12 Oct 11 19 Oct 11 26 Oct 11 02 Nov 11 09 Nov 11 16 Nov 11 23 Nov 11 30 Nov 11 07 Dec 11 14 Dec 11 21 Dec 11 28 Dec 11 04 Jan 12 11 Jan 12 18 Jan 12 25 Jan 12 01 Feb 12 08 Feb 12 15 Feb 12 22 Feb 12 29 Feb 12 07 Mar 12 14 Mar 12 21 Mar 12 28 Mar 12 04 Apr 12 11 Apr 12 18 Apr 12 25 Apr 12 02 May 12 09 May 12 16 May 12 23 May 12 30 May 12 06 Jun 12 13 Jun 12 20 Jun 12 27 Jun 12 04 Jul 12 11 Jul 12 18 Jul 12 25 Jul 12 01 Aug 12 08 Aug 12 15 Aug 12 22 Aug 12 29 Aug 12 05 Sep 12 12 Sep 12 19 Sep 12 26 Sep 12 03 Oct 12 10 Oct 12 17 Oct 12 24 Oct 12 31 Oct 12
8500
China’s domestic investors seem to be less optimistic for the time being However, unlike the H-shares, which are easily accessible to international investors, the A-shares markets on the mainland (traded in Shanghai and Shenzhen) do not seem to share the same optimism. This CSI 300 index shown below is broadly unchanged since early September, and has begun to fall again in recent days. The chances for a successful bottom have certainly improved in recent weeks, but overall it is probably still too early to anticipate a more lasting uptrend in Chinese equities. Shanghai Shenzhen CSI 300 Index
20 day moving average / 20 Tage gl. Durchschnitt
3000 2900 2800 2700 2600 2500 2400 2300 2200 2000
20 Jul 07 24 Aug 07 28 Sep 07 02 Nov 07 07 Dec 07 11 Jan 08 15 Feb 08 21 Mar 08 25 Apr 08 30 May 08 04 Jul 08 08 Aug 08 12 Sep 08 17 Oct 08 21 Nov 08 26 Dec 08 30 Jan 09 06 Mar 09 10 Apr 09 15 May 09 19 Jun 09 24 Jul 09 28 Aug 09 02 Oct 09 06 Nov 09 11 Dec 09 15 Jan 10 19 Feb 10 26 Mar 10 30 Apr 10 04 Jun 10 09 Jul 10 13 Aug 10 17 Sep 10 22 Oct 10 26 Nov 10 31 Dec 10 04 Feb 11 11 Mar 11 15 Apr 11 20 May 11 24 Jun 11 29 Jul 11 02 Sep 11 07 Oct 11 11 Nov 11 16 Dec 11 20 Jan 12 24 Feb 12 30 Mar 12 04 May 12 08 Jun 12 13 Jul 12 17 Aug 12 21 Sep 12 26 Oct 12
2100
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page.
2/4
Global Market Price @ share Cap. in $ cut-off
Equities World
1 year
Year to date
Trend
-0.8%
5.0%
9.3%
Rising
1.9% 1.0% 1.8% 6.1% 2.6% 2.2%
0.6% -2.6% -1.6% 0.7% -2.5% 5.4%
9.9% 9.2% 8.6% 1.0% 6.8% 15.0%
12.3% 14.7% 9.5% 3.5% 6.3% 12.2%
Rising Rising Rising Rising Rising Rising
2.0% 1.9% 0.9% 1.1% -2.0% -2.4%
7.2% 3.8% 7.6% 3.3% 6.3% 1.2%
6.9% 2.0% 5.7% -0.6% 3.7% -3.4%
7.0% 5.5% 14.3% 4.9% -2.0% -5.0%
10.3% 5.0% 19.0% 7.9% 8.3% 1.5%
Rising Rising Rising Rising Rising Sideways
0.7% 3.3% 6.8% -2.0% -1.8% -4.1% -7.1%
2.7% 8.8% 8.6% -3.7% 7.2% 1.7% -1.4%
-6.2% 2.1% -5.2% -14.4% 5.7% -3.5% -4.5%
-0.7% 8.4% -0.1% -16.6% 4.7% 0.2% -5.6%
5.6% 16.8% 5.7% -4.2% 22.5% 4.8% 1.3%
Rising Rising Rising Falling Rising Rising Falling
5.0% 7.6% 12.2% 9.7% 12.7% 11.7%
-0.3% 3.6% 11.8% 4.6% 11.7% 11.5%
Rising Rising Rising Rising Rising Rising
-7.8% -8.8% -0.1%
-13.0% -4.1% 9.4%
Falling Falling Rising
5 days
1 month
157.4
0.1%
-0.6%
4.1%
-1.5% -0.6% -1.0% 1.2% 1.2% -1.1%
-2.0% -4.1% -2.9% 0.5% -0.1% 1.8%
1.3% 0.9% 1.5% 0.7% 0.6% -1.9% -0.3% -1.1% -1.3% -2.6% -1.9% 0.0% -2.0%
BBG World All Country
100%
50,158
S&P 500
32.9%
16,518
1,411.9
Nasdaq Composite *
9.1%
4,583
2,988.0
S&P 600 Small Cap *
1.1%
528
454.4
TSX
4.0%
2,004
12,377.1
Bovespa
2.3%
1,146
20,954.7
Mexbol
1.0%
483
41,599.0
Euro Stoxx *
6.6%
3,298
249.1
FTSE 100
6.6%
3,312
5,849.9 3,982.0
3 months 6 months
Americas
USA USA USA Canada Brazil Mexico Europe
Euroland UK Germany Switzerl. Poland Russia
DAX Price Ix
2.9%
1,454
Swiss Perf Extra Pr Ix
2.3%
1,170
148.0
WSE
0.3%
156
2,323.3
Micex
1.5%
748
1,423.6
Asia
Japan Hong Kong China H China A India Korea Taiwan
Nikkei 225
6.8%
3,428
8,928.3
Hang Seng Ix
6.1%
3,083
21,531.3
China Enterprises Ix
5.5%
2,745
10,504.6
CSI 300 *
1.4%
719
2,247.5
Sensex
2.4%
1,192
18,423.5
Kospi
2.2%
1,079
1,913.5
Taiex
1.5%
749
7,166.1
All indices: price indices (excl. dividends), in local currency. Market cap in billion USD at current exchange rates refers to country, except where market with *
Bonds
US Dollar Index US Treasuries ** EMU Bonds (Germany)** UK Gilts** iBoxx $ Liquid Investment Grade Index iBoxx $ Liquid High Yield Index
USD
79.9
USD
421.1
EUR
196.4
GBP
553.5
USD
234.8
USD
208.7
0.0% 0.3% 0.1% 0.0% 0.4% -0.3%
0.0% -0.6% 1.0% -0.7% 1.0% 0.9%
-3.3% -0.8% 4.0% -0.5% 2.6% 3.2%
1.5% 2.7% 6.5% 4.0% 7.2% 5.5%
**Total return indices of long term securities with maturities of 7 to 10 years, or **a representative segment of the liquid corporate bond market.
Commodities
WTI Crude oil (generic future) JOC Industrial Metals Index Gold
USD
85.8
USD
115.8
USD
1,712.6
0.2% -3.8% 0.6%
-6.8% -9.1% -3.5%
-2.4% 4.8% 6.1%
-18.1% -8.9% 2.9%
All data based on last traded price at the date and time given below. Source: Bloomberg. Performance figures represent annual changes, in percent.
Cut-off (Singapore Time):
10/31/12 14:21
Performance of Markets and Asset Classes (light colors - year to date, dark colors: past 5 days)
25% 20% 15% 10% 5% 0% -5% -10%
Gold in USD
WTI oil
Ind metals
IG bonds
IG bonds
UK bonds
US bonds
GER bonds
USD index
Taiwan
India
Korea
China A
China H
Japan
Hong Kong
Russia
Poland
Switzerland
UK
Germany
Eurozone
Brazil
Mexico
Canada
US Small
US Nasdaq
US S&P 500
-15%
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. 2/4
Economic and Corporate Snapshots
Economy Gross domestic product 2013, nominal ¹= - per person, nominal ¹ - expected growth current year, real - expected growth next year, real
bn US$ US$
(consensus) (consensus)
USA
Eurozone
China
Japan
Germany
Britain
Brazil
Russia
Switzerl.
16,198 51,056
11,989 36,111
9,039 6,644
5,997 47,096
3,373 41,332
2,532 39,884
2,504 12,643
2,109 14,911
617 76,598
2.1% 2.0% 2.0% 7.8% 2.0% 2.8%
-0.5% 0.2% -0.8% 11.4% 2.6% -2.9%
2.3% 1.1% 0.7% 4.2% -0.3% -8.1%
0.9% 1.0% 1.2% 6.9% 2.1% -1.4%
-0.3% 1.1% 4.1% 7.9% 2.2% -1.2%
1.5% 4.0% 1.6% 5.4% 5.3% 1.5%
3.7% 3.6% 0.4% 5.2% 6.6% 2.0%
1.1% 1.5% -0.4% 2.9% -0.4% 4.6%
GDP growth, current * Unemployment rate ² Inflation rate (CPI) Industrial production
q/q
Structural budget balance/GDP ¹ Gross government debt/GDP ¹ Current account balance/GDP ¹ International reserves (ex. gold)
2013
-5.5%
-3.0%
7.7% 8.1% 9.1% 4.1% 1.9% 9.2% 2,745 0.2%
-8.6%
-0.3%
-4.0%
-1.3%
-0.1%
0.6%
2013
111.7% -3.1% 50
94.9% 1.3% 218 EFSF
19.6% 2.5% 3,285 3,083
245.0% 2.3% 1,198
81.5% 4.7% 39
93.3% -2.7% 63
61.2% -2.8% 185
9.9% 3.8% 476
45.6% 10.0% 505
0.30% 1.73% 0.25%
0.28% 0.83% 0.75%
3.22% 3.58% 6.00%
0.10% 0.78% 0.10%
0.04% 1.48% 0.75%
0.26% 1.83% 0.50%
5.32% 6.21% 7.25%
7.64% 8.30% 8.25%
-0.16% 0.50% 0.25%
y/y y/y
2013 bn US$
Govt bond yield 2yr ** Govt bond yield 10yr ** Central bank rate °
p.a. p.a. p.a.
¹IMF estimates. *annualized, most recent qtr. ²PRC ex. migrant workers. ** Currency swap rates for China and Brazil, Germany as benchmark for Eurozone. ˚Max target rate for Fed, SNB
Corporate fundamentals Exchange capitalization
bn US$
Earnings growth (est) Revenue growth (est) Price-Earnings Ratio (est) Price-Sales Ratio (est) Dividend yield
USA
Eurozone
China incl. HK
Japan
Germany
Britain
Brazil
Russia
Switzerl.
16,518 S&P 500 10.4% 3.6% 13.5 1.3 2.2%
n.a. Eurostoxx 15.3% 3.0% 11.9 0.7 3.9%
5,827 HSCEI 8.7% 8.7% 8.7 0.9 3.7%
3,428 Topix 17.8% 4.4% 13.1 0.4 2.6%
1,454 DAX 6.3% 3.7% 10.7 0.6 3.6%
3,312 FTSE100 9.8% 1.5% 11.5 1.0 4.0%
1,146 Bovespa 51.2% 8.4% 15.3 1.1 3.7%
748 Micex 12.6% 5.7% 5.6 0.8 3.7%
1,170 SPI 67.6% 103.8% 13.8 1.5 3.4%
All data based on last traded price at the date and time given below (Singapore/HK time equals central European time +6 hours, +7 hours in winter) Source: Bloomberg. Performance figures represent annual changes, in percent.
Cut-off (Singapore Time):
10/31/12 14:21
LGT Asset Allocation Strategy Tactical positioning after most recent regular review on 23 October 2012 Preferrence for US in equities, corporate credit in fixed income, and US dollars in currencies. Gold remains strong against most currencies. The LGT Capital Management strategy team reviews and sets investment policy every quarter. It also makes intermediate and ad-hoc decisions as necessary. The tactical positioning is shown as a minor, moderate, or major deviation from the strategic (or "neutral") quota allocated to each asset class in mixed portfolios. Some deviations may at times appear to contradict fundamental economic views due to various portfolio considerations (e.g. risk exposure limitations, technical market moves). The table on the right shows a simplified overview of the tactical positioning that summarizes the positions of the various asset allocation strategies of LGT Capital Management. However, different investment restrictions or liquidity considerations may lead to deviations. Therefore, this overview is strictly for general reference only.
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. Disclaimer This document is intended solely for the recipient and may not be duplicated, distributed or published either in electronic or any other form without the prior written consent of LGT Group Foundation. This publication is for your information only and is not intended as an offer, solicitation of an offer, public advertisement or recommendation to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any undertaking or guarantee as to it being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published, therefore, information shall not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other consulting matters, nor should any investment or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Forecasts are not a reliable indicator of future value developments. The risk of price and foreign currency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out. There is a possibility that investors will not recover the full amount they initially invested. We disclaim without qualification all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. It is up to potential investors to obtain comprehensive information and appropriate advice in their home country, country of residence or country of domicile about the applicable legal requirements and any tax consequences, foreign currency restrictions or foreign exchange controls and any other aspects that are of relevance prior to any decision to subscribe to, purchase, own, exchange or redeem such investments, or enter into any other transaction in relation to same. The securities and rights mentioned in this document may not be purchased or held by investors or for investors domiciled in the USA and/or with US citizenship, nor may such securities and rights be transferred to them. 2/4
Driven by Exogenous Factors By Mikio Kumada, CIIA Economic and corporate news will not be in short supply in coming days and weeks, but markets are liable to be driven by exogenous factors for a while. The US general election will be held on 6 November, to be followed by the Chinese Communist Party congress, which starts on 8 November. Hurricane Sandy may also temporarily boost market volatility.
US citizens will elect their next president on 6 November, along with the House of Representatives, and one-third of the Senate. Despite a noteworthy improvement in some economic data in the US since mid-September, various opinion polls and the relatively weak stock market suggest that President Barack Obama's chances of reelection have diminished recently. With three different outcomes widely considered as most likely, political events, rather than economic news, may influence short-term mood swings in the stock market in the near future. The generally expected US electoral scenarios For the record, the most-cited scenarios are three: 1) Status quo – i.e. President Obama is reelected, the Republicans keep control of the House, while the Democrats keep the Senate. This scenario would presumably not facilitate a quick compromise on future fiscal policy, which means that concerns over the looming “fiscal cliff” should remain a headwind for a while. 2) Republican sweep – challenger Mitt Romney wins the election, and Republicans gain full control of Congress. This outcome could boost market sentiment by making a coherent, probusiness economic policy more likely. This view, however, might be based on the political preferences of many influential market participants, rather than historical precedent. The latter suggests that the stock market, on average, tends to perform better after a Democratic victory, or an incumbent’s reelection. 3) A Romney victory, combined with the status quo of a divided Congress. This could postpone any compromise on the fiscal issues until after 20 January, when the new president is actually sworn into office. Its impact on the market, many assume, would be similar to the impact of the first scenario – perhaps temporarily worse. For completeness' sake, we note that a Democratic sweep is considered so unlikely that hardly any analysts have bothered to speculate about how markets might react. Be it as it may, we prefer to refrain from betting on a specific political outcome, and maintain a moderately defensive overall investment positioning for now. Power transition in China with many unknowns Political news will probably continue to dominate even after the US election, as the Chinese Communist Party’s 18th congress will begin on 8 November. This event is likely to confirm the key personnel changes at the top of the world’s second-largest economy. Specifically, Xi Jinping and Li Keqiang are expected to emerge as the leaders that will take over the presidency and premiership, respectively, when the National People’s Congress convenes in March 2013. Until recently, markets appeared to associate positive developments with this anticipated outcome, such as continued economic reforms and measures to stimulate the economy. This is evident by the rally of Hong Kong-traded Chinese shares in recent months. However, for now, we maintain an element of caution on this matter because the domestic Chinese Ashares market does seem to fully share this optimistic vision (see page 2). At the very least, mainland markets seem to signal that there might still be some political hurdles left between now and March 2013. Hurricane Sandy’s potential impact adds another wild card Lastly, global markets may also be affected by the aftermath of Hurricane Sandy, which shut down business activity in the Northeastern US on Monday and Tuesday, including trading on US capital markets. Even if the actual damage from this calamity remains rather limited in macroeconomic and hopefully also in humanitarian terms, the storm has already distorted global market performance to a certain degree. Needless to day, this natural phenomenon may also significantly impact the US election by giving President Obama the opportunity to prove himself as a crisis manager – an opportunity that does not come without risks, of course. In such an environment, price moves in either direction can be quite volatile, without containing much information about the actual trend. This rather unusual mix of exogenous, noneconomic factors that influence the market at present is another reason we believe that our moderately defensive general investment position, with its carefully selected exposure to some growth assets, remains appropriate for the time being.
LGT Capital Management, Schützenstrasse 6, CH-8808 Pfäffikon, Phone +41 55 415 92 11, Fax +41 55 415 94 80, [email protected], www.lgt-cm.com. The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. 1/4
Market View Selected Benchmarks
Asset Class (reference) Equities (S&P 500)
View
Previous
Bonds (US Treasury 10y)
Quote 1411.94
Trading-Range ca. 1400 - 1500
Trend/comment Consolidation continues
1.73%
ca. 1.5% - 2.5%
Sideways, manipulated by policy
Bonds (Germany 10y)
1.48%
Currencies (EUR/USD)
$1.30
WTI Crude oil/bbl
$85.84
ca. 1.0% - 2.0% Sideways ca. $1.28 - $1.32 Sideways ca. $85-105
Sideways, downward pressure
International investors price in an optimistic vision of China The Hang Seng China Enterprises Index, which represents the mainland Chinese H-shares traded in Hong Kong, has performed remarkably well since early September, rallying by 13% (for more performance comparisons, see table on page 3). Many international investors seem to be reallocating funds from the US and other markets to a market that had been underperforming for a while. It can also be explained by possible expectations of positive economic developments and proclamations after the Communist Party’s congress starts on 8 November. Hong Kong Stock Exchange Hang Seng China Enterprises Index
20 day moving average / 20 Tage gl. Durchschnitt
12000 11500 11000 10500 10000 9500 9000
8000
12 Oct 11 19 Oct 11 26 Oct 11 02 Nov 11 09 Nov 11 16 Nov 11 23 Nov 11 30 Nov 11 07 Dec 11 14 Dec 11 21 Dec 11 28 Dec 11 04 Jan 12 11 Jan 12 18 Jan 12 25 Jan 12 01 Feb 12 08 Feb 12 15 Feb 12 22 Feb 12 29 Feb 12 07 Mar 12 14 Mar 12 21 Mar 12 28 Mar 12 04 Apr 12 11 Apr 12 18 Apr 12 25 Apr 12 02 May 12 09 May 12 16 May 12 23 May 12 30 May 12 06 Jun 12 13 Jun 12 20 Jun 12 27 Jun 12 04 Jul 12 11 Jul 12 18 Jul 12 25 Jul 12 01 Aug 12 08 Aug 12 15 Aug 12 22 Aug 12 29 Aug 12 05 Sep 12 12 Sep 12 19 Sep 12 26 Sep 12 03 Oct 12 10 Oct 12 17 Oct 12 24 Oct 12 31 Oct 12
8500
China’s domestic investors seem to be less optimistic for the time being However, unlike the H-shares, which are easily accessible to international investors, the A-shares markets on the mainland (traded in Shanghai and Shenzhen) do not seem to share the same optimism. This CSI 300 index shown below is broadly unchanged since early September, and has begun to fall again in recent days. The chances for a successful bottom have certainly improved in recent weeks, but overall it is probably still too early to anticipate a more lasting uptrend in Chinese equities. Shanghai Shenzhen CSI 300 Index
20 day moving average / 20 Tage gl. Durchschnitt
3000 2900 2800 2700 2600 2500 2400 2300 2200 2000
20 Jul 07 24 Aug 07 28 Sep 07 02 Nov 07 07 Dec 07 11 Jan 08 15 Feb 08 21 Mar 08 25 Apr 08 30 May 08 04 Jul 08 08 Aug 08 12 Sep 08 17 Oct 08 21 Nov 08 26 Dec 08 30 Jan 09 06 Mar 09 10 Apr 09 15 May 09 19 Jun 09 24 Jul 09 28 Aug 09 02 Oct 09 06 Nov 09 11 Dec 09 15 Jan 10 19 Feb 10 26 Mar 10 30 Apr 10 04 Jun 10 09 Jul 10 13 Aug 10 17 Sep 10 22 Oct 10 26 Nov 10 31 Dec 10 04 Feb 11 11 Mar 11 15 Apr 11 20 May 11 24 Jun 11 29 Jul 11 02 Sep 11 07 Oct 11 11 Nov 11 16 Dec 11 20 Jan 12 24 Feb 12 30 Mar 12 04 May 12 08 Jun 12 13 Jul 12 17 Aug 12 21 Sep 12 26 Oct 12
2100
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page.
2/4
Global Market Price @ share Cap. in $ cut-off
Equities World
1 year
Year to date
Trend
-0.8%
5.0%
9.3%
Rising
1.9% 1.0% 1.8% 6.1% 2.6% 2.2%
0.6% -2.6% -1.6% 0.7% -2.5% 5.4%
9.9% 9.2% 8.6% 1.0% 6.8% 15.0%
12.3% 14.7% 9.5% 3.5% 6.3% 12.2%
Rising Rising Rising Rising Rising Rising
2.0% 1.9% 0.9% 1.1% -2.0% -2.4%
7.2% 3.8% 7.6% 3.3% 6.3% 1.2%
6.9% 2.0% 5.7% -0.6% 3.7% -3.4%
7.0% 5.5% 14.3% 4.9% -2.0% -5.0%
10.3% 5.0% 19.0% 7.9% 8.3% 1.5%
Rising Rising Rising Rising Rising Sideways
0.7% 3.3% 6.8% -2.0% -1.8% -4.1% -7.1%
2.7% 8.8% 8.6% -3.7% 7.2% 1.7% -1.4%
-6.2% 2.1% -5.2% -14.4% 5.7% -3.5% -4.5%
-0.7% 8.4% -0.1% -16.6% 4.7% 0.2% -5.6%
5.6% 16.8% 5.7% -4.2% 22.5% 4.8% 1.3%
Rising Rising Rising Falling Rising Rising Falling
5.0% 7.6% 12.2% 9.7% 12.7% 11.7%
-0.3% 3.6% 11.8% 4.6% 11.7% 11.5%
Rising Rising Rising Rising Rising Rising
-7.8% -8.8% -0.1%
-13.0% -4.1% 9.4%
Falling Falling Rising
5 days
1 month
157.4
0.1%
-0.6%
4.1%
-1.5% -0.6% -1.0% 1.2% 1.2% -1.1%
-2.0% -4.1% -2.9% 0.5% -0.1% 1.8%
1.3% 0.9% 1.5% 0.7% 0.6% -1.9% -0.3% -1.1% -1.3% -2.6% -1.9% 0.0% -2.0%
BBG World All Country
100%
50,158
S&P 500
32.9%
16,518
1,411.9
Nasdaq Composite *
9.1%
4,583
2,988.0
S&P 600 Small Cap *
1.1%
528
454.4
TSX
4.0%
2,004
12,377.1
Bovespa
2.3%
1,146
20,954.7
Mexbol
1.0%
483
41,599.0
Euro Stoxx *
6.6%
3,298
249.1
FTSE 100
6.6%
3,312
5,849.9 3,982.0
3 months 6 months
Americas
USA USA USA Canada Brazil Mexico Europe
Euroland UK Germany Switzerl. Poland Russia
DAX Price Ix
2.9%
1,454
Swiss Perf Extra Pr Ix
2.3%
1,170
148.0
WSE
0.3%
156
2,323.3
Micex
1.5%
748
1,423.6
Asia
Japan Hong Kong China H China A India Korea Taiwan
Nikkei 225
6.8%
3,428
8,928.3
Hang Seng Ix
6.1%
3,083
21,531.3
China Enterprises Ix
5.5%
2,745
10,504.6
CSI 300 *
1.4%
719
2,247.5
Sensex
2.4%
1,192
18,423.5
Kospi
2.2%
1,079
1,913.5
Taiex
1.5%
749
7,166.1
All indices: price indices (excl. dividends), in local currency. Market cap in billion USD at current exchange rates refers to country, except where market with *
Bonds
US Dollar Index US Treasuries ** EMU Bonds (Germany)** UK Gilts** iBoxx $ Liquid Investment Grade Index iBoxx $ Liquid High Yield Index
USD
79.9
USD
421.1
EUR
196.4
GBP
553.5
USD
234.8
USD
208.7
0.0% 0.3% 0.1% 0.0% 0.4% -0.3%
0.0% -0.6% 1.0% -0.7% 1.0% 0.9%
-3.3% -0.8% 4.0% -0.5% 2.6% 3.2%
1.5% 2.7% 6.5% 4.0% 7.2% 5.5%
**Total return indices of long term securities with maturities of 7 to 10 years, or **a representative segment of the liquid corporate bond market.
Commodities
WTI Crude oil (generic future) JOC Industrial Metals Index Gold
USD
85.8
USD
115.8
USD
1,712.6
0.2% -3.8% 0.6%
-6.8% -9.1% -3.5%
-2.4% 4.8% 6.1%
-18.1% -8.9% 2.9%
All data based on last traded price at the date and time given below. Source: Bloomberg. Performance figures represent annual changes, in percent.
Cut-off (Singapore Time):
10/31/12 14:21
Performance of Markets and Asset Classes (light colors - year to date, dark colors: past 5 days)
25% 20% 15% 10% 5% 0% -5% -10%
Gold in USD
WTI oil
Ind metals
IG bonds
IG bonds
UK bonds
US bonds
GER bonds
USD index
Taiwan
India
Korea
China A
China H
Japan
Hong Kong
Russia
Poland
Switzerland
UK
Germany
Eurozone
Brazil
Mexico
Canada
US Small
US Nasdaq
US S&P 500
-15%
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. 2/4
Economic and Corporate Snapshots
Economy Gross domestic product 2013, nominal ¹= - per person, nominal ¹ - expected growth current year, real - expected growth next year, real
bn US$ US$
(consensus) (consensus)
USA
Eurozone
China
Japan
Germany
Britain
Brazil
Russia
Switzerl.
16,198 51,056
11,989 36,111
9,039 6,644
5,997 47,096
3,373 41,332
2,532 39,884
2,504 12,643
2,109 14,911
617 76,598
2.1% 2.0% 2.0% 7.8% 2.0% 2.8%
-0.5% 0.2% -0.8% 11.4% 2.6% -2.9%
2.3% 1.1% 0.7% 4.2% -0.3% -8.1%
0.9% 1.0% 1.2% 6.9% 2.1% -1.4%
-0.3% 1.1% 4.1% 7.9% 2.2% -1.2%
1.5% 4.0% 1.6% 5.4% 5.3% 1.5%
3.7% 3.6% 0.4% 5.2% 6.6% 2.0%
1.1% 1.5% -0.4% 2.9% -0.4% 4.6%
GDP growth, current * Unemployment rate ² Inflation rate (CPI) Industrial production
q/q
Structural budget balance/GDP ¹ Gross government debt/GDP ¹ Current account balance/GDP ¹ International reserves (ex. gold)
2013
-5.5%
-3.0%
7.7% 8.1% 9.1% 4.1% 1.9% 9.2% 2,745 0.2%
-8.6%
-0.3%
-4.0%
-1.3%
-0.1%
0.6%
2013
111.7% -3.1% 50
94.9% 1.3% 218 EFSF
19.6% 2.5% 3,285 3,083
245.0% 2.3% 1,198
81.5% 4.7% 39
93.3% -2.7% 63
61.2% -2.8% 185
9.9% 3.8% 476
45.6% 10.0% 505
0.30% 1.73% 0.25%
0.28% 0.83% 0.75%
3.22% 3.58% 6.00%
0.10% 0.78% 0.10%
0.04% 1.48% 0.75%
0.26% 1.83% 0.50%
5.32% 6.21% 7.25%
7.64% 8.30% 8.25%
-0.16% 0.50% 0.25%
y/y y/y
2013 bn US$
Govt bond yield 2yr ** Govt bond yield 10yr ** Central bank rate °
p.a. p.a. p.a.
¹IMF estimates. *annualized, most recent qtr. ²PRC ex. migrant workers. ** Currency swap rates for China and Brazil, Germany as benchmark for Eurozone. ˚Max target rate for Fed, SNB
Corporate fundamentals Exchange capitalization
bn US$
Earnings growth (est) Revenue growth (est) Price-Earnings Ratio (est) Price-Sales Ratio (est) Dividend yield
USA
Eurozone
China incl. HK
Japan
Germany
Britain
Brazil
Russia
Switzerl.
16,518 S&P 500 10.4% 3.6% 13.5 1.3 2.2%
n.a. Eurostoxx 15.3% 3.0% 11.9 0.7 3.9%
5,827 HSCEI 8.7% 8.7% 8.7 0.9 3.7%
3,428 Topix 17.8% 4.4% 13.1 0.4 2.6%
1,454 DAX 6.3% 3.7% 10.7 0.6 3.6%
3,312 FTSE100 9.8% 1.5% 11.5 1.0 4.0%
1,146 Bovespa 51.2% 8.4% 15.3 1.1 3.7%
748 Micex 12.6% 5.7% 5.6 0.8 3.7%
1,170 SPI 67.6% 103.8% 13.8 1.5 3.4%
All data based on last traded price at the date and time given below (Singapore/HK time equals central European time +6 hours, +7 hours in winter) Source: Bloomberg. Performance figures represent annual changes, in percent.
Cut-off (Singapore Time):
10/31/12 14:21
LGT Asset Allocation Strategy Tactical positioning after most recent regular review on 23 October 2012 Preferrence for US in equities, corporate credit in fixed income, and US dollars in currencies. Gold remains strong against most currencies. The LGT Capital Management strategy team reviews and sets investment policy every quarter. It also makes intermediate and ad-hoc decisions as necessary. The tactical positioning is shown as a minor, moderate, or major deviation from the strategic (or "neutral") quota allocated to each asset class in mixed portfolios. Some deviations may at times appear to contradict fundamental economic views due to various portfolio considerations (e.g. risk exposure limitations, technical market moves). The table on the right shows a simplified overview of the tactical positioning that summarizes the positions of the various asset allocation strategies of LGT Capital Management. However, different investment restrictions or liquidity considerations may lead to deviations. Therefore, this overview is strictly for general reference only.
The Beacon. Sources: Bloomberg, or as noted. See Disclaimer on last page. Disclaimer This document is intended solely for the recipient and may not be duplicated, distributed or published either in electronic or any other form without the prior written consent of LGT Group Foundation. This publication is for your information only and is not intended as an offer, solicitation of an offer, public advertisement or recommendation to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any undertaking or guarantee as to it being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published, therefore, information shall not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other consulting matters, nor should any investment or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Forecasts are not a reliable indicator of future value developments. The risk of price and foreign currency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out. There is a possibility that investors will not recover the full amount they initially invested. We disclaim without qualification all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them. It is up to potential investors to obtain comprehensive information and appropriate advice in their home country, country of residence or country of domicile about the applicable legal requirements and any tax consequences, foreign currency restrictions or foreign exchange controls and any other aspects that are of relevance prior to any decision to subscribe to, purchase, own, exchange or redeem such investments, or enter into any other transaction in relation to same. The securities and rights mentioned in this document may not be purchased or held by investors or for investors domiciled in the USA and/or with US citizenship, nor may such securities and rights be transferred to them. 2/4
