International News (Issue 351) – 15 May 2015

International Economic News

Europe

Forgive my brevity this week.

Perhaps the two most important events this week were the UK election and the surprising twist in the Greek debt-imbroglio which saw a report suggest the IMF were unwilling to further finance the country.

In the UK, the return of the Conservatives to power (albeit minority) saw a strong response from the pound (GBP) which jumped 3% post the result.

 

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In Greece, the suggestion that Europe would be left holding the can for Greece’s restructuring was another twist in the road, and caused a large sell-off in German and ‘core’ European bond markets to continue.

German 10-year bunds have now fallen from a yield as low as 0.07% a month ago, to be 0.70% last night. The whole Greek farrago gets more tedious by the day, however since the IMF are a large contributor to Greece’s existing package, the suggestion that they no longer are willing or able to fund a country without concrete plans for debt repayment (supposedly a legal issue now) could be another significant risk going forward.

Forgive me, but I am tired of talking about Greece.

China

China rebounded well after the Peoples Bank of China cut interest rates again on the weekend. Encouragingly for China and perhaps modestly for Australian mining companies, signs are of a thawing in property sector sentiment in terms of both prices and activity. This is a good thing.

Also on the positive front are suggestions that Chinese mainland equities could be included in the global MSCI Emerging Market indices, which would be a major step forward for Chinese financial markets. A move of this kind would add increasing credibility to Chinese equity markets, in forcing more fund managers benchmarked to this key index, to own and track Chinese shares.

We like Asia as a place to invest right now. Much of the region is benefiting from lower interest rates due to currencies linked to the USD, lower imported energy costs and the continued rise of middle class income.

Please talk to us about opportunities for investment.

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