Global Market Thoughts (GMT)

Post NFP & last night FOMC linked T-note sell-off seemsset to continue some more – so hold shorts instituted at 133-27+ … There isfairly active supply coming into the market next 7 days, and also noises aroundagreements reached in Washington re Fiscal Cliff-hanger will weigh on fixedincome markets (latest surveys endorsing Obama’s stance will make moreRepublican legislators wary of not reaching some accord – as the media circuswill now fully blame them for a ‘No Agreement’ situation)!

Thus am still positive on Risk(stay long equities), and short Treasuries … Credit Bonds are still great placeto be – esp. as Bernanke reiterated Fed message yesterday with quant target onInflation & Unemployement Rate ! So yes, we say T-notes under pressure, buttruly, how much can they really sell-off... not massively – but for short termtrading possies – 20 bps is a move ! (and that’s all we are looking for having institutedshorts  at 1.55-1.58%).

Really positive equities globally – esp China (whereevidently folks are “closing” brokerage accounts by the dozens .. few yearsago, at the Top of the market, brokerage accounts were being “opened” by thedozens (incl by the proverbial taxi drivers) – so given this reverse indicator& market frenzy at play – would  continueadding to China Stocks. Think China growth is now bottomed out & policymeasures after new leadership takes helm will only be growth-inducing (withinitial emphasis on infrastructure esp in West China).  So like Infrastructure plays (Anhui, WestChina) .. and bonds/stocks of Real Estate Cos selectively (Agile, Longfor). Anotherpersonal fave is Ping An with its insurance/financial biz model &attractive revenue growth as well as ROE! HSBC exit of PA is strategic, andwill have no impact on performance. And then, with China turning, how about AUD& the resources plays in Indonesia (Adaro) or Peabody (BTU) ? They lookattractive too ..

Amongst US stocks still like the trio of CSCO, DELL, INTC –really cheap valuations for these quality cos (p/e in single digits) for stocksstill turning around 16-20+ % ROE ! Gosh, you just have to look at Banks(western financials) to see how mouth-watering these ROEs are !! The so-calleddeath of traditional techs (as the world moves to “smarties/tablets”), havedecimated these prices into great “buys” in my view – time will tell ! Anywaysthese are just 3-6mth plays in my portfolio at moment.

Of course, Euro financials are still at times being pricedfor ‘death’ with P/B trading at massive discounts (way below even 50% to bookin many cases). Me thinks the new Regulatory/Supervisory framework just agreedin Euroland yesterday (did not get as much press as everyone looking atFed-Speak), is really path breaking  and healthyfor the euro banking system – and will slowly result in these distressedvaluations getting corrected (Unicredito).

In Credit space the Euro financial (esp. UK – Barc/RBS  hybrid / juniors) have performedspectacularly, and the same will happen with many European names. Asian Creditwhether Indian Financials or Chinese RealEstate/Infra have all done well(except of course the Muddy Water driven Olam saga in Singapore) … Got longOlam, and will stay with it (maybe not to maturity) ! Still like the BOIIN perp(apr/17 callable) .. For the traditional portfolios  Agile, West china, Gemdale bonds (mostly all2016-17) maturities still good for another year !

Being Risk Positive, and Long Assets (both equities &credit), in this loosely monetary world, one has to continue to own Asian FX(still continue to like North Asia esp. CNY, and KRW). SGD & AUD willcontinue to be popular in this risk positive world for now – but will stay waryof INR (neutral, not short at current 54.2 levels). The JPY is doing somefrenzied catch-up & the Japanese stocks are loving it – finally some muchneeded relief for the Japan economy (which has been decimated by the jpy/krwrelationship) – not sure if this is start of year-long “weaker jpy” trend... butdoes seem one has to stay short-jpy, for now !