☀️☕️ India’s Ascent

📊 Also: US inflation too hot (but not really?); Japan touching 1990; Arm pit 🎓 BRICS

📈 Market Roundup [14-Feb-24]

US large-cap S&P 500 closed 1.37% DOWN 🔻

Tech-heavy Nasdaq Composite closed 1.8% DOWN 🔻

Pan European STOXX Europe 600 closed 0.95% DOWN 🔻

HK/China’s Hang Seng Index closed 0.83% DOWN 🔻

Japan’s broad TOPIX closed 2.12% UP ▲▲

📝 Focus

  • India’s Ascent

📊 In the Markets

  • US inflation too hot (but not really?); Japan touching 1990; Arm pit

📖 MoneyFitt Explains

  • 🎓️ BRICS

💸 Personal Finance Corner

📝 Focus

The MFM has addressed the Indian market from time to time, but has not given this fast rising market the attention it deserves as a focus for global attention, particularly since its indexes have been racking up a succession of all-time highs. Last December, the value of India’s stock market exceeded that of the Hong Kong SAR’s for the first time, according to data compiled by Bloomberg, making India the fourth-biggest equity market globally, half a year after its population was estimated by the UN to have exceeded China’s. Our guest writer today checks out the rise of this global giant.

Shifting Tides in Global Finance: India's Ascent 🌟

A seismic shift is underway in the investment realm, one that could redefine the future of emerging markets. A recent analysis from Bloomberg (link below) illuminates a trend that's catching the eyes of savvy investors worldwide: a pivot from China to India. This marks not just a shift, but the dawn of a 'New Investment Era.

🔍 Understanding the Shift: For years, China has been the quintessential emerging market. But now, India is stepping into the spotlight, drawing in heavyweights like Marshall Wace and Vontobel Holding, with Goldman Sachs and Morgan Stanley at the helm of this transition.

🇮🇳 India's Investment Appeal: With an economy brimming with vitality, India's market valuation has skyrocketed from $500 billion to an impressive $3.5 trillion in just two decades. This growth is fueled by robust infrastructure development and a burgeoning digital economy.

Yet, with opportunity comes caution. Investing in emerging markets like India involves navigating risks such as market volatility, regulatory changes, and political shifts, as highlighted by sources like Reuters. These risks are an integral part of the investment equation and must be balanced against the potential for high returns.

📈 Accessible Investment Avenues: For those looking to tap into India's potential without direct equity investment, ETFs like the iShares MSCI India ETF (INDA) and the WisdomTree India Earnings Fund (EPI) present strategic opportunities. These funds offer a gateway to diversified market segments within India, helping to balance risk with exposure to growth.

💰 Capital Inflow Confidence: The recent surge in capital inflows into funds like INDA—despite the backdrop of outflows from China-centric funds—signals robust investor confidence in India's market promise.

🔮 Long-Term Outlook: High valuations and possible market corrections are part of the journey. Yet, the overarching narrative for India is one of bullish optimism for the long haul. India is not merely an alternative but is emerging as a standalone powerhouse in the global economic arena.

For those strategising their investment portfolios, embracing India's dynamic market could be a key move. ETFs like INDA and EPI can serve as conduits to India's economic dynamism, offering a blend of growth potential and resilience.

As we navigate this investment landscape, let's engage with the full spectrum of what India has to offer. It's not just about riding the wave of growth but also about understanding the nuances of the market. The journey may have its ebbs and flows, but for the discerning investor, India represents a horizon brimming with opportunity.

For further insights and to deepen your understanding of this strategic shift, delve into the Bloomberg article here (no paywall.)

Guest writer: Dr. Christina Chua: SVP in Wealth Management, Where Finance Gets Serious, and Fun Gets a PhD. This article is for information only and not investment advice. The writer may have long or short positions in the companies mentioned above. All opinions are hers and hers alone. Please see the important disclaimer at the bottom.

Please see Dr. Chua’s original LinkedIn post here

🇸🇬 Singapore: Let’s Get MoneyFitt!

📊 In the Markets

US stocks dropped as Treasury yields surged after US consumer price inflation cooled less than forecast in January. The two-year Treasury yield spiked by 0.18 percentage points to 4.65%, marking the largest daily increase in about a year.

US inflation eased less than expected with January prices 3.1% higher than in January 2023. That inflation rate is down from 3.4% in December and well off its pandemic-era peak of 9.1% in June 2022. But experts were expecting an even greater slowing of price pressures with a forecast of 2.9%, hence the resetting of expectations and the market selloff.

Campbell Harvey, the Duke econs professor who first identified the link between recessions and inverted yield curves, notes that “shelter” (housing), the largest single CPI component, is calculated using lagging data and that using current data (which is still trending down) would actually show that real-time inflation is ALREADY at or below the Fed’s 2% target. (See excellent LinkedIn post here.)

Duke has come up with many stars in academia as well - Image credit: Ian Mackey via Unsplash

Fed Fund futures prices now imply a 30% chance of a May cut, down from 50% just a day earlier, with March cuts nearly ruled out. Fed Chair Powell signalled three rate cuts this year at the January Fed meeting, but did also hint at waiting for more progress towards the 2% inflation target. The Fed's next meeting in March will reveal officials' “Dot Plot” projections.

Arm crashed 20% after its spectacular rise over the previous three trading days in which it had doubled to a valuation of $150bn after (briefly) assuming the mantle of AI’s Next Big Thing. And then loses a fifth on the first risk-off day. 

Also losing on a risk-off day was Bitcoin, which had just recently recovered to the $50k mark last seen two years ago, and which seems less and less like an uncorrelated asset class and more like just another risk trade (and neither does it look much like an inflation hedge.) Though up sharply since the start of 2023, it remains, for now, far from its $69k all time high. 

Japan’s stock markets reopened on Tuesday and the broad-based Topix climbed 2% to hit a 34-year high. The popular (and slightly more exporter oriented) Nikkei 225 benchmark also briefly crossed the 38,000 mark for the first time since the bubble burst in 1990 as the weak-Yen-rally continued, rising 3% and also hitting 34-year highs.

One US dollar bought more than ¥150 for the first time since mid-November as US inflation slowed by less than expected. It gained 0.7% against the yen, reaching ¥150.44, a level that may lead to intervention by Japanese authorities. The yen's decline this year reflects diminishing expectations of a Bank of Japan rate hike, but today’s dollar strength stems more from further delayed expectations for Federal Reserve interest rate cuts.

Other Asia-Pacific markets like South Korea and Singapore also rose on return from the Lunar New Year long weekend. Hong Kong will reopen on Wednesday while China’s swooning markets will resume next Monday.

“Risk On“ vs. “Risk Off”: A mini-Explainer

Risk On: Investors seek higher returns even with the potential for increased volatility. They favour riskier assets like equities, emerging market currencies, and growth-oriented sectors (like tech) and sell safer assets. Risk-on generally sees higher overall market volatility, while risk-off leads to lower volatility and tighter price ranges. 

Risk Off: Investors prioritise capital preservation over potential gains, shifting towards safer assets like government bonds, gold and defensive sectors (like utilities) and sell riskier assets. This often happens during periods of geopolitical tension or general uncertainty. 

While strong growth often fuels risk-on, unforeseen or unsustainable growth can trigger risk-off (often via concern over policymaker response to inflation.) The influence of economic growth data depends on various factors like the type of growth, market expectations and other global narratives.

Transitions between risk-on and risk-off can be sudden and driven by various factors, not just economic data.

Just like with waxing a car, risk on is followed by risk off, to be followed again by… - Image credit: Karate Kid (1984) / Columbia via Tenor

📖 MoneyFitt Explains


The term "BRIC" was coined in 2001 by Jim O'Neill, an economist at Goldman Sachs, to group together the rapidly growing economies of Brazil, Russia, India, and China. 

The acronym highlighted their potential to reshape the global economic landscape. South Africa "joined" in 2010, turning it into BRICS. The BRICS forum was established in 2017 to promote economic cooperation and development among its members, and in 2023, expansion was announced with the inclusion of Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE.

O'Neill's intention at the time was purely economic, focusing on growth prospects and investment potential. He downplayed the political or strategic links between these nations, emphasising the economic rationale behind the grouping. 

O'Neill's view was that beyond their status as emerging markets with high growth potential, there was little inherently connecting these countries in terms of political alignment or shared goals. 

The BRICS concept aimed to spotlight their economic dynamism rather than their geopolitical cohesion.

For his "services to the British economy", O'Neill was knighted in 2016 after (not for) leaving GS. The knighthood was in recognition of his work in economics and finance, including his role in coining the term "BRIC".

💸 Personal Finance Corner

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