Asian stocks fell on Wednesday as a key measure of China’s manufacturing strength declined more than expected to its lowest since 2009. It reflected concerns that the world’s second-biggest economy is growing at a slower pace than previously thought.
European stocks, however, bucked the trend after better than expected macroeconomic expectations were released that signalled to investors that the euro zone has not been as badly affected by China’s woes.
“As China is getting a cold, the virus is spreading basically,” said Aymeric Forest, a multi-asset fund manager at the London-based asset manager Schroders who oversees about US$12.5 billion. “In this environment, we believe that yields should remain relatively low and there’s little chance for global monetary policy to tighten too much.”
China’s benchmark Shanghai Stock Exchange Composite Index fell 2.2 per cent, while the benchmark Stoxx Europe 600 Index increased 0.6 per cent. The euro-zone economy is expected to continue to grow after increasing by an estimated 0.4 per cent in third quarter, according to Markit Economics, a company that produces closely watched economic indicators.Meanwhile, the European Central Bank president Mario Draghi said on Wednesday that it is still too early to tell economically if Europe will need more financial stimulus.
In China, a Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.
The woes of Chinese stocks, which have been plummeting back to earth in recent months after a sharp rise, are weighing heavily on global investor sentiment, especially since the country is one of the biggest consumers of many commodities ranging from oil to copper. While the benchmark Chinese stock index is down only about 4 per cent year to date, since last June it has lost more than 75 per cent of its value.
And the fallout in China has weighed heavily on other emerging markets such as Brazil and Russia, which are major commodity exporters. At the same time, currencies of developing countries have been declining against the US dollar.
Investors dumped global stocks last week after the Fed’s decision to refrain from raising interest rates. The Fed chairwoman Janet Yellen expressed concerns about the turmoil in China and emerging markets spilling over into the US. That has caused investors to question the outlook for the global economy.
“It’s a fair reflection of more uncertainty surrounding the pace of nominal growth in the world and this low inflationary environment is likely to remain,” said Mr. Forest of the sell-off.
mkassem@thenational.ae
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The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
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THE SPECS
Engine: 1.5-litre
Transmission: 6-speed automatic
Power: 110 horsepower
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
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Three ways to limit your social media use
Clinical psychologist, Dr Saliha Afridi at The Lighthouse Arabia suggests three easy things you can do every day to cut back on the time you spend online.
1. Put the social media app in a folder on the second or third screen of your phone so it has to remain a conscious decision to open, rather than something your fingers gravitate towards without consideration.
2. Schedule a time to use social media instead of consistently throughout the day. I recommend setting aside certain times of the day or week when you upload pictures or share information.
3. Take a mental snapshot rather than a photo on your phone. Instead of sharing it with your social world, try to absorb the moment, connect with your feeling, experience the moment with all five of your senses. You will have a memory of that moment more vividly and for far longer than if you take a picture of it.
Details
Through Her Lens: The stories behind the photography of Eva Sereny
Forewords by Jacqueline Bisset and Charlotte Rampling, ACC Art Books
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Director: Jon Favreau
Starring: Donald Glover, Seth Rogen, John Oliver
Rating: 2 out of 5 stars
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The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now