By Emily Lai
The past week we have seen some sunshine after the rain, with the Chinese market at the rising after its tumble and the European and US markets being more positive at the end of the week, looking forward to a solution ending the Greek Saga.
Steven Moeller, Managing Director and Portfolio Manager, Head of Investment Solutions Asia at Franklin Templeton Investments tells BENCHMARK it is “hard to be overly optimistic.” “Greece seems to be agreeing to many of the original terms, but the main issue is the trust factor,” he says. “While I think most would like Greece to remain in the Eurozone, a general lack of trust in the Greek government to deliver on restructuring promises may be insurmountable. It is likely we will see continued volatility around this issue for the next few days and perhaps weeks.” He hopes the market would be more stable after getting more clarity on the issue, after all, the market has realized that the Greek market is very small. “The impact (of a Grexit) would be more psychological than fundamental.”
Chinese investors also had relief at the end of last week, with a rebound of almost 3% for the whole week in the Shanghai market. The Chinese government has ramped up a bundle of policies in response to the rout in the market. Moeller believes that with intervention “the road is paved with good intentions, but they were perhaps a little early in trying to intervene,” creating more issues in the short term. “The intervention makes the market less transparent and likely added to the recent volatility,” he says.
The US market has been back in the spotlight with the dollar index posting a rebound in the past month. Moeller has been underweighting the US market most of the year, but he is now neutral and may even give it an overweight position in the near future. He believes economic data in the second half of the year will outperform that in the first half, and that the Fed will be raising rates sometime between the end of this year to the beginning of next year and could trigger a capital rotation from the fixed income market to equities. BM