QuotedData’s economic round up – November 2017 – is a collation of recent insights on markets and economies taken from the comments made by chairmen and investment managers of investment companies – have a read and make your own minds up. Please remember that nothing in this note is designed to encourage you to buy or sell any of the companies mentioned. Kindly sponsored by Martin Currie
The UK was, once again, one of the weakest stock markets globally but, generally equities did well in October. Asian technology stocks were especially strong. Japan was buoyed by the results of its general election, which returned Shinzo Abe to power with an increased majority. The oil price climbed and has gone higher still, since the end of the month, on fears of instability in Saudi Arabia. The UK finally saw a modest uptick in interest rates.
Diametrically opposed views on market valuations give rise to very different stances. Familiar stories of increased M&A and Brexit uncertainty persist.
Georgina Brittain and Katen Patel, managers of JPMorgan Smaller Companies, are comforted that valuations for smaller companies are ‘compelling’ and they expect to see more M&A activity. Nicholas Fry, chairman of BlackRock Smaller Companies, disagrees, saying valuations are not cheap. He thinks share prices are vulnerable to reduced growth expectations or any economic setback. The manager of that fund, Mike Prentis, concurs. He also highlights the uncertainty created by Brexit negotiations.
The managers of Scottish Oriental Smaller Companies are cautious. They say that the improved growth outlook is priced into markets and companies are finding it hard to grow earnings beyond reaping the rewards of lower input costs. Kate Bolsover, chairman of Fidelity Asian Values, thinks that further earnings upgrades are required to justify current valuation levels. The manager of that fund thinks a combination of indicators suggests that market participants are leaning towards “greed” rather than “fear”. The managers of Pacific Assets are downbeat. They say that valuations are stretched across the board in Asia, both in equities and property, and are focused on capital preservation.
To give the contrary view, Nigel Cayzer, chairman of Aberdeen Asian Smaller Companies notes the economic and geopolitical risks that overshadow markets but remains enthused about the prospect for nimble smaller companies. The managers of that fund say that they are cautiously optimistic. They say that China is being pragmatic, backed by a desire to keep the economy on a sustainable growth path. Ewan Markson-Brown, manager of Pacific Horizon, focuses on the profound technological changes that are both creating and destroying wealth across a range of sectors. He thinks that increasing free cash flow will feed through into positive earnings surprises for Chinese companies. Susan Platts-Martin, chair of Witan Pacific, says that earnings growth is finally picking up and this contributes to a positive environment for investors.