4.07 - bad monetary news coming from the USA
There is very bad news coming form the USA today.
With all of the focus being on the equities market, there is a lot we are missing. Of course, currencies is what holding it all together, but right now there are losses in all of the sectors of the market and we are not seeing this. But we think that today is the day for us to look at Chinese financial giants and draw our own conclusions about trading.
We are very interested in Chinese Amazon – Alibaba group. It is one of the biggest Chinese companies and one of the most famous Chinese companies. Up until the whole tariffs mess Alibaba was a trusted trading instrument and one of the leaders in the fields. But right now, a lot of faith in the stock of Alibaba is lost. For the outside observer, Alibaba’s stock is not that cheap. And that’s in fact true. It is now traded around #185 per share level. But it used to cost much more – beyond the point of $200 per share. Such fall is pretty explainable with traders trying to draw as much investment from Chinese economy as they possibly can in order to protect their assets in case of collapse.
But we think that the recent fall isn’t really connected to the trade war. It is connected to weak yuan and here is why. Much like Facebook and Apple the company can’t really be affected by the trade war. In fact, it is one of the few companies that can be bullish with America and have nothing to fear as Alibaba isn’t really oriented on American market. It is working for Asian and Eurasian markets mainly. That is why when all of the companies were trembling in fear of Trump’s statements Alibaba was gaining points.
Also, the fact that Alibaba isn’t really traded on Chinese exchange and it listed on New York exchange mans that yuan’s weaknesses can’t harshly influence the price per share. So now we have protection of the stock from weal yuan and tariffs policy. To us it sounds like the perfect stock at the moment. The fact that e-shopping is only gaining more and more popularity and is not going anywhere is just icing on a cake.
With the number of problems that we have been facing lately we have to be honest – we were hoping for a break. Several weeks of trading bliss with no major losses and stable equities – that is what we wanted. But not what we will get. There are disturbing news coming from the US this morning as the experts there started to claim that financial crisis of 1997-1998 is going to repeat itself soon.
We have analyzed the data and unfortunately, we too see the trend here. Dollar is growing, and technical stocks is going higher. Greenback is pushing on Asian markets where the stocks and equities are breaking under such a weight. Russian ruble is falling, and euro is not really stable with a lot of problems n the region. Emerging markets are suffocating. All of that looks exactly like it looked in 1998. Since the crisis of 2008, emerging markets have reached the lowest points. And dollar is on the fast pace.
Although it is possible that the recent fall is caused for the tightening policies coming form the USA and the situation will no repeat itself. But the picture is scary. In case everything falls apart we will have to turn to Asian markets where the growth can easily reach 6 percent by 2020 in case they move from the UISA onto other world partners. Just imagine all of the major investors turning to China instead of the USA. That would be simply amazing for Asian region and devastating for America. Although we have to understand that these are only the predictions. And not 100-percet-sure-facts. But those who put any assets in Chinese economy are already seeing the profits. We can’t even think of the profits which would be promised by Chinese economy in case of investors’ flood.
Dollar is retreating today while Chinese yuan is recovering after the fall. Markets are looking more or lees stable today with mixed-as-usual performance. Let’s hope, that these fears remain fears.
- by Anna K.