Stimulus Kicks In From Japan and Europe

Gold bullion barr on a stocks and shares chart
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Vocus Communications Limited [ASX:VOC] has jumped back onto my trading portfolio this week. The stock continues to prove itself as a very profitable growth stock for investors. Today, the market continued to rally on the back of an apparent stimulus from the Bank of Japan, taking Japan into negative interest rates. However, today’s Asian market rally was a continuation of the positive sentiment from last Friday.

After the Aussie market closed, the Wall Street stock futures appeared to be in negative territory, which will likely transmit to the Aussie stock futures for tomorrow. The cause of this reversal was China’s worse-than-expected manufacturing activity numbers. This means investors should expect further volatilities in the week despite today’s gain in VOC pricing.

On the commodities front, it is hard to say what OPEC is planning with other oil producing nations such as Russia. Saudi Arabia and Iran continue to be the centerpiece for the oil story. The purely one-sided negative sentiments from oil deflation, slowing China, rising US rates and Chinese financial reform uncertainties are now no longer the sole chemistry in the market. The stimulus-side from Japan and potentially from Europe will start to kick in. The Fed is also softening in the face of financial market uncertainties. Another leg of support would be any actual or signal on production cuts in oil. All these are supportive factors that will have a positive effect on the market.

China continues to be a negative drag on the market. There are two possible ways going forward for China. One is more financial reform uncertainty from the currency or capital market sides; a contagion on corporate debt or a slowdown in consumer activities. This would be negative for the market. Another way forward is a gradual bottom and surprises on the upside. This would give the final leg to support a recovery in the stock markets.

I am seeing a shift from pure negative factors towards more positive support factors. This makes sense since the market has been dominated by the downside in the past few weeks. We could soon see a reversion to the mean.

Will this bring about a new bull market? Not yet. We need China to start to pick up and we need commodity supplies to sort themselves out. The worse it gets, the more stimulus we will likely see. I am fond of the stimulus-driven markets such as Japan and Europe.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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Ken Wangdong

Having spent half of his life in Australia and the other half in China, Ken is a man of two worlds. He’s fluent in English and Mandarin, and has first-hand experience living, working and investing in both countries. As Money Morning’s emerging markets analyst he uses this cross-border intelligence to discover the best investment opportunities in not just China, but all emerging markets around the world.
Ken Wangdong is Money Morning’s emerging markets analyst. Having spent half of his life in Australia and the other half in China, Ken is a man of two worlds. He’s fluent in English and Mandarin, and has first-hand experience living, working and investing in both countries.

This rare cross-border insight gives Ken a powerful inside advantage when it comes to uncovering the best investment opportunities in China.

And that’s key. Because you cannot hope to invest successfully in this fast growing super power without a guide to help you navigate the cultural, political and historical factors that deeply influence the way they do business.

But China isn’t the only place Ken searches for big growth opportunities — he looks at all emerging markets around the world. Whether it’s Indonesia, Burma, Bolivia or Mongolia, Ken is passionate about hunting down exciting investments in the markets that will drive the next stages of global growth.

With two degrees in economics and finance from a prestigious Australian university, Ken has worked for a number of high-profile research, consulting and financial services firms both here and in China.

Now Ken brings his unique expertise in cross-border intelligence to Money Morning, where he helps readers discover the best investment opportunities in emerging markets across the globe.

Official websites and financial e-letters Ken writes for:

(You can find a list of recent articles written by Ken below.)

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Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@moneymorning.com.au