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Market 2018年7月July

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prudential.com.hk ? Equity markets dipped into the end of the month when domestic political developments in Italy, Brazil and elsewhere combined with concerns over developing economy debt levels to send many indices lower, especially in emerging markets. ? Among the developed markets, the US comfortably outperformed Europe, which saw Italy fall 11%, dragged lower by its banking sector that is heavily invested into its domestic bond market. Greece lost 19% on concerns its banks would follow suit while Spanish markets also suffered after the Prime Minister faced a no-confidence vote. Hungary fell 14% and Turkey lost 13% as its currency woes continued. ? Not surprisingly, the MSCI EMEA index fared poorly in May, losing 5.8%. But it wasn'

t the worst performing region with Latin America falling 14%, dragged down by index heavyweight Brazil which lost more than 16% as the truckers'

strike began to bite. Leading fuel provider Petrobras lost 30% at one point as the government lent heavily on it to increase fuel subsidies. Meanwhile the Argentinian Merval index (not part of the MSCI family) lost 6% with investors'

wrath here reserved for the bond market. ? In contrast, Asia only just ended in the red with the MSCI Asia ex Japan index down just 1.3%. Here, the Greater China markets markedly outperformed and ended with small gains while the Market Overview 市场概览 The World in five bullet points ? The US pulled out of the nuclear deal with Iran although it remains in place with the other Big Power signatories. The US promised sanctions against any company dealing with Iran, leading to some, including Maersk and Total, to cancel agreements with Tehran. President Trump also cancelled a meeting with North Korea due to take place in mid June, although in the final days of the month, had seemingly reinstated the possibility of talks taking place. The world awaits the next tweet. ? The rise in the US dollar began to take its toll on some emerging markets. Argentina was arguably the worst hit and was forced to go cap in hand to the IMF for help (see Currencies section below). Indonesia also saw currency investors take flight along with those from Hungary, Poland, Greece and South Africa as a reaction to higher US interest rates and a higher dollar. Turkey, was another victim and, like others, this was mainly due to its large current account deficit, with the lira duly slumping C it is now down more than 25% year to date despite the central bank'

s 3% rate increase in May alone. ? Brazil slipped into yet another political crisis with truck drivers blocking roads across the country to protest against high diesel prices: fuel ran out, deliveries were cut, and several companies had to temporarily shut operations. A temporary cut to fuel prices failed, more subsidies were proposed and this time accepted. But the strike may lead to a deterioration in the country'

s fiscal account, slower economic growth, higher inflation and a yet more fragile government unable to move forward with reform. And with the spectre of military intervention being whispered quietly in dark corners, Brazil suddenly looks wobbly again. ? Italy also tumbled into a political quagmire with two anti-establishment parties dropping a coalition plan after two months of talks after the country'