Equity markets experienced a sharp turn-around in August, with most major indices ending deep in the red. In the US, the S&P 500 declined by 1.6%, while the Nasdaq fell by 2%. London’s FTSE 100 fell by 2.6% and in the East, Hong Kong’s Hang Seng Index was down a whopping 8.2%. On a global basis, the MSCI All Country World Index declined by 2.7%, while the MSCI Emerging Markets index fell by 6.1%. On a relative basis, the commodities market was fairly subdued, with Brent Crude oil trading 1.5% higher and gold 1.3% lower. The notable standout here being copper, which fell by 5.8%.
US economists are starting the attach a higher probability to the US potentially escaping a recession, despite the Fed’s remarks that the economy is not cooling, and monetary tightening may not be over. Ratings Agency Fitch struck a less optimistic tone, downgrading US debt from its triple A rating on the back of ever-increasing fiscal deficits. On the political side, Donald Trump seems to be expanding his lead over Republican hopefuls, despite being the first former president to officially have a mugshot.
The news flow from China continues to be ample, and mostly negative. The property slump continued in August as Country Garden Holdings also ran into financial difficulty. Given the fact that they have 4 times as many developments as Evergrande, this is potentially a major economic headache. Concerns were also raised after certain large asset managers missed payments on high yield investment products, and the government stopped releasing youth unemployment numbers after this measure hit a record high earlier in the year. Most recently, it emerged that Xi Jinping would not be attending the September’s G20 summit, marking his first ever absence from the event.
Despite all this doom and gloom, China’s largest ETF saw the largest monthly inflow on record with local investors presumably trying to “buy the dip”.
