Short Term Outlook and Strategy

The G20 meeting scheduled on 28 – 29 Jun in Japan where Trump said he will meet with President Xi. As G20 meeting approaches it could spark some short covering and buying interest. However this blog believes that ‘Red lines’ indicated by the China White Paper makes quick deal is unlikely as “China will not sign a deal that does not immediately remove all tariffs on Chinese exports” and “China will not sign an agreement that requires unrealistic increases in China’s purchases of US goods. 

The initial request by the US, that Chinese imports rise by US$200bn is already borderline unrealistic.” The recent China PMI figures shows that manufacturing is contracting.  Thus monetary policy support will continue, but demand from the real economy is not catching up. If the trade issue escalates, there will be more earnings cuts in the future. Offshore markets will be affected by Rmb depreciation. Stick to consumer sector, with strong domestic demand is good, dividend plays, such as utilities but not banks because of the low interest rate environment.

All posts and charts are for educational and illustration purposes only